Company said that for the first time, company-owned stores now represent more than half its total store network
MONROE, Mich. — La-Z-Boy’s latest earnings call for its second fiscal quarter ended Oct. 28 shed further light on the growing importance of its retail store network now and in the future.
While the company experiences some of the same retail malaise as the rest of the industry as consumers continue to watch their spending, the company continues to develop this part of its business.
Based on its latest quarterly results, written same-store sales for the entire La-Z-Boy Furniture Galleries network increased 1% from a year ago, while same-store sales for company-owned stores within the network were flat against what the company described as a “challenged consumer environment.”
But the company is looking to reverse this through various efforts including its recently launched “Long Live the Lazy” brand campaign which the company said already generated strong early results in the form of “more productive traffic to stores.” In addition, company President and CEO Melinda Whittington noted during the call that “in-store execution remains solid with strong conversion and higher design sales.”
She also noted that the company-owned retail portion of its network totals 177, or just over half of its entire retail network, for the first time in its history. The second quarter in particular boosted this footprint with the opening of two new stores, and the $2 million acquisition of one independent store in Lafayette, Louisiana.
In October, she added, the company also signed an agreement to acquire an additional six stores from a dealer in the Midwest that is expected to close in the third quarter.
The company also made some $13 million in capital improvements during the quarter which largely was related to retail store openings and remodels, although some also went to upgrades at its manufacturing and distribution facilities.
In the near term, she added, the company sees potential for up to 400 stores, not only further bolstering this part of its business, but also giving it further opportunities to connect directly with the consumer. Obviously, that’s not just a plus for its own retail network, but also its other partner retailers that can benefit from market tested product — and related marketing initiatives — in their own stores.
Its Joybird e-commerce platform is also expected to develop a larger retail footprint. According to Whittington, it currently operates 12 stores including a new location in Portland, Oregon. It also has identified 25 potential locations, although the pace of such expansion she noted will depend “on opportunities in real estate and the overall business environment.”
“We remain committed to growing the brand over the long term and will continue to maintain our disciplined approach as we work to balance growth and profitability,” added Bob Lucian, chief financial officer, of the Joybird brand, which saw written sales rise 5% during the quarter, while delivered sales fell 15%, the same percentage decrease in delivered sales on the retail side of the business. While the company noted that e-commerce trends remain challenging, it reported that Joybird’s written sales and delivered sales also showed sequential improvement from Q1.
Using some sports-related analogies, Whittington noted that the company is playing offense from both a retailer and consumer standpoint. This includes filling in the void other retailers have experienced because of the closing of other resources (think Klaussner, Lane and United), but also making sure the brand is top of mind for consumers including with its own retail store network.
“Within our furniture galleries, and particularly our company-owned furniture galleries, we have been on a really strong execution march for quite a few quarters now,” she said, of areas ranging from design sales to the conversion rates of average tickets.
Lucian noted, for example, that design sales represent roughly 30% of business, a figure he said “that’s continuing to increase. We continue to see year-over-year improvements in that metric as the stores execute extremely well with the consumers who are coming in to shop there. And from an average ticket perspective, we’re also seeing increases there, particularly with the higher design sales.”
All this is aimed at positioning the company for a strong rebound once the economy improves, although when that occurs is anyone’s guess, particularly with fears of an even more pronounced recession next year. La-Z-Boy ads also will be competing with an onslaught of political ads that dominate several key platforms during election season.
But the company remains optimistic, noting that its results show that already it is outperforming others in the industry.
“All the channel expansion strategy that we have got right now is delivering,” Lucian added. “We are getting new customers and we are delivering incremental volume from that. … Then, eventually, we will see the consumer come back in and start shopping because the economy will get better, the housing market will improve and we will see the industry come back from that perspective.”
Added Whittington, “Although the macroeconomic environment remains challenging, we will continue to focus on driving our business, focusing on the consumer and continuously improving our execution. We have every intention of growing from our post-Covid base gaining share, and I believe the best is yet to come as we deliver long-term profitable growth and returns to all stakeholders.”