La-Z-Boy Reports Record Full Year Operating Income and EPS

MONROE, Mich., June 20, 2023 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (: LZB), a global leader in residential furniture, today reported solid fourth quarter and full year results for the period ending April 29, 2023.

Fourth Quarter 2023 Financial Highlights:

• Consolidated sales of $561 million
  • -12% adjusting for the 53rd week in the fourth quarter of fiscal 2022, versus last year, which benefited from a strong backlog
• Retail segment sales increased 4% to $243 million
  • +12% adjusting for the 53rd week in the fourth quarter of fiscal 2022
  • Written same-store sales were essentially flat
• GAAP operating income decreased by 31%
  • Non-GAAP operating income decreased by 15%
  • GAAP operating margin decreased 190 basis points to 9.6%
  • Non-GAAP operating margin increased 40 basis points to 9.8%
• GAAP diluted EPS of $0.79, with Non-GAAP diluted EPS of $0.99, a 7% decrease
• Cash generated from operating activities was $78 million
  

Fiscal 2023 Financial Highlights:

• Consolidated sales of $2.3 billion
  • +2% adjusting for the 53^rd week in fiscal 2022
• Retail segment sales increased 22% to $982 million
  • Record sales, operating profit, and operating margin
• GAAP operating income increased by 2%
  • Non-GAAP operating income increased by 17%
  • GAAP operating margin increased 20 basis points to 9.0%
  • Non-GAAP operating margin increased 140 basis points to 9.5%
• Record diluted EPS
  • GAAP diluted EPS increased by 3% to $3.48
  • Non-GAAP diluted EPS increased by 24% to $3.86
• Cash generated from operating activities more than doubled to $205 million

Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, "I would like to congratulate and thank our entire organization for delivering another strong year, with record Retail segment sales and operating profit, and record consolidated diluted EPS. We achieved these results through disciplined supply chain investments and solid execution in our company owned retail stores, reflecting the strength of our vertically integrated Retail and Wholesale model. We are pleased with our strong finish in the fourth quarter, where we were able to maintain roughly flat written same-store sales despite the declining macro environment."

Whittington added, "Our results were enabled by our strong portfolio of iconic brands, collaboration and leadership of our talented employees, and execution of our value proposition - comfortable custom furniture with quick delivery - as our backlog has returned to more normalized historical levels. Our playbook is working, with our Retail penetration increasing through new store growth and independent Furniture Galleries^® store acquisitions. We are confident in our ability to advance our business in an uncertain macro environment with our strong debt free balance sheet allowing us to invest in our Century Vision strategy to drive future growth. The foundation is set through Century Vision to expand brand reach and we continue to target sales growth exceeding the industry growth rate and double-digit operating margins over the long term. We look forward to executing this business strategy to create long-term shareholder value."

Key Results:

Liquidity Measures:

FY23 Q4 Results vs. FY22 Q4:

Consolidated Results:

• Consolidated sales in the fourth quarter of fiscal 2023 decreased 18% (-12% adjusting for the 53rd week in fiscal 2022) to $561 million, with the realization of pricing and surcharge actions and the positive effects of a favorable product and channel mix more than offset by lower delivered unit volume versus last year's backlog driven sales
• Consolidated GAAP operating margin was 9.6% versus 11.5%
• Consolidated non-GAAP⁽¹⁾ operating margin was 9.8% versus 9.4%
  • Improved operating margin was driven primarily by strong Retail performance
• GAAP diluted EPS decreased 41% to $0.79 from $1.33; non-GAAP⁽¹⁾ diluted EPS decreased 7% to $0.99 from $1.07
  

Retail Segment:

• Sales:
  • Delivered sales increased 4% (+12% adjusted for the 53rd week in fiscal 2022) to $243 million; delivered same-store sales were relatively flat
  • Total written sales for the Retail segment (company owned La-Z-Boy Furniture Galleries^® stores) increased 4%
• Written same-store sales for the Retail segment were essentially flat as strong store execution mitigated lower consumer traffic
• Operating Performance:
  • Non-GAAP⁽¹⁾ operating margin and operating income was 15.5% and $38 million, respectively, up 250 basis points and 24%, respectively, primarily driven by higher delivered sales relative to selling expenses and fixed costs

Wholesale Segment:

• Sales:
  • Decreased 23% (-17% adjusted for the 53rd week in fiscal 2022) to $395 million driven primarily by a decline in delivered volume as the backlog returned to pre-pandemic levels, partially offset by pricing and favorable channel and product mix
• Operating Margin:
  • Non-GAAP⁽¹⁾ operating margin decreased to 8.7%, down 10 basis points; pricing and surcharge actions along with declining raw material and freight costs were essentially offset by fixed cost deleveraging on lower unit volume

Corporate & Other:

• Joybird delivered sales decreased 31% (-25% adjusted for the 53rd week in fiscal 2022) to $37 million, and written sales declined 24%, reflecting slowing e-commerce trends and industry demand challenges
  

