La-Z-Boy Incorporated Q2 FY2026 earnings call

• Completed acquisition of a 15-store network in the Southeast U.S. region, adding an estimated $80 million in annual retail sales and roughly $40 million net to the company. These stores are in attractive markets like Atlanta, Orlando, etc.
• Announced plans to exit noncore businesses including Kincaid casegoods, American Drew casegoods, and Kincaid upholstery, and proposed closure of U.K. manufacturing facility, with expectations to complete these exits by end of fiscal year.
• Opened 5 new company-owned stores in the quarter, with 15 new Joybird stores planned for the fiscal year. Over the last 12 months, opened 15 new stores and closed 5.
• Made progress on supply chain transformation, consolidating 2 distribution centers as part of a project to reduce distribution footprint to 3 hubs, expected to bring 30% reduction in square footage, 20% reduction in mileage, etc.
• Named to Forbes' 2026 Best Customer Service list, capitalizing on new brand identity rollout well-received by media, customers, and consumers.

For the fiscal 2026 second quarter, total delivered sales were $522 million. In the Retail segment, delivered sales increased slightly to $222 million, with retail adjusted operating margin at 10.7% (versus 12.6% prior due to fixed cost deleverage on lower delivered same-store sales and investments in new stores). The Wholesale segment had delivered sales of $369 million, up 2%, driven by growth in core North America La-Z-Boy branded wholesale business, with adjusted operating margin at 8.1% (versus 6.8% prior, 160 basis points improvement due to lower warranty expense and solid operating trends, partially offset by incremental expenses related to distribution transformation and increased advertising). Joybird, reported in Corporate and Other, had delivered sales of $35 million, down 10%, primarily due to lower delivered sales volume, with operating loss increasing versus prior year.

• Fiscal third quarter sales expected in range of $525 million to $545 million (1% to 4% year-over-year growth). Adjusted operating margin expected in range of 5% to 6.5%.
• Expect to open approximately 15 new company-owned and independent La-Z-Boy stores and 3 to 4 new Joybird stores during the full fiscal year.
• Full year tax rate expected in range of 26% to 27%. Capital expenditures expected in range of $90 million to $100 million.
• Expected annual net sales decrease of approximately $30 million with significant adjusted operating margin improvement of 75 to 100 basis points from strategic initiatives (15-store acquisition, casegoods exit, U.K. facility closure, management reorganization).

• Macroeconomic challenges affecting consumer trends in the home furnishings industry.
• Impact of trade tariffs, particularly on non-U.S. manufactured products, which could affect costs and competitiveness.
• Execution risks related to strategic initiatives such as exiting noncore businesses and completing supply chain transformation, including potential challenges in integrating acquisitions and managing portfolio optimization.

Q: Any differences in geographic sales dispersion?

A: Nothing dramatic, with some choppiness across geographies, but Canada more challenged due to trade tariff situation.

Q: Extent of pricing actions and unit volumes?

A: Took nominal pricing based on trade policies, North America wholesale volume flat year-over-year.

Q: Friction costs from portfolio and supply chain optimization?

A: Related to distribution transformation and strategic exits, seeing impact in back half of the year, particularly in Q3.

Q: Acquisition integration and retail growth?

A: Focus on continuing store expansion, with estimated 15 new stores this year, and opportunities for remodels, emphasizing efficient execution in challenging environment.

Q: Noncore businesses and casegoods?

A: Casegoods important for enhancing upholstery experience, but noncore businesses exited as not core competency; casegoods partnerships and sourcing still considered for enhancing upholstery offerings.

Q: Inventories and tariff coverage?

A: Inventories improved due to supply chain team's inventory management, nominal pricing taken covers tariffs as of now, with agility to adjust if needed.

Q: Capital allocation and dividend?

A: Capital tilted to reinvestment in business, with fifth consecutive double-digit dividend increase, reflecting strong financial footing and confidence in business.