La-Z-Boy Incorporated Reports Solid Fourth Quarter and Full Year Results; Operating Cash Flow of $158 million for the Full Year

Fiscal 2024 Fourth Quarter Highlights:

• Consolidated delivered sales of $554 million
  • Up 22% versus most recent pre-pandemic fourth quarter (Fiscal 2019 Fourth Quarter)
  • Down 1% versus prior year
• GAAP diluted EPS of $0.91
  • Non-GAAP⁽¹⁾ diluted EPS of $0.95
• Generated $53 million in operating cash flow for the quarter
• Grew company-owned La-Z-Boy Furniture Galleries^® network by three stores (including two acquired independent La-Z-Boy Furniture Galleries^® stores)
  

Fiscal 2024 Highlights:

• Consolidated delivered sales of $2.05 billion
• Gross margin expansion on GAAP and Non-GAAP⁽¹⁾ basis, across all segments
• GAAP diluted EPS of $2.83
  • Non-GAAP⁽¹⁾ diluted EPS of $2.98
• Generated $158 million in operating cash flow for the year
• Strong balance sheet with $341 million in cash and no external debt
• Opened six company-owned and acquired 11 independent La-Z-Boy Furniture Galleries^® stores
  • Retail (company-owned) stores now represent over half of the total La-Z-Boy Furniture Galleries^® network for first time in company history
• Returned $85 million to shareholders through share repurchases and dividends
  • Increased prior quarterly dividend by 10% to $0.20 in third quarter

MONROE, Mich., June 17, 2024 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE: LZB), a global leader in the manufacture and retail of residential furniture, today reported fourth quarter and full year results for the period ended April 27, 2024. For the quarter, sales totaled $554 million, a decrease of 1% against a year ago period that benefited from pandemic backlog deliveries and 22% above the pre-pandemic fourth quarter of Fiscal 2019. Operating margin was 9.1% in the quarter on a GAAP basis and 9.4% on a Non-GAAP⁽¹⁾ basis. Diluted earnings per share totaled $0.91 on a GAAP basis and $0.95 on a Non-GAAP⁽¹⁾ basis.

Written sales again outperformed the industry, with fourth quarter total written sales for the Retail (company-owned La-Z-Boy Furniture Galleries^®) segment up 1% versus a year ago, and written same-store sales down 5% versus a year ago. Written same-store sales for the entire La-Z-Boy Furniture Galleries^® network decreased 3% versus the year ago period. Trends were strongest in the first half of the quarter around key holiday events and recovery from January weather events. Written sales results continue to outperform the broader industry, which was down 8% for the quarter, as furniture and home furnishings spending remains depressed with overall traffic trends challenged and housing activity down due to continued higher interest rates.

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, “We are pleased with our strong finish to the fiscal year as fourth quarter results exceeded expectations. Wholesale unit volumes improved in the quarter and recovery from weather and related disruptions in January also provided a tailwind. The industry continues to grapple with higher for longer interest rates and housing turnover near 30-year lows negatively impacting store traffic. However, our execution is the strongest it has ever been, including conversion rates at all-time highs and average ticket and design sales trending up for the year. We expect industry fundamentals to remain volatile for the near term, but remain confident in our ability to outperform the market and gain share longer term. Our first quarter is off to a good start and we are encouraged by our solid Memorial Day results as we believe our assortment and best-in-class motion offerings are resonating with consumers in the marketplace.”

Whittington added, “During the year we made great progress on our Century Vision strategy increasing both the total La-Z-Boy Furniture Galleries^® store network and the number of company-owned stores. We opened six new company-owned stores and acquired 11 independent Furniture Galleries^® stores. We also invested in both our stores and manufacturing operations through remodels and improving the agility of our supply chain. As a market leader in comfortable custom furniture with quick delivery, we are positioned to continue to outperform the industry and grow share. Our focus remains on executing our proven playbook of expanding our Retail segment through new and acquired stores, delivering sales growth double the industry, and driving margin expansion. I want to thank all of our dedicated employees for their strong contributions throughout the year. The momentum in our business is palpable, particularly with our strong merchandising offerings and new "Long Live the Lazy" brand campaign building awareness, consideration, and purchase intent. We are excited to build further on this foundation in Fiscal 2025."

First Quarter Outlook:
Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, “Taken together, our third quarter and fourth quarter results were largely in line with our plans for the second half of Fiscal 2024. Recall, delivered sales in Fiscal 2023 included $300 million of backlog. Thus, our sales were roughly flat compared to last year, absent this backlog. Looking forward, in Fiscal 2025, we expect the industry to continue to be challenged, down by as much as 5%, with any improved industry trends occurring late in our fiscal year, towards calendar 2025, when expected interest rate cuts filter through the economy and begin to positively impact housing activity. We expect to continue to outperform the industry in Fiscal 2025, which should result in modest sales growth year-over-year. Growth will be supported by executing our Century Vision strategy, including the opening of 12 to 15 new La-Z-Boy Furniture Galleries^® stores, mainly in the second half of the fiscal. For the first quarter of Fiscal 2025, we expect delivered sales to be in the range of $475-495 million and Non-GAAP operating margin⁽²⁾ to be in the range of 6-7%. Also, as a reminder, our first quarter is generally the lowest sales and margin quarter in the fiscal year due to seasonally lower industry sales and our annual week-long plant shutdown in July."

