LA-Z-BOY INC Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fiscal 2025 Results: Consolidated delivered sales were $2.1 billion, up 3% year-over-year. Operating cash flow was $187 million, up 18% year-over-year. Returned $113 million to shareholders through share repurchases and dividends.
• Supply Chain: Recovered quickly from storm damage in Siloam Springs, AR, losing only 1 week of production with support from across the company.
• Retail Network: Opened 200th company-owned La-Z-Boy Furniture Galleries store, owning 55% of the network. Written sales for company-owned Retail increased 3% year-over-year, but same-store sales decreased 5% due to high mortgage rates.
• Century Vision: Focus on growing Retail network, optimizing Joybird, brand building (new brand identity launching summer 2025), and supply chain optimization.
• Distribution Network: Kicked off multiyear project to redesign distribution network and home delivery program to enhance efficiency and consumer experience.

Segment Performance

• Retail Segment: Fourth quarter delivered sales were $247 million, up 8% year-over-year. Adjusted operating margin was 13.1% (down from 14.2% due to investment in new stores). For the full fiscal year, Retail segment delivered sales grew 5% led by new stores and acquisitions.
• Wholesale Segment: Fourth quarter delivered sales were $402 million, up 2% year-over-year. Adjusted operating margin was 8.5% (flat year-over-year). Full year Wholesale segment delivered sales grew 2% led by core North America La-Z-Boy wholesale business.
• Joybird (Corporate & Other): Fourth quarter delivered sales were $36 million, down 2% year-over-year. Adjusted operating margin was positive for the quarter and year. Full year Joybird sales grew 5% with adjusted operating margin slightly positive.

Guidance

• Fiscal 2026 First Quarter: Sales expected to be in the range of $490 million to $510 million. Adjusted operating margin expected to be in the range of 5.5% to 7%, including transitory pressure from U.K. and Joybird businesses and investment in distribution network.
• Store Openings: Expect to open approximately 15 new company-owned and independent La-Z-Boy Furniture Galleries stores and 3 to 4 new Joybird stores in fiscal 2026.
• Capital Expenditures: Fiscal 2026 capital expenditures expected to be in the range of $90 million to $100 million, including investments in La-Z-Boy Furniture Galleries, distribution network redesign, and manufacturing.
• Trade Environment: Mitigating global trade impact through supply chain agility, sourcing adjustments, vendor diversification, and potential pricing actions.

Risks

• Global Trade Uncertainty: Impact on costs and pricing due to evolving trade policies.
• Macroeconomic Factors: High mortgage rates and economic volatility affecting consumer sentiment and industry traffic.
• U.K. Business Challenges: Transitory pressure on margins from customer transition in international wholesale.
• Joybird Consumer Challenges: Impact on sales and margins due to challenges faced by the Joybird core consumer.

Question and Answer

Q: Discussion on Wholesale margin expansion and distribution project timing A: Taylor mentioned ~0.5% of margin control is in their hands via the distribution project, with the rest dependent on a healthy industry and housing market. Melinda noted the timing is due to business scale and efficiency needs.

Q: Joybird store expansion plans A: Melinda stated they are pleased with Joybird stores, see a path to 25 stores, and plan 3 to 4 new stores in fiscal 2026, growing prudently.

Q: Pricing strategy and margin outlook A: Melinda and Taylor discussed nominal pricing in the fourth quarter to manage costs, with agility to respond to input costs, and margin outlook tied to industry health and internal initiatives.