La-Z-Boy Incorporated Reports Strong Second Quarter Results; Retail Segment Delivered Sales Up 3%; Board Approves 10% Increase to Quarterly Dividend

Globe Newswire 19-Nov-2024 4:15 PM

Fiscal 2025 Second Quarter Highlights:

• Consolidated delivered sales of $521 million
  • Up 2% versus prior year
• Retail segment sales increased 3%
  • Led by independent La-Z-Boy Furniture Galleries^® acquisitions, new stores, and record Labor Day sales results
• GAAP and Non-GAAP⁽¹⁾ diluted EPS of $0.71
• Delivered sales and Non-GAAP⁽¹⁾ operating margin ahead of guidance
• Company-owned La-Z-Boy Furniture Galleries^® network grew by five stores, with three new stores, two newly acquired independent La-Z-Boy Furniture Galleries^® stores, and an additional two-store acquisition signed and expected to close in the third quarter
• Quarterly dividend increased to $0.22, 10% higher than the previous dividend

MONROE, Mich., Nov. 19, 2024 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE:LZB), a global leader in the retail and manufacture of residential furniture, today reported strong second quarter results for the period ended October 26, 2024. For the quarter, sales totaled $521 million, growing 2% against the prior year comparable period. Operating margin was 7.4% for the quarter on a GAAP basis and 7.5% on a Non-GAAP⁽¹⁾ basis. Diluted earnings per share totaled $0.71 on a GAAP and Non-GAAP⁽¹⁾ basis. The company returned $70 million to shareholders through the first two quarters, nearly double last year's comparable period.

Written sales trends also remained solid, with second quarter total written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries^®) up 6% versus a year ago and written same-store sales (which exclude the impact of newly opened stores and newly acquired stores) down a modest 1% versus a year ago. Written same-store sales for the entire La-Z-Boy Furniture Galleries^® network also decreased 1% versus the year ago period. Trends were strongest during the Labor Day period, with solid results driven by accelerated consumer traffic and superior in-store execution. Furniture and Home Furnishings advance monthly retail sales growth as reported by the U.S. Census Bureau was +1% for our fiscal quarter driven by growth in home furnishings, sundry items for the home that are outside of our primary focus. The industry remains challenged with home-related spending impacted by higher mortgage rates and a lack of housing affordability and availability.

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, "Our second quarter results demonstrate the continued progress we are making against our strategic pillars and our strong execution throughout the enterprise. We were pleased to deliver a second consecutive quarter of sales growth across our business despite the continued challenging macroeconomic trends. The combination of our iconic brand, strong product portfolio particularly in reclining and motion furniture, and our talented team again produced steady results against persistently weak consumer demand. In our company-owned La-Z-Boy Furniture Galleries^®, conversion rates, average ticket, and design sales all improved again year-over-year. We are consistently solving for the unique needs of our consumers and transforming houses into homes with our high quality, comfortable custom furniture solutions."

Whittington added, "While our Retail segment continues to lead the way, our Wholesale and Joybird businesses similarly made steady progress in the quarter. With our long heritage of made in North America manufacturing, customers continue to gravitate towards our handcrafted, customized product offering. Additionally, our Joybird brand is making meaningful improvements on its path to sustained profitable growth. Our Century Vision strategy continues to deliver and we have considerable runway ahead as we transform for the next hundred years. What will endure is the comfort, quality, and customization for which our iconic La-Z-Boy brand is known. We view these as our true differentiators, which will uniquely position us to continue to outperform the industry and grow share over the longer term."

Third Quarter Outlook:
Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, "Our strong performance in the quarter is another proof point of controlling what we can control and driving positive outcomes in a challenged industry. We outperformed our guidance with strong performance particularly around the Labor Day holiday, impressive execution, and a resolute focus on improving the agility of our operations. Furniture and home furnishings related spending continues to be soft, but we are outperforming the industry in a sustainable manner. Our expectation is for industry sales trends to remain under pressure, though we expect our growth to continue to outpace the industry. Taking those factors into account, we expect fiscal third quarter sales to be in the range of $505-525 million (an increase of 1-5% year-over-year) and Non-GAAP operating margin⁽²⁾ to be in the range of 6-7%."