Key Results:

Liquidity Measures:

Fiscal 2024 Fourth Quarter Results versus Fiscal 2023 Fourth Quarter:

• Consolidated sales in the fourth quarter of Fiscal 2024 decreased 1% to $554 million versus last year. Sales in the fourth quarter of Fiscal 2023 included the delivery of a significant backlog resulting from heightened demand in prior periods. Sales increased 22% versus the most recent pre-pandemic fourth quarter in Fiscal 2019
• Consolidated GAAP operating margin was 9.1% versus 9.6%
  • Consolidated Non-GAAP⁽¹⁾ operating margin decreased 40 basis points to 9.4% versus 9.8%, driven by lower gross margin from segment mix partially offset by lower SG&A spend
• GAAP diluted EPS increased to $0.91 from $0.79 and Non-GAAP⁽¹⁾ diluted EPS decreased to $0.95 from $0.99

Retail Segment:

• Sales:
  • Written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries^® stores) increased 1% with growth from acquired and new stores, more than offsetting lower same-store sales compared to the year ago period
    • Written same-store sales decreased 5%, driven by lower traffic and the challenging economic environment, partially offset by stronger conversion rates and higher design sales
  • Delivered sales decreased 6% to $228 million versus last year's results that included delivery of pandemic-related backlog but increased 50% versus the most recent pre-pandemic fourth quarter in fiscal year 2019
• Operating Margin:
  • GAAP operating margin and GAAP operating income was 14.1% and $32 million, versus 15.5% and $38 million, respectively
    • Non-GAAP⁽¹⁾ operating margin and Non-GAAP⁽¹⁾ operating income were 14.2% and $32 million, down 130 basis points and 14%, respectively, driven by improved gross margin from favorable shift in product mix, more than offset by fixed cost deleverage on lower delivered sales
      

Wholesale Segment:

• Sales:
  • Sales decreased 1% to $392 million, relatively flat versus the year ago period
• Operating Margin:
  • GAAP operating margin decreased to 8.1% versus 8.5%
    • Non-GAAP⁽¹⁾ operating margin decreased to 8.5%, down 20 basis points; gross margin declines were partially offset by lower SG&A expenses
      

Corporate & Other:

• Joybird written sales decreased 1% and delivered sales were roughly flat at $37 million as sales trends have largely stabilized. Joybird again made meaningful progress on improving profitability in the quarter with lower freight and warranty expenses, improved product mix, and a higher return on advertising spending
  

Balance Sheet and Cash Flow, Fiscal 2024:

• Ended the fiscal year with $341 million in cash⁽³⁾ and no external debt
• Generated $158 million in cash from operating activities, including $53 million in the fourth quarter, versus $205 million in Fiscal 2023 and $78 million in last year's fourth quarter, which benefited from pandemic backlog deliveries
• Invested $54 million in capital expenditures, primarily related to La-Z-Boy Furniture Galleries^® (new stores and remodels), and projects at our manufacturing and distribution facilities
• Returned approximately $85 million to shareholders, including $53 million in share repurchases and $33 million in dividends

Conference Call:
La-Z-Boy will hold a conference call with the investment community on Tuesday, June 18, 2024, at 8:30 a.m. ET. The toll-free dial-in number is (888) 506-0062; international callers may use (973) 528-0011. Enter Participant Access Code 175127.

The call will be webcast live, with corresponding slides, and archived on the internet. It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at (877) 481-4010 and to international callers at (919) 882-2331. Enter Replay Passcode: 50747. The webcast replay will be available for one year.

Investor Relations Contact:
Mark Becks, CFA, (734) 457-9538
mark.becks@la-z-boy.com

About La-Z-Boy:
La-Z-Boy Incorporated brings the transformational power of comfort to people, homes, and communities around the world - a mission that began when its founders invented the iconic recliner in 1927. Today, the company operates as a vertically integrated furniture retailer and manufacturer, committed to uncompromising quality and compassion for its consumers.

The Retail segment consists of 187 company-owned La-Z-Boy Furniture Galleries^® stores, and is part of a broader network of over 350 La-Z-Boy Furniture Galleries^® that, with La-Z-Boy.com, serve customers nationwide. Joybird^®, an e-commerce retailer and manufacturer of modern upholstered furniture, has 12 stores in the U.S. In the Wholesale segment, La-Z-Boy manufactures comfortable, custom furniture for its Furniture Galleries^® and a variety of retail channels, England Furniture Co. offers custom upholstered furniture, and casegoods brands Kincaid^®, American Drew^®, and Hammary^® provide pieces that make every room feel like home. To learn more, please visit: https://www.la-z-boy.com/.

