Operator: Our next question comes from the line of Budd Bugatch with Water Tower Research. Please proceed with your question.
Budd Bugatch: Good morning and thanks for taking my question. Good morning, Clarence, Steve and Richard. Congratulations on the profit performance involve this quarter, very impressive.
Clarence Smith: Welcome back Budd. It’s been a long time.
Budd Bugatch: Thank you. Thank you. Thank you, Clarence. Good to be back. The questions I have primarily relate to the sales impact, and you all have got a wide swap in stores and talked to a lot of consumers in the stores as you visit the stores. And we’ve had that – and Clarence you noted the twin effects of movement from focusing on the home, which we saw during COVID and then the higher interest rates, the kind of a double whammy to industry demand right now. I wonder if you – as you talk to consumers, are you seeing that change. It seems like we watch this diversion to services away from the home now for maybe three to five quarters or so. Are you seeing that come to an end? Do you sense that as you talk to consumers in the stores?
Clarence Smith: Well, Steve and I have been with the industry players, and we’re listening to what’s happening out there. It’s certainly an impact. And I don’t see a clear ending to it. Some of the terms we’ve heard is the second half of next year; it might start to get better. That’s probably as good as I can give you as far as what we anticipate. I mean we’re in a tough situation now for the industry. And those who have debt and need to refinance will be – will have issues. And there are going to be opportunities for us. So we’re prepared to take advantage of converting existing boxes to [indiscernible]. We’re very good at that, and that’s what we’re looking at. So it is a tough time, and I don’t see a clear ending to it, but I would think late next year should be better.
Budd Bugatch: And Steve, are you seeing any change in the cycle times of when customers start the process and particularly thinking of design customers, they begin and you go through a process, as the sales cycle at all changed? And can you…
Steve Burdette: Budd, on that side of it – yes, from a designer standpoint, it hasn’t changed. I mean it’s still the same. I mean, if somebody is either moving, they’re redoing a home, and that’s been part of the process. What may have sped it up is our availability of product. We can get it quicker and provide it quicker to them, where a year ago, two years ago we were struggling with that. And so that stretched it out because of us. Now it’s because it’s where the consumer is, and so we’re able to meet them. So I’d say, from that standpoint, it has condensed because of the consumers. We’re able to deliver the product quicker to the consumer based on their needs. But overall, I’d say the cycle is still the same. We can deliver quickly on in-stock product. We still deliver within less than a week, and in some cases, within two to three days. It just depends on the area we’re going to when that market – when that’s available.
Budd Bugatch: That’s always been a strength of Haverty. And you have a number of different regions. Are you seeing any geographical changes between, or differences between the regions in terms of comps and order comps?
Steve Burdette: We really aren’t, Budd, I mean, it’s pretty much across the board – in the – across all the districts. We’ve got seven districts and they’re all equally down within a percentage or two to reach out. So there’s no real difference there.
Budd Bugatch: Okay. And the quarter ending backlog versus the quarter beginning backlog, can you comment if there are much change in that? I know you had less – the orders were down, less than delivery. So that would say that backlog probably grew during the quarter. Is that a good way to look at it?
Richard Hare: Hey, Budd its Richard. I’d say the backlog number in the last quarter and in the quarter – in the third quarter is basically flat. And our customer deposit number at the end of the third quarter versus at the end of the second quarter is basically flat as well. So we’re kind of at a – we’re back to the old backlog. We’re delivering what the orders that we take in.
Budd Bugatch: And you haven’t made any changes, I’m sorry…
Richard Hare: Go ahead, Clarence.
Clarence Smith: What is you kill [ph] again, Budd.
Budd Bugatch: Got you. I know that brings Clarence, so we’re – in our industry, we’re very familiar with that phrase. The issue that you’ve mentioned and I think it’s very accurate. You’re a strong player with your suppliers and the suppliers have got to be hurting maybe even worse than the customers are – than their customers are. And you have some opportunity there. What are you hearing from them? And you talked about some of the new collections coming in. Obviously, you’re not going to take advantage of them, but that doesn’t mean that you don’t get great new product and great new pricing.
Clarence Smith: I mentioned John Gill in Vietnam last week, and he told me that a number of our key suppliers who are the best players in the industry, are down anywhere from 30% to 50% and they’re all looking for orders. So, I mean, we’re not worried about these guys failing or anything like that, but it is hitting the manufacturers, I think, more dramatically than the retailers right now, and that all catches up. So everything was on hold last year. I mean it took us sometimes up to nine months to get product, and now it’s down to normal or even shorter. So a number of vendors are hurting, but I think our suppliers, we feel very good about. And the partnership there are strong, and they come to us and give us great values, and we appreciate that.
Budd Bugatch: Okay. And you did mention you were bringing in some leather from China. Are there any geopolitical issues that are going on that might worry you with China? Because the country has got its own issues, but…
Clarence Smith: We used to do almost everything from China now only basically better in leather. They’re very good suppliers. We like them. We do. It does make you so uncomfortable with what’s happening, but they’re able to work through it, and we’re getting the product and we’re good partners. So they still, with even the tariff on top of them, are offering better quality product than we’re getting elsewhere. But you certainly have to look at moving into other places like Vietnam or even Cambodia, things like that. We’re looking at all of that. But right now, we have some very strong players in China that we’re still doing good business with.
Budd Bugatch: And much of the leather in China, as I recall was being imported from Italy and actually tanned either in Italy, also in China because of their environmental [indiscernible]. Is it still coming from Italy? I’m sorry.
Clarence Smith: It does. It comes from the U.S. too and South America. But that’s where mostly – anywhere.
Budd Bugatch: Yes. Okay. And last for me, I’m always curious beginning to the outdoor furniture business. When I was in the retail business, it was the product category; both hated and loved the most because of the seasonality and the differences. So you said you’re going to do what right this time. Can you maybe give us a feeling of what you meant by that? And what was different at this time over last time?
