Greetings, and welcome to Haverty's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tiffany Hinkle, Assistant Vice President, Financial Reporting and Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, and thank you for joining us for our third quarter earnings call. I'm here today with our President and CEO, Steven Burdette; and Executive Vice President and CFO, Richard Hare. Before we begin, I'd like to remind everyone that today's conference call may contain 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. A replay of this call will be available on our Investor Relations website this afternoon. For commentary about our business, I will now turn the call over to Steve.

Good morning. Thank you for joining our 2025 third quarter conference call. We are excited to report an increase in both written and delivered comp sales for Q3. Our sales for Q3 were $194.5 million, which was up 10.6% with comps up 7.1%. Total written sales were up 10% with comps up 8%. Our steady growth in written and delivered sales over the past 4 quarters reflects improvements across marketing, merchandise assortments, promotions, supply chain, distribution, home delivery, service and store execution. While this quarter's results are positive, we remain focused on the significant opportunities in front of us that will allow our return to a $1 billion-plus company with no additional investments needed in our distribution infrastructure. Gross margins continue to be strong, coming in at 60.3% compared to 60.2% in Q3 2024. Our pretax profits for the quarter were $6.4 million or 3.3% operating margin compared with $6.9 million or 3.9% operating margin in Q3 2024. Our EPS for the quarter came in at $0.28 compared to $0.29. Richard will provide additional details regarding the increase in SG&A expenses and LIFO impact for the quarter. During the quarter, our Labor Day event was the company's largest event of the year and was key to our success in the quarter. We had a terrific written 4-day increase of 13.6% over last year with strong metrics. Traffic was positive in the mid-single digits. Average ticket grew to over $4,000 with design average ticket over $8,000. And conversion rates showed a slight -- although conversion rates did slow a slight decrease compared to last year. The industry faces ongoing challenges. High interest rates and rising home prices continue hurting the housing market. Tariffs remain an issue, geopolitical tensions persist, consumer confidence is falling and the government shutdown is now heading into…

Thank you, Steve, and good morning. In the third quarter of 2025, net sales were $194.5 million, a 10.6% increase over the prior year quarter. Comparable store sales were up 7.1% over the prior year period. Our gross profit margin increased 10 basis points to 60.3% from 60.2%. Excluding the impact of the $624,000 LIFO expense in the third quarter of 2025, our gross profit margin would have been $0.606. The overall increase in margins was due to product selection and merchandising, pricing and mix. Selling, general and administrative expenses increased $11.4 million or 11.3% to $112.3 million. As a percentage of sales, these costs approximated 57.8% of sales, up from 57.4% in the prior year's quarter. We experienced increased advertising, selling, occupancy and administrative costs during the quarter. Other income expense in the third quarter of 2025 was $348,000 and interest income was approximately $1.1 million during the third quarter of 2025. Income before income taxes decreased $400,000 to $6.4 million. Our tax expense was $1.7 million for the third quarter of 2025, which resulted in an effective tax rate of 26.4% compared to an effective tax rate of 28.3% in the prior year period. Net income for the third quarter of 2025 was $4.7 million or $0.28 per diluted share of our common stock compared to net income of $4.9 million or $0.29 per share in the comparable quarter last year. Now turning to our balance sheet. At the end of the third quarter, our inventories were $92.4 million, which was up $9 million from the December 31, 2024 balance and up $3.7 million versus the Q3 2024 balance. At the end of the third quarter, our customer deposits were $43.9 million, which was up $3.1 million from the December 31, 2024 balance and flat with Q3 of…

[Operator Instructions] Our first question comes from Anthony Lebiedzinski with Sidoti & Co.

So very nice to see the return to positive same-store sales here in the quarter. I know you highlighted the strong Labor Day. Just -- can you comment also just on the monthly trends that you saw in the third quarter and whether or not you saw any notable regional differences in your markets?

Sure, Anthony. This is Richard. Our written business trends in the third quarter in July, we were up on a same-day week basis, a little -- about 10.6% in July, 10.9% in August and a little over 8% in September. Deliveries were fairly consistent, 11.6% in July, 7% in August and 13.1% in September. I don't believe there are much, if any, regional differences. But Steve, I don't know if you got anything else you want to add.

No. Anthony, there was not much difference there. We certainly had probably more strength in the Midwest, Georgia, Central and Florida were -- and Texas were really good. The East was a little lighter, but everybody was positive. All districts were positive across the board.

That's good to hear, certainly. And then as far as tariffs, is there any way you guys could quantify or like give a sense as to the impact of tariffs that had on the quarter?

