Sidoti & Company - Expect Sales, Margin Gains Drove Higher 3Q:26 EPS; See Further Upside From Growing Design Service Penetration, Expanding Store Base, Positive Expense Leverage; Maintain $36 Price Target

Research on Heavitree Brewery (HVT) from Sidoti & Company

As referenced in today's Residential Furniture Industry update note, last week, we met with Haverty's senior management team at the High Point Market in High Point, NC. Following the 7.1% year over year same-store sales gain registered in 3Q:25, we estimate that 3Q:26 same-store sales increased 5.9%, mostly due to our expectation of a higher average ticket driven by more in-home design sales. Assuming one net new store addition, we estimate total September quarter revenue advanced 6.7% to $207.5 million. As detailed in Exhibit 1 below, we think a modestly higher gross margin and favorable SG&A expense leverage resulted in a much improved operating margin and EPS of $0.47 compared to $0.28 a year earlier. In our view, HVT will benefit from its continued strategic opening of about five stores per year, an increased focus on driving more revenue from in-home design services (now representing about 36% of sales but only around 17% of its customers), while also looking to grow its e-commerce sales over time. Assuming additional same-store sales gains, new store openings and operating margin expansion, we estimate EPS of $1.77 in 2026 and $3.00 in 2027, up from $1.19 in 2025. We maintain our $36 price target, which is based on 12x our 2027 EPS estimate of $3.00. Our moderate risk rating reflects our assumption for a profit recovery in 2026 and 2027, supported by HVT's solid balance sheet and ample free cash flow generation (estimated at $1.32 per share in 2026 and $2.24 per share in 2027).