ThisIn addition to historical information, this document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition. These statements are within the meaning of Section 27A of the Securities Act of 1933 and Section 21F of the Securities Exchange Act of 1934.

These forward-looking statements are based upon assessments and assumptions of management in light of historical results and trends, current conditions and potential future developments that often involve judgment, estimates, assumptions and projections. Forward-looking statements reflect current views about our plans, strategies and prospects, which are based on information currently available.

Although we believe that our plans, intentions and expectations as reflected in or suggested by any forward-looking statements are reasonable, they are not guarantees. Actual results may differ materially from our anticipated results described or implied in our forward-looking statements, and such differences may be due to a variety of factors. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business.Important factors which could cause our actual results to differ materially from the forward-looking statements in this report include, but are not limited to, the following items, in addition to those matters described in Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Discussed elsewhere in further detail in this report are some important risks, uncertainties and

Forward-looking statements are only as of the date they are made and they might not be updated to reflect changes as they occur after the forward-looking statements are made. We assume no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time to time in our other reports and documents filed with the Securities and Exchange Commission, or SEC, and you should not place undue reliance on those statements.

We intend for any forward-looking statements to be covered by, and we claim the protection under, the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Unless otherwise indicated by the context, we use the terms “Havertys," "we," "our,"” “we,” “our,” or "us"“us” when referring to the consolidated operations of Haverty Furniture Companies, Inc. and subsidiary.

Havertys is a specialty retailer of residential furniture and accessories. Our founder, J.J. Haverty began the business in 1885 in Atlanta, Georgia with one store and made deliveries using horse-drawn wagons. The Company grew to 18 stores and was incorporated in September 1929. Anticipating further growth, the Company accessed additional capital through its initial public offering in October 1929.

Havertys has grown to 120121 stores in 16 states in the Southern and Midwest regions. All of our retail locations are operated using the Havertys name and we do not franchise our stores. Our customers are generally college educated women in middle to upper-middle income households. Our brand recognition is very high in the markets we serve, and consumer surveys indicate Havertys is associated with a high level of quality, fashion, value, and service.

We develop our merchandise selection with the tastes ofto meet the diverse taste of our typical “on trend” consumercustomer in mind. A wide range of styles from traditional to contemporary are in our core assortment and mostvirtually all of the furniture merchandise we carry bears the Havertys brand. We also tailor our product offerings to the needs and tastes of the local markets we serve emphasizing more “coastal,” “western” or “urban” looks as appropriate. Our custom upholstery programs and eclectic looks are an important part of our product mix and allow the on-trend consumer more self-expression.

Our customers use varying methods to purchase or finance their sales. As an added convenience to our customers, we offer financing by third-party finance companies or through an internal revolving charge credit plan.companies. Sales financed by the third-party providers are not Havertys’ receivables; accordingly, we do not have any credit risk or servicing responsibility for these accounts, and there is no credit or collection recourse to Havertys. The most popular programs offered through theSlightly less than one-third of our sales are third-party providers for 2018 were no interest offers requiring monthly payments over periods of 18 to 36 months.financed. The fees we pay to the third-party are included in our selling, general, and expenses (“SG&A&A”) as a selling expense. We also maintain a small in-house financing program for our customers with the offer most frequently chosen carrying no interest for 12 months and requiring equal monthly payments. This program generates very minor credit revenue and is for credit worthy customers who prefer financing with the retailer directly or who are not able to quickly establish sufficient credit with other providers on comparable terms.

As of December 31, 2018,2021, we operated 120121 stores serving 8385 cities in 16 states with approximately 4.4 million retail square feet. Our stores range in size from 19,00015,000 to 66,00060,000 selling square feet with the average being approximately 35,000 square feet. We strive to have our stores reflect the distinctive style and comfort consumers expect to find when purchasing their home furnishings. The store’s location and curb appeal isare important to the type of middle to upper-middle income consumer that we target, and our use of classicalattractive facades and attractive landscaping complementscomplement the quality and style of our merchandise. Interior details are also important for a pleasant and inviting shopping experience. We are very intentional in having open shopping spaces and our disciplined merchandise display ensures uniformity of presentations in-store, online and in our advertising.

