Good day and welcome to the Haverty's Fourth Quarter 2015 Financial Results Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Dennis Fink, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Good morning, everybody. During this conference, we will 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 in 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 us an update on its roles and directions. Clarence?

Good morning. Thanks for joining our 2015 fourth quarter and full year conference call. Earnings for the fourth quarter were $0.41 per share versus a GAAP loss of $0.45 and adjusted earnings per share of $0.46 at the same period of 2014. Earnings for the full year of 2015 were $1.22 per share compared to $0.37 per GAAP and adjusted earnings per share were $1.28 for 2014. The earnings were consistent with our expectations based on our previously released 1.4% for Q4 net sales increase. We are encouraged by our improvement in sales for the first quarter of 2016 to date, with total delivered sales of 0.9% and total written sales of 1.4% comparable store delivered sales are up 3.9% with written sales up 0.3%. These increases were on top of good Q to date results a year ago, where total delivered sales have been up 7.7% and total written sales were up 7.2%. At 2015, 4.7% total sales increase was driven by the identical percentage increase in average ticket. We continue to enhance and improve our design capabilities through our 128 design associates in our stores. The design staff has helped us grow the special order and custom upholstery business up 11.8% over the previous year. In addition to our strong sales and upholstery, we’ve seen an increase in our dining category particularly in the more casual groups. Our accessory business shows nice increases another benefactor of our growth in H Design (inaudible). We continue to develop and source exclusive Haverty’s products across several categories using the best designers of the industry. We strengthen our sourcing team and our quality control organization with the addition of key new positions both here and in Asia. We recognize the need to be on sight more for pre-production and production launch of…

Thank you Clarence. Last night earnings press release covered our financial highlights and I’ll just touch on a few of those points now, before we open the call up to your questions. We customarily give guidance for expected gross margins, SG&A expenses for the current year within each of our earnings releases. We don’t publicize any sales forecast and do announce our actual results of sales in a few days after each quarter ends. And that discloses how sales for the new quarter and new data are trending when we announce our quarterly earnings. Our first quarter 2016 to-date sales have shown better percent increases over last year’s same time period than we experienced year-over-year in the fourth quarter. However, Easter falls on the last weekend of March this year versus the first weekend of April 2015, our stores were closed on Easter Sunday and sales over the long weekend for us in those furniture stores are very soft. So this year we will have some shift at sales out of Q1 and in to Q2, as compared to 2015. Fourth quarter gross profit margins at 53.8% were really better than we had expected. We anticipate that the full year 2016 gross profit margins will be close to the 53.5% actual results for the 2015 full year. I want to reiterate the point and release of our expected 2016 fixed and discretionary type expenses with an SG&A increasing more year-over-year in the first half of 2016 than in the second half. That is the opposite of how our normal consecutive quarterly sales levels run, and we’ll resolve in 2016 profitability being negatively impacted in the first two quarters versus the typical year. Operator at this time, we’ll take questions from the audience.

[Operator Instructions] And we’ll take our first question from [Bud Bugatch]. Please go ahead.

This is [David Vargas] on for Bud, thank you for taking my questions. I was wondering if you could just talk a little bit about what you’re seeing so far Q1 to-date in terms of how the customers acting differently may be than in Q4 given the pretty strong quarter to-date sales number on top of a strong Q1 to-date same period last year.

Well we’ve seen a little bit of balance across the regions than we had earlier, let’s say the previous year. The quarter to-date had some different issues, January weather was certainly a factor, February is come back nicely, deliveries are better. I think we’re better staff position of our best sellers than we were last year. So I think it’s a combination. I also think that some of the things that we’ve invested in and done in our stores and in our design program are helping us. But its’ a combination of things overall, it is not a big difference, but it’s certainly positive.

And just expanding on that, you said you have a 128 design associates in the stores now, what’s your ultimate end target for that number, where do you see that going, and then a follow-up on that, to what extent do you think customers are now coming in to the stores because they are aware of and they plan to use the H-Design service versus in the past.

Well I think where we are is about where we want to be. We’ve got a 121 stores, 120 designers is about where we want to be. We may move them around to different stores and have more than one in some of our best stores. I do think that customers are now coming to us or we’re getting some credit for the fact that we offer this free service. And I think it was something that we didn’t provide in the past that our customers wanted, and the fact that we now have it we’re getting some traction with it. It’s growing as a percentage of our overall business, people are recognizing it. So we have an internal goal to get that to about 25% of our business, it’s less than that now. But I think it is clearly a main focus, and somewhere our advertising gets that message across also.

We’ll take our next question from Brad Thomas. Please go ahead.

Wanted to ask first about gross margin and perhaps Clarence if you could talk a little bit more about the puts and takes, and maybe the opportunity to drive gross margins higher not necessarily but this year, but in years down the road as you refine some of the merchandising.

Well as you know we’re developing more of exclusive products and I think we’re getting better at it; we’re better at sourcing also. So I think we can get more credit for that, higher gross margins with our new products that we got coming in. Some of the challenges that Dennis has mentioned this year, we do have some products that we need to get out of this system. It’s not necessarily distressed at all, but it’s just product that is not selling like some of the new products. So that is a little bit of pressure this year, but I do think that we’ll be getting higher margins on the exclusive products that we’re developing not only in cases but in upholstery. And also as we draw our special order business that gives us the opportunity to gain some margin there. So I do think there’s an upside in the future for higher margins.

