by Move would impact American Drew and Kincaid wood furniture divisions, Kincaid upholstery and the company’s UK upholstery manufacturing operations
MONROE, Mich. — La-Z-Boy has announced plans to exit what it described as non-core segments of its case goods and upholstery businesses in the second half of its fiscal year ending next April.
This would impact its American Drew veneered wood furniture division and its Kincaid solid wood furniture division, along with its Kincaid upholstery segment.
It also is looking to exit its UK upholstery manufacturing operations which it purchased from UK-based Furnico Furniture in 2021 to serve the UK market. The plant has produced upholstery for the La-Z-Boy brand since 2008.
With the sale or closure of this facility, the company could serve this market with goods produced in the U.S. The wood and upholstery divisions are also reportedly up for sale.
The company said these initiatives combined will reduce sales by about $30 million net and increase margins by 75-100 basis points.
In a statement announcing La-Z-Boy’s second quarter earnings, Board Chair, President and Chief Executive Officer Melinda D. Whittington, said the move is part of an overall plan to invest in its core, vertically integrated North American upholstery business, and take steps “to optimize our portfolio.”
“We have announced plans to exit our non-core wholesale case goods and upholstery businesses in the back half of the fiscal year, announced the proposed closure of our UK manufacturing facility, and strategically realigned our commercial leadership and corporate staffing to enhance operating efficiency,” she said. “On top of this, leveraging our North American manufacturing base with 90% of finished goods produced in the U.S., we are successfully navigating the current trade and tariff volatility. Our iconic brand, well-positioned manufacturing base, strong balance sheet, and talented team provide the foundation for continued growth and margin expansion.”
As part of the proposed changes, the company likely would keep its Hammary occasional furniture division, which would be sold as part of its overall living room assortment in its retail stores.
Further details of the planned changes are expected to be revealed as part of the company’s earnings call Wednesday morning.
For the quarter ended Oct. 25, it reported sales of $522.5 million, up from $521 million the same period last year. The company said that modest growth in its retail and wholesale businesses was offset by lower delivered volume in its Joybird business.
It reported that written sales for its retail segment that includes its company-owned La-Z-Boy stores rose 4% compared to the same period last year. It said this was driven by new and acquired stores.
Meanwhile, written same-store sales decreased 2%, which it described as “a sequential improvement versus the last two quarters, as lower traffic and conversion were partially offset by higher average ticket and design sales.”
Delivered sales increased slightly to $222 million.
It reported net income of $28.9 million, or 70 cents per share, down slightly from just over $30 million, or 71 cents per share the same period last year. Gross profit totaled $231.1 million, or 44.2% of total sales, compared with $230.6 million last year, also about 44.2% of total sales.
Operating income totaled $36.2 million, for an operating margin of 6.9% compared with $38.8 million, for an operating margin of 7.4% last year.
Sales in its wholesale segment totaled $369.4 million, up 1.5% from $363.9 million last year. Sales in its retail segment totaled $222.04 million, up slightly from $221.6 million last year.
Operating income in its wholesale division totaled $29.1 million, or 7.9% of sales, compared with $24.5 million, or 6.7% of sales last year and operating income in its retail segment totaled $23.8 million, or 10.7% of sales compared with $27.9 million, or 12.6% last year.
For the full first half, it reported $1.014 billion in sales, up slightly from $1.016 billion last year. Net income totaled $47.1 million, or $1.14 per share compared with $56.2 million, or $1.34 per share last year.
For the full first half, gross profit totaled $440.3 million, or 43.4% of revenue compared with $444 million, or 43.7% of total revenues last year. Consolidated operating income totaled $58.2 million, or 5.7% of sales, compared with $71.1 million, or 7% of sales the same period last year.
Wholesale sales totaled $722.4 million, compared with $714.8 million last year, up 10.6%. Retail sales totaled $429.2 million, compared with $423.9 million, up 1.25%.
Operating income in the wholesale segment totaled $54.2 million, or 7.5% of sales compared with $48.5 million, or 6.8% last year and operating income on the retail side totaled $36.9 million, or 8.6% of sales compared with $48.5 million, or 11.4% of sales last year.
Other highlights of the report are as follows:
+ The company said Joybird written sales increased 1%, improving sequentially from last two quarters, and driven by strength in retail store performance
+ It reported that Joybird delivered sales decreased 10% to $35 million primarily due to lower delivered volume
+ Corporate & Other operating loss increased versus the prior year, primarily due to expense deleverage on lower Joybird delivered sales
+ The company also reported ending the quarter with $339 million in cash and no external debt
+ It said it generated $50 million in cash from operating activities in the quarter, “more than triple last year’s comparable period, and generated $86 million in cash year-to-date”
+ It invested $20 million in capital expenditures, primarily related to new stores and remodels, and manufacturing investments
+ It returned about $10 million to shareholders, including $9 million in dividends
