by Company has its eye on expansion during challenging times
MONROE, Mich. — On the surface, current year-over-year sales comparisons — particularly in the furniture industry of late — can be deceiving.
That’s mainly because they compare current volumes with volumes during periods of high demand. In that respect, they fail to give shareholders or other investors a good comparison to normal business conditions, or what we now refer to as pre-pandemic levels.
Such was the case with La-Z-Boy’s first fiscal 2024 quarter results, which showed sales decreased 20% to $482 million compared to the same period last year. However, as noted during a recent conference call by Chief Financial Officer Bob Lucian, the company had a $300 million increase in delivered sales in fiscal 2023 because of a high backlog of Covid-related furniture orders — a situation he said will not repeat this year. He went on to note that this particularly impacted the wholesale segment where delivered sales declined by 25% compared to the prior-year period. The decrease, he said, was largely due to lower delivered unit volume as the backlog returned to pre-pandemic levels.
Overall consolidated delivered sales were up 16% during the first quarter ended July 29 compared to the company’s most recent pre-pandemic quarter. In addition, same-store written sales for company-owned stores were up 2% compared to last year, as were written sales for the entire La-Z-Boy Furniture Gallery store network that includes 351 locations, half of which are company owned. Total written sales for company-owned stores were up 8% from last year’s first quarter and up 32% compared to the pre-pandemic fiscal first quarter of 2020.
The company’s overall sales of $482 million also were in line with previous guidance of $470 million to $490 million, and the company remains profitable with $28 million in net income for the quarter. Cash generated from operating activities during the quarter totaled $26 million, and the company ended the quarter with $340 million in cash and no external debt.
Thus, despite what President and CEO Melinda Whittington described as a sluggish home furnishings market, the company is not only doing well, but appears well positioned to pursue further growth opportunities in the months ahead. Here are a few examples cited during the call:
+ The company launched a new national brand campaign “Long Live the Lazy” on Aug. 10. Whittington said that this targets a larger audience than the company has traditionally reached in the past, “by combining a focus on the everyday consumer and embracing moments of laziness during our otherwise increasingly hectic lifestyles. Our new creative vision combines our greatest product strength, comfort and motion, with the emotional benefits of much deserved feet-up moments.” The company officially launched the new campaign on NBC’s Today Show.
+ The company plans some $50 million to $60 million in capital expenditures this fiscal year. Lucian added that the company’s capital allocation strategy is to invest about half of its operating cash into the business and return the other half to company shareholders through dividends and share repurchases, although the “50/50 split can vary in any given year.” In the near term, he said, the company anticipates capital allocation to be more skewed toward investments in the business, which he noted yields returns of two to three times “our cost of capital.”
+ Whittington noted that the company has continued to expand its retail business, opening of two new stores, completing the acquisition of two independent La-Z-Boy Furniture Galleries and opening one new retail location for Joybird. It sees the potential for up to 400 stores over time, a 14% increase over its current 351 locations. It spent $13 million alone in capital expenditures during the first quarter, which was primarily related to retail store openings and remodels, along with upgrades to its manufacturing facilities. Some $4 million of this was spent on the purchase of two independent La-Z-Boy Furniture Galleries in Colorado Springs, Colorado.
+ It also announced a new partnership with Rooms To Go, selling a mix of select La-Z-Boy recliners to the HNN 125 retailer. “This is an exciting new opportunity for us to expand our reach with a new untapped market of consumers,” Whittington said during the call. The new product at Rooms To Go is beginning to show up on sales floors at many locations, and we look forward to building this partnership over the coming quarters.”
+ Joybird remains a challenged area of the business, with a 17% decline in sales during the quarter. However, with both an online and brick-and-mortar presence, the company sees the brand as “an opportunity to increase our omnichannel presence for consumers,” Whittington noted. “The brand continues to have significant opportunity to grow share, which will be the focus as we make prudent choices to return to profitability.”
As we’ve noted before, the company’s progress with these and other initiatives will be worth watching. As will the results a year from now as we compare them to what we assume could be called a post-pandemic period.
Whittington, for one, appears extremely optimistic, as she should, given the company’s aggressive growth strategy.
“With many initiatives coalescing in the quarter, including our new brand campaign launch, I’m more excited than ever about the future of La-Z-Boy Inc.,” she said. “We are engaging with an even broader consumer than we have in the past and while we expect the macro environment will remain challenging, we will continue to drive our business forward, focusing on the consumer and continuously improving our execution. We have every intention of growing from our post-Covid base, gaining share and we believe the best is yet to come as we deliver long-term profitable growth and returns to all stakeholders.”
