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From Home Furnishing Business

La-Z-Boy Sees Profit Increase Despite Sales Decline

Despite slight sales declines in the fourth fiscal quarter and fiscal year that ended April 29, La-Z-Boy (NYSE: LZB) had higher profits for both reporting periods due to operational improvements and increased sales of higher margin goods.

Net income totaled $28 million or 57 cents per share for the fiscal quarter, up more than 23% from $22.7 million or 45 cents per share in last year’s fourth quarter.

Sales for the 13-week quarter totaled $412.7 million, a 1% drop from last year’s fourth quarter, which had 14 weeks.

For the fiscal year, profits totaled $85.9 million or $1.73 per share. That was up 8.4% from $79.3 million or $1.55 per share in the previous fiscal year.

Sales in the most recent 52-week fiscal year totaled $1.52 billion, down from $1.525 billion in the previous fiscal year, which had 53 weeks.

During the fiscal year, the upholstery and case goods segments each had sales declines of about 2%, but recorded healthy increases in operating income.

Upholstery sales were down 2% to $1.19 billion, but operating income rose to $146.2 million from $134.2 million the previous fiscal year. Case goods sales fell 2.2% to $100.2 million, while operating income rose to $8.62 million from $7.73 million the previous year.

“We delivered a strong finish to fiscal 2017 with our earnings performance demonstrating the increasing traction and momentum of our ongoing strategic initiatives and results of our ability to leverage operating platform efficiencies,” said Kurt Darrow, chairman, president and CEO. “In fiscal 2017, we increased our gross margin, recorded our highest consolidated operating margin in more than a decade, and generated $146.2 million in cash from operating activities.  Throughout fiscal 2017, we made strategic investments to drive long-term growth, returned $57 million to shareholders through dividends and share purchases, and ended the year with a strong balance sheet.”

Sales at company-owned retail stores were up more than 10% to $443.2 million, while operating income declined to $19.2 million from $25.6 million the previous fiscal year.

In the fourth fiscal quarter, same-store written sales rose 2.4% throughout the La-Z-Boy Furniture Galleries system, including company-owned stores and those owned by independent licensees.

The company ended the year with 143 company-owned retail stores and 204 owned by licensees.

During the year, seven company-owned stores were opened, two were closed, and 14 were acquired from dealers who retired.

“We have started to see positive results from the additional investments we are making in advertising in select markets where there is greater competitive intensity to garner share of voice,” said Darrow. “At the same time, we believe the increased traffic to our web site and other digital platforms is driving engaged consumers to our stores.”

He said the company expects to have a net gain of seven stores during the current fiscal year, and is projecting 148 company-owned and 206 dealer-owned by the end of the year.

“We are optimistic about the opportunities before us,” said Darrow. “Given the strength of the La‑Z‑Boy brand, we believe the company is solidly positioned in the marketplace with a core demographic that will continue to expand.  Investments in our digital platforms will provide for additional growth opportunities as we will be able to effectively leverage those initiatives to expose more people to the brand as well as to continue to make other strategic investments in our business to drive long-term sales and earnings growth.”

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