by Increase is driven largely by newly acquired stores and gains in its wholesale business and offset by declines in same store sales and its Joybird division
MONROE, Mich. — Driven in part by the strength of sales from newly acquired stores and a slight increase in its wholesale business, La-Z-Boy reported a 4% increase in sales for its third quarter ended January 24.
The company also remained profitable, achieving both a strong operating margin and maintaining a strong cash position.
Consolidated sales totaled $541.6 million, up 4% from $521.8 million the same period last year. This was partially offset by a 4% decline in written same-store sales and a 13% decrease in its Joybird business which the company said “continues to be particularly volatile against the current macroeconomic backdrop.”
Net income totaled $21.7 million, or 52 cents per share, compared with $28.4 million, or 68 cents per share the same period last year.
Its operating income was $29.8 million, for an operating margin of 5.5%, compared with $35.2 million, or 6.7% the same period last year. Gross profit was $233.5 million, or 43% of sales, compared with $231.4 million, or 44.3% the same period last year.
SG&A expenses totaled $203.7 million, or 37.6% of sales, compared with $ 196.2 million the same period last year, also 37.6% of sales.
Sales in the retail segment totaled $251.9 million, compared with $227.7 million the same period last year. Driven by acquired and new stores, written sales for company-owned stores rose 11% and written same-store sales declined 4% as “lower traffic was partially offset by higher conversion rates, average ticket, and design sales. During the quarter, same-store sales trends were strongest in January with the exception of dramatic weather events late in the month,” the company noted.
Operating income in the retail segment was $26.5 million, or 10.5% of sales compared with $24.5 million, or 10.7% of sales last year.
Sales in the wholesale segment totaled $366.6 million, compared with $363 million, the same period last year. The company said this was “driven by modest growth across the majority of our businesses, including our core North America La-Z-Boy wholesale business.”
Operating income in the segment was $19.1 million, or 5.2% of sales, compared with $23.6 million, or 6.5% of sales the same period last year.
The company said that Joybird written sales decreased 13%, and that Joybird delivered sales decreased 3% to $35 million, on lower delivered volume.
The company also reported updates on the following initiatives:
+ Successfully integrated a 15-store acquisition in southeast U.S. region
+ Formally announced the planned closure of its U.K. manufacturing facility with production set to cease by fiscal year end in April
+ Completed the the sale of its Kincaid upholstery business subsequent to the close of the third quarter
+ Signed a letter of intent for sale of wholesale case goods businesses (American Drew and Kincaid)
Melinda D. Whittington, board chair, president and chief executive officer, said, that the company’s strong third quarter results “are proof that we continue to strengthen our enterprise and increase the agility of our business. Amid the ongoing challenging consumer environment, we continue to create our own momentum, led by Retail expansion through both acquired and new stores, driving double-digit sales growth in our written and delivered business in the quarter. Over the last twelve months, we have added 29 net company-owned stores, reflecting 16 new, 17 acquired, and four closed. And our current proportion of company-owned stores is now at an all-time high of ~60% of total network. Growing our La-Z-Boy brand reach by expanding our direct-to-consumer business remains a key pillar of our Century Vision strategy.”
“Furthermore, the momentum in our wholesale segment remains solid, delivering our seventh consecutive quarter of growth in our core North America La-Z-Boy wholesale business,” she added. “In addition, we are making meaningful progress on the strategic initiatives announced last quarter to focus on our core business of branded, customized upholstered furniture. Our vertically integrated model with ~90% of upholstered products produced in the U.S. is a key competitive advantage. This has served as the foundation throughout our 99-year history and continues to be a strength as we navigate the challenging macroeconomic environment.”
Other highlights of the Q3 report are as follows:
+ The company said it ended the quarter with $306 million in cash and had no external debt
+ It also reported generating $89 million in cash from operating activities, increasing 57% versus the third quarter of last fiscal year. Year to date, cash flow from operations was $176 million, up 40% from last year’s comparable period
+ It also said it invested $18 million in capital expenditures, primarily related to La-Z-Boy stores (new stores and remodels), manufacturing-related investments, and spending related to our distribution and home delivery transformation
+ It also said it returned about $24 million to shareholders, including $10 million in dividends, and resumed more normalized share repurchases of $14 million
