Wednesday, August 12, 2020

Retail - home furniture stocks rally on “new operating reality”

Retail home furniture stores are shifting resources to meet changing circumstances, benefit from new opportunities, and capitalize on competitive advantages while battling a worldwide pandemic, and its working. Retail home furniture stores have become the hottest stocks to own right now. Lets take a look at two heavy hitters in the market.

Kirkland's, Inc.

Kirkland's, Inc. (NASDAQ:KIRK) is a specialty retailer of home décor in the United States, currently operating 404 stores in 36 states as well as an e-commerce enabled website, The company's stores present a curated selection of distinctive merchandise, including holiday décor, furniture, wall décor, art, textiles, mirrors, fragrances, lamps and other home decorating items. The company's stores offer an extensive assortment of holiday merchandise during seasonal periods. The company provides its customers an engaging shopping experience characterized by casual, comfortable merchandise with a southern feel and a modern flair at a discernible value. This combination of quality and stylish merchandise, value pricing and a stimulating online and store experience has led the company to develop a loyal customer base.

But Kirkland's first quarter earnings results were negatively impacted by the temporary closure of all its stores for approximately half of the quarter due to the COVID-19 pandemic.

The company's first quarter cash flow was also negatively impacted by the temporary closure of its stores. The use of cash was driven by continuing to pay merchandise and freight costs, payroll for store management and the corporate office and essential payables, with the significant reduction in sales.

"While the stores were closed, we were pleased with the acceleration of our online sales and the customer reception of our contactless curbside pickup option,” said Woody Woodward, Chief Executive Officer. “Since reopening most of our stores, we have seen a quick ramp up in demand along with margin improvement.  The customer is reacting positively to our expanded merchandise assortment that can furnish a home of any size on a budget.

"We have worked in partnership with our vendors, landlords and employees to preserve these improvements as a new operating reality at Kirkland's that should enable us to better leverage an improving sales trend. The increase in first-time customers to our website and the benefit of stimulus funds on consumer demand are clearly having a positive effect on our sales and margin trends to date in May and we believe will provide a bright future for Kirkland's."

Shares of KIRK stock are up 438 percent over the last 52 weeks (Aug. 12, 2019 to Aug. 12, 2020). This year alone the stock is up 478 percent, closing Wednesday at $7.11 per share, up 0.71 percent for the day. KIRK has a 52-week low of $0.56 and high of $7.60.

Now if you want a dividend play in the retail home furniture sector take a look at Haverty Furniture Companies, Inc.

Haverty Furniture Companies, Inc.

Havertys (NYSE: HVT), established in 1885, is a full-service home furnishings retailer with 119 showrooms in 16 states in the southern and midwestern regions providing its customers with a wide selection of quality merchandise in middle to upper-middle price ranges.

Second-quarter earnings for Haverty was like no other in the company's history, “but optimism for our future and the opportunities for growth endure,” company Chairman, President and CEO Clarence H. Smith said in a company press release this month. “We reopened our stores in May with team members ready to serve customers eager to refresh their homes. Our customers want their homes to reflect their style and be a comfortable, happy place. Our wide merchandise selection, custom options, and free design service assists them in that endeavor.

“We are analyzing our personnel needs and are currently challenged to accelerate staffing and increase our delivery capacity. Many of our vendor partners are also facing workforce issues as they restart their operations and seek to meet product demand. Our inventory position in certain products could be stressed during the coming months as availability lags demand.

“Given the sustained pace of our business since reopening and our liquidity position, the board approved important shareholder actions related to dividends and the stock repurchase program. The per share dividend for the third quarter was increased 33 percent, restoring it to the first quarter’s amount, and the resumption of the stock repurchase program was approved. The board will continue to evaluate returning value to stockholders given the ongoing uncertainty caused by COVID-19.

“The opening of our new store in the Dallas/Ft. Worth, Texas, market is on schedule for late August and as previously planned, we closed a store in that market in July. We have also set a new opening date in the first quarter of 2021 for entering the Myrtle Beach, S.C., market.”

Stock shares of HVT are down 5 percent over the last 52 weeks (Aug. 12, 2019 to Aug. 12, 2020). This year alone the stock is down 5 percent, closing Wednesday at $18.52 per share, up 3.93 percent for the day. HVT has a 52-week low of $9.81 and high of $21.43.

The company paid a dividend of $0.20 per share in September, December and March. The dividend was cut to $0.15 per share in June. A $0.20 dividend is planned in September.

Disclaimer: This post is provided for information purposes only and should not be used as the basis for any investment decision. I am neither licensed nor qualified to provide investment advice. Keith Stein has no position in any stocks mentioned in this post. DCNewsroom has no position in any of the stocks mentioned in this post.

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