La-Z-Boy Incorporated Reports Third Quarter Results

Consolidated delivered sales of $500 million

Results impacted by winter weather events in January

Gross margin expansion on GAAP and Non-GAAP basis, across all segments

GAAP diluted EPS of $0.66

Generated $48 million in operating cash flow for the quarter; $105 million year to date

Acquired six independent La-Z-Boy Furniture Galleries^® stores

La-Z-Boy Incorporated (“La-Z-Boy”), a global leader in the manufacture and retail of residential furniture, reported third quarter results for the period ended January 27, 2024. For the quarter, sales totaled $500 million, a decrease of 13% against a year ago period that benefited from delivery of pandemic related backlog and 5% above the pre-pandemic third quarter of fiscal 2020. Results were impacted by winter weather events in January, which caused temporary shutdowns of our U.S. manufacturing facilities, delivery delays, and reduced store traffic throughout much of the central U.S. Operating margin was 6.5% in the quarter on a GAAP basis and 6.6% on a Non-GAAP basis. Diluted earnings per share totaled $0.66 on a GAAP basis and $0.67 on a Non-GAAP basis.

Written same-store sales for the entire La-Z-Boy Furniture Galleries^® network decreased 6% versus the year ago period, with company-owned written same-store sales down 8% in a challenged consumer environment and due in part to winter weather events. Written same-store sales were positive across the entire network and for company-owned stores in November and December, but were significantly challenged in January, impacted by softening traffic, a strong base period, and weather.

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, “We remain optimistic about the mid-to-long-term growth potential for our industry, given structural housing shortages and the expectation of improvements in interest rates and housing affordability, and our ability to disproportionately grow with the consumer. In the near term, despite the furniture and home furnishings industry being in a sustained slowdown, our La-Z-Boy Furniture Galleries^® network is executing well. Results in January, the third month of our quarter, were negatively impacted by winter weather events, which caused reduced store traffic throughout much of the central U.S. and delivery and production delays at our U.S.-based assembly facilities, the source of the majority of our customized upholstery finished product. After January’s weather disruptions, production and deliveries are now back to normal as we focus on servicing our customers and consumers with the high quality, comfortable products they expect from us.”

Whittington added, “We continue to make progress on our Century Vision strategy, as we completed the acquisition of a six-store network in the Midwest, bringing the company-owned store network to 184 of the 353 total store network. Furthermore, we recently signed an agreement to acquire an additional two stores from an independent La-Z-Boy Furniture Galleries^® dealer in the South. Our company-owned store base now represents 52% of our total network, compared to 32% a decade ago. While the market remains challenging and volatile, we are confident in our ability to leverage our strong financial position to outperform the market over the longer term. This includes expanding our La-Z-Boy brand reach with data-based consumer insights driving our marketing and product design, investing in our growing company-owned Retail store base, and increasing the agility of our supply chain. With our customized product primarily manufactured in the U.S., our vertically integrated model serves as a key differentiator in the industry.”

Fourth Quarter Outlook

Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, “Our third quarter results were largely on track with our sales guidance and Non-GAAP operating margin⁽²⁾ expectations excluding unexpected weather events in January. While production and deliveries have returned to normal at the start of our fourth quarter, we are planning prudently for the near term, while investing and building for the long term. For the fourth quarter of fiscal 2024, we expect delivered sales to be in the range of $505-535 million and Non-GAAP operating margin⁽¹⁾ to be in the range of 7-8%.”

