Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Havertys Q1 2014 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Dennis Fink. Please go ahead, sir.

Good morning, everyone. During this conference, we'll make forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those made or implied in such statements, which speak only as of the date they are made and which we undertake no obligation to publicly update or revise. Factors that could cause actual results to differ include economic and competitive conditions and other uncertainties detailed in the company's reports filed with the SEC. Our President, CEO and Chairman, Clarence Smith, will now give you an update. Clarence?

Thank you, Dennis. Good morning. Thank you for joining our first quarter conference call. Early last month, we released our first quarter sales, which decreased on a comparative store basis 0.9% to $181.7 million versus $186.1 million last year. As most companies reported, we were also impacted by severe weather, with store closings and significant delays for inbound product shipments. We're pleased to report a recent uptick in our comparative store written sales of 7.5% for the second quarter. We've seen this nice improvement over a very strong month last year. Our pretax earnings for the quarter were $10 million versus an adjusted $12.7 million last year, with EPS at $0.27 versus an adjusted $0.34. Gross margins were up modestly to 53.8% versus 53.5% last year. In the first quarter, our average ticket was up 5%. This increase is driven by our higher-quality product and addition of our in-home designer program, H Design [ph]. Our average ticket for the in-home designer sales is running at 2.5x our overall average. We now have 72 designers in the H Design [ph] program, serving 82 stores, working closely with our sales associates and the team selling program. We're offering highly-valued design assistance to our customers, and they're responding positively to this complementary service. In the first half of 2014, we are bringing inventories back up to levels to support new sales growth. Due to a few key manufacture service issues and difficulties bringing in containers in the winter months, we were out of stock in some of the key sellers, and the flow of merchandise is now starting to come back in line. We believe that this will allow us to better serve our customers and capture sales we might have been missing. We should have a strong in-stock position by the end…

[Operator Instructions] Our first question is from the line of Budd Bugatch with Raymond James.

This is David Vargas on for Budd. I was just wondering if you could give a little color on what the mix was of accessories this quarter.

Well, Accessory business is improving. The fastest-growing category and that is the rug category, which we really weren't a player in, in the past. But that entire category is going -- a lot of that has been driven by our in-home design program, where we're adding more accessories. We're completing the room package for the customer. And it's about 3.4% of our sales in Q1, which is up from previously.

And also, with the margin that the accessories carry, does it tend to leverage the gross margin a little bit? Or is it in line with -- roughly in line with your current margin?

I would say it's a little lower right now. It's roughly in line, and I think it will continue to improve. We're creating a whole new product category. And certain parts of it or more are better margins than the others. But I'd say, overall, it's about the same; in some of the categories, a little lower.

Okay. And then just one final question. You mentioned that you're bringing inventories back up to levels to support sales this quarter. Do you see the sales recovery that you've experienced so far this quarter continuing? And do you expect comp store sales to improve and get back to, like, normalized levels this quarter? Or do you think it's going to be more back half of the year weighted?

We really don't give estimates on our projections for comps going forward. We certainly feel much better about the last several weeks and this quarter than we did, obviously, in the first quarter. So I would say conditions are better. We're optimistic. We don't give estimates for comps going forward. That's all I could comment [ph].

And our next question comes from the line of Todd Schwartzman with Sidoti & Company.

Sticking with the accessory theme. Is the mix -- or was the mix of the quarter, has it been recently about the same at all your geographic markets?-

The mix for accessories?

Yes. Accessories to total sales, does it vary greatly by region?

It's about -- no, not in a significant manner. They're about the same by region. Where we're the strongest with the in-home designer program is where it's -- the higher percentages of accessories. And so there's some markets that are stronger than that, but I would say there's not any major difference from region to region.

And with the in-home design, what can you tell us that you haven't already told us so far, as far as how that's progressing? In particular, what are you learning? What's surprised you, if anything?

I'd say we're very pleasantly surprised with the positive response our customers are giving us. I think our customer base was coming to us in the past and we didn't have this service and they needed it. And when we offered it to them, they are enthusiastic about it. We're having very good closing rates. As I mentioned, the average ticket is 2.5x our average. It's extremely positive. We are learning how to integrate it into our regular store operations and our sales teams, and that's a learning experience. But I would say, it's more important than we thought it would be.

And Clarence, do you think that your price points now are, on average, about where you need them to be to fully take advantage of -- to maximize the potential of the service?

Not fully. We are bringing in several new lines that are in the upper end of the general product mix that we're very optimistic about. I think that as we improve the service levels, the quick ship parts of the special order program, it will continue to grow, and we're working with all our vendors to improve that. Most of our efforts in product development are in the better end of the industry's price points. So we're growing in the better product and the higher quality. And we'll continue to do that because it's been well received, and I think our customers are asking for it.