Notes:
⁽¹⁾Non-GAAP amounts for the fourth quarter of fiscal 2024 exclude:

• a $1.7 million pre-tax, or $0.03 per diluted share, charge related to our supply chain optimization actions
• purchase accounting charges related to acquisitions completed in prior periods totaling $0.3 million pre-tax, or $0.01 per diluted share, all included in operating income

Non-GAAP amounts for the fourth quarter of fiscal 2023 exclude:

• a $0.7 million pre-tax, or $0.01 per diluted share, charge related to the closure of the Torreón, MX facility, primarily reflecting asset relocation costs
• purchase accounting charges related to acquisitions completed in prior periods totaling $0.3 million pre-tax, or $0.01 per diluted share, with $0.3 million included in operating income and a de minimis amount included in interest expense
• a pre-tax charge of $10.6 million, or $0.18 per diluted share related to an impairment of one investment
  

Non-GAAP amounts for the full fiscal 2024 year exclude:

• a $7.5 million pre-tax, or $0.13 per diluted share, charge related to our supply chain optimization actions
• purchase accounting charges related to acquisitions completed in prior periods totaling $1.2 million pre-tax, or $0.02 per diluted share, with $1.1 million included in operating income and $0.1 million included in interest expense

Non-GAAP amounts for the full fiscal 2023 year exclude:

• a $10.8 million pre-tax, or $0.19 per diluted share, charge related to the closure of the Torreón, MX facility, primarily reflecting the impairment of various assets
• purchase accounting charges related to acquisitions completed in prior periods totaling $0.6 million pre-tax, or less than $0.01 per diluted share, with $0.3 million included in operating income and $0.3 million included in interest expense
• a pre-tax charge of $10.6 million, or $0.18 per diluted share, related to an impairment of one investment
• a $0.6 million pre-tax, or $0.01 per diluted share, charge related to the company's business realignment, announced in June 2020

⁽²⁾This reference to Non-GAAP operating margin for a future period is a Non-GAAP financial measure. We have not provided a reconciliation of Non-GAAP operating margin for future periods in this press release because such reconciliation cannot be provided without unreasonable efforts.

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

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

Cautionary Note Regarding Forward-Looking Statements:
This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry.

The forward-looking statements in this press release are based on certain assumptions and currently available information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Fiscal 2023 Annual Report on Form 10-K and other factors identified in our reports filed with the Securities and Exchange Commission (the “SEC”), available on the SEC’s website at www.sec.gov. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason.

Non-GAAP Financial Measures:
In addition to the financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), this press release also includes Non-GAAP financial measures. Management uses these Non-GAAP financial measures when assessing our ongoing performance. This press release contains references to Non-GAAP operating income (on a consolidated basis and by segment), Non-GAAP operating margin (on a consolidated basis and by segment), and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share, Non-GAAP diluted earnings per share (and components thereof, including Non-GAAP income before income taxes and Non-GAAP net income attributable to La-Z-Boy Incorporated), each of which may exclude, as applicable, business realignment charges, supply chain optimization charges, investment impairment charges, and purchase accounting charges. The business realignment charges include severance costs, asset impairment costs, and costs to relocate equipment and inventory related to organizational changes we undertook as a result of our response to COVID-19, including a reduction in the company’s work force, temporary closure of certain manufacturing facilities and subsequent gains resulting from the sale of related assets. The supply chain optimization charges include asset impairment costs, accelerated depreciation expense, lease termination gains, severance costs, and employee relocation costs resulting from the closure, consolidation, and centralization of various global supply chain operations and includes the closure of our Torreón manufacturing facility (previously disclosed as Mexico optimization). The purchase accounting charges include the amortization of intangible assets, fair value adjustments of future cash payments recorded as interest expense, and adjustments to the fair value of a contingent consideration liability. These Non-GAAP financial measures are not meant to be considered superior to or a substitute for La-Z-Boy Incorporated’s results of operations prepared in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.

Management believes that presenting certain Non-GAAP financial measures will help investors understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers. Management excludes purchase accounting charges because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions consummated and the success with which we operate the businesses acquired. While the company has a history of acquisition activity, it does not acquire businesses on a predictable cycle, and the impact of purchase accounting charges is unique to each acquisition and can vary significantly from acquisition to acquisition. Similarly, business realignment charges and supply chain optimization charges are dependent on the timing, size, number and nature of the operations being closed, consolidated or centralized, and the charges may not be incurred on a predictable cycle. Management also excludes the impacts from the impairment charge for one investment when assessing the company's operating and financial performance due to the one-time and infrequent nature of the transaction. Management believes that exclusion of these items facilitates more consistent comparisons of the company’s operating results over time. Where applicable, the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” tables present the excluded items net of tax calculated using the effective tax rate from operations for the period in which the adjustment is presented.