We currently have no plans to expandadd stores outside our distribution footprint and there are a limited numberfootprint. The planned expansion of our current distribution capabilities will enable us to consider additional markets that we do not currently serve that are expansion candidates.presently serve. We are evaluating certain existing stores for relocation.relocation or closure. We expect a slightan approximate 1% increase of approximately 2.0% in our retail square footage in 2019.2022.

We consider our website an extension of our brick-and-mortar locations and not a separate segment of our business. Most customers will use the internet for inspiration and as a start to their shopping process to view products and prices. Our website features a variety of helpful tools including a design center with 3D room planners, upholstery customization, and inspired accessories to create shareable “Idea Boards.” A large number of product reviews written by our customers isare also provided, which some consumers find important in the decision-making process.

The next stop in the purchase journey for most consumers is a visit to a store to touch, sit, and see merchandise in person. Our sales consultants also use havertys.com as a tool to further engage our customers while they are in the store. They may make their purchase in the store or opt to return home and finalize their decisions, place their orders online and set delivery. We limit online sales of our furniture to within our delivery network, and accessories to the continental United States.

Our website traffic, as expected, increased dramatically due to the COVID-19 pandemic as people spent more time in their homes and were reluctant or not able to shop in our stores. During the early stages of the COVID‑19 pandemic when our stores were closed, we reassigned a number of our store personnel to serve as online chat agents and our in-home designers shifted to virtual visits. Once our stores reopened, we saw, and have continued to see a rise in the completion of the sales process online. Our total sales completed online for 20182021 increased 28.9% over 2020 and were approximately 2%4.1% of our total sales and the2021 sales. This level of online sales increased 10.9%.makes our website our highest performing “store.”

We believe thatoffering a direct-to-customer business complements our retail store operations by building brand awareness.as we serve the customer in the method of their choosing and leverage the power of high touch service and online capabilities.

The retail sale of home furnishings is a highly fragmented and competitive business. There has been growth in the e‑commerce channel both from internet only retailers, from start-up furniture retailers and larger more established retailers, and those with a brick-and-mortar presence. The degree and sources of brick-and-mortar retail competition varyvaries by geographic area. We compete with numerous individual retail furniture stores as well as national and regional chains. Retail stores opened or operated by furniture manufacturers in an effort to control and protect the distribution prospects of their branded merchandise compete with us in certain markets.  Mass merchants, certain department stores, and some electronics and appliance retailers also have limited furniture product offerings. There has been growth in the e‑commerce channel both from internet only retailers and those with a brick-and-mortar presence.

We believe Havertys is uniquely positioned in the marketplace, with a targeted mix of merchandise that appeals to customers who are somewhat more affluent than those of promotional price-oriented furniture stores. Our online presence provides most elements of a seamless, omni-channel approach that many of our competitors do not have or cannot replicate. We consider the expansion of our custom order capabilities, free in-home design service, the tailoring of merchandise on a local market basis, and the ability to make prompt delivery of orders through maintenance of inventory, significant competitive advantages.

We purchase our furniture merchandise produced in Asia through sourcing companies and also buy direct from manufacturers. We have dedicated quality control specialists on-site during production to ensure the items meet our specifications. Our employeesdirect import team works with industry designers and manufacturers in some of the best factories throughout Asia. Approximately 15.9% of our case goods sales and 8.6% of our upholstery sales in 2021 were generated by our direct imports.