Got it. You're returning to Buckhead shortly, right?

Yes, sir.

Are you hopeful that the sales per square foot at that store will exceed the company average?

Absolutely. That is definitely the plan. It needs to -- we're paying more for it. It's a smaller format so we need to get more production out of that. And I would say that most all of our new stores that we're developing, our plan is to exceed our average ticket. So I mean, you've heard us articulate our plan to be over $200 a foot. We were in the high-$170s last year. We want to get back over that, where we were in 2006. And all of the stores we're opening, we certainly model to be above that, and we're closing stores that are weaker, that are underperforming. And we've done that over the last several years. So yes, it needs to be significantly better than our average.

Okay. And lastly, if you could discuss the casegoods versus upholstery demand and within casegoods, the children's category. You've seen a number of manufacturers have kind of methodically exited or maybe decided to exit that particular business. How -- what your take is on youth bedroom? But maybe more importantly, just the -- whether casegoods as a whole has closed the gap somewhat in terms of demand with upholstery.

Upholstery is still growing faster than casegoods. We're doing well in our dining category, particularly in the casual area, and we're bringing out more exclusive product at the better price points, which are being well received. The Bedroom category has always been a strength for us. It is improving, but not like upholstery still. Youth category, we're not that strong in youth. We do have a youth program, and we're strengthening it. We're adding several collections to it. But we're not -- it's not a huge part of our overall casegoods business. The -- we were not doing business with Stanley or we weren't doing business with La-Z-Boy's youth so that really doesn't directly affect it.

[Operator Instructions] Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets.

I got into the call a few minutes late, so I apologize if I missed this. But I did just want to ask a little bit more about the recent trends. Obviously, the number from your press release, the 7.5% comp for April is pretty encouraging. I just wanted to make sure I understood that right. You've adjusted that for an Easter shift. So if we looked at actual written orders April over April, would those be up in the 3% to 4% range? Is that how we should think about that?

Yes. That'd be about right or slightly less than that. Because the Easter adjustment on a single month has a bigger impact, obviously, than it does on a quarter.

And so is the results of the business -- but as you think about the run rate of the business as we moved into the second quarter, it has seemed to snap back pretty well.

Yes. I think it's legitimate to look at it with Easter made comparable as it is -- we write nothing on that day. So I think the way we look at it internally is with either Easter in both years or out of both years. And that's the run rate that we've been at. We adjusted the -- of course, as you remember, the first quarter down because Easter had been in the first quarter last year, so we adjusted the comparison down. And the adjustment isn't as much again because, on a quarterly basis, it doesn't make as much difference as it does on a monthly.

Great. And then just trying to connect the dots between 2 other items. The inventory, obviously, down year-over-year in both 2013 and the first quarter of this year. The deposit is very strong, up close to 19% year-over-year. You may have touched on this before I was able to get through onto the call. But are you in a position to tap some of these orders that you've already taken? And could that help the sales growth accelerate at a greater pace than the written orders that come through in the second quarter?

Yes. We do have a higher deposit. Some of that is because there's more custom order and more designer orders, and they do require a deposit on them. And then part of it was because we were a little higher holiday backlog at the end of first quarter than we were a year ago. We think that there won't be increases in that from performance of the manufacturers. We think we're getting -- that will be behind us in the second quarter, largely behind us. It's a matter, really, of whether the increases in the custom order and the designer orders continue to be a better part of our increases, and those just deliver out a little more slowly, the bigger orders. People don't want every room at the same time necessarily, so there is a little bit of momentum that will help deliver sales. But I don't think for the quarter we'll see a big change in that relative to written.

Okay. And if I could just add -- ask one last more on the bedding category. Just any commentary on your thoughts on the industry growth for this year? And anything notable that you might call out given that there is a tremendous amount of new product getting on floors right now with new Tempur and new Stearns, new Optimum, for example? How are you thinking about that category?

Well, it is a huge change out, Brad. We're changing out almost all of our lines, which is disruptive and costly, not only for us, but as you noted, for some of the vendors. So we're really in the middle of all of that. I think some of these improvements are nice, and I think they'll be well received. But it's really just now starting to play out, and we're just now getting some of these samples on the floor. So I'd say we're all in the mix right now of a significant change out across almost all of our lineup.

Okay. Should we -- is there a particular quarter where we should factor that into a greater degree from a gross margin standpoint? Or do you think you're in a good position to manage through it?

I think we're fine in managing through that. I don't think it's going to impact the overall margins.

[Operator Instructions] I'm showing no further questions. I'll turn the call back to Clarence Smith for closing comments.

Thank you, operator. I want to -- I appreciate you joining our call and for your interest in Havertys.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.