by MONROE, Mich. – It’s clear from its latest fiscal Q2 earnings call that La-Z-Boy is bullish on opening new brick and mortar stores now and in the future.
During the call, La-Z-Boy President and CEO Melinda Whittington said as part of its Century Vision initiative leading to the company’s 100-year anniversary in 2027 and beyond, the company plans to expand its La-Z-Boy Galleries program to 400 stores across North America. That’s up from 351 galleries currently, including 159 company-owned locations.
La-Z-Boy’s growing retail presence is not necessarily new. However, it shows that the company hasn’t lost faith in consumers’ desire to get out into physical stores.
The expansion is also part of a branding initiative that recognizes whiles customers may begin their search for product online, they still want to see, touch and sit on the furniture they plan to buy.
“While the purchase journey may start digitally, our consumers like to visit our stores to shop, providing us with a great opportunity to deliver the flagship La-Z-Boy Furniture Galleries store experience,” Whittington told analysts. “Most importantly, our goal is to connect with consumers along their purchase journey through multiple means, whether that’s online or in person.”
She added that the company continues to acquire independent La-Z-Boy galleries “to round out our portfolio where it makes sense for us and the dealer.” She noted, for example, a recently-signed agreement to purchase five stores in Alabama and Tennessee from a retiring dealer. This deal is expected to close during the third fiscal quarter.
This fiscal year, which ends next April, Whittington also noted that the company has some 30 projects in the works, including store remodels and relocations.
These and other retail insights took place during the release of the company’s Q2 earnings. During the quarter ended Oct. 23, the company posted a record $575.9 million in sales, up 25.4% from the $459.1 million reported in the second quarter of FY 21. During the quarter the company also reported net income of $40.4 million, up 14.3% up from the $35.3 million reported in the same period last year.
La-Z-Boy’s brick-and-mortar expansion doesn’t stop at the La-Z-Boy name. Whittington noted during the call that the company’s direct-to-consumer Joybird division also is expanding its store footprint. This includes a new store that opened in Los Angeles this month and an additional store to be opened by the end of this fiscal year.
“In markets where we have Joybird small format stores, we consistently see a geo lift in the online sales, demonstrating the appeal of an omni-channel model across all brands and retail formats,” Whittington noted, of the blended retail strategy that is helping fuel the business. The division, she added, also opened a virtual store at Joybird’s L.A. headquarters that allows online shoppers to “chat, call and video conference into a dedicated retail environment, which has been very successful in terms of both consumer satisfaction and closing sales.”
Commenting further on the blended strategy, Chief Financial Officer Bob Lucian, said, “For the quarter, Joybird increased both its web and in-store traffic, conversion and average ticket. Joybird is sustaining profitability, and with a focus on accelerating disproportionate growth we will continue to invest in Joybird marketing to drive broader brand awareness and customer acquisition.”
This begs the question — is now a good time to be expanding both brands’ retail presence? The numbers would indicate so as brick and mortar sales continue on a healthy pace. During the second fiscal quarter, the company said that retail sales rose 18.6% to $192.4 million and 47.7% to $374.2 million during the first half. These gains were driven by 16.5% and 43.8% increase in delivered same-store sales, respectively.
The hope is that consumer demand remains strong, but that of course remains a big unknown, particularly as wait times for furniture continue both domestically and for imported goods. Executives also touched on these challenges during the call.
“Across multiple areas, we expect to face continued supply chain disruptions, with respect to having all component parts available to finished units and complete orders, particularly for our company owned retail segment, which tends to disproportionately sell our higher end products,” Lucian told analysts. “Given the Covid-related shutdown in Vietnam, we expect our case goods business to experience a significant, temporary decline in sales, and margin in the third quarter, reflecting a delay in shipments, as manufacturing facilities restart there and product gets on the water.”
For now, consumers appear to have been willing to either wait for goods or turn to their second, third or fourth choices in home furnishings. How long they continue to do that depends on whether their attention and spending turns instead to other areas ranging from travel to automobiles.
With its planned store expansion, La-Z-Boy is betting the demand will continue and that it will address the home furnishings needs of consumers over the short and long-term.
