La-Z-Boy Incorporated ((LZB)) has held its Q2 earnings call. Read on for the main highlights of the call.
TipRanks Black Friday Sale
- Claim 60% off TipRanks Premium for the data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
La-Z-Boy Incorporated’s recent earnings call presented a balanced outlook, reflecting both optimism and challenges. The company reported modest sales growth, strong cash flow, and strategic expansion efforts, but also faced hurdles such as mixed consumer trends and declining segments like Joybird.
Modest Sales Growth
La-Z-Boy reported total delivered sales of $522 million, marking a slight increase from the previous year. The company saw a notable 4% increase in total written sales and a 2% growth in the Wholesale segment, highlighting steady progress despite market challenges.
Strong Operating Cash Flow
The company generated $50 million in operating cash flow for the quarter, tripling the previous year’s comparable period. This significant increase underscores La-Z-Boy’s effective financial management and operational efficiency.
Dividend Increase
La-Z-Boy announced a 10% dividend increase, marking the fifth consecutive year of double-digit increases. This move reflects the company’s commitment to returning value to shareholders and confidence in its financial stability.
Strategic Store Expansion
The company opened five new company-owned stores in the quarter, totaling 15 new stores over the last 12 months. Additionally, a 15-store acquisition in the Southeast U.S. was completed, indicating La-Z-Boy’s aggressive expansion strategy.
Distribution and Home Delivery Transformation
La-Z-Boy continued its progress in transforming its distribution network by consolidating two additional distribution centers. The aim is to reduce the distribution footprint from 15 to three centralized hubs, enhancing efficiency and service delivery.
Mixed Consumer Trends
The company experienced a 2% decrease in written same-store sales for the quarter, despite sequential improvements over the last two quarters. Early November results remain mixed, reflecting ongoing consumer uncertainty.
Challenges in Canada
La-Z-Boy continues to face challenges in the Canadian market, primarily due to trade tariffs and other external factors, which have impacted its performance in the region.
Joybird Sales Decline
Joybird, a segment of La-Z-Boy, saw a 10% decline in delivered sales, primarily due to lower sales volume. This has led to an increased operating loss, highlighting the need for strategic adjustments.
Retail Margin Deleverage
The retail adjusted operating margin decreased to 10.7% from 12.6%, attributed to fixed cost deleverage on lower delivered same-store sales and investments in new stores.
Forward-Looking Guidance
Looking ahead, La-Z-Boy anticipates continued modest sales growth, with strategic moves such as a 15-store acquisition in the Southeast U.S. expected to add $80 million in annual retail sales. The company plans to exit non-core businesses by the end of the fiscal year, aiming to streamline operations and focus on core strengths.
In conclusion, La-Z-Boy’s earnings call highlighted a mix of positive developments and challenges. While the company is making strategic expansions and maintaining strong cash flow, it must navigate mixed consumer trends and specific market difficulties. The overall sentiment reflects cautious optimism as La-Z-Boy continues to adapt and grow in a dynamic market environment.