Executive Summary / Key Takeaways

• Strategic Rebound and Growth Momentum: Haverty Furniture Companies, Inc. (HVT) is demonstrating a compelling turnaround, evidenced by a return to positive comparable store sales growth in Q3 2025, driven by enhanced marketing, merchandise, and operational execution. The company is strategically expanding its physical footprint, aiming for five new stores annually from 2026, leveraging its existing distribution network.
• Digital and In-Store Innovation: HVT is actively investing in technological differentiators, including Adobe 's Edge delivery service for its website, which has yielded a double-digit lift in organic traffic, and the use of AI and data for targeted marketing. In-store, a new point-of-purchase and tagging program is rolling out to enhance the customer experience and streamline product selection.
• Resilient Financials Amidst Headwinds: Despite a challenging macroeconomic environment marked by high interest rates and tariffs, HVT maintains a strong, debt-free balance sheet and robust gross profit margins. Management's proactive approach to pricing and supply chain adjustments is effectively mitigating tariff impacts, ensuring margin stability.
• Differentiated Competitive Stance: HVT distinguishes itself through its in-house "final mile delivery" service, free in-home design consultations, and a focus on middle to upper-middle income consumers. These operational advantages foster customer loyalty and provide a competitive moat against both online-only retailers and broader home furnishing chains.
• Outlook Focused on Controlled Expansion: Management's 2025 guidance projects stable gross margins and controlled SG&A expenses, with capital expenditures directed towards strategic store growth and technological enhancements. The company's confidence is underpinned by the continued spending power of its target demographic and its proven ability to adapt to market shifts.

The Enduring Appeal of Home: Haverty's Century-Old Foundation Meets Modern Retail

Haverty Furniture Companies, Inc. (NYSE:HVT), founded in Atlanta, Georgia, in 1885, has cultivated a legacy as a specialty retailer of residential furniture and accessories, catering to the discerning middle to upper-middle income consumer. The company operates all its stores under the unified Havertys brand across 17 states in the Southern and Midwestern U.S., a testament to its commitment to a consistent, high-quality customer experience. This enduring brand heritage, coupled with a strategic focus on in-house "final mile delivery" and complimentary in-home design services, forms the bedrock of HVT's competitive differentiation in a fragmented and increasingly digital home furnishings market.

HVT's operational model, which eschews outsourcing key functions like delivery, provides a significant advantage in ensuring a "regret-free experience" for its customers. This direct control over the customer journey, from showroom to living room, fosters trust and loyalty, distinguishing HVT from many competitors who rely on third-party logistics. The company's seasoned, commission-based sales team further enhances this personalized approach, driving engagement and higher average tickets, particularly within its robust design business.

The furniture retail industry, however, is not immune to broader economic and technological currents. High interest rates, rising home prices, and fluctuating consumer confidence continue to present a challenging demand environment. Geopolitical tensions and evolving tariff policies add layers of complexity to global sourcing and supply chain management. Against this backdrop, HVT's strategic initiatives, including targeted store expansion and significant investments in digital and in-store technology, are crucial for sustaining growth and enhancing its competitive posture.

Technological Evolution: Enhancing Customer Engagement and Operational Efficiency

Haverty's is not merely a traditional retailer; it is strategically integrating technology to refine both its customer-facing and internal operations. The company has made notable strides in its digital presence and marketing capabilities. By implementing Adobe (ADBE)'s Edge delivery service on its website, HVT has seen a "double-digit lift in organic traffic" to its homepage, which accounts for approximately 20% of its site traffic. This enhancement, coupled with an expanded use of AI and data, has improved targeting and personalization in marketing investments, making them more efficient. The result has been a 13.6% growth in written e-commerce sales for the third quarter of 2025, demonstrating the tangible benefits of these digital initiatives.

Beyond the digital realm, HVT is also innovating its physical retail experience. A new point-of-purchase and tagging program is being rolled out across all stores, with full implementation targeted by Labor Day 2025. This initiative aims to improve the in-store customer experience by centralizing special order fabrics for easier choice and introducing a new tagging system that visually presents more product choices not physically displayed on the floor. It also simplifies available configurations by collection for sales and design consultants, streamlining the sales process and enhancing customer satisfaction. These technological and operational improvements are critical to HVT's competitive moat, contributing to higher customer engagement, potentially better conversion rates, and a more efficient sales cycle, ultimately bolstering financial performance and market positioning.

Financial Performance and Operational Resilience

Haverty's has demonstrated a notable return to growth, with net sales for the third quarter of 2025 increasing by 10.6% to $194.5 million, compared to $175.9 million in the same period of 2024. This growth was accompanied by a 7.1% rise in comparable store sales, marking a significant positive shift. For the nine months ended September 30, 2025, net sales increased by 3.4% to $557.1 million, although comparable store sales for this period saw a marginal decrease of 0.1%. Written business for Q3 2025 was up 10%, with comparable store written business up 8%, indicating sustained demand.

The company has maintained strong profitability, with a gross profit margin of 60.3% in Q3 2025, a slight increase from 60.2% in Q3 2024. For the first nine months of 2025, the gross profit margin stood at 60.8%, up 50 basis points from 60.3% in the prior year. This margin strength is primarily attributed to effective product selection, merchandise pricing, and mix. While a LIFO expense of $624,000 impacted Q3 2025 gross margins, management has a proven track record of strategically adjusting retail prices to offset such pressures.

