$21.57
$41.92
bear $21.57
base $32.99
bull $41.92
margin of safety $17.00
market price* $28.10
THE BUSINESS. Havertys is a 141-year-old furniture retailer that sells its own-brand sofas, bedroom, dining and mattress lines through 129 stores in 17 states across the South and Midwest, plus its website. It designs its products and sources them from factories in the U.S. and overseas. Customers pay deposits when they order, and the company delivers from its own regional distribution centers. Gross margins are steady at about 60%. Most of the swing in profit comes from sales volume spread across a large fixed cost base of rent, salaries and delivery. Sales follow home buying and moving. Revenue was about $800-820 million a year in 2016-2019, rose above $1 billion in the 2021-2022 home-furnishing boom, and fell to $723 million in 2024 when existing-home sales froze. It recovered to $759 million in 2025. Sales in the first half of 2026 were up 5.9%, and the second quarter brought a fourth straight quarter of comparable-store growth. The company has no borrowings. It had $104 million of cash at June 30, 2026, has paid a dividend every year since 1935, and in June 2026 extended its unused $100 million credit line to 2031. WHAT THE BUSINESS EARNS. We measure the cash an owner could take out each year. We start with operating cash flow, strip out swings in inventory, customer deposits and payables, and subtract stock pay and the capital spending needed to keep the stores and warehouses up to date. On that basis the business produced about $26M (2016), $33M, $39M, $26M, $30M, $83M (2021), $81M (2022), $22M (2023), $9M (2024) and $24M in 2025. Interest is negligible, so this is also the cash the business produces before lenders. Two accounting points: (1) the 2020 figure excludes the $34.7 million gain from selling and leasing back the distribution centers; (2) before 2019, part of the rent on some leased stores was recorded as debt repayment, which flattered 2016-2018 by about $2 million a year. Since the 2020 sale-leaseback the company also pays rent on its warehouses. Stores and warehouses are leased under about $231 million of lease obligations. That rent is already deducted in the figures above, so it is not subtracted again as debt. THE NORMAL LEVEL. Furniture retail is cyclical, so we use the whole 2016-2025 decade, which covers a normal housing market, a boom and a bust. After the two rent-related adjustments, the median is about $28 million. Because warehouse rent now replaces the depreciation of owned buildings, we set today's normal level at about $26 million a year, or roughly $1.64 per share on about 15.9 million diluted shares. Cash generated in 2025 rose 172% from the depressed 2024 level. The base case starts 2026-27 at $25-26 million, below that recovery rate and close to the 2025 level, even though the first half of 2026 ran ahead of the first half of 2025. GROWTH WE CREDIT. The only growth credited is new stores. Two new leases are signed, the company plans to reach 133 stores by the end of 2026, and it has opened stores steadily for decades out of its own cash. The store count, however, rose only from 124 at the end of 2016 to 129 today, so we credit about 0.5% a year in the base case and 1% in the bull case. We give no credit to a housing recovery, a return to 2021-22 profits, gains in market share, or management's 2026 margin and expense guidance. BASE CASE (median): cash generation of $25 million in year 1 and $26 million in year 2, then 0.5% a year from new stores to about $27 million by year 10. That level then continues without growth. The business has run through many housing cycles since 1885 and pays its way through them, which supports a level that lasts. Business value is about $445 million. With no debt and about $79 million of cash beyond the roughly $25 million the stores need to operate, equity is worth about $525 million, or about $33 per share. BEAR CASE (10th percentile): new import tariffs, including the 10% Section 122 tariff from February 2026 and the 10-12.5% Section 301 tariffs disclosed in the June 2026 quarterly report, hold cash generation to $18 million in years 1-2. Then a housing downturn like the 2022-2024 freeze, when revenue fell 31% from its peak, cuts sales about 15% from current levels for two years. With fixed costs above $300 million a year, the business loses about $15 million of cash in each of those years, recovers over two more years, and settles at $20 million a year permanently. Business value is about $264 million. With no debt and $79 million of excess cash, equity is about $343 million, or about $21.60 per share. The cash pile would cover the loss years without borrowing. BULL CASE (90th percentile): store openings land on plan, the four-quarter run of comparable-store growth holds, and cash generation returns over three years to $34 million. The business earned that much in 2017-2018 with fewer stores and before paying warehouse rent. Cash generation then grows 1% a year from stores to about $36.5 million and holds there. Business value is about $587 million, plus $79 million of excess cash, for about $667 million or about $42 per share. WHAT COULD MAKE THIS WRONG. The normal level is uncertain because results swing hard with housing: within three years the business went from $81 million to $9 million. A deeper or longer slump than 2023-2024, such as the 2008-2010 housing collapse, or tariffs that permanently squeeze margins would leave the shares worth about the bear figure or less. The debt-free balance sheet and the cash cushion mean the company should survive even a severe downturn without diluting shareholders. A larger risk to returns is the store lease commitments, which cannot be cut quickly. Our earlier estimates were made on a different basis and are not comparable with these figures. MARGIN-OF-SAFETY PRICE: $17. We are moderately sure of the normal level: a decade of filed cash flows centers on $25-30 million, but single years ranged from $9 million to $83 million. The worst plausible outcome is a multi-year housing and tariff squeeze with losses. With no debt, a $100 million unused credit line and more than $100 million of cash, the company would survive it, though owners might wait years. If we are wrong about both the normal level ($20 million rather than $26 million) and store growth (none), the shares are worth about $21-22. At $17, the price values the company at about $270 million. Subtracting the excess cash leaves about $190 million for a business that normally generates about $26 million a year, which is roughly 7 times normal cash generation. The $1.32 regular dividend alone would yield close to 8% over the holding period. At that price, normal earnings and dividends imply 20% a year if the business only returns toward its normal level over three or four years. A further slump would still leave a cushion of cash and the dividend record.