La-Z-Boy Incorporated Q1 FY2026 earnings call

• Retail segment delivered sales up 2%, written sales up 5%; opened 2 new company-owned La-Z-Boy Furniture Galleries, announced 15-store acquisition in Southeast US. - Wholesale segment delivered sales up 1%, led by core North American business; successfully transitioned to new Arizona distribution center. - Delivered strong operating cash flow of $36 million; strong balance sheet with $319 million cash and no external debt. - Joybird written sales down 14%, trends improving; named by Newsweek as America's Best Retailer in 2025, ranking #1 in furniture. - Progress on brand campaign update and Lazy Boy brand identity; ongoing distribution network transformation to 3 centralized hubs, reducing square footage and mileage of inventory traveled. - Actively evaluating alternatives for non-core business parts.

Retail segment: Delivered sales were $207 million, up 2% over the prior year's first quarter, with adjusted operating margin at 6.3%. Wholesale segment: Delivered sales increased 1% to $353 million, driven by core North America La-Z-Boy Wholesale and Casegoods business, with adjusted operating margin at 7.5%. Joybird: Delivered sales were $28 million, down 20% versus the prior year quarter, with store performance stronger than online.

• Fiscal 2026 second quarter sales expected to be in range of $510 million to $530 million, adjusted operating margin 4.5% to 6%. - Distribution transformation expected to improve wholesale margin by 50 to 75 basis points over time, with modest drag on adjusted operating margins in first 2 years and savings flowing through in year 3 and beyond. - 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. - Full year tax rate expected in range of 26% to 27%; purchase accounting charges expected $0.01 to $0.02 per share. - Capital expenditures expected in range of $90 million to $100 million for fiscal 2026.

• Challenged consumer and macroeconomic environment affecting store traffic and same-store sales. - Industry traffic remains depressed with housing transactions near 30-year lows. - Uncertainty in tariffs and pricing affecting Wholesale customers. - Transition inefficiencies during distribution network transformation could impact margins in short term.

Q: Investors focus on earnings outlook, any additional color on trends?

A: Saw sequential traffic improvement through first quarter, continued into early August; consumer fundamentals challenged but traffic overall increased.

Q: New stores putting pressure on Retail margin, how to think about ramp to maturity?

A: New stores are a drag on profitability in year 1, improve in year 2, neutral to accretive in year 3; biggest impact in Q1 was traffic and consumer challenge.

Q: Hearing from Wholesale customers on uncertainty, how La-Z-Boy benefits?

A: Wholesale business grew, majority product manufactured in North America less impacted by tariffs; providing steady supply to strategic customers.

Q: North American business geographic differences and non-core parts evaluation?

A: No big geographic differences in North America; evaluating options for non-core parts like Casegoods and international business to improve performance.

Q: Written business cadence and supply chain rework impact?

A: Traffic trends improved but softer consumer, investment in new stores and discounting impacted margins; supply chain rework will have modest drag on adjusted margins in first 2 years, then savings in year 3 and beyond, benefiting Wholesale segment.