Selling, general, and administrative (SG&A) expenses increased by $11.4 million, or 11.3%, in Q3 2025, reaching 57.8% of sales, up from 57.4% in the prior year. This rise was primarily driven by higher administrative costs ($3.8 million due to salaries, incentive compensation, and stock-based compensation), increased advertising and marketing ($2.8 million for television and direct mail), and higher selling expenses ($2.7 million from sales commissions). Despite these increases, HVT's debt-free balance sheet, with $130.5 million in cash and cash equivalents at September 30, 2025, provides substantial financial flexibility. Net cash provided by operating activities was $45.3 million for the first nine months of 2025, reflecting healthy cash generation.

Competitive Landscape and Strategic Positioning

Haverty's operates in a competitive home furnishings market, contending with a diverse array of players ranging from online giants to luxury brands and regional specialists. The company's core competitive advantages lie in its established brand heritage, its comprehensive in-house "final mile delivery" service, and its personalized in-home design consultations. Unlike many competitors, HVT's direct control over delivery ensures a seamless and professional customer experience, a critical differentiator against online-focused retailers like Wayfair , which prioritize digital convenience and vast selection. While Wayfair (W) excels in digital innovation and market reach, HVT's physical showrooms and personalized service foster deeper customer relationships and potentially higher average tickets, particularly through its design business.

Against upscale and design-driven retailers such as Williams-Sonoma (including Pottery Barn and West Elm) and RH (Restoration Hardware), HVT positions itself in the middle to upper-middle price range, offering a blend of quality, style, and value. While Williams-Sonoma (WSM) leverages a broader brand ecosystem and RH (RH) focuses on luxury and experiential retail, HVT's emphasis on regional presence and custom upholstery provides a unique value proposition. HVT's new merchandising team is actively refining product assortments to address any gaps in its "good, better, and best" lineups, ensuring it remains competitive across various price points. The company's ability to offer 60-month no-interest financing, even when credit usage is not increasing, serves as a competitive advantage against rivals.

HVT's strategic response to industry trends, such as the shift to e-commerce, involves enhancing its digital platforms while simultaneously investing in its physical store experience. This omnichannel approach aims to capture market share by appealing to both traditional and digitally-savvy consumers. The company's commitment to controlling its supply chain and proactively managing tariff impacts further strengthens its operational resilience against external pressures.

Outlook, Guidance, and Growth Initiatives

Haverty's management maintains a confident yet cautious outlook for 2025 and beyond, balancing growth aspirations with ongoing macroeconomic uncertainties. The company anticipates ending 2025 with 129 stores, having strategically managed openings and closures, including the opening of a third Houston location in New Caney in October 2025. Looking ahead, HVT plans to resume its goal of opening five new stores annually in 2026, with four additional leases already finalized in St. Louis, Nashville, and two more in Houston, aiming for a robust presence of five to eight stores in the Houston market. These expansions are designed to leverage the existing distribution network, maximizing operational efficiency.

For 2025, HVT expects gross margins to be between 60.4% and 60.7%. This guidance incorporates current tariff impacts and reflects management's confidence in strategic pricing and product mix adjustments. Fixed and discretionary SG&A expenses are projected to be in the $296 million to $298 million range, an increase from previous guidance primarily due to higher anticipated advertising and administrative costs. This includes increased marketing investments, such as a successful direct mail campaign and expanded digital advertising, aimed at driving traffic and conversion. Variable SG&A costs are expected to range from 18.6% to 18.8% of sales, with anticipated efficiencies in warehouse and delivery.

Capital expenditures for 2025 remain at $24 million, allocated primarily to new stores, remodels, and technology investments.

Management projects an effective tax rate of 26.5% for 2025. While the housing market faces headwinds from high interest rates, HVT remains confident due to the continued spending of its target demographic—customers with household incomes over $150,000. The company also anticipates a slight increase in inventories in Q4 2025 due to additional tariffs, a proactive measure to ensure product availability and mitigate supply chain disruptions.

Risks and Challenges

The investment thesis for HVT is not without its challenges. The home furnishings industry remains sensitive to macroeconomic factors, particularly interest rates and housing market conditions. High mortgage rates and rising home prices continue to dampen housing activity, which directly impacts demand for furniture. Consumer confidence, geopolitical tensions, and the potential for government shutdowns also introduce uncertainty.

Tariffs represent a significant and evolving risk. New tariffs of 25% on upholstered wood products from Mexico, Vietnam, Cambodia, Thailand, and Indonesia became effective October 14, 2025, increasing to 30% on January 1, 2026. Tariffs on upholstered goods from China also escalated to 70% on October 14, 2025, and will reach 75% on January 1, 2026. While HVT has demonstrated agility in adjusting pricing and realigning its supply chain, these tariffs introduce cost pressures and potential LIFO expense impacts that could affect profitability. The ongoing Supreme Court case challenging the legality of certain tariffs under the IEEPA adds further regulatory uncertainty. Labor shortages and wage challenges in key sourcing regions like Vietnam could also impact supply chain stability and costs.

Conclusion

Haverty Furniture Companies, Inc. stands as a resilient player in the home furnishings sector, leveraging a rich history, a strong brand, and a debt-free balance sheet to navigate a dynamic market. The company's strategic investments in digital and in-store technology, coupled with its unique in-house delivery and design services, provide a distinct competitive edge. Despite persistent macroeconomic headwinds and escalating tariff pressures, HVT's proactive management of pricing, supply chain, and marketing has enabled a return to positive comparable sales growth and sustained profitability.

The outlook for HVT is characterized by controlled expansion and a focus on operational excellence, with clear guidance for stable margins and strategic capital deployment. The company's ability to cater to an affluent customer base, which continues to spend despite broader economic concerns, underpins its confidence for future performance. For investors, HVT represents a compelling opportunity in a company that is not only adapting to modern retail demands through technological innovation but also reinforcing its foundational strengths to drive long-term value in a challenging yet essential consumer market.