We believe that our distribution and delivery system is one of the best in the retail furniture industry and provides us with a significant competitive advantage. Our distribution system uses a combination of three distribution centers (“DCs”) and four home delivery centers (“HDCs”). The DCs receive both domestic product and containers of imported merchandise. A warehousing management system using radio frequency scanners tracks each piece of inventory in real time and allows for random storage in the warehouse and efficient scheduling and changing of the workflow. The DCs are amongalso designed to shuttle prepped merchandise up to 250 miles for next day home deliveries and serve HDCs within a 500-mile radius. The HDCs provide service to markets within an additional 200 miles. During 2022 we plan to expand our best investmentsOhio HDC and are criticalconvert our Virginia facility to a DC. The conversion will enable us to bring product to this location direct from ports and maintain

inventory closer to our customers. We use a third-party to handle over-the-road delivery of product from the DCs to the HDCs and market areas. We use Havertys team members for executing home delivery, and have branded this service “Top Drawer Delivery,” an important function serving as the last contact with our success. As of December 31, 2018, we had 3,418 employees: 2,102customers in individual retail store operations, 196 in our corporate and credit operations, 70 in our customer-service call centers, and 1,050the purchase process. Operating standards in our warehouse and delivery points.functions provide measurements for determining staffing needs and increasing productivity. At various points during 2020 and 2021 due to the COVID-19 pandemic, we had reduced delivery capacity due to fewer personnel. Time between purchase and delivery lengthened from our pre-pandemic average of 3 to 5 days for in stock items to 3 to 5 weeks when staffing constraints were the most acute and were 1 to 2 weeks by the end of 2020. We have added additional team members and purchases of in stock product were typically delivered within 3 to 5 days by the end of 2021. The disruptions to our supply chain have resulted in lower inventory and for out-of-stock merchandise delivery times can be 8 to 12 weeks. Our vendor partners for special order products continue to experience delays, but are reducing their backlogs and delivery on these orders is now 12 to 20 weeks on average. 

Our business is affected by traditional retail seasonality, advertising and promotion programs, and general economic trends. We typically achieve our smallest quarter by revenues in the second quarter and the largest in the fourth quarter. In 2018, our fourth quarter sales did not match historical patterns as business surrounding the traditional holiday shopping periods around Thanksgiving and Christmas was significantly lower thanThe “nesting” response generated by COVID-19 created outsized demand beginning in the prior years.second quarter of 2020 and, when combined with the strong housing market contributed to the strong sales levels we experienced through 2021.

We have registered our various logos, trademarks and service marks. We believe that our trademark position is adequately protected in all markets in which we do business. In addition, we have registered and maintain numerous internet domain names including “havertys.com.” Collectively, the logos, trademarks, service marks and domain names that we hold are of material importance to us.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.havertys.com as soon as reasonably practicable after such material is electronically filed with, the SEC

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding any statement in this annual report on Form 10-K or elsewhere. The following information should be read in conjunction with Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A), and the consolidated financial statements and related notes in Part II, Item 8. “Financial Statements and Supplementary Data” of this annual report on Form 10-K.

We routinely encounter and address risks, some of which may cause our future results to be different – sometimes materially different – than we presently anticipate. The following factors, as well as others described elsewhere in this report or in our other filings with the SEC, that could materially affect our business, financial condition or operating results should be carefully considered. Below, we describe certain important operational and strategic risks and uncertainties, but they are not the only risks we face. Our reactions to material future developments, as well as our competitors’ reactions to those developments, may also impact our business operations or financial results. If any of the following risks actually occur, our business, financial condition or operating results may be adversely affected.

We source substantially all of our products from non-exclusive, third-party producers, many of which are located in foreign countries. Although we have long-term relationships with many of our suppliers, we must compete with other companies for the production capacity of these independent manufacturers. We regularly depend upon the ability of third-party producers to secure a sufficient supply of raw materials, a skilled workforce, adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity. Although we monitor production and quality in many third-party manufacturing locations, we cannot be certain that we will not experience operational difficulties with our manufacturers, such as the reduction of availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines or increases in manufacturing costs. Such difficulties may negatively impact our ability to deliver quality products to our customers on a timely basis, which may, in turn, have a negative impact on our customer relationships and result in lower net sales.

