Please stand by. We're about to begin. Good day, and welcome to the Haverty Furniture first quarter results 2022 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Hare, Chief Financial Officer. Please go ahead, sir.
Thank you, operator. During this conference call, we'll make 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 Securities and Exchange Commission. Our Chairman and CEO, Clarence Smith, is a little under the weather this morning, and he will not be on today's call. Our President, Steve Burdette, will now give you an update on our results and comment on our business.
Thank you, Richard. Good morning, and thank you for joining our 2022 first quarter conference call. We are pleased to report a record first quarter in sales and a strong profit of $1.11 per share versus $1.04 per share last year. We had outstanding gross profit margins of 59%, demonstrating our ability to adjust our retail pricing to our cost increases and our values in the marketplace. We had good pricing discipline in the stores and with our merchandise teams to help build the record gross margins. Our business was good during the early part of the quarter in both delivered and written business compared to the very strong results in 2021 due to a record President's Day weekend.
For the quarter, our sales performance could be attributed to our continued improvement in our average ticket of over $3,000, an improvement in our special orders, and more H Design in-home opportunities. However, we now face headwinds, including inflation, rising interest rates, continued supply chain disruptions, softening consumer confidence, and an adverse geopolitical situation. Overall, our written sales were down 8.8% for the quarter, with March being the weakest month. We have a very strong backlog of undelivered orders, but our average age has increased slightly to 11- weeks. However, with our planned increase in shipments on the water, we expect to be able to fulfill a number of the backorders and reduce the average age of the undelivered orders over the next several quarters. This past weekend, we opened our third store in the Austin market in Pflugerville, Texas.
We believe that we are beautifully positioned to build our business in that dynamic market. This year, we expect to open a relocated store in Indianapolis, a store in Gainesville, Virginia, which is a suburb of Washington, D.C., and another store in an existing market not yet announced. We plan to net an additional two stores in 2022, bringing our store count to 123 at year-end, which will be a 1%-2% growth in retail square footage. We are closely evaluating new store opportunities to expand our reach within our distribution footprint. We have several sites we are pursuing, but we'll be opportunistic in making the best long-term deals for the company. We believe that we are very well-positioned in many of the fastest-growing markets in the country and offer a unique, better quality product mix with broad custom and special order opportunities.
Our merchandising teams are excited about the new products and designs which are finally arriving following the COVID delays. It is energizing for the store teams to have the new designs hit the floor. Several of our new collections have already jumped to the bestseller list. We are pleased with our recently expanded curated product selections that are held in third-party warehouses. This allows us to expand our selections, serve our customers quicker, and move into new home furnishing categories without inventory risk. The strongest categories are occasional, home office, upholstery, and outdoor. During Q1, we continued to experience challenges in our supply chain network. Our import vendors have been slower to recover from the shutdowns in 2021, and the recent COVID restrictions in Shanghai have not helped.
However, we do remain optimistic that we are seeing an increase in production over the last 60- days out of Vietnam, which should help to offset some of these delays. Also, we continue to be encouraged with the reduction in lead times from our domestic upholstery vendors, which we have seen lead times reduced by 10%-25%. Our expectations are this will continue to improve during Q2. Our special order business has improved by 20%+ from Q4 - Q1 in total dollars, which is a tremendous improvement, and we remain focused on getting our special order business back to our targeted 25% of total upholstered sales by mid-year. It is important to note that this business carries a higher average ticket. The most important internal project for the company is the upcoming relaunch of our havertys.com.
We are on track for the launch later this summer using the Adobe suite of applications as the foundation. Havertys.com is our front door, and almost all our customers utilize the site in the shopping process. Several of the planned enhancements are an improved AI-driven smart search, improved brand positioning, better personalization, integrated content and commerce-enhanced category and product tools, and real-time analytics, all of which should provide our customers with faster and more relevant content to drive a better user shopping experience. We are committed to having the best home furnishings website in the industry, and our team is excited about the upcoming relaunch.
We have had a good start to the year in repeating our record sales and profit performance, and we believe that we are the best-positioned home furnishings retailer in the country and see great growth opportunities, both near term and into the future. Our management teams continue to focus on retention with our team members to ensure that we are furnishing happiness to all our customers with the absolute best service and quality as we continue to enhance the customer shopping experience through our key investments in our digital capabilities. Finally, I'd like to thank the entire Havertys team and our merchandise and logistic partners for all their support and efforts in making Q1 a record for Havertys. Now I'll turn the call over to Richard.
