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La-Z-Boy Reports Fiscal 2021 Fourth-Quarter and Full-Year Results

General News
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La-Z-Boy Incorporated, a global leader in residential furniture, reported strong operating results for the fiscal 2021 fourth quarter and full year ended April 24, 2021.

Fiscal 2021 fourth quarter versus Fiscal 2020 fourth quarter:

Consolidated sales increased 41% to $519.5 million

Written same-store sales for the entire La-Z-Boy Furniture Galleries® network doubled, increasing 100%

Consolidated operating margin:

-GAAP: 9.6% versus 3.7%

-Non-GAAP(1): 10.0% versus 9.3%; Wholesale(2): 10.2% versus 11.1%; Retail: 12.2% versus 10.8%

Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):

-GAAP: $0.81 versus $0.05

-Non-GAAP(1): $0.87 versus $0.49

The company returned $50 million to shareholders through share repurchases and dividends

Fiscal 2021 full year versus Fiscal 2020 full year:

Consolidated sales increased 1.8% to $1.7 billion

Written same-store sales for the entire La-Z-Boy Furniture Galleries® network increased 31%

Consolidated operating margin:

-GAAP: 7.9% versus 7.0%
-Non-GAAP(1): 9.0% versus 8.2%; Wholesale(2): 10.6% versus 10.6%; Retail: 7.7% versus 8.2%; Joybird became profitable

Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):

-GAAP: $2.30 versus $1.66

-Non-GAAP(1): $2.62 versus $2.16

Cash generated from operating activities of $310 million versus $164 million in the prior year

Cash(3) at fiscal year end increased to $395 million versus $264 million in the prior year

The company returned $61 million to shareholders through share repurchases and dividends

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy, said, “In an extremely difficult year marked by the pandemic, related macroeconomic uncertainty and supply chain disruption, we delivered strong results. Our start to the fiscal year in May 2020 came as the world was still in the early stages of its COVID-19 response. We had just restarted our plants after a month-long shutdown and retailers were slowly beginning to reopen. Progressing strongly from that starting point, for the fiscal 2021 full year, we delivered consolidated non-GAAP(1) operating margin of 9%, generated $310 million in cash from operations, and returned $61 million to shareholders through share repurchases and dividends. Additionally, we strengthened our business by significantly expanding production capacity, enhanced our retail platform, including the acquisition of the Seattle-based La-Z-Boy Furniture Galleries® stores, and turned Joybird profitable. All business units are experiencing record demand, demonstrating the strength of our brands in the marketplace combined with fantastic execution from all retail and sales teams. I thank every employee across the La-Z-Boy enterprise for their agility, hard work and dedication, all of which contributed to our excellent performance while in the midst of historic challenges.

“For the fiscal 2021 fourth quarter, record sales led to all-time record profits driven by increased production capacity, excellent performance by our company-owned La-Z-Boy Furniture Galleries® stores, and continued growth and profitability at Joybird. And, fiscal 2022 is off to a great start with continued robust written order rates and a record backlog, setting us up well for a strong year of shipments ahead.”

Consolidated sales in the fourth quarter of fiscal 2021 increased 41.4% to $519.5 million versus the fiscal 2020 fourth quarter, which was impacted by COVID-19-related plant and retail closures. Consolidated GAAP operating margin increased to 9.6% versus 3.7% in the prior-year fourth quarter. Consolidated non-GAAP(1) operating margin improved to 10.0% versus 9.3% in last year’s fourth quarter, reflecting strong performance across all business units.

For the entire La-Z-Boy Furniture Galleries® network, written same-store sales doubled, increasing 100%, for the fiscal 2021 fourth quarter compared with the fiscal 2020 fourth quarter. Compared with the pre-pandemic fiscal 2019 fourth quarter, written same-store sales for the La-Z-Boy Furniture Galleries® network increased 29%.

For the fiscal 2021 fourth quarter, delivered sales in the company’s Wholesale(2) segment increased 40% to $384.0 million compared with the prior-year fourth quarter, which was impacted by COVID-19. Non-GAAP(1) operating margin for the Wholesale(2) segment was a healthy 10.2% versus 11.1% for the prior-year period, reflecting disciplined cost management on advertising which helped offset higher raw material and freight costs and expenses to expand production capacity to service record backlog. Last year’s fourth quarter benefited from a one-time rebate of previously paid tariffs partially offset by higher bad debt expense.

Retail segment delivered sales increased 39% to $193.5 million in the fourth quarter of fiscal 2021 compared with the prior-year fourth quarter. Written same-store sales for the company-owned La-Z-Boy Furniture Galleries® stores more than doubled, increasing 114% in the quarter, reflecting positive trends across all sales metrics, including traffic, conversion and average ticket, versus last year’s fourth quarter which included store closures during the last four weeks of the period. Non-GAAP(1) operating margin for the Retail segment was 12.2% in the fiscal 2021 fourth quarter versus 10.8% in last year’s fourth quarter, primarily driven by fixed-cost leverage on higher delivered sales volume.

Within Corporate & Other, Joybird sales more than doubled compared with the prior-year quarter, increasing 144% to $37.7 million. Written sales increased 125% compared with the prior-year quarter, reflecting ongoing strong order trends and the strength of the brand in the online marketplace. For the third consecutive quarter, Joybird posted strong gross margins, delivered profitable growth and increased conversion rates while increasing its marketing spend to drive customer acquisition.

GAAP diluted EPS was $0.81 for the fiscal 2021 fourth quarter versus $0.05 in the prior-year quarter. Non-GAAP(1) diluted EPS was $0.87 versus $0.49 in last year’s fourth quarter.

