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From Home Furnishing Business

La-Z-Boy Records 6.1% Sales Jump, but Tax Changes Hurt Earnings

La-Z-Boy (NYSE: LZB) said sales rose 6.1% to $413.6 million in the quarter ended Jan. 27, but earnings were nearly sliced in half by one-time charges stemming from recently-enacted changes in federal tax law.

Sales increases were recorded in all three of the company’s business segments – upholstery, case goods and company-owned retail stores – and the retail segment saw increased use of design services and custom orders that resulted in a higher average ticket.

“We experienced positive sales momentum for the quarter and, in addition to posting a 6.1% increase, each of our business segments operated at a high level during the period,” said Kurt Darrow, chairman, president and CEO “Additionally, the La-Z-Boy Furniture Galleries store network posted its fourth consecutive quarterly written same-store sales increase.”

“The company also generated strong cash flow from operations enabling us to make the necessary strategic investments to grow our business in the dynamic marketplace and return value to shareholders,” he added.

Net income for the quarter, the third quarter of La-Z-Boy’s fiscal year, totaled $12.1 million or 25 cents per share. That was down from $23.3 million or 47 cents per share in the third quarter of the previous fiscal year. 

The most recent quarter included a net charge of $9.5 million or 20 cents per share, related to the new tax law. The charge included a $9.8 million reduction in the value of deferred tax assets, a $1.9 million charge for tax on repatriation of foreign earnings, and a gain of $2.2 million from the lower blended tax rate.

Darrow also noted that operating margins in the upholstery segment were hurt in November and December by rising raw materials prices. However, a price increase on delivered orders became effective in January, which should offset the raw materials inflation.

For the nine months ended Jan. 27, sales rose 5.1% to $1.16 billion.

Nine-month net income totaled $46.7 million or 96 cents per share. That was down from $57.9 million or $1.16 per share in the first nine months of the previous fiscal year.

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