Balance Sheet and Cash Flow, Fiscal 2023 Full Year

• Ended the fiscal year with $347 million in cash⁽²⁾ and no external debt
• Generated $205 million in cash from operating activities, including $78 million in the fourth quarter, versus $79 million in full fiscal year 2022 and $34 million in last year's fourth quarter
• Invested $69 million in capital expenditures, primarily related to La-Z-Boy Furniture Galleries^® (new stores and remodels), Joybird store projects, and upgrades at our manufacturing and distribution facilities
• Returned $35 million to shareholders, including $30 million in dividends and $5 million in share repurchases

Outlook

Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, "Excluding the impact of delivering backlog sales (approximately $300 million), normalized La-Z-Boy consumer demand in fiscal 2023 was 17% higher that it was in pre-pandemic fiscal 2019. In fiscal 2024, we expect to grow ahead of the industry from this normalized base, with the back half of our fiscal year stronger than the front half, in line with pre-pandemic seasonality trends. For our first quarter of fiscal 2024, which is generally the lowest sales quarter in the fiscal year, we expect sales to be in the range of $470 to $490 million and operating margin to be in the range of 6.5% to 7.5%."

Conference Call

La-Z-Boy will hold a conference call with the investment community on Wednesday, June 21, 2023, 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 392627.

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: 48491. The webcast replay will be available for one year.

Investor Relations Contact

Mark Becks, CFA, (734) 457-9538
[email protected]

About La-Z-Boy

La-Z-Boy Incorporated is one of the world’s leading residential furniture producers, marketing furniture for every room of the home. The Wholesale segment includes La-Z-Boy, England, American Drew^®, Hammary^®, Kincaid^® and the company's international wholesale and manufacturing businesses. The company-owned Retail segment includes 171 of the 349 La-Z-Boy Furniture Galleries^® stores. Joybird is an e-commerce retailer and manufacturer of upholstered furniture.

The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 349 stand-alone La-Z-Boy Furniture Galleries^® stores and 522 independent Comfort Studio^® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at https://www.la-z-boy.com/.

Notes
⁽¹⁾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 fourth quarter of fiscal 2022 exclude:

• a purchase accounting net benefit related to acquisitions completed in prior periods totaling $3.4 million pre-tax, or $0.08 per diluted share, with $3.5 million included in operating income and $0.1 million included in interest expense
• a benefit of $10.7 million pre-tax, or $0.18 per diluted share, related to sale-leaseback transactions of three retail locations

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

Non-GAAP amounts for the full fiscal 2022 year exclude:

• a purchase accounting net benefit related to acquisitions completed in prior periods totaling $1.7 million pre-tax, or $0.04 per diluted share, with $2.3 million included in operating income and $0.5 million included in interest expense
• a $3.3 million pre-tax, or $0.06 per diluted share, gain on the sale of the Newton, Mississippi facility related to the company's business realignment, announced in June 2020. The company continues to operate a portion of this facility
• a benefit of $10.7 million pre-tax, or $0.18 per diluted share, related to sale-leaseback transactions of three retail locations
  

Please refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” 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.

⁽²⁾Cash includes cash, cash equivalents and restricted cash.

⁽³⁾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.

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.

Additional Information

This news release is just one part of La-Z-Boy’s financial disclosures and should be read in conjunction with other information filed with the SEC, which is available at: https://lazboy.gcs-web.com/financial-information/sec-filings. Investors and others wishing to be notified of future La-Z-Boy news releases, SEC filings and quarterly investor conference calls may sign up at: https://lazboy.gcs-web.com/.

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, Non-GAAP operating margin, and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share (and components thereof, including Non-GAAP income before income taxes and Non-GAAP net income attributable to La-Z-Boy Incorporated), which may exclude, as applicable, business realignment charges, Mexico optimization charges, investment impairment charges, purchase accounting charges and sale-leaseback gains. 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, 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 Mexico optimization charges include asset impairment costs, severance costs, and employee relocation costs resulting from the closure of our Torreón manufacturing facility. The purchase accounting charges may include the amortization of intangible assets, incremental expense upon the sale of inventory acquired at fair value, amortization of employee retention agreements, fair value adjustments of future cash payments recorded as interest expense, and adjustments to the fair value of contingent consideration. Sale-leaseback gains are the result of the sale of the buildings and related fixed assets of three Retail stores. 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 Mexico optimization charges are dependent on the timing, size, number and nature of the operations being moved or closed, and the charges may not be incurred on a predictable cycle. Management also excludes the impacts from the impairment charge for one investment and sale-leasebacks when assessing the company’s operating and financial performance due to the one-time or infrequent nature of these transactions. 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, except for the non-tax deductible goodwill impairment charge and the adjustment to the fair value of contingent consideration which reflects the associated GAAP tax impact in the period presented.

LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME