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From Home Furnishing Business

Operational Improvements Drive La-Z-Boy Profit Increase

La-Z-Boy (NYSE: LZB) said sales edged up 1.6% to $390 million in the quarter ended Jan. 28, but profits jumped more than 6% due largely to improved operating margins in its wholesale upholstery business.

Net income for the quarter, the third quarter of its fiscal year, totaled $23.3 million or 47 cents per share. That was up from $21.9 million or 43 cents per share in last year’s third fiscal quarter.

Wholesale upholstery sales were up just 0.2% to $302.9 million, but the segment’s operating margin of 11.5% was the highest posted in the third quarter in more than a decade.

“Our supply chain team continues to streamline procurement, logistics and plant productivity to drive performance and, in turn, we are improving our service to customers with quicker delivery,” said Kurt Darrow, chairman, president and CEO. “In particular, the ability to deliver custom furniture to consumers in four weeks or less remains a competitive advantage and differentiator in the marketplace.”

Sales from company-owned retail stores rose 10.9% to $122.1 million, but that was due largely to acquisitions and new store openings. Comparable-store delivered sales fell 8.1%.

 “We made targeted marketing investments that helped drive pockets of growth, but our sales declined for our core stores as we were unable to overcome challenges in the overall retail environment,” said Darrow. “This sales decline reduced our ability to absorb the fixed costs associated with the retail business and impacted our operating margin.  For the period, on lower traffic, conversion was flat while the average ticket increased, fueled by higher design sales.”

The company owns 142 of the 346 La-Z-Boy Furniture Galleries stores. During the quarter, three stores were opened throughout the network, one was relocated and three others were remodeled, he said.

“While the retail environment for home furnishings remains challenging, our brand strengh, relevant product offering, vast proprietary distribution system and extensive base of independent dealers will allow us to navigate through this period as we modify our go-to-market strategies,” Darrow added. “At the same time, our operating platform is efficient, fueled by an outstanding supply chain, and we are working to create long-term value for shareholders.”

For the nine months ended Jan. 28, net sales totaled $1.107 billion, down from $1.108 billion in the first nine months of the previous fiscal year.

Nine-month profits totaled $57.9 million or $1.16 per share. That was up from $56.5 million or $1.11 per share in the comparable period.



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