The recent quarterly financial results unveiled by La-Z-Boy Incorporated (LZB) have left investors on a rollercoaster ride of emotions. While the figures surpassed the Zacks Consensus Estimate, with both earnings and sales managing to beat projections, the year-over-year comparison brought a twinge of disappointment. This downturn was attributed to a decrease in consumer spending on furniture and home goods, with a decline in store foot traffic hinting at a subdued retail environment. The slowdown in housing market activity, influenced by an upsurge in interest rates, played a crucial role in this narrative.
Despite these headwinds, La-Z-Boy showed robust performance, boasting record-high conversion rates and an uptick in average sales per customer, marking it as the pinnacle of its execution prowess to date. The company remains cautiously optimistic in the face of ongoing industry volatility yet carries a strong belief in its capacity to outshine competitors and enlarge its market share steadily over the long haul.
Looking ahead to fiscal 2025, LZB foresees continued challenges in the industry, with a potential decline of up to 5%. However, a ray of hope shines in the forecasted improved industry dynamics expected later in the fiscal year post-anticipated interest rate reductions that could breathe life into housing activities. In this challenging landscape, La-Z-Boy aims to outpace industry performance in fiscal 2025, targeting modest year-over-year sales growth driven by the strategic implementation of its Century Vision framework. This strategy entails the establishment of 12-15 new La-Z-Boy Furniture Galleries stores, predominantly in the latter half of the fiscal year.
Quarter in Review
La-Z-Boy delivered adjusted earnings of 95 cents per share for the quarter, trumping the Zacks Consensus Estimate of 68 cents per share. However, this figure represented a 4% dip from the 99 cents per share reported in the corresponding period the previous year.
Segmental Insights
The company’s Retail arm witnessed a 6% decline in delivered sales to $228 million, reflecting the completion of outstanding pandemic-related backlog deliveries. Nonetheless, these figures soared by 50% compared to the pre-pandemic fourth quarter of fiscal 2019. While written sales in the Retail segment witnessed a 1% increase from the previous year, the challenge of reduced foot traffic and a complex economic backdrop led to a 5% decline in written same-store sales. The segment’s non-GAAP operating margin faced a 130 basis points contraction year over year.
On the Wholesale front, sales in the segment slid 1% year over year to $392 million despite a recovery in wholesale unit volumes during the quarter. The non-GAAP operating margin for this segment shrunk by 20 basis points compared to the previous year.
Sales in the Corporate & Other segment dropped 2.4% year over year to $39 million. Despite Joybird’s written sales slipping by 1%, delivered sales remained relatively stable at $37 million, signaling a stabilization in sales trends.
Fiscal 2024 Highlights
For the entire fiscal year, La-Z-Boy reported earnings per share of $2.98, a decrease from $3.86 reported in the prior year. Moreover, consolidated delivered sales fell 13% to $2 billion from the previous year’s recorded $2.3 million.
The non-GAAP operating income took a hit, shrinking to $159 million from the $223 million reported in the prior year. The non-GAAP operating margin also saw a decline, slipping to 7.8% from the previous year’s level of 9.5%.
Financial Overview
La-Z-Boy ended fiscal 2024 with $341.1 million in liquidity, reflecting a marginal decline from the year-ago period. Cash from operations saw a decrease to $53 million for the quarter, compared to $78 million in the prior-year period. Capital expenditures for fiscal 2024 stood at $54 million.
Q1 Fiscal 2025 Projections
The company expects delivered sales for the first quarter of fiscal 2025 to range between $475 million and $495 million. This estimate indicates a slight drop from the $482 million reported in the comparable year-ago period. The non-GAAP operating margin is anticipated to fall within a range of 6% to 7%, compared with the 7% reported in the previous year’s first quarter. It’s worth noting that LZB’s Q1 typically sees the weakest sales and margins due to seasonal industry fluctuations and the company’s annual plant shutdown in July.
Looking Ahead
Despite the challenges ahead, the resilience exhibited by La-Z-Boy in navigating turbulent industry waters is commendable. As the company sets its sights on outshining competitors and expanding market share, investors keen on riding the wave of LZB’s strategic execution should keep a close eye on how the market dynamics unfold in the upcoming quarters.
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