We also require third-party producers to meet certain standards in terms of working conditions, environmental protection and other matters before placing business with them. As a result of costs relating to compliance with these standards, we may pay higher prices than some of our competitors for products. In addition, failure by our independent manufacturers to adhere to labor or other laws or business practices accepted as ethical, and the potential litigation, negative publicity and political pressure relating to any of these events, could disrupt our operations or harm our reputation.

All of our vendors must comply with applicable product safety laws and regulations, and we are dependent on them to ensure that the products we buy comply with all safety standards. Any actual, potential or perceived product safety concerns could expose us to government enforcement action or private litigation and result in recalls and other liabilities. These could harm our brand'sbrand’s image and negatively affect our business and operating results.

Optimal product flow is dependent on demand planning and forecasting, production to plan by suppliers, and timely transportation. We often make commitments to purchase products from our vendors in advance of proposed production dates. Significant deviation from the projected demand for products that we sell may have an adverse effect on our results of operations and financial condition, either from lost sales or lower margins due to the need to reduce prices to dispose of excess inventory. Disruptions to our supply chain could result in late arrivals of product. This could negatively affect sales due to increased levels of out-of-stock merchandise and loss of confidence by customers in our ability to deliver goods as promised.

In addition, there is a risk that compliance lapses by our foreign manufacturers could occur which could lead to investigations by U.S. government agencies responsible for international trade compliance. Resulting penalties or enforcement actions could delay future imports or otherwise negatively impact our business. There also remains a risk that one or more of our foreign manufacturers will not adhere to applicable legal requirements or our compliance standards such as fair labor standards, the prohibition on child labor and other product safety or manufacturing safety standards. The violation of applicable legal requirements, including labor, manufacturing and safety laws, by any of our manufacturers, the failure of any of our manufacturers to adhere to our global compliance standards or the divergence of the labor practices followed by any of our manufacturers from those generally accepted in the U.S., could disrupt our supply of products from our manufacturers, result in potential liability to us and harm our reputation and brand, any of which could negatively affect our business and operating results.

Supply chain challenges have been faced by the entire home furnishings industry, including the Company, as a result of COVID-19 related labor shortages and supply chain disruptions. These supply chain disruptions have created significant delays in our ability to fulfill customer orders and increased backlogs. The risereceipt of inventory sourced from impacted areas has been slowed or disrupted and our merchandise suppliers are expected to face similar challenges in receiving materials and fulfilling our orders. In addition, ocean freight capacity issues continue to persist worldwide due to the ongoing global COVID-19 pandemic as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container. Streamline ships are charging priority booking fees to allocate space as they have less ships and workers operating. While we continue to manage and evaluate our freight carriers, there is no indication that shipping container rates will return to historical levels in the near-term and these increases could have a material adverse effect on our consolidated results of operations.

Furthermore, transportation delays, higher oil and gasoline prices, could affectincreases on shipping containers rates, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas, may impact our profitability.

We utilize three large distribution centers to flow our merchandise from the vendor to the consumer. This system is very efficient for reducing inventory requirements but makes us operationally vulnerable should one of these facilities become damaged.damaged or experience significant business interruption. If such an interruption were to occur, our ability to deliver our products in a timely manner would likely be impacted.

Our ability to operate our business from day to day, in particular our ability to manage our point-of-sale, distribution system and credit operations,payment information, largely depends on the efficient operation of our computer hardware and software systems. We use management information systems to communicate customer information, provide real-time inventory information, manage our credit portfolio and to handle all facets of our distribution system from receipt of goods in the DCs to delivery to our customers’ homes. These systems are subject to damage or interruption from power outages, computer and telecommunications failures, viruses, phishing attempts, cyber‑attacks, malware and ransomware attacks, security breaches, severe weather, natural disasters, and errors by employees.

