La-Z-Boy Reports 22% Sales Increase for the Fiscal 2022 Third Quarter

La-Z-Boy Incorporated (“La-Z-Boy”), a global leader in residential furniture, today reported operating results for the fiscal 2022 third quarter ended January 22, 2022.

Fiscal 2022 third quarter versus Fiscal 2021 third quarter:

• Consolidated sales increased 22% to $572 million
  • Retail segment posted record sales and operating profit
• Strong written order trends
  • Written same-store sales for the La-Z-Boy Furniture Galleries^® network increased 3%
  • Written sales for Joybird increased 27%
• Consolidated operating margin:
  • GAAP: 6.9% versus 7.3%
  • Non-GAAP⁽¹⁾: 7.0% versus 9.5%
• Net income attributable to La-Z-Boy Incorporated per diluted share (“EPS”):
  • GAAP: $0.65 versus $0.62
  • Non-GAAP⁽¹⁾: $0.65 versus $0.74
• $32 million returned to shareholders through share repurchases and dividends in FY22 Q3

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy, said, “During our third quarter, we delivered a strong 22% increase in consolidated sales versus the prior-year period. Demand continues unabated across the La-Z-Boy enterprise and remains well above pre-pandemic levels. Additionally, we returned $32 million to shareholders through dividends and share repurchases, bringing our year-to-date returns to an all-time high level. While delivering an improved top line, the quarter was marked by greater-than-expected supply chain volatility, which had significant near-term impact on the efficiency of our manufacturing capacity ramp plans, dampening delivered sales growth and profit margins. A shortage of component parts, record levels of COVID absenteeism in January, and the challenge of hiring and training new employees at manufacturing facilities all contributed to the issues we faced as the quarter progressed. Additionally, a 14-week COVID-related shutdown in Vietnam temporarily and dramatically impacted sales and profitability for our casegoods import business, with minimal product available to ship to customers and high freight costs.”

Whittington added, “Our number one priority is to improve the agility of our supply chain in this high-demand environment to increase production more quickly and efficiently. While the challenges faced during the quarter were significant, we are managing through them to improve efficiencies, work down our backlog and service customers and consumers while achieving greater profitability. I remain very optimistic about the future of La-Z-Boy Incorporated as we continue to make strategic investments to increase our market share and drive long-term profitable growth and returns for all stakeholders.”

Consolidated sales in the third quarter of fiscal 2022 increased 22% to $572 million versus the fiscal 2021 third quarter, reflecting ongoing capacity increases and pricing and surcharge actions.

Consolidated GAAP operating margin was 6.9% versus 7.3% in the prior-year third quarter. Consolidated non-GAAP⁽¹⁾ operating margin was 7.0% versus 9.5% in the prior-year third quarter.

Operating margin for the period was impacted by supply chain challenges, including raw material inflation, and plant inefficiencies primarily related to new manufacturing capacity as well as COVID impacts, partially offset by pricing and surcharge actions, and fixed-cost leverage on higher volume.

GAAP diluted EPS increased to $0.65 for the fiscal 2022 third quarter versus $0.62 in the prior-year quarter. Non-GAAP⁽¹⁾ diluted EPS decreased to $0.65 versus $0.74 in the prior-year third quarter.

Wholesale Segment:

• Sales:
  • Increased 21% to $423 million in the fiscal 2022 third quarter compared with the fiscal 2021 third quarter driven by realized pricing and surcharge actions as well as increased volume
• Operating Margin:
  • Non-GAAP⁽¹⁾ operating margin in the fiscal 2022 third quarter was 6.5% versus 10.2% for the prior-year period, primarily reflecting higher raw material and freight costs, sourcing-related tariff and duty increases, component parts shortages, plant inefficiencies due to manufacturing capacity start-up activities, and continued labor challenges. Additionally, the company’s casegoods business was significantly impacted by COVID-related shutdowns in Vietnam and freight costs. These factors were partially offset by pricing and surcharge actions, fixed-cost leverage on higher volume and a lower marketing spend as a percentage of sales

Written same-store sales for the entire La-Z-Boy Furniture Galleries^® network:

• Increased 3% for the fiscal 2022 third quarter compared with the fiscal 2021 third quarter
• Compared with the pre-pandemic fiscal 2020 third quarter, written same-store sales increased 9% for the fiscal 2022 third quarter, for a compound annual growth rate of approximately 4% over the two years