Key Results:

Liquidity Measures:

Fiscal 2025 Second Quarter Results versus Fiscal 2024 Second Quarter:

• Consolidated sales in the second quarter of Fiscal 2025 increased 2% to $521 million versus last year, primarily driven by higher delivered volume within our Retail segment and Joybird business
• Consolidated GAAP operating margin was 7.4% versus 6.6%
  • Consolidated Non-GAAP⁽¹⁾ operating margin decreased 40 basis points to 7.5% versus 7.9%, due to demand challenges in our casegoods import business and a significant temporary customer disruption in our international wholesale business
• GAAP diluted EPS increased to $0.71 from $0.63 and Non-GAAP⁽¹⁾ diluted EPS totaled $0.71 versus $0.74 last year in the comparable period

Retail Segment:

• Sales:
  • Written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries^® stores) increased 6% with growth from new and acquired stores, more than offsetting slightly lower same-store sales compared to the year ago period
    • Written same-store sales decreased 1%, driven by lower traffic from softer industry-wide demand, partially offset by strong execution driving higher conversion rates
  • Delivered sales increased 3% to $222 million versus last year, primarily due to growth from new and acquired stores
• Operating Margin:
  • GAAP operating margin and GAAP operating income were 12.6% and $28 million, versus 13.0% and $28 million, respectively
    • Non-GAAP⁽¹⁾ operating margin and Non-GAAP⁽¹⁾ operating income were 12.6% and $28 million, down 40 basis points and flat, respectively, driven by an increase in selling expense and fixed costs supporting our long-term strategy of growing our Retail business through new and acquired stores, partially offset by gross margin improvements resulting from a favorable shift in product mix

Wholesale Segment:

• Sales:
  • Sales were roughly flat at $364 million, as higher sales to our Retail segment mostly offset lowered delivered sales in our international wholesale business
• Operating Margin:
  • GAAP operating margin was 6.7% versus 5.9%
    • Non-GAAP⁽¹⁾ operating margin was 6.8%, down 90 basis points from the year ago period driven by demand and macroeconomic challenges in our casegoods import business and fixed cost deleverage on lower sales in our international wholesale business due to a significant temporary customer disruption

Corporate & Other:

• Joybird written sales increased 1% and delivered sales increased 20% to $39 million on stronger sales trends in both our online and retail businesses
• Joybird operating margin performance saw year-over-year improvement from higher gross margins driven by favorable product mix and fixed cost leverage on higher sales leading to breakeven operating margin

Balance Sheet and Cash Flow, Fiscal 2025 Second Quarter:

• Ended the quarter with $303 million in cash⁽³⁾ and no external debt
• Generated $16 million in cash from operations versus $31 million in the second quarter of last fiscal year. Year to date, cash flow from operations was $68 million, up 20% from last year's comparable period
• Invested $17 million in capital expenditures, primarily related to La-Z-Boy Furniture Galleries^® (new stores and remodels)
• Returned approximately $28 million to shareholders, including $19 million in share repurchases and $8 million in dividends. Year to date, $70 million has been returned to shareholders, nearly double the same period last year

Dividend:
On November 19, 2024, the Board of Directors declared a quarterly cash dividend of $0.22 per share on the common stock of the company, a 10% increase over the previous dividend. The dividend will be paid on December 16, 2024, to shareholders of record on December 5, 2024.

Conference Call:
La-Z-Boy will hold a conference call with the investment community on Wednesday, November 20, 2024, at 8:30 a.m. ET. The toll-free dial-in number is (888) 506-0062; international callers may use (973) 528-0011. Enter Participant Access Code: 770725.

The call will be webcast live, with corresponding slides, and archived on the internet. It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at (877) 481-4010 and to international callers at (919) 882-2331. Enter Replay Passcode: 51407. The webcast replay will be available for one year.

