Good day and welcome to the Haverty's Second Quarter 2016 Financial Results Conference Call. Today's conference is being recorded. Now, 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.

Thank you, and good morning everyone. During this second quarter conference call, 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 on our results and progress. Clarence?

Good morning. Thanks for joining us on our second quarter conference call. As previously reported, net sales and comparable store sales rose 3.8% for the quarter. Written total and comparable store sales both rose 6%. Our average ticket increase about 2.2%, traffic was slightly lower, but we were encouraged by our improved closing rate for the quarter and year-to-date. Earnings for the second quarter were $0.24 compared to $0.21 for the same period last year. For the first half, earnings per share were $0.45 compared to $0.48 last year. We did see our SG&A increase as a percent of sales to 49.6% compared to 49.4% last year. These increases were largely due to high administrative cost related to increased healthcare cost, selling expense and occupancy related to new stores that have opened in the last year. Both written and delivered sales for Q3 to date are up 3.8% with comparable store delivered sales up 3.9% and written comp sales up 3.6%. This year we’ve made heavy investments in the systems and the infrastructure to help provide a better experience for or customers. The major hardware computer additions that our CIO Head, Clairy and his dedicated team installed this spring with upgrade so the leading edge IBM Power8 has helped to cut the screen speed when placing orders on our stores by over half. The purpose of these upgrades is to help serve all of our customers in every phase of the shopping cycle, including the processing and handling of the product through delivery. We’ve added new state-of-the-art scanners for all of our drivers and service technicians to provide a paperless system and to speed up every stage of handling merchandise through completion of our top drover delivery process. We recently had over a 100 of our vendors and freight carriers…

Thank you, Clarence. I’ll just make a few comments about our financial highlights from last night’s earnings press release and then we’ll take your questions. Within our SG&A, our fixed and discretionary type expenses were $61.4 million for the second quarter of 2016, that’s $2.8 million above the $58.6 million recorded last year. As stated in the release, we estimate that the full year total expense for this category will be approximately $252 million which is about $1 million higher than our prior guidance. We expect that will translate into increases over the prior year for Q3 and Q4 of approximately $2.4 million to $2.5 million each quarter in this fixed and discretionary SG&A category. The increases are largely due to depreciation and occupancy costs for new and relocated and remodeled stores, for staffing increases and higher health and benefit expense as well as inflation. Second half sales were normally higher than the first half so profitability should be impacted less by the fixed and discretionary cost increases in Q3 and Q4 than they were in the first half. In the health benefits area, although we do have more employees under coverage this year and newer prescription drugs are more expensive, the cost increases have mostly come from higher individual medical claims than in recent years. The company is self-insured but we have Star Plus insurance coverage both on an individual and aggregate basis. The variable type costs within SG&A for the second quarter of 2016 were 18.2% of sales, the same is in last year’s quarter and full year variable costs are also anticipated to run at the same rate as last year’s 17.9%. Our weighted average square foot changes by quarter for 2016, and the first quarter we had 1.1% higher average square footage, second quarter 0.5% higher…

Thank you. [Operator Instructions] And our first question comes from the line of Bud Bugatch of Raymond James. Please go ahead.

Good morning, Clarence and Dennis. This is David on for Bud. How are you?

Good morning, Dave.

Let’s just start out, when you’re looking at the retail environment this year versus last year, what are some of the biggest changes you’re seeing and what are some of the biggest changes the company has made, whether it’d be from a product promotional or other standpoint?

We haven’t had any major changes in the last year that I can – we started lot of this process of upgrading our product in the H design. I think that’s maturing, I think some of our product selection is hitting more to the customer, we are doing more special order in custom which I think continues to grow. As far as parts of our territory, Texas is still a drag, particularly the West Texas the old part of the start is a drag, some of the other parts of the city – of the state are doing better but overall it’s down. So I would say that the main difference is that we just are continuing on this upgrading plan and adding the kind of product that our customers are trying to – like to mix and it’s being a little bit more successful. We were up single digit so it’s not a major issue but we are seeing some real positives that we’re encouraged about.

Got it. And any – how is your product inventory of older product that may need to be discounted or cleared out, how is the level there, are you happy with it or – and is it improving?

We do have – well it is coming down and we do need to move more of it out, we have a plan to do that. We’re running most of it through our clearance centers and we’ll be a little bit more aggressive on that in the next several months but I think our plan is solid and we will get it to the position we want by the end of the year.

Okay. Going to the Lakeland – new Lakeland Distribution Center, nice to see that that’s in place, hopefully you get some good benefits from it. Along that line when do you think we’ll expect to see some of those benefits start to hit the P&L?

It will take a while, I mean it’ll be a slow ramp up, we’re moving product that down there now that we couldn’t before that’ll be our best sellers to begin with. I think it’ll take a while for that to play out completely. The main thing that will give us within the next quarter or so as a quicker service to the customers there, so hopefully just serve the customer and grow our business in Florida quicker. I think the cost savings won’t kick in for a while because it will take a while to offset those loads that we’re bringing down from Braselton and they reduced great inbound freight to come through the P&L.

Okay, great. And then two more from me then I’ll get off the line. Any changes in the promotional strategy going into yearend and how do you see the promotional environment right now?

Well it’s pretty promotional out there, you know that. We’re consistent with what we did last year and we’ll be an aggressive in a few different areas that we weren’t before. But I don’t see any major changes, I think it’s all baked into what we’re projecting here as far as the cost and the advertising mix that we’ve given in the past.

Got it. Thank you and to confirm, percentage penetration of online sales you – internet that was less than 2%, is that correct at this time?

It’s less than 2% but it’s growing rapidly so that shows you that it was a minimal number, it was like 1.5%, we’re getting closer to 2%. So it’s growing, it will continue to grow, we’re spending more money on digital advertising and trying to reach that customer better. But still most of great majority of our customers want to see the product in the store, and we encourage that.

Great. Thank you very much and good luck on the next quarter.

Thanks so much.

[Operator Instructions] It appears there are no further questions at this time. Mr. Fink, I’d like to turn the conference back over to you for any additional or closing remarks.

Thank you, operator. We appreciate participation and look forward to good second half. Thank you for being an attendance.

This concludes today’s call. Thank you for your participation. You may now disconnect your line and have a wonderful day.