The failure of these systems to operate effectively, problems with integrating various data sources, challenges in transitioning to upgraded or replacement systems, difficulty in integrating new systems, or a breach in security of these systems could adversely impact the operations of our business. Though losses arising from some of these issues would be covered by insurance, interruptions of our critical business information technology systems or failure of our back-up systems could result in longer production times or negatively impact customers resulting in damage to our reputation and a reduction in sales. If our critical information technology systems or back-up systems were damaged or ceased to function properly, we might have to make a significant investment to repair or replace them.

Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Cyber threats and cyber-attackers, including ransomware attacks, can be sponsored by countries or sophisticated criminal organizations or be the work of single "hackers"“hackers” or small groups of "hackers."“hackers.”

We invest in industry standard security technology to protect the Company’s data and business processes against risk of data security breach and cyber-attack. Our data security management program includes identity, trust, vulnerability and threat management business processes as well as adoption of standard data protection policies. We measure our data security effectiveness through industry accepted methods.  We are continuously installing new and upgrading existing information technology systems. We use employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for all companies, including ours. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification standards.

Nevertheless, as cyber threats evolve, change and become more difficult to detect and successfully defend against, one or more cyber-attacks might defeat our or a third-party service provider'sprovider’s security measures in the future and obtain the personal information of customers, employees or employees.business partners. Employee error or other irregularities may also result in a failure of security measures and a breach of information systems. Moreover, hardware, software or applications we use may have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security. A security breach and loss of information may not be discovered for a significant period of time after it occurs. While we have no knowledge of a material security breach to date, any compromise of data security could result in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of our business. AIn addition, the costs to eliminate or alleviate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful, resulting potentially in the theft, loss, destruction or corruption of information we store electronically, as well as unexpected interruptions, delays or cessation of service, any of which could cause harm to our business operations. Moreover, a security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could give rise to unwanted media attention, materially damage our customer relationships and reputation, and result in fines, fees, or potential liabilities, which may not be covered by our insurance policies.policies, as well as risk of litigation, each of which could have a material adverse effect on our business, results of operations and financial condition.

Our retail store space at December 31, 20182021 totaled approximately 4.4 million square feet for 120121 stores.  The following table sets forth the number of stores we operated at December 31, 20182021 by state:

The 40 retail locations which we owned at December 31, 20182021 had a net book value for land and buildings of $80.5$65.4 million. Additionally, we had 19 leased locations open whose properties have a net book value of $50.9 million which, due to financial accounting rules, are included on our balance sheets. The remaining 6181 locations are leased by us with various termination dates through 20322035 plus renewal options.

We lease or ownall of our distribution facilities except for the Virginia property. Our regional distribution facilities are in the following locations:

We lease approximately 48,000 square feet on two floors of a suburban mid-rise office building located at 780 Johnson Ferry Road, Suite 800, Atlanta, Georgia.

We believe that our facilities are suitable and adequate for present purposes, and that the productive capacity in such facilities is substantially being utilized. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report under Item 7 of Part II.

The following are the names, ages and current positions of our executive officers and, if they have not held those positions for the past five years, their former positions during that period with Havertys or other companies.

Our executive officers are elected or appointed annually by the Board of Directors for terms of one year or until their successors are elected and qualified, subject to removal by the Board at any time.

The retail residential furniture industry'sindustry’s results are influenced by the overall strength of the economy, new and existing housing sales, consumer confidence, spending on large ticket items, interest rates, and availability of credit. These factors remain tempered by rising consumer debt, home inventory constraints, and tight access to home mortgage credit, all of which provide impediments to industry growth.

We sell home furnishings in our retail stores and via our website and record revenue when the products are delivered to our customer. Our products are selected to appeal to a middle to upper-middle income consumer across a variety of styles. Our commissioned sales associatesteam members receive a high level of product training and are provided a number of tools with which to serve our customers. We also have over 120 in‑home designers serving most of our stores. These individuals work with our sales associatesteam members to provide customers additional confidence and inspiration in their furniture purchase journey. We do not outsource the delivery function, something common in the industry, but instead ensure that the “last contact” is handled by a customer-oriented Havertys delivery team. We are recognized as a provider of high-quality fashionable products and exceptional service in the markets we serve.

