La-Z-Boy Reports Solid Fiscal 2021 Third-Quarter Results

La-Z-Boy Incorporated (“La-Z-Boy” or “company”), a global leader in residential furniture, reported strong operating results for the fiscal 2021 third quarter ended January 23, 2021.

Fiscal 2021 third quarter versus Fiscal 2020 third quarter:

Consolidated sales decreased 1.2% to $470.2 million

Written same-store sales for the entire La-Z-Boy Furniture Galleries® network increased 6.3%, with strong acceleration in January

Consolidated operating margin

– GAAP: 7.3% versus 11.0%

-Non-GAAP(1): 9.5% versus 9.4%: Wholesale(2): 10.2% versus 11.1% ; Retail: 8.9% versus 9.8%

Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):

– GAAP: $0.62 versus $0.74

– Non-GAAP(1): $0.74 versus $0.72

Strong cash generation, with fiscal year-to-date cash from operating activities of $250 million

Cash(3) more than doubled to $393 million at quarter end

The company returned $7.4 million to shareholders through share repurchases and dividends during the quarter

Kurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, “Robust written trends continue across all La-Z-Boy Incorporated businesses as consumer demand for home furnishings remains unabated. However, delivered sales declined slightly versus last year’s record third quarter due to greater-than-anticipated impacts from COVID-19 across our supply chain. We continue to add additional capacity to service our unprecedented order rate, with our supply chain team actively ramping production as quickly as possible to service customers while prioritizing the health and safety of employees. Even with these short-term challenges, we delivered a strong consolidated operating margin, including another profitable quarter for Joybird. We also continued to generate strong cash from operations and declared an increased dividend of $0.15 per share. We are well positioned to deliver continued solid financial results.”

Consolidated sales in the third quarter of fiscal 2021 decreased 1.2% to $470.2 million versus the fiscal 2020 record third quarter, affected by temporary supply chain impacts from COVID-19. Consolidated GAAP operating margin was 7.3% versus 11.0% in the prior-year quarter. Consolidated non-GAAP(1) operating margin improved to 9.5% versus 9.4% in last year’s third quarter, primarily driven by strong performance by Joybird.

For the entire La-Z-Boy Furniture Galleries® network, written same-store sales increased 6.3% for the fiscal 2021 third quarter compared with the fiscal 2020 third quarter. Stripping out Canadian stores that were closed at various points during the quarter due to COVID-19 restrictions, written same-store sales increased 8.2% for the network. Strong momentum in January brought fiscal 2021 year-to-date written same-store sales for the network to 18% versus the prior-year period.

For the fiscal 2021 third quarter, delivered sales in the company’s Wholesale(2) segment decreased 3.9% to $350.7 million compared with the prior-year quarter. While significant demand has led to a record-level backlog, COVID-19-related issues, including plant absenteeism and shipping delays, hampered the company’s ability to increase production and delivery at planned rates and also impacted product mix. Non-GAAP(1) operating margin for the Wholesale(2) segment was 10.2% versus 11.1% for the prior-year period, primarily reflecting COVID-19-related impacts on our supply chain and increased costs to expand manufacturing capacity, partially offset by lower promotional activity in the strong demand environment.

Retail segment delivered sales decreased 0.9% to $166.0 million in the third quarter of fiscal 2021, reflecting COVID-19-related product delays. Written same-store sales for the company-owned La-Z-Boy Furniture Galleries® stores increased 9.1% in the quarter, with strong momentum in January, reflecting positive trends across all sales metrics, including traffic, conversion and average ticket. Non-GAAP(1) operating margin for the Retail segment was 8.9% versus 9.8% in last year’s third quarter, primarily related to lower delivered sales relative to fixed costs and higher selling expenses driven by commissions paid on increased written sales, partially offset by decreased spending for marketing given robust demand and decreased travel expenses.

Within Corporate & Other, Joybird sales increased 30% to $28.6 million. Written sales increased 79% compared with the prior-year quarter, reflecting ongoing strong order trends and the strength of the brand in the online marketplace. Joybird again delivered profitable growth, improving its gross margin and investing in marketing to drive customer acquisition.

