La-Z-Boy Inc. (LZB, Financial) is one of the growth stocks in the furniture industry that has been playing well.
This furniture company has produced excellent quarterly results including an 11.24% increase in net sales. For the full year, La-Z-Boy’s total sales increased 7.75%.
The company began operation in 1941. It is the second-largest manufacturer/distributor of residential furniture in the U.S. and third-largest retailer of single-source home furnishings. La-Z-Boy manufactures, markets, imports, exports, distributes and retails upholstery furniture products. The company operates in three reportable segments.
Wholesale segments
- Upholstery.
- Casegoods.
Retail segment
La-Z-Boy sells its products chiefly in the U.S. and Canada but also internationally to furniture retailers and directly to consumers through its stores. At the end of the fourth quarter, the La-Z-Boy Furniture Galleries store system was composed of 338 stand-alone stores with 89 in the new concept design format.
Strong fourth-quarter results
On June 21, the Monroe, Michigan-based company reported its financial results for the fourth quarter ended April 30. The company’s consolidated sales increased 11.24% to $417.1 million compared to $374.94 million for the comparable prior-year period. In the reported quarter, EPS from continuing operations attributable to La-Z-Boy increased 18.42% to 45 cents compared to 38 cents for the same period last year.
La-Z-Boy’s gross profit margin in the fourth quarter increased 39.32% compared to 35.65% for the comparable prior-year period. The company’s consolidated operating income increased 15.87% to $34.24 million compared to $29.55 million in the year-ago quarter. Selling, general and administrative expense increased 25.02% to $129.61 million compared to $103.37 million for the same period last year.
Same-store written sales for the La-Z-Boy Furniture Galleries network increased 4.3% compared with the fiscal 2015 comparable period.
La-Z-Boy ended the quarter with cash and cash equivalents of $112.36 million and long-term debt of $510,000 (an increase of 18.60%, compared to $430,000 for the comparable prior-year period).
Strong fiscal 2016 results
For fiscal 2016, La-Z-Boy’s consolidated sales increased 7.04% to $1.52 billion compared to $1.42 billion for the comparable prior-year period. For the reported period, EPS from continuing operations attributable to La-Z-Boy increased 21.09% to $1.55 compared to $1.28 for the same period last year.
The company’s consolidated operating income increased 18.64% to $122.39 million compared to $103.16 million for fiscal 2015. Selling, general and administrative expense increased 14.37% to $459.14 million compared to $401.46 million for the same period last year. La-Z-Boy generated $112.36 million cash from operating activities for the reported period. Further, the company has paid dividends of $18.14 million compared to $14.51 million for the year-ago period.
Share repurchase
During fiscal year 2016, La-Z-Boy spent $44.1 million purchasing 1.7 million shares of stock in the open market under its existing authorized share purchase program, including 600,000 in the fourth quarter, leaving 4.0 million shares in the program.
Segments’ performances
| Metrics | Upholstery segment | Casegoods segment | Retail segment | |||||||||
| Â | Q1 2016 | % change compared to Q1 2015 | Fiscal 2016 | % change compared to fiscal 2015 | Q1 2016 | % change compared to Q1 2015 | Fiscal 2016 | % change compared to fiscal 2015 | Q1 2016 | % change compared to Q1 2015 | Fiscal 2016 | % change compared to fiscal 2015 |
| Sales | $334 .92 | 9.69% | $1.2 1 billi on | 5.22% | $26. 31 | 1.58% | $102 .54 | (6.53)% | $109 .19 | 25.95% | $402 .48 | 20.51% |
| Operat -ing income | $39. 54 | 12.01% | $134 .19 | 10.53% | $1.6 4 | 59.22% | $7.7 3 | 20.59% | $6.2 9 | 92.35% | $25. 57 | 122.93% |
| Operat -ing margin | 11.8% | ----- | 11.04% | ----- | 6.23% | ----- | 7.54% | ----- | 5.76% | ----- | 6.35% | ----- |
All figures are in millions except fiscal 2016 sales of the Upholstery segment
Projections
To fuel its short- and long-term growth, La-Z-Boy is leveraging its assets. For fiscal 2017, the company has approximately 25 to 30 projects scheduled to be completed and expects to end the year with about 120 stores in the new concept design format and 350 in total.
Strategies
La-Z-Boy’s strategic objectives include growth of business, enhancing margins and return to shareholders. Further, the company’s concurrent growth strategies are:
- 4-4-5 store build out program: This program will maximize the power of the La-Z-Boy brand and fully penetrate the North American market with its store footprint. It also will elevate the performance of the store network.
- Expanding company-owned retail through acquisitions of independent La-Z-Boy Furniture Galleries, which will increase the size of the company-owned retail segment. During fiscal 2016, La-Z-Boy acquired 11 stores (six in Ohio, two each in Wisconsin and the Carolinas and one in Colorado).
- Expanding sales through a multichannel distribution network includes the dual distribution strategy, which is not solely dependent on one channel to deliver growth.
- Other strategies are providing a great retail experience, innovation, new concept design stores, integrated marketing and a new ecommerce platform.
A peek into the furniture industry
The U.S. furniture industry is booming as the housing market is growing and discretionary spending is increasing. Ecommerce has become the largest source of growth in the U.S. furniture and home furnishings industry. As per the analysts, by 2018, online sales will reach $32 billion. As per marketresearch.com, the global market for furniture will reach a projected value of $695 billion by 2019.
(Source: company website)
On a concluding note
Overall, La-Z-Boy is a rock-solid company with revenue growth, an impressive record of earnings per share growth, solid financial position with reasonable debt levels, expanding profit margins and attractive valuation levels.
From fiscal 2012 to fiscal 2016, La-Z-Boy has provided a continuous increase in sales. Further, from fiscal 2012 to fiscal 2016, the company’s operating margin has increased from 4.2% to 8.0%. Finally, with the recent quarterly release, the company is aiming for a better future and is set to deliver greater shareholder returns.
Disclosure: I do not hold any position in the company.
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