Management is focused on capturing more market share and increasing sales per square foot of showroom space. This organic growth will be driven by concentrating our efforts on our customers with improved interactions highlighted by new products, services, enhanced storeshigh touch service and better technology. The Company’s strategies for profitability include gross margin focus, targeted marketing initiatives, productivity and process improvements, and efficiency and cost-saving measures. Our focus is to serve our customers better and distinguish ourselves in the marketplace.

We evaluate our performance based on several key metrics which include net sales, comparable store sales and written comparable store sales, sales per weighted average square foot, gross profit, operatingselling, general and administrative costs as a percentage of sales, EBITDA,operating income, cash flow, total debt to total capital, and earnings per share. The goal of utilizing these measurements is to provide tools in economic decision-making such as store growth, capital allocation and product pricing. We also employ metrics that are customer focused (customer satisfaction score, on-time-delivery and quality), and internal effectiveness and efficiency metrics (sales per employee, average sale per ticket, closing ratios per customer store visit, inventory out-of-stock, exceptions per deliveries, and lost time incident rate).  These measurements aid us in determining areas of our operations that are in need of additional attention but are not evaluated in isolation from others, so as not to conflict with our company goals.

Net Salessales is the revenues from merchandise sales and related fees, net of expected returns and sales tax. We record our sales when the merchandise is delivered to the customer.

Comparable-store or “comp-store” sales is a measure which indicates the performance of our existing stores and website by comparing the growth in sales in store and online for a particular periodmonth over the corresponding periodmonth in the prior year. Stores are considered non-comparable if they were not open for less than 12 full calendar monthsduring the corresponding month in the prior year or if the selling square footage has been changed significantly during the past 12 full calendar months.by more than 10%. Large clearance sales events from warehouses or temporary locations are also excluded from comparable store sales. The method we use to compute comp-store sales asmay not be the same method used by other retailers.

We also track written sales and written comp-store sales. Written sales are periods when stores are closeda customer makes a deposit or being remodeled.pays in full, and places an order. Written sales shows the current pace or trend of customer transactions. The lag time between customers placing orders and delivery grew in 2020 and remained high during 2021 due to demand outpacing merchandise supply and disruptions in supply chain. As a retailer, comp‑store sales isand written comp‑store sales are an indicator of relative customer spending and store performance. Comp-store sales, total written sales and written comp-store sales are intended only as supplemental information and is not a substitute for net sales presented in accordance with US GAAP.

The table and discussion below should be read in 2018conjunction with our consolidated financial statements and $1.7 million or 0.2%related notes included in 2017.  Comparable store sales, which includes online sales, increased 0.3% or $2.2 million in 2018 and decreased 1.3% or $10.9 million in 2017. The remaining $4.4 million in 2018 and $9.2 million in 2017 of the changes were from closed, new and otherwise non-comparable stores.this report.

The following outlines our sales and comp-store sales increases and decreases for the periods indicated. (Amounts and percentages may not always add to totals due to rounding.)

Sales in 20182021 reached record levels for each quarter as customer demand remained strong despite ongoing COVID concerns and supply chain challenges. The comparisons for 2020 reflect the impact of our store closures in mid‑March and re-opening on May 1, and the surge in business that followed. In response to increasing product and freight costs, we raised our retail prices. The impact of the supply chain disruptions is reflected in our sales by merchandise category. Our mattress business, as a percent of total sales, continues to lag at 8.9% compared to its pre-pandemic level of 11.3%. The impact of the factory closures in Vietnam affected our sales of bedroom furniture, particularly in the fourth quarter, and we expect this may continue into the second quarter of 2022. Our upholstery suppliers made good strides towards meeting demand and sales in this category in 2021 increased 37.3% over 2020 and as a percent of total sales increased 60 basis points. COVID concerns continue to affect sales generated by our in-home designers and as a percent of our total sales they remain at the 2020 level of 22.8%.

