Upholstery manufacturer La-Z-Boy Incorporated has reported a decline in first quarter sales but was towards the higher end of its previous forecast.
According to its latest Q1 trading update for the period ended 29 July 2023, total sales fell 20% to $482m, but was in line with its guidance of $470 to $490m, as well as being ahead of consensus analyst estimates of $474m.
Delivered sales for the company owned Furniture Galleries® Retail segment decreased 12% to $208m, versus last year’s delivery of pandemic related backlog. Company owned Retail same-store sales increased 2%, led by strong store execution.
Operating margin was 7.2% in the quarter on a GAAP basis and 7.0% on a Non-GAAP basis. Net income resulted at $27.4m, down 29% year-on-year.
Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said: “As demonstrated by our positive written same-store sales, the La-Z-Boy brand continues to outperform in a challenging home furnishings environment. These results are reflective of the strength of the La-Z-Boy brand and focus on execution in our stores. Further, we continued to execute on our Century Vision strategy, increasing our company owned Retail store count by four to 175 and opening incremental distribution via an enhanced channel strategy during the quarter. We remain confident we will consistently grow faster than the industry and deliver double digit operating margins over the long term.
“While our delivered results reflect comparison versus delivery of record pandemic related backlog levels in last year’s results, we are encouraged by positive written trends in both our company owned Retail segment and the broader La-Z-Boy Furniture Galleries® network during the quarter, which accelerated from May to July. Looking forward, given the overall macro-economic environment, we expect the furniture market to remain challenged. However, we are expecting some improvement in the back half of our fiscal year consistent with historic seasonality of consumers’ furniture purchases.
“As we navigate the challenging environment, we are focused on controlling what we can control, leveraging our brand and strong product offerings, and strengthening conversion levels. We are particularly pleased to introduce our new brand campaign, “Long Live the Lazy,” which launched two weeks ago across TV and social media. We look forward to capitalizing on this new brand campaign and executing our business strategy to deliver solid results in the near term and drive our Century Vision over the long term.”
Looking ahead, Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, added: “Despite the macroeconomic headwinds facing La-Z-Boy and our peers in the industry, we delivered on our guidance. Looking forward, we expect consumer trends to remain soft and sales trends remain challenged against last year, which benefited from an elevated pandemic backlog. Considering these trends, and historical seasonality, we expect sales in the second quarter of fiscal 2024 to be slightly higher than the first quarter.
“Further, we expect Q2 operating margin to be similar to the first quarter, as we increase marketing investment in support of our new “Long Live the Lazy” campaign, which started in August. As such, we expect fiscal second quarter sales to be in the range of $490-$510 million and operating margin to be in the range of 6.5%-7.5%.”