Thank you, Steve, and good morning. In the first quarter of 2022, net sales were $238.9 million, a 1% increase over the prior year quarter. Comparable store sales were up 0.2% over the prior year period. Our gross profit margin increased 190 basis points from 57.1% - 59% due to better pricing discipline and merchandise mix. Selling, general, and administrative expenses increased $5.4 million or 4.9% to $115.2 million. As a percentage of sales, these costs approximated 48.2% of sales, up from 46.4% in the prior year quarter. As expected, we saw increased selling, distribution, and transportation expenses during the quarter.
Income before income taxes increased $356,000 - $25.7 million. Our tax expense was $6.4 million during the first quarter of 2022, which resulted in an effective tax rate of 24.7%. The primary difference in the effective rate and statutory rate is due to state income taxes and the tax benefit from vested stock awards. Net income for the first quarter of 2022 was $19.4 million or $1.11 per diluted share on our common stock compared to net income of $19.4 million or $1.04 per share in the comparable quarter last year.
Now looking at our balance sheet, at the end of the first quarter, our inventories were $119.9 million, which was up $7.8 million from the December 31, 2021 balance and up $16.3 million versus the Q1 2021 balance. At the end of the first quarter, our customer deposits were $98.5 million, which was down $400,000 from the year-end balance and down $6.2 million versus the Q1 2021 balance. We ended the quarter with $162.3 million of cash and cash equivalents. We have no funded debt on our balance sheet at the end of Q1 2022.
Looking at some of our uses of cash flow, capital expenditures were $7.1 million for the first quarter of 2022, and we paid $4.3 million of regular dividends during the first quarter of this year. Also, during the first quarter, we purchased $12.5 million of common shares, or 438,499 shares. At the end of the first quarter of 2022, we have $12.5 million remaining under current authorization in our buyback program. Our earnings release lists out several additional forward-looking statements indicating our future expectations on certain financial metrics. I'd like to highlight a few, but please refer to our press release for additional commentary. We do expect our gross margins for 2022 to be between 57.7% and 58%.
We anticipate gross profit margins will be impacted by our current estimates of product and freight costs and changes in our LIFO reserve. Our fixed and discretionary type SG&A expenses for 2022 are expected to be in the $295 million-$298 million range, a 5% increase over the prior year levels. The variable type costs within SG&A for 2021 are expected to be in the range of 18%-18.2%. Our planned CapEx for 2022 remains at $37 million. Anticipated new or replacement stores, remodels, and expansions account for $20.1 million. Investments in our distribution network are expected to be $12.7 million, and investments in our information technology are expected to be approximately $4.2 million.
Our anticipated effective tax rate in 2022 is expected to be 25%. This projection excludes the impact from vesting of stock awards and any potential new tax litigation. As Steve indicated, we are excited about our opportunities for future growth, and we are well positioned for the future. This completes my commentary on the first quarter financial results. Operator, we would like to open up the call for any questions at this time.
Thank you. To signal for a question, please press star one on your telephone keypad. Also, if you are using a speakerphone, please make sure that your mute button is turned off to allow your signal to reach our equipment. Once again, it is star one at this time for questions. We'll pause for just a moment to give everyone the opportunity to signal. We'll take our first question from Anthony Lebiedzinski with Sidoti & Company.
Good morning, and thank you for taking the questions. Hope you guys are doing well.
Hey, Anthony.
Hey, first, a quick question just to get some color. As far as the Q1 sales, you know, how much did pricing influence revenue? Just wanna get a sense of, you know, pricing versus volume.
Well, you know, Anthony Lebiedzinski, we're continuing to see obviously average ticket rise and, you know, pricing. Price increases have slowed some from where they were, but that's certainly continuing to have an impact on our business, no doubt about it. Exact percentage, we don't have that. We don't have that calculated to give that to you, specifically.
Okay. That's fine. Just curious, you know, what demand levers are you using to improve the current slower pace of store traffic? Just wanted to get some color as far as what you're trying to do there.
You know, overall, Anthony, I'd say, you know, one of the things we've looked at as we commented on March is we probably are getting back into more seasonality in our business. Travel has picked back up, you know, with spring break in March. Certainly, Easter can be either in March or April, and then you deal with tax season. All that's behind us now, and we're looking forward to the, you know, Memorial Day, which is our biggest event of the first half of the year. We have our most aggressive promotion going out that we run, but it's for this event. Then we also have our credit that we have amped up.