Sales in 2019 declined for the year due to severe supply-chain disruptions as business slowed markedlywe moved several product lines out of China due to the increased tariffs. Although these changes were not fully resolved until the first quarter of 2020, we did see improvement late in the last halfthird quarter of 2019.  Revenues by product category reflected the supply-chain disruption with a drop in case goods sales. Our mattress business saw an increase of 6.5% over 2018 due to customer purchases of new higher price point offerings. We offer a number of custom upholstery items and sales in this category rose 6.8% in 2019 over 2018. Total sales for 2019 decreased $15.4 million or 1.9% compared to 2018. Comp-store sales decreased 1.4% or $11.6 million in 2019 compared to 2018 and the remaining $3.8 million of the fourth quarter.  Our revenues by category remained relatively consistent with prior years with increases in our accessories saleschange was from closed, new and delivery revenue. Our average ticket increased 4.4% to $2,184 which helped offsetotherwise non-comparable stores. 

We cannot predict the decline in the numberimpact of transactions. Our in-home designers were part of 21.5% of our sales and their average ticket was $4,466.

Our cost of goods sold consists primarily of the purchase price of the merchandise together with inbound freight, handling within our distribution centers and transportation costs to the local markets we serve.  Our gross profit is primarily dependent upon vendor pricing, the mix of products sold and promotional pricing activity. Substantially all of our occupancy and home delivery costs are included in selling, general and administrative expenses as is a portion of our warehousing expenses. Accordingly, our gross profit may not be comparable to those entities that include some of these expenses in cost of goods sold.

Gross profit as a percentage of net sales was 54.6%56.7% in 20182021 compared to 54.3%56.0% in 2017. This improvement2020. The increase of 70 basis points was predominately driven by our execution onprimarily due to merchandise price increases and disciplined discounting offsetting product mixcost and pricing. Our Havertys branded merchandise providesfreight increases. The use of the LIFO method generated a strong value and fashion statement$12.3 million charge in 2021 versus $0.6 million in 2020, or a negative 110 basis points impact to consumers. The increasing sales generated by our in‑home designers have boosted higher margin mix opportunities through custom upholstery and accessories sales.  The imposition of tariffs of 10% on products imported in China began in late September. We raised the selling prices on some impacted products and worked with our suppliers to minimize cost increases.total gross profit change. 

Gross profit as a percentage of net sales was 54.3%56.0% in 20172020 compared to 54.0%54.2% in 2016.2019. The increase was primarily due to less discounting and sales promotions and product mix. The use of the LIFO method generated a $2.7$0.6 million or 33charge in 2020 versus $1.8 million in 2019. The impact of changes in reserves, including LIFO, contributed approximately 23 basis points positive impact in 2017 over 2016.to the total gross profit improvement. 

Our expectations for 20192022 are for annual gross profit margins of approximately 54.6%56.6% to 57.0%. This assumes no additional increaseschanges in tariffs for goods imported from China.  We are shifting some product to other countries and have factored this into our 2019 gross profit margin expectations. The impact of a further increase in tariffs is difficult to quantify given the variables of product cost, replacement merchandise and changing retail prices.  We do not plan to increasefreight costs and its impact on the level of our promotional pricing.LIFO reserve.

SG&A expenses are comprised of five categories: selling, occupancy, delivery and certain warehousing costs, advertising, and administrative. Selling expenses primarily are comprised of compensation of sales associatesteam members and sales support staff, and fees paid to credit card and third-party finance companies. Occupancy costs include rents, depreciation charges, insurance and property taxes, repairs and maintenance expense and utility costs. Delivery costs include personnel, fuel costs, and depreciation and rental charges for rolling stock.

Warehouse costs include supplies, depreciation, and rental charges for equipment. Advertising expenses are primarily media production and space, direct mail costs, market research expenses and agency fees. Administrative expenses are comprised of compensation costs for store personnel exclusive of sales associates,team members, information systems, executive, accounting, merchandising, advertising, supply chain, real estate and human resource departments.