Investor Relations Contact:
Mark Becks, CFA, (734) 457-9538
mark.becks@la-z-boy.com

About La-Z-Boy:
La-Z-Boy Incorporated brings the transformational power of comfort to people, homes, and communities around the world - a mission that began when its founders invented the iconic recliner in 1927. Today, the company operates as a vertically integrated furniture retailer and manufacturer, committed to uncompromising quality and compassion for its consumers.

The Retail segment consists of 193 company-owned La-Z-Boy Furniture Galleries^® stores and is part of a broader network of over 350 La-Z-Boy Furniture Galleries^® that, with La-Z-Boy.com, serve customers nationwide. Joybird^®, an e-commerce retailer and manufacturer of modern upholstered furniture, has 12 stores in the U.S. In the Wholesale segment, La-Z-Boy manufactures comfortable, custom furniture for its Furniture Galleries^® and a variety of retail channels, England Furniture Co. offers custom upholstered furniture, and casegoods brands Kincaid^®, American Drew^®, and Hammary^® provide pieces that make every room feel like home. To learn more, please visit: https://www.la-z-boy.com/.

Notes:
⁽¹⁾Non-GAAP amounts for the second quarter of fiscal 2025 exclude:

• purchase accounting charges related to acquisitions completed in prior periods totaling $0.3 million pre-tax, or less than $0.01 per diluted share, all included in operating income

Non-GAAP amounts for the second quarter of fiscal 2024 exclude:

• a $6.6 million pre-tax, or $0.11 per diluted share, related to our supply chain optimization actions
• purchase accounting charges related to acquisitions completed in prior periods totaling $0.3 million pre-tax, or less than $0.01 per diluted share, all included in operating income

⁽²⁾This reference to Non-GAAP operating margin for a future period is a Non-GAAP financial measure. We have not provided a reconciliation of Non-GAAP operating margin for future periods in this press release because such reconciliation cannot be provided without unreasonable efforts.

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

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

Cautionary Note Regarding Forward-Looking Statements:
This news release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry.

The forward-looking statements in this press release are based on certain assumptions and currently available information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Fiscal 2024 Annual Report on Form 10-K and other factors identified in our reports filed with the Securities and Exchange Commission (the "SEC"), available on the SEC's website at www.sec.gov. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason.

Non-GAAP Financial Measures:
In addition to the financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), this press release also includes Non-GAAP financial measures. Management uses these Non-GAAP financial measures when assessing our ongoing performance. This press release contains references to Non-GAAP operating income (on a consolidated basis and by segment), Non-GAAP operating margin (on a consolidated basis and by segment), and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share, Non-GAAP diluted earnings per share (and components thereof, including Non-GAAP income before income taxes and Non-GAAP net income attributable to La-Z-Boy Incorporated), each of which may exclude, as applicable, supply chain optimization charges and purchase accounting charges. The supply chain optimization charges include asset impairment costs, accelerated depreciation expense, lease termination gains, severance costs, and employee relocation costs related to shifting upholstery production from our Ramos, Mexico operations to other upholstery plants and relocating our cut and sew operations back to Ramos, Mexico, resulting in the permanent closure of our leased cut and sew facility in Parras, Mexico. The purchase accounting charges include the amortization of intangible assets, incremental expense upon the sale of inventory acquired at fair value, and fair value adjustments of future cash payments recorded as interest expense. These Non-GAAP financial measures are not meant to be considered superior to or a substitute for La-Z-Boy Incorporated's results of operations prepared in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.

Management believes that presenting certain Non-GAAP financial measures will help investors understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers. Management excludes purchase accounting charges because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions consummated and the success with which we operate the businesses acquired. While the company has a history of acquisition activity, it does not acquire businesses on a predictable cycle, and the impact of purchase accounting charges is unique to each acquisition and can vary significantly from acquisition to acquisition. Similarly, supply chain optimization charges are dependent on the timing, size, number and nature of the operations being closed, consolidated or centralized, and the charges may not be incurred on a predictable cycle. Management believes that exclusion of these items facilitates more consistent comparisons of the company's operating results over time. Where applicable, the accompanying "Reconciliation of GAAP to Non-GAAP Financial Measures" tables present the excluded items net of tax calculated using the effective tax rate from operations for the period in which the adjustment is presented.