That's probably the one difference that we've done right now, Anthony, is we've increased our credit offering and running it a little more often right now to try to encourage that customer. We are seeing closing rates, Anthony. I will add to that, have remained flat over last year. Average ticket is up, as we have stated, about 15%. The one element of our three key metrics, traffic is the only one that's down right now. You know, we're hopefully looking for that to bounce back.
Got it. Okay. All right. You know, in terms of the backlog, you mentioned that it's bigger. Just, you know, in terms of the product categories, what is that. Well, first of all, can you give some more color or maybe try to quantify the backlog just to have a better sense as to how big that is? Or if you can't share like specific details, maybe just give us some more color, please, as far as, like, which product categories are the largest components of that backlog?
Yeah. Anthony, I'd say our backlog remains strong. At the end of the quarter, it's up mid-single digits over the prior backlog. In terms of product categories, I think in terms of sales for Q1, we did see a decline in case goods and an increase in upholstery. I would say our backlog would have quite a bit of case goods in it.
I'd agree with that. Certainly weighted that way.
Gotcha. Okay, thanks for that. Then, you know, in terms of the gross margin, you guys, you know, obviously increased the gross margin outlook for the year. Over the last few years, you have steadily increased the gross margin. Kind of how should we think about, you know, longer term, gross margin and sustainability of these, you know, gross margins going forward?
Well, I'll start and Steve, please add to it. Our merchandising group, you know, in the short-term here did a great job, was very proactive and opportunistic on certain price increases. They also, you know, expanded those margins. We didn't just maintain, but we also expanded. We expect to see, you know, in our guidance going forward this year, you know, we're gonna continue to see the same pressures we saw last year, you know, with freight and other rising inflation costs. We don't expect to maintain the level we're at now through the rest of the year. We expect some slight erosion. Now, in terms of overall company strategy with gross margins going up.
Yeah, I would add to that, Anthony. We just believe we're getting the value we deserve and what our product deserves and that, you know, we have better discipline in the stores, and discipline from our merchandising team. You know, we're making sure that we get that value, that price on the product. We feel comfortable, as Richard said, that we'll stay in that 57.7%-58%, which is a slight erosion from where we were in the first quarter. Some of that is, you know, in case we have to get with our pricing or any kind of, you know, as far as promotions, looking at that, if we have to do things differently with pricing, and also with cost of goods catching up with it. We don't see any erosion any further than that 57.7%-58%. We feel comfortable with it.
I mean, just going back, you know, we were, I think, 54.2% in 2019, 56% in 2020, 57.1% in 2021. You know, we're delighted to continue to see those margins go on.
Yeah. That's definitely great to see there. So in terms of the supply chain, just wondering what is your exposure to China now? You mentioned, Steve, that the Shanghai lockdown doesn't help. Just wanting to get a better sense as to the magnitude of your exposure to China now.
Well, if you look at our imports, Anthony, it's about 55% of our purchases, a little over that, come from imports overseas and 45 here. Of that, about 20% or so, 25% is coming from China. We have some exposure, but production is happening. Our biggest struggle there is, 'cause we're outside of Shanghai, it's the trucking side of it that has caused some disruption in getting it out of the ports. Our vendors are certainly trying to find creative ways to get the stuff to the ports and we can get it out. We are seeing some shipments come out, just not at the velocity we had expected. You know, we're hoping to see that solve itself here soon.
Got you. Okay. You know, last question from me. You know, in terms of the $12.5 million left on the buyback, do you expect to fully use that in this second quarter?
We'll have to wait and see. We definitely think that'll get us through the next quarter or two. We had initially indicated we would get through that by the end of the second quarter. You know, the world's changed a little bit, so it may be the second or third quarter at this point.
Got it. All right. Well, thanks for that and best of luck going forward.
Thanks.
Thank you.
Once again, it is star one for questions. We'll pause for just a moment. That does conclude our question and answer session. I'd like to turn it back to Mr. Hare for any additional or closing comments.
Well, we thank you for your participation in today's call. We certainly look forward to talking with you in the future when we release our second quarter results.
Thank you. That does conclude today's call. We'd like to thank everyone for their participation. You may now disconnect.