We classify our SG&A expenses as either variable or fixed and discretionary. Our variable expenses include the costs in the selling and delivery categories and certain warehouse expenses as these amounts will generally move in tandem with our level of sales. The remaining categories and expenses are classified as fixed and discretionary because these costs do not fluctuate with sales. The following table outlines our SG&A expenses by classification:

Our SG&A dollars as a percent of sales decreased to 45.1% in 2021 from 50.4% in 2020. We were able to leverage our fixed and discretionary costs as we achieved record sales throughout the year. We increased our advertising spend $9.5 million in 2021 to $49.3 million. Our occupancy costs increased $3.9 million driven by greater rent expense primarily on the distribution facilities in the sale-leaseback in 2020 and higher utilities and repairs and maintenance partly offset by lower depreciation expense. Warehouse and transportation expense rose $10.6 million on higher salaries and benefits, temporary labor and $4.2 million in accessorial and demurrage fees. Administrative expense increased $18.9 million primarily from increased wages and related costs, higher amortization expense on performance stock awards, and increased incentive compensation costs.

Our SG&A dollars as a percent of sales decreased 40 basis points to 49.5%50.4% in 20182020 from 49.1%50.8% in 2017.2019. Our fixed and discretionary expenses increased $1.7fell $18.0 million or 0.7%6.9% in 20182020 over 2017.2019. This changedrop was primarily due to increasesactions taken as part of our business continuity plan. Advertising expenditures decreased approximately $9.4 million. Our occupancy costs were down $5.4 million in administrative costs of $1.52020 versus 2019 due to rent abatements in 2020 and a $2.4 million which included a $2.0 million increaseimpairment charge in group medical expenses.  We2019. The workforce reduction in April also had increasescontributed to the reduction in our advertisingfixed and marketing expenses, warehouse costs and other occupancy costs totaling $1.4 million. These increases were partly offset by $0.7 million in lower depreciation expense and rent expense.discretionary costs. Our variable expenses increased slightly due to higher transportation and delivery costs.

Fixed and discretionary type expenses within SG&A are expected to be in the $260.0$295.0 to $262.0$298.0 million range for 2019. Approximately $2.0 million of the increase is due to amounts previously charged to interest2022. We anticipate higher advertising and marketing costs in 2022, increased compensation and incentive expense, that will be classified as lease expense. This change is the result of the implementation on January 1, 2019 of the lease accounting standard update ASU 2016-02 (“ASU”). We also anticipate in 2019 higher occupancyand additional costs fromassociated with new and relocated stores, increases in employee group medical costs and increases from inflation.stores. Fixed and discretionary type expenses in total should average approximately $66.0 million per quarter excluding the second quarter which isare expected to be $3.0 million lower. For 2018 these expenses averaged $64.5 million per quarterat similar quarterly levels in all but2022 as in 2021, as adjusted for the second quarter which was $61.5 million.overall increases.

Variable costs within SG&A for 20192022 are expected to be 18.2%between 17.2% and 17.4% as a percent of sales.

We earned $0.1 million less interest income in 2021 than in 2020 due to lower rates and incurred $0.2 million less interest expense under our lease obligations. For leases accounted for as capital and financing lease obligations, we record straight-line rent expense for the land portion in occupancy costs in SG&A along with amortization on the additional asset recorded. Rental payments are recognized as a reduction of the obligations and as interest expense.credit agreement.

Our effective tax rate was 25.0%23.4% in 2018, 51.2%2021, 22.9% in 20172020 and 38.1%23.9% in 2016.2019. The 2018 and 2016 rate variesrates vary from the U.S. federal statutory rate primarily due to state income taxes. The 2017 rate is impacted byrates in 2021 and 2020 also benefitted from the negative effectrecognition of $5.9 millionstate quality jobs credits of $481,000 and $1,527,000, respectively.  See Note 7, “Income Taxes” of the Notes to Consolidated Financial Statements for the Tax Act. further information about our income taxes.