FY24 Q3 Results versus FY23 Q3

• Consolidated sales in the third quarter of fiscal 2024 decreased 13% to $500 million, primarily reflecting lower delivered unit volume versus last year’s third quarter results that included delivery of backlog but increased 5% versus the most recent pre-pandemic third quarter in fiscal year 2020. Combined with a challenging consumer environment, volume was also negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S. manufacturing facilities, delivery delays, and reduced store traffic throughout much of the central U.S.
• Consolidated GAAP operating margin was 6.5% versus 7.5%
  • Consolidated Non-GAAP⁽²⁾ operating margin decreased 270 basis points to 6.6% versus 9.3%, driven by improved gross margin from lower input costs (improved sourcing and reduced commodity prices) more than offset by fixed cost deleverage on lower delivered sales
• GAAP diluted EPS decreased to $0.66 from $0.74 and Non-GAAP⁽²⁾ diluted EPS decreased to $0.67 from $0.91

Retail Segment

• Sales:
  • Written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries^® stores) decreased 2% with lower same-store sales partially offset by acquired and new stores
    • Written same-store sales decreased 8%, due in part to winter weather events in January, which negatively impacted retail store traffic across much of the central U.S., combined with an overall challenging consumer environment, partially offset by strong execution that drove higher ticket and conversion rates
  • Delivered sales for the Retail segment decreased 18% to $205 million versus last year’s results that included delivery of backlog but increased 22% versus the most recent pre-pandemic third quarter in fiscal year 2020. Additionally, sales were negatively impacted by winter weather events in January which caused delivery delays and reduced store traffic throughout much of the central U.S.
• Operating Margin:
  • GAAP operating margin and GAAP operating income was 10.9% and $22 million, versus 17.6% and $44 million, respectively
    • Non-GAAP⁽²⁾ operating margin and Non-GAAP⁽²⁾ operating income were 10.9% and $22 million, down 670 basis points and 50%, respectively, driven by improved gross margin from prior period pricing actions and favorable shift in product mix, more than offset by fixed cost deleverage on lower delivered sales

Wholesale Segment

• Sales:
  • Sales decreased 13% to $356 million due to a decline in delivered volume versus the year ago period, which benefited from pandemic backlog production and deliveries. Additionally, volume was negatively impacted by winter weather events in January, which caused temporary shutdowns of our U.S. manufacturing facilities
• Operating Margin:
  • GAAP operating margin increased to 6.4% versus 4.2%
    • Non-GAAP⁽²⁾ operating margin decreased to 6.4%, down 20 basis points; gross margin improvement from lower input costs (improved sourcing and reduced commodity prices), was more than offset by fixed cost deleverage and increased marketing investments

Corporate & Other

• Joybird written sales decreased 14% reflecting challenging E-commerce trends across the industry, and delivered sales increased 18% to $34 million, reflecting improvement from a challenged base period. Joybird made meaningful progress on improving profitability in the quarter with improved product mix and return on advertising spending

Balance Sheet and Cash Flow, Third Quarter Fiscal 2024

• Ended the third quarter with $333 million in cash⁽³⁾ and no external debt
• Generated $48 million in cash from operating activities
  • Year to date, cash flow from operations was $105 million, down 17% from last year’s comparable period, which benefited from pandemic backlog
• Invested $12 million in capital expenditures, primarily related to La-Z-Boy Furniture Galleries^® (new stores and remodels), and projects at our manufacturing and distribution facilities
• Returned $29 million to shareholders, including $20 million in share repurchases and $9 million in dividends
  • Year to date, we have returned $64 million to shareholders

Dividend

On February 20, 2024, the Board of Directors declared a quarterly cash dividend of $0.20 per share on the common stock of the company. The dividend will be paid on March 15, 2024, to shareholders of record on March 5, 2024.

For the full third quarter results, click here.

About La-Z-Boy

La-Z-Boy Incorporated is a global leader in the manufacture and retail of residential furniture, marketing furniture for every room of the home. The Wholesale segment includes La-Z-Boy, England, American Drew^®, Hammary^®, Kincaid^® and the company’s international wholesale and manufacturing businesses. The company-owned Retail segment includes 184 of the 353 La-Z-Boy Furniture Galleries^® stores. The Corporate and Other segment includes Joybird, an e-commerce retailer and manufacturer of upholstered furniture that also has 12 stores in the U.S. The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 353 stand-alone La-Z-Boy Furniture Galleries^® stores and over 500 independent Comfort Studio^® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at https://www.la-z-boy.com/.

Contact:

Mark Becks, CFA – Investor Relations Contact –

Source: La-Z-Boy Incorporated