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La-Z-Boy Posts 3Q Income of $11 Million
February 16,
2010 by in UnCategorized 
By Home Furnishings Business in Financial Reports on February 17, 2010
La-Z-Boy Inc. (NYSE: LZB) reported net income of about $11 million for the third quarter ended Jan. 23, compared to a net loss of $64.5 million during the same quarter last year.
Sales for the quarter were $305 million, up 5.7 percent compared to $288.6 million during the third quarter of last year.
Third quarter results include income of $4.4 million from anti-dumping duties received on imports of Chinese wood bedroom furniture. That compares with $8.1 million in duties received in the third quarter of fiscal 2009.
For the nine-month period, the company reported net income of $18.9 million, compared to a net loss of $127.8 million in the same time frame last year. Sales for the nine months were $868.5 million, compared to $942.2 million during the same period last year.
Sales in the company's upholstery segment increased 17.6 percent to $234.3 million, compared with $199.2 million in the previous year's third quarter. Last year, the company shifted the reporting of its retail warehouse operations to the upholstery segment. The change impacted the timing of intercompany revenue and profit recognition for the upholstery group and resulted in a one-time reduction in last year's third quarter intercompany sales and operating income for the group. When accounting for the revenue adjustment, upholstery sales for fiscal 2010 third quarter increased 11 percent.
"Our results clearly demonstrate the efficiencies of our operations, particularly throughout the La-Z-Boy branded facilities, where we implemented the cellular production process and are achieving the benefits we envisioned," said Kurt Darrow, president and chief executive officer. "Going forward, we expect to further strengthen our operational efficiencies as our Mexico-based cut-and-sew center continues to increase its production. We are on plan to be transitioned by the end of fiscal 2010 and will begin to realize a portion of the estimated $20 million in annual savings during this fiscal years fourth quarter.
Third quarter sales for the company's case goods segment were $36 million, a 14.5 percent decline compared to $42.1 million during last year's third quarter.
Even on a double-digit decline in sales, we were able to generate a small profit, posting a 0.8% operating margin," Darrow said. "Although the case goods business continues to be impacted more severely than upholstery in challenging economic times, our team continues to refine its operations and
achieve efficiencies. We are on track to realize $5 million in annual cost savings, based on current volumes, from the manufacturing facility consolidation and the warehouse shift announced earlier this year. We completed the consolidation of the two manufacturing facilities into one in Hudson, N.C., and the associated transition of our warehouse facility is on schedule to be completed by the fiscal year end. A small portion of the cost savings from these initiatives was realized in the third quarter. Additionally, we are in the process of consolidating our American Drew/Lea and Hammary operations. The consolidation will be completed by the end of our fiscal 2010 fourth quarter and will garner greater operational efficiencies and allow us to better leverage the global supply chain.
Systemwide same-store sales for the fiscal 2010 third quarter increased 3.9 percent, while total written sales, including new and closed stores, decreased 1.9 percent. Retail sales for the quarter were $40.4 million compared to $40.5 million in the prior-year period. The retail group posted an operating loss of $4.1 million for the quarter, compared to an operating loss of $7.1 million during the same period in the prior year.
Our retail operation continues to make progress in what remains a difficult operating environment," Darrow said. "During the quarter, we improved the segments gross margin, demonstrated good cost disciplines and decreased our loss compared with last years third quarter. On the front end of the business, the sales team is focused on increasing the average ticket and close ratios and we have noted an increase in customer traffic into our stores. Throughout the course of the past year, our
marketing initiatives have remained robust with advertising designed to drive traffic into the La-
Z-Boy Furniture Galleries network of stores, and we believe La-Z-Boy is gaining market
share.
Looking forward, Darrow said there are a few positive signs out there.
"While we remain concerned about various economic factors, particularly unemployment and credit availability, we note some positive signs with respect to La-Z-Boys same-store-sales figures, the strength of our upholstery sales performance this quarter as well as continued progress in our retail segment," he said. "As noted earlier, while we will remain mindful of cost containment and controls, our entire organization is focused on driving sales throughout all three segments of our business as we continue to pursue market share gains to ensure La-Z-Boy Inc. maintains a leadership position in the industry. At the same time, we will continue to ensure that our balance sheet remains strong to allow for the greatest operating flexibility going forward.