Balance Sheet and Cash Flow

For fiscal 2021, the company generated $310 million in cash from operating activities, reflecting strong profit performance and a $140 million increase in customer deposits from written orders for the company’s Retail segment and Joybird. La-Z-Boy ended the period with $395 million in cash(3) and no debt, compared with $264 million in cash(3) and $75 million in short-term borrowings at the end of fiscal 2020. The company holds $32 million in investments to enhance returns on cash versus $29 million at the end of fiscal 2020. In fiscal 2021 the company spent $8 million related to acquisitions, invested $38 million in the business through capital expenditures, paid $17 million in dividends and spent $44 million repurchasing approximately 1.1 million shares of stock in the open market under its existing authorized share repurchase program, leaving 3.4 million shares available for repurchase under the program as of April 24, 2021.

Business Outlook

Demand trends remain strong across the business with backlog at record levels. The company anticipates ongoing incremental increases in manufacturing capacity throughout fiscal 2022 that will enable higher delivered sales, but expects ongoing global supply chain disruptions and headwinds related to raw materials and freight costs will cause some volatility in results. In the short term, the company expects a temporary negative impact to profit margins versus very strong fourth-quarter results due to dramatic raw material price increases which will only be offset by previously announced pricing actions as the company works through its backlog in the back half of the year.

Incoming order rates and backlog will mitigate the usual seasonal slowdown associated with the first quarter. However, as usual, capacity in the first quarter is limited to 12 weeks of production/shipments to enable a shutdown week in July for maintenance for most of the company’s plants, compared with 13 weeks in the second and fourth quarters.

Whittington said, “As we look ahead, our prudent financial culture and strong cash position provide opportunities for investment in our next chapter of growth. For the immediate term, we are focused on continuing to increase capacity and deliver units while making investments in technology solutions across the company, our stores, and updating and expanding our plants, all to enhance the consumer experience, drive future growth and emerge stronger in a post-pandemic environment.”

(1)Non-GAAP amounts for the full fiscal 2021 year exclude:

-purchase accounting charges related to acquisitions totaling $16.7 million pre-tax, or $0.33 per diluted share, primarily due to a write-up of the Joybird contingent consideration liability based on forecasted future performance, with $16.0 million included in operating income and $0.7 million included in interest expense;

-a charge of $3.8 million pre-tax, or $0.07 per diluted share, related to the company’s business realignment initiative announced in June 2020; and

-income of $5.2 million pre-tax, or $0.08 per diluted share, related to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) recorded in other income related to the impact of employee retention credits.

Non-GAAP amounts for the full fiscal 2020 year exclude:

-a non-cash, non-tax deductible goodwill impairment charge of $26.9 million pre-tax, or $0.58 per diluted share;

-a non-cash charge of $6.0 million pre-tax, or $0.09 per share, related to an impairment for one investment;

-a purchase accounting net benefit of $1.4 million pre-tax, or $0.07 per diluted share, with a $2.1 million benefit included in operating income and $0.7 million expense included in interest expense

-a net benefit of $4.4 million pre-tax, or $0.07 per diluted share, related to the company’s supply chain optimization initiative, including the closure and sale of the company’s Redlands, California upholstery manufacturing facility and relocation of its Newton, Mississippi leather cut-and-sew operations; and

-a benefit of $1.9 million pre-tax, or $0.03 per diluted share, related to the 2019 termination of the company’s defined benefit pension plan.

Non-GAAP amounts for the fourth quarter of fiscal 2021 exclude:

-purchase accounting charges related to acquisitions totaling $2.0 million pre-tax, plus related tax adjustments, or $0.06 per diluted share, primarily due to a write-up of the Joybird contingent consideration liability based on forecasted performance, with $1.9 million included in operating income and $0.1 million included in interest expense.

Non-GAAP amounts for the fourth quarter of fiscal 2020 exclude:

-a non-cash, non-tax deductible goodwill impairment charge of $26.9 million pre-tax, or $0.58 per diluted share;

-a purchase accounting net benefit of $5.9 million pre-tax, or $0.14 per diluted share, with a $6.1 million benefit included in operating income and $0.2 million included in interest expense; and

-a benefit of $0.1 million pre-tax, or $0.00 per diluted share, related to the company’s supply chain optimization initiative, including the closure of the company’s Redlands, California upholstery manufacturing facility.

Please refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” for detailed information on calculating the Non-GAAP measures used in this press release and a reconciliation to the most directly comparable GAAP measure.

(2)Wholesale segment: Effective in the first quarter of fiscal 2021, in order to better align with the manner in which we view and manage the business, coupled with economic and customer channel similarities, the company revised its reportable operating segments by aggregating the former Upholstery segment with the former Casegoods segment to form the newly combined Wholesale segment. The change in reportable operating segments reflects how the company evaluates financial information used to make operating decisions. Prior-period results disclosed in this earnings release with respect to the Wholesale segment have been revised to reflect these changes.

(3)Cash includes cash, cash equivalents and restricted cash.

For the complete press release, click here.

About La-Z-Boy

La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The Wholesale segment includes England, La-Z-Boy, American Drew®, Hammary®, and Kincaid®. The company-owned Retail segment includes 158 of the 351 La-Z-Boy Furniture Galleries® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture. The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 351 stand-alone La-Z-Boy Furniture Galleries® stores and 563 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at http://www.la-z-boy.com/.

Contact:

Kathy Liebmann – kathy.liebmann@la-z-boy.com – (734) 241-2438

Source: La-Z-Boy Incorporated