by Improvement is driven by gains on the wholesale side of the business and offset by lower sales to its retail stores and lower delivered volume in its case goods segment
MONROE, Mich. — La-Z-Boy reported a 3% increase in sales for its first quarter ended July 27, which the company said was driven by higher delivered volume in its wholesale segment.
The company reported consolidated sales of $496 million, up 3% from $481.7 million the same period last year. The bulk of this was related to a 5.2% increase on the wholesale side of its business, which boosted sales to $351 million, from $333.5 million last year. This was driven by higher delivered volume to outside customers and offset by lower sales to stores in the company’s retail segment and lowered delivered volume in its case goods business.
Operating income on the wholesale side of the business totaled $24 million, compared to $23.5 million last year, resulting in a GAAP operating margin of 6.8% vs. 7% a year earlier.
Sales in the retail segment fell 2.8% to $202.4 million, from $208.2 million. The company added that written sales on the retail side of the business rose 4% because of growth from acquired and new stores. This compares to a 3% drop in same-store sales driven by lower traffic and soft industry-wide demand. The company noted that this was partially offset by strong execution that drove higher conversion rates.
“Trends were strongest around the Memorial Day holiday and softened towards the end of the quarter,” the company noted, adding that “Written sales results outperformed the broader furniture and home furnishings industry for May and June, which were also down 3% for the quarter. Across the industry, the consumer continues to be challenged and to pull back spending outside of key holidays.”
Operating income on the retail side of the business was $20.7 million, compared to $29.3 million last year, which resulted in a GAAP operating margin of 10.2% compared to 14.1% the same period last year.
Consolidated operating income was $32.4 million, or 6.5% of sales, compared to $34.5 million or 7.2% a year earlier.
Overall net income was $26.2 million, or 61 cents per share, compared to $27.5 million, or 63 cents per share the same period last year.
Melinda D. Whittington, president and chief executive officer, said that the company continues to deliver positive results in a challenging macroeconomic backdrop.
“We were pleased to return to delivered sales growth in the quarter, led by our wholesale segment, which benefited from higher delivered volume supported by Century Vision’s channel expansion strategy,” she said. “While the retail business currently continues to wrestle with depressed traffic trends experienced across our industry, we again delivered strong execution. Conversion rates and design average ticket sales both improved again year-over-year, and our in-store teams remain laser focused on providing the highest level of customer service and showcasing our industry leading product assortment.”
She added that over the past five years, the company’s retail business has experienced 7% compound annual sales growth.
“Our high quality offering of comfortable, custom furniture with quick delivery is resonating in a challenging marketplace,” she said. “And while we expect industry fundamentals to be volatile for the foreseeable future, we remain confident in our ability to outperform the market and gain share longer term.
“We remain committed to investing in our business for the long term, as we navigate the near-term headwinds in the furniture industry. As an iconic brand with a storied near 100-year history, we have the proven ability to adapt, with a strong balance sheet to support our strategy. Near-term market disruptions are likely to continue pressuring the fiscal year, but we are well positioned to disproportionately benefit when industry tailwinds re-emerge. With our Century Vision strategy, we are actively investing in growing our core retail segment through strengthening in-store execution, opening new stores, and acquiring independent La-Z-Boy Furniture Galleries stores when we are able, as we believe our vertically integrated model offers superior returns over the longer term. This will uniquely position us to continue to outperform the industry and grow share.”
Other highlights of the report are as follows:
+ Written sales in the Joybird e-commerce segment rose 9%, and delivered sales decreased 3% to $35 million. “Joybird operating performance again made meaningful progress against the prior comparable period as the brand focuses on balancing sales growth and profitability,” the company said.
+ The company said it generated $52 million in cash from operating activities compared to $26 million during the same period last year..
+ The company also said it invested $16 million in capital expenditures, primarily related to new stores and remodels in the La-Z-Boy Furniture Galleries network along with upgrades at its manufacturing facilities and market showrooms.
+ It also noted that it ended the quarter with $342 million in cash and no external debt.
+ It estimates that it returned about $42 million to its shareholders, including $34 million in share repurchases and $8 million in dividends.
