La-Z-Boy Incorporated LZB revealed a mixed bag of results for the fourth quarter of fiscal 2024 (concluded on April 27, 2024) that managed to beat market expectations. The esteemed company reported earnings and sales figures that outshone the Zacks Consensus Estimate.

However, this shining moment was dimmed by a year-over-year decline in metrics, attributable to subdued consumer spending on home furnishings as well as a notable decrease in store footfall. The slowdown in the housing market, driven by towering interest rates, added more storm clouds to the horizon.

Amidst this turbulent market backdrop, LZB showcased its mettle by achieving its most robust performance to date. Marking record-high conversion rates and an upsurge in average sales per customer, La-Z-Boy exuded confidence in weathering the stormy seas and outperforming rivals, securing a larger slice of the market as time unfolds.

In the upcoming fiscal year 2025, La-Z-Boy anticipates persistence of industry challenges, potentially translating into a steep 5% decline. However, a silver lining appears on the horizon, with improved industry trends forecasted for later in the fiscal year, following anticipated interest rate cuts that would likely rekindle housing activity. Against this austere backdrop, LZB remains optimistic about outshining industry peers in fiscal 2025, eyeing modest year-over-year sales growth driven by the meticulous execution of its Century Vision strategy. This blueprint includes the inauguration of 12-15 new La-Z-Boy Furniture Galleries stores, chiefly slated for the latter half of the fiscal year.

The Quarter Under the Microscope

La-Z-Boy flourished in the reporting period with adjusted earnings of 95 cents per share, trumping the Zacks Consensus Estimate of 68 cents per share. Despite this surge, the bottom line witnessed a 4% decline from the equivalent of 99 cents per share reported a year ago.

La-Z-Boy’s Fiscal Fortitude Unveiled

 

Consolidated sales of $554 million for the quarter surpassed the consensus projection of $519 million by 6.7%. However, this figure lagged behind the previous year’s quarter by 1%, settling below the $561 million mark.

A Glimpse at the Segments

Retail: Sales plummeted by 6% to $228 million compared to the previous year, reflecting the completion of pandemic-driven backlog deliveries. Nevertheless, the current figures represented an impressive 50% leap from the Retail segment’s pre-pandemic performance in the fourth quarter of fiscal 2019.

Written sales within the Retail segment (encompassing La-Z-Boy Furniture Galleries stores owned by LZB) leaped by 1% year over year, buoyed by expansions into new territories. This growth managed to offset a dip in same-store sales compared to the prior year.

Written same-store sales saw a 5% decrease year over year due to dwindling foot traffic and a volatile economic landscape, albeit partially cushioned by elevated conversion rates and intensified design sales.

Despite a brighter gross margin outlook due to a favorable product mix shift, the segment endured a 130-basis point compression in its non-GAAP operating margin year over year, pegged at 14.2%. Heightened fixed costs due to reduced sales aggravated this downtrend for LZB.

Wholesale: The segment experienced a marginal 1% decline in sales, totaling $392 million as compared to a year earlier. The quarter witnessed a rebound in wholesale unit volumes, courtesy of the recovery from weather-related disruptions earlier in the year.

The segment’s non-GAAP operating margin contracted by 20 basis points to 8.5% year over year.

Corporate & Other: Sales within this segment dwindled by 2.4% year over year to $39 million. Within this domain, Joybird’s written sales saw a modest 1% dip from the previous year, while delivered sales remained nearly unchanged at $37 million year over year, signifying a stabilization in sales trends.

Highlights from Fiscal 2024

The fiscal year witnessed La-Z-Boy reporting earnings per share (EPS) of $2.98, down from $3.86 in the previous year. Furthermore, consolidated sales saw a discouraging 13% drop to $2 billion from the $2.3 billion reported in the prior year.

Non-GAAP operating income sagged to $159 million from $223 million recorded in the year prior, while the non-GAAP operating margin shriveled to 7.8% from the previous year’s 9.5% level.

Inspecting the Financial Health

By the end of fiscal 2024 on April 27, 2024, La-Z-Boy boasted a liquidity of $341.1 million, with cash and equivalents amounting to $341.1 million, marking a slight drop from $343.4 million in the corresponding period last year.

Operational cash for the quarter totaled $53 million, a slide from $78 million in the previous year. The cumulative operational cash for fiscal 2024 stood at $158 million, a retreat from $205 million in fiscal 2023. Capital expenditures for fiscal 2024 summed up to $54 million.

Forward Outlook for Q1 Fiscal 2025

In the initial quarter of fiscal 2025, La-Z-Boy envisages delivered sales within the range of $475 million to $495 million, in contrast to the $482 million in the comparable quarter of the previous year.

The non-GAAP operating margin is anticipated to hover within the range of 6% to 7%, a modest decline from the 7% reported in the year-ago quarter.

It’s vital to note that historically, LZB’s first quarter typically exhibits subdued sales and margins, attributed to seasonally-influenced declines in industry sales and the company’s scheduled week-long plant closure in July.

Zacks Rank & Noteworthy Picks

LaZBoy presently holds a Zacks Rank #3 (Hold).

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