And as you contemplate the benefit from refining some of your promotional strategy, hopefully that would result in increased traffic of course and conversion, but is there any anticipated impact on gross margin either positive or negative from refining promotions.

No, I don’t think we expect to have our margins. I think Dennis’s guidance has been truly about where it is right now. The main thing we’re doing there Brad is we’re pricing products let’s just say on the television that we haven’t in the past, we’re pricing more product that we feature on the internet, and I think it’s just getting us more credit for the value we offer. So I don’t think it’s going to impact negatively on our margins.

And then just lastly for every retailer really there are questions around Texas, and of course you all don’t have exposure to Houston in particular. So I was hoping you could just offer a little bit more color around what’s been happening in that state from a demand standpoint and to the extent you can comment on it from a competition standpoint.

Sure. As you know we’ll be anniversaring in the next month or so the entry of Nebraska in to Dallas which was a major impact for that market, and we’re already seeing some positives coming back there. I think that that’s going to be less of a factor in the next few months. It’s certainly better now. I think that we’re getting more credit for the services and the product that we offer there and that impact will be less. That is a major issue for Texas. You might have read here, we did lose a key store which was out of business right now in Lubbock. We’ll have a temporary location coming back and we’ll be rebuilding that store, but that won’t complete till next year. The old part of west Texas is definitely affected, the south parts of Texas we’re doing pretty well. Austin, San Antonio, we’re doing pretty well, but I’d say overall it’s going to be for this year compared to last year probably positive, because of the improvement in Dallas.

[Operator Instructions] We’ll take our next question from [Christine Curver]. Please go ahead.

A few questions, first just wanted to follow-up on the gross margin question and some of the new products that you’re introducing with higher margin, and can you quantify the margin differential between some of the new products, the exclusive products you are introducing and some of the old products. That gives you some idea how much higher the margin is?

We’ll I’d say the overall average is a couple of percentage; it’s primarily in cased goods as exclusive product collections we’ve developed. The average would be I’d say a couple of percentage points. But overall, we do have some collections that we can get a significant advance in. It’s primarily in cased good. There wouldn’t be as much upholstery because that’s a little more competitive.

With regards to advertising, you indicated that you plan to spend more in Q1. How is the TV advertising working and what’s your plan for 2016 as far as advertising goes?

We just entered in some new campaign that we kicked off for President’s Weekend and we’re happy with that. It does emphasize more the whole home and what we can do for the home and change the customer’s life with what we can offer. That is now rolling out; it will continue to roll out. We’ve got a continuation of that campaign next month, and in to the spring. So, television’s about the same spend as we have previously. We were spending more on the digital and internet world, but it’s a campaign we’re excited about.

As far as internet goes, the e-commerce, you indicated that you’re gaining traction now. What are consumers buying? Is it more accessory, smaller ticket type items or you’re starting to see customers purchase furniture online?

Well we’re seeing - we would have to kind of deep dive on that, because it’s up nicely this year from a lower basis I would say. And what we’re seeing is people are buying sections, buying more upholstery which is interesting. In the past it’s probably been focused around items like desks and entertainment centers and used furniture, recliners that type of things. But now they’re buying a bigger ticket. Some of that is because we’re offering tools that allow them to see the product a lot better than in the past, and allow them to see exactly what colors could it look like and what the upholstery will look like before they buy it. But again it’s a very little base, I’ll mention that, at least last year for the first quarter it was only 1% of our business and now it’s 1.5% of our business. So it’s up significantly, and it could get up to or approach 2%, but it’s not a large part of our business right now.

So the long term strategy with regard to e-commerce is not going to change. People are still using it to do research and then come in to the store.

That’s absolutely primarily what people are doing, but they’re becoming more comfortable ordering online and it’s easier because we made it easier and looks better and they trust that we can make the delivery in good condition. So I think it will continue to grow. It will be more and more.

As far as new stores, what is the timing of the new store openings? Bet you have two new stores.

I’ll let Dennis comment on that.

Yeah, in 2016, we’re going to have an opening in August in a new market and one in September.

And then just lastly, can you talk about the Florida DC expansion, what needs to be done now I know you broke ground and kind of the timing. And then what about the Dallas DC expansion, I believe you were going to expand that facility as well?

The Florida facility is underway, and we expect it to be complete this summer. So we’ll be bringing product in there directly from our sources in Asia as opposed to flowing them through our Braselton facility. It will allow us to serve the customers quicker, less handling and a lower inbound cost. So we’re excited about that. It will also allow us to warehouse more of the exclusive product for the Florida region. We do not have plans today to expand the western facility in Dallas. We will at some point, but that’s not on the agenda right now.

And currently there are now further questions in the queue at this time.

Well thank you very much for joining our conference call, and we appreciate your interest in Havertys.

And this does conclude your teleconference for today. Thank you for your participation. You may disconnect at any time.