GAAP diluted EPS was $0.62 for the fiscal 2021 third quarter versus $0.74 in the prior-year quarter. Non-GAAP(1) diluted EPS was $0.74 versus $0.72 in last year’s third quarter.

Balance Sheet and Cash Flow

Year to date, the company generated $250 million in cash from operating activities, reflecting strong profit performance and a $122 million increase in customer deposits from written orders for the company’s Retail segment and Joybird. La-Z-Boy ended the period with $393 million in cash(3), compared with $168 million in cash(3) at the end of the fiscal 2020 third quarter. The company holds $31 million in investments to enhance returns on cash versus $30 million at the end of last year’s period. Year to date, the company invested $8 million in acquisitions, $27 million in the business through capital expenditures, paid $10 million in dividends and spent $0.9 million purchasing approximately 22 thousand shares of stock in the open market under its existing authorized share repurchase program, leaving 4.5 million shares available for repurchase under the program as of January 23, 2021.

Dividend

On February 16, 2021, the Board of Directors declared a quarterly cash dividend on the company’s common stock of $0.15 per share, an increase of 7%. The dividend is payable on March 15, 2021 to shareholders of record as of March 4, 2021.

Business Outlook

Due to the unusual business trends driven by the pandemic, La-Z-Boy is updating the perspective previously provided for the fiscal 2021 fourth quarter. The company does not intend to provide this level of forward-looking perspective regularly.

Given the continued temporary impacts of COVID-19 on the company’s manufacturing facilities and broader supply chain, and comparing with a prior-year base period which included the month-long pandemic shutdown, La-Z-Boy now expects fiscal 2021 fourth-quarter consolidated sales growth of 34% to 39% versus the prior-year quarter, and consolidated non-GAAP operating margin at the lower end of the 9% to 11% range.

For the full third quarter results, click here.

(1)Non-GAAP amounts for the third quarter of fiscal 2021 exclude:

– purchase accounting charges related to acquisitions totaling $10.4 million pre-tax, or $0.20 per diluted share, primarily due to a write-up of the Joybird contingent consideration liability based on forecasted future performance, with $10.3 million included in operating income and $0.1 million included in interest expense

-income of $5.2 million pre-tax, or $0.08 per diluted share, related to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) recorded in other income related to the impact of employee retention credits

Non-GAAP amounts for the third quarter of fiscal 2020 exclude:

– purchase accounting charges of $1.4 million pre-tax, or $0.02 per diluted share, with $1.3 million included in operating income and $0.1 million included in interest expense

– a charge of $6.0 million pre-tax, or $0.10 per diluted share, related to an impairment for one investment

– income of $8.7 million pre-tax, or $0.14 per diluted share, related to the company’s supply chain optimization initiative, including the closure of the company’s Redlands, California upholstery manufacturing facility and relocation of its Newton, Mississippi leather cut-and-sew operations

Please refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” for detailed information on calculating the Non-GAAP measures used in this press release and a reconciliation to the most directly comparable GAAP measure.

(2)Wholesale segment: Effective in the first quarter of fiscal 2021, in order to better align with the manner in which we view and manage the business, coupled with economic and customer channel similarities, the company revised its reportable operating segments by aggregating the former Upholstery segment with the former Casegoods segment to form the newly combined Wholesale segment. The change in reportable operating segments reflects how the company evaluates financial information used to make operating decisions. Prior-period results disclosed in this earnings release with respect to the Wholesale segment have been revised to reflect these changes.

(3)Cash includes cash, cash equivalents and restricted cash.

About La-Z-Boy

La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The Wholesale segment includes England, La-Z-Boy, American Drew®, Hammary®, and Kincaid®. The company-owned Retail segment includes 158 of the 351 La-Z-Boy Furniture Galleries® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture. The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 351 stand-alone La-Z-Boy Furniture Galleries® stores and 563 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 http://www.la-z-boy.com/.

Contact:

Kathy Liebmann – kathy.liebmann@la-z-boy.com – (734) 241-2438

Source: La-Z-Boy Incorporated