Retail segment:

• Delivered sales:
  • Increased 19% to a record $197 million in the third quarter of fiscal 2022 compared with the prior-year third quarter
  • Within this, delivered same-store sales increased 16% in the fiscal 2022 third quarter versus the year-ago period
• Written same-store sales for the company-owned La-Z-Boy Furniture Galleries^® stores:
  • Decreased 1% in the fiscal 2022 third quarter
  • Fiscal year-to-date written same-store sales increased 3% versus the prior-year period
• Operating Performance:
  • Non-GAAP⁽¹⁾ operating profit increased to a record $24 million in the fiscal 2022 third quarter
  • Non-GAAP⁽¹⁾ operating margin increased to 12.2% in the fiscal 2022 third quarter versus 8.9% in the fiscal 2021 third quarter, primarily driven by fixed-cost leverage on higher delivered sales volume and disciplined expense management

Corporate & Other:

• Joybird delivered sales:
  • Increased 56% to a record $45 million in the fiscal 2022 third quarter compared with the same quarter last year
  • Compared with the pre-pandemic fiscal 2020 third quarter, delivered sales more than doubled, increasing 103%, representing a compound annual growth rate of 43%
• Joybird written sales:
  • Increased 27% in the fiscal 2022 third quarter compared with the prior-year quarter
  • Compared with the pre-pandemic fiscal 2020 third quarter, written sales increased an impressive 128%, representing a compound annual growth rate of 51%, reflecting continued robust order trends and the strength of the brand in the online marketplace
• Profit for the quarter was roughly break even, reflecting significant investment in marketing to grow the business and increased raw material and freight costs which negatively impacted gross margin

Balance Sheet and Cash Flow

For the fiscal 2022 year to date, the company generated $45 million in cash from operating activities, after investing $83 million in higher inventory levels to protect against supply chain disruptions and to support increased production and delivered sales.

The company continued to make disciplined investments in the business, including $59 million in capital expenditures to increase capacity, remodel stores, and upgrade infrastructure, for the fiscal year to date.

The company has returned $96 million to shareholders fiscal year to date, including $21 million in dividends with $7 million paid in the third quarter, as well as $76 million in share repurchases, or approximately 2.1 million shares of stock, leaving approximately 7.9 million shares available for repurchase under its authorized share repurchase program as of January 22, 2022.

La-Z-Boy ended the period with $240 million in cash⁽²⁾ compared with $393 million in cash⁽²⁾ at the end of the fiscal 2021 third quarter. The company holds $30 million in investments to enhance returns on cash versus $31 million at the end of the fiscal 2021 third quarter.

Dividend

On February 15, 2022, the Board of Directors declared a quarterly cash dividend of $0.165 per share on the common stock of the company. The dividend will be paid on March 15, 2022, to shareholders of record on March 3, 2022.

Outlook

Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, “Demand trends remain strong and our backlog will support strengthening delivered sales as we increase capacity over time, but near-term production gains will be slower than previously expected. Global supply chain disruptions continue and disproportionately impact our higher-end products, which sell at a greater level in our La-Z-Boy Furniture Galleries^® stores, including our company-owned Retail stores. Separately, we expect our casegoods import operations to normalize during the first half of fiscal 2023 as we more consistently receive product and ship it to customers.

“Taking these factors into consideration, we now expect delivered sales per week in the fourth quarter to be flat to slightly up versus the third quarter. Further, the fiscal fourth quarter will benefit from containing 14 weeks compared to the third quarter which contained only 12 weeks. We expect consolidated non-GAAP operating margin to strengthen to the range of 7.5% to 8.5%. Over time, we continue to expect sales and operating margin performance will improve incrementally as increases in capacity allow us to more fully meet demand while leveraging fixed costs with higher volume.”

For the full third quarter results, 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^®, Kincaid^® and the company’s international wholesale and manufacturing businesses. The company-owned Retail segment includes 163 of the 350 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 350 stand-alone La-Z-Boy Furniture Galleries^® stores and 559 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 – Media Contact – kathy.liebmann@la-z-boy.com – (734) 241-2438

Source: La-Z-Boy Incorporated