All year long, Haverty Furniture (NYSE:HVT) has defied its critics and beaten analyst consensus estimates for its quarterly earnings. Can the furniture retailer make it a clean sweep for the year? We'll find out on Tuesday afternoon, when Haverty reports fourth-quarter and full-year 2006 earnings.

What analysts say:

  • Buy, sell, or waffle? Six analysts follow Haverty, down one from last quarter. Bullish sentiment is also down, however. Only one analyst rates Haverty a buy; the rest all say hold.
  • Revenues. On average, they expect to see quarterly sales fall 4% to $215.7 million.
  • Earnings. Profits are predicted to crater, falling to just $0.12 per share.

What management says:
When last we checked in on Haverty, the firm was coming off of a bang-up quarter. Revenues and earnings sufficed to beat Wall Street's expectations. Same-store sales came in 8% stronger than in the previous year's third quarter -- but storm clouds were on the horizon. CEO Clarence Smith took a cautious stance on Q4, warning that he was seeing a "definite slowdown" in furniture sales.

Although the firm has filed no updates with the SEC since then, a review of its press releases shows Smith's misgivings were well-founded. Same-store sales declined in November, December, and January. That doesn't bode well for Tuesday's news.

What management does:
That's a real pity, because it threatens to blow up a very nice trend of rising profitability at the retailer. Rolling gross margins have been climbing steadily for the last 18 months, operating margins for nearly a year, and net margins, while more wobbly, also seem to be on a general uptrend.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

46.9%

47.8%

47.9%

48.5%

48.9%

49.2%

Operating

3.1%

2.7%

2.5%

2.6%

3.0%

3.1%

Net

2.1%

2.1%

1.8%

2.0%

2.3%

2.2%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
One need not abandon all hope. As Smith observed in the firm's most recent monthly sales report, "January started very slowly with weak business for the New Year's holiday in many of the markets we serve, [however] We experienced a gradual increase in momentum throughout January with total written sales off by about 6% for the full month."

Even so, Smith took the opportunity to again warn investors in this sector that "the general trend for retail home furnishings sales remains sluggish." In contrast to other furnishings retailers, who have had to discount their wares to move inventory, though, Haverty worked down its own inventories impressively last quarter, and as a result, Smith confirms that Haverty has "continued to maintain our pricing integrity and are focusing on adjusting our operating costs to meet the current business conditions." Reading between the lines, therefore, I suspect we'll see continued gross margin strength on Tuesday -- but perhaps special charges for whatever moves the company has made to "adjust" its operating costs. Even those, however, will likely be aimed at keeping operating margins rising in the long term.

Related Companies:

  • Hooker (NASDAQ:HOFT)
  • La-Z-Boy (NYSE:LZB)
  • Sealy (NYSE:ZZ)
  • Tempur-Pedic (NYSE:TPX)

For another look at Haverty, check out "Foolish Forecast: Haverty Lounges In ."

Hooker is a Motley Fool Hidden Gems recommendation, and La-Z-Boy is a Motley Fool Income Investor selection. Try out these or any of our other Foolish newsletters for yourself, free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above.