Anthony, we don't -- a dollar impact, no, because we adjusted in our pricing. I mean, we've been very clear from the beginning. We make strategic price changes immediately once we know the tariffs. And we feel like our positioning on that, even going back to COVID when we were doing all price increases, we know how to handle this and know how to move forward with it. So I don't think we had it. But the impact would come on LIFO, and I'll let Richard talk to that specifically.

Yes. Thanks. I did mention in my remarks about the impact of LIFO expense on our gross margins. So we are seeing as the tariffs -- as that material comes in, in the third quarter, and it will continue to come in the fourth quarter, you'll see our LIFO expense go up. So I believe last year, we had a LIFO benefit of around $800,000 for the year. So far this year, we have LIFO expense for the first 3 quarters of about $750,000. So I would expect to continue to see some more LIFO expense roll through the P&L throughout this year and probably into next year.

But Anthony, I don't -- we don't see that as an impact. We've been able to grow sales, and we've changed the prices and maintain our margin. So we feel good about where we're going in the direction we're taking with it, how we're handling it.

Understood. Okay. Got you. Okay. And then just in terms of your expense guidance, I know you talked about higher advertising and administrative costs. How should we think about those for next year? Do you think that trend will continue? Or just overall, just wondering if you could comment on what you're seeing in terms of cost of running the business?

Yes. I'd say for this year, we went up maybe about $5 million band on our non-variable costs from the last quarter to this quarter for the year. About 3/5 of that was advertising cost. The rest is on the administrative cost is more incentive compensation. This year, we are hitting our annual targets in our incentive plans. Last year, we were not. So it's kind of a tough comparison. We have not developed our full budget for next year, but I would expect basically normal inflationary type increases, nothing significant to note in the non-variable side of the business.

Anthony, let me speak to the marketing specifically. In '24, we basically pulled back too hard. We were experiencing some double-digit decreases in written. We're trying to manage the business. We had an election going on. And we basically -- if you remember from Q2, we increased our marketing expense. I think it was about $1 million. We upped that -- in the third quarter as well. We felt to levels that it needed to be. And I might want to remind you of that $2.8 million. About half of it is due to the Houston market is now new to us, and we're investing more advertising as we led to that -- our third store opening there. And then obviously, we also returned to direct mail, which we think is a key part of our direction going forward. So we have one event now that's out in the fourth quarter as well right now. So -- but I don't see marketing. I think we've gotten it back to levels that we can sustain. And I think for 2026, we'll be fairly flat with where we are in '25.

Our next question comes from Cristina Fernández with Telsey Advisory Group.

Congratulations also on the positive comp. I wanted to see if you can talk more about the composition of that comp. It definitely seemed like ticket was the bigger driver. So I wanted to understand, is that mostly due to the price increases? Or are you seeing consumers kind of trade up on the price points or navigate to some of those bigger ticket items?

Certainly, average ticket is driving that. One thing that we do look at is we have been able to drive our design tickets up by selling -- we're selling basically more pieces to the consumer. We measure that. And so that's helped drive it. But obviously, price increases are having an impact on that as well. I don't have a direct breakdown between the two, Cristina, but there's certainly both of those. And I will also add conversion rates, while we're not above last year, we are getting, as I commented in my notes, we're basically low single digits, and we were running mid-single digits at Q2 when I reported. So we're seeing continual improvement there, and that's obviously still a focus for us and where we think we still have significant opportunities moving forward.

And then on the price increases to offset the newer Section 232 tariffs, what's the timing of that? Have you already taken some or that's something that's going to take place here in the fourth quarter?

It has already taken place in early October. We got -- as soon as we knew and got to it, as I said, our merchandising and supply chain teams were working with our factories to get everything solidified and price changes were made early to mid-October. So they are already in place now as we go forward.

And then I also -- my last question is on the, I guess, bigger picture, how should we think about the level of sales where you can leverage SG&A expenses? I mean you had a great growth rate this quarter, 10%, but expenses grew faster than that. So should we think about a growth rate or more an absolute number of sales that will allow you to leverage those expenses and start to see operating margin expansion year-over-year as your sales grow?

Yes, Cristina, if you look historically, when we get particularly above $800 million and -- $800 million to mid-$800 millions, you really start seeing some expansion there. And then as you saw during the COVID years when we blew $1 billion, you really saw it fall. So I would definitely, in my mind, over $800 million, you really see it falling significantly to the bottom line.

Yes. And as I commented on the marketing, Cristina, we're going to keep that. We think it will be fairly flat in '26 to '25. So that will be an opportunity to leverage as well. We can continue to get the growth.

There are no further questions at this time. And I would now like to turn the floor back over to Tiffany for closing comments.

Thank you for your participation in today's call. We look forward to talking with you in the future when we release our fourth quarter results. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.