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From Home Furnishing Business

La-Z-Boy Sales Slip 1.6% Amid Weak Summer, Fall Demand

Hampered by weak consumer demand during the summer and early fall months, La-Z-Boy (NYSE: LZB) said sales fell 1.6% to $376.6 million in the quarter ended Oct. 29.

Net income of $20.83 million was essentially even with the same quarter last year, but earnings of 42 cents per share were 1 cent above the prior year period because the company had fewer outstanding shares.

The company said wholesale upholstery sales were down 3.3% to $295.8 million, while wholesale case goods sales were off 8.3% to $25.9 million.

Sales from company-owned La-Z-Boy Furniture Galleries stores increased 11.3% to $107.4 million due largely to acquisitions and new store openings. On the core 111 stores included in last year’s comparable quarter, the company said delivered sales fell 5.5%.

“While the consumer environment experienced weaker demand during the summer and early fall, macroeconomic indicators that generally bode well for discretionary spending and home furnishings remain positive,” said Kurt Darrow, chairman, president and CEO. “With that as a backdrop, our advertising, merchandising and promotional plans remain intact as we strategically position the company to capitalize on what is typically a strong holiday selling season.”

Darrow noted that despite the sales decline, the company’s operating margin improved to 8.8%, and said operating margin in the upholstery segment was 12.7%, the highest in any second quarter since fiscal 2003.

“This performance demonstrates the efficiencies our supply chain initiatives are delivering with respect to procurement and plant productivity,” he said of the upholstery segment. “Additionally, our ERP system, which was implemented throughout the La-Z-Boy branded facilities about a year ago, is helping us manage our inventory and work flow better, and our on-time shipping and speed to market have increased significantly over last year, enabling us to provide excellent service to our dealers and delight our ultimate consumer.”

Operating margin in the case good segment was 11%.

On the retail side, the company acquired four stores in Canada during the quarter, and acquired nine others in the northeastern Pennsylvania market shortly after the quarter ended.

The company said same-store written sales for its entire La-Z-Boy Furniture Galleries network declined 4.4%, but noted that same-store trends improved as the quarter progressed, with only a 1.9% decline in October.

By the end of the current fiscal year in April, the company expects to have 349 dedicated La-Z-Boy stores, a net gain of 11 from the start of the year.

For the six months ended Oct. 29, sales fell 0.9% to $717.3 million. Six-month net income was $34.64 million or 70 cents per share, compared with $34.63 million or 68 cents per share in the first half of the previous fiscal year.

In addition, La-Z-Boy’s directors approved an increase in the cash dividend to 11 cents per share. That’s a 10% increase from the previous dividend of 8 cents per share

The new dividend is payable Dec. 15 to stockholders of record Dec. 9.

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