LA-Z-BOY INC Q2 FY2025 earnings call

• Melinda mentioned consolidated delivered sales of $521 million, up 2% vs prior year. Retail segment sales increased 3%. GAAP and non-GAAP diluted EPS was $0.71, quarterly dividend $0.22 (up 10%). Progress against Century Vision growth strategy, including opening 3 new company-owned La-Z-Boy Furniture Galleries, acquiring 2 stores in Florida, and signing agreement to acquire another 2-store independent dealer in Midwest.
• Second quarter results exceeded guidance on sales and non-GAAP operating margin. Consumers gravitate towards comfortable, high-quality custom furniture. Furniture Galleries associates provide superior shopping experience.
• Total La-Z-Boy Furniture Galleries network ended the quarter with 358 stores, on track to grow to ~400 stores in next several years. Retail segment has 193 stores (54% of total network), opened 3 new stores in the quarter, acquired 2 stores in Florida, and signed agreement to acquire 2-store network in Midwest.
• Long Live the Lazy brand campaign launched in August 2023 has increased unaided awareness, consideration, and purchase attempts, and lowered average age of consumers by 2 years.
• Joybird had solid quarter with positive delivered and written sales trends, operating performance improving, and is exploring additional store expansion.

Retail segment: Delivered sales were $222 million, up 3% vs prior year's second quarter, driven by growth from acquired stores. Conversion rates, average ticket, and design sales remained strong. Non-GAAP operating margin was 12.6% vs 13% prior year, driven by slightly lower same-store sales, increased selling expense and fixed costs, but offset by gross margin improvements from favorable product mix shift. Wholesale segment: Delivered sales were flat at $364 million, with higher sales to Retail segment offsetting lower sales in international wholesale business. Non-GAAP operating margin was 6.8% vs 7.7% prior year, driven by demand and macroeconomic challenges in Casegoods import business and fixed cost deleverage in international wholesale, partially offset by improvement in core North America La-Z-Boy brand wholesale business. Joybird: Reported incorporate and other delivered sales were $39 million, up 20% vs prior year quarter on stronger sales trends in Joybird retail stores. Operating performance improved vs prior year comparable period, resulting in breakeven operating margin for the quarter.

• Expect industry to continue challenged by lower consumer demand due to higher mortgage rates and low housing turnover. Third quarter delivered sales expected in range of $505 million to $525 million, representing growth vs last year.
• Second quarter non-GAAP operating margin expected in range of 6% to 7%, due to same-store sales challenges and margin accretion from independent La-Z-Boy Furniture Galleries acquisition partially offset.
• Full fiscal year tax rate expected in range of 25.5% to 26.5%, non-GAAP adjustments for purchase accounting charges expected in range of $0.01 to $0.03 per share. Capital expenditures expected in range of $70 million to $80 million for fiscal '25.
• Presuming no significant worsening in macroeconomic trends, expect to continue share repurchases at dollar amounts consistent with pre-COVID levels.

• The most significant risk factors that could affect future results are described in the Annual Report on Form 10-K, including factors such as uncertain macroeconomic environment, consumer demand changes, and supply chain disruptions.

Q: Bobby Griffin asked about the driver of the year-over-year step-down in EBIT margins on the Wholesale segment, the growth in core La-Z-Boy branded margins, the High Point showroom feedback, post-election market situation, and Joybird's future plan.

A: Bob Lucian said about half was due to international transition and Casegoods impacts; Melinda mentioned core La-Z-Boy branded North America business was positive on margins; Melinda talked about positive feedback in High Point showroom and post-election being early but positive; Melinda said Joybird is achieving positive sales trends, is prudent but starting to pursue expansion for stores.

Q: Anthony Lebiedzinski asked about the driver of Q3 margin guidance, average order amount and design situation, and the reason for inventory increase and inventory status.

A: Bob Lucian said it was due to Casegoods business and DFS transition; Melinda talked about average ticket growth due to store execution, sales associate training, remodels, etc.; Bob Lucian said inventory increase was planned for raw materials and regional distribution centers, a planned increase due to busy season and supplier shutdowns.

Q: Brad Thomas asked about tariff impact, opportunity with wholesale partners, and appropriate cash balance level.

A: Melinda said relatively well positioned vs competition due to North America footprint; Melinda talked about opportunities with wholesale partners due to strategic partnerships and flight to safety; Bob Lucian said longer term expect cash balance in low 200 million range, with combination of spending on business and share repurchase to glide path down to that level