La-Z-Boy earnings up 34.4%, sales slip 1.3%
By Jay McIntosh -- Furniture Today, February 17, 2002
MONROE, Mich. — A strong performance in upholstery balanced a weak one in case goods for La-Z-Boy in its fiscal third quarter, with total sales down just 1.3% from a year ago to $545 million.
Earnings jumped 34.4% to $21.7 million for the three months ended Jan. 26 as cost-cutting and restructuring moves kicked in, including the sale of the Pilliod division in November.
"It appears the residential furniture industry is in the process of bottoming out," said Jerry Kiser, president and chief executive officer, who added the results were better than expected. Earnings of 35 cents per share beat Wall Street analysts' average estimate by 4 cents, according to Thomson Financial/First Call.
The company benefited from a 16.2% comparable-store sales gain at La-Z-Boy Furniture Galleries stores, Kiser said.
Upholstery segment sales rose 7% in the quarter to $397.4 million, with La-Z-Boy, Bauhaus and England all enjoying healthy gains. Case goods sales were down 18% from a year ago to $147.9 million. Excluding Pilliod, the case goods decline was 13%.
Operating margins improved by 2 percentage points to 9.4% in upholstery, and doubled to 5% in case goods.
Among case goods divisions, operating margins ranged from a break-even to "double digit," Kiser said. He said Hammary, which imports most of its case goods, was at the top, but would not disclose the performance of other divisions.
La-Z-Boy said it sold Pilliod for about $6 million, resulting in a small gain after a tax benefit. California-based Michels & Co. acquired the promotional case goods producer. La-Z-Boy said its operating margin benefited from the sale and other plant closures and conversions.
Kiser said the company's case goods imports have tripled in the past two years to 28.5% of the segment's sales, and should rise to 30% to 35% in the next fiscal year.
"In view of these trends, I cannot categorically state that La-Z-Boy will not be shutting down any more domestic case goods plants," he said, although no moves have been announced.
For the fourth quarter ending in April, Kiser said the company expects another small, single-digit percentage decline in sales, with earnings of 42 to 46 cents per share, compared with 28 cents last year before a restructuring charge.
La-Z-Boy also may be repurchasing stock. Its board increased management's buyback authorization last week by 4 million shares.
| Quarter ended 1/26 | 2002 | 2001 | Change |
|---|---|---|---|
| Sales | $544,980,000 | $552,019,000 | (1.3%) |
| Operating income | 37,358,000 | 27,219,000 | 37.2% |
| Net income | (a)21,663,000 | 16,117,000 | 34.4% |
| Earnings per share | 0.35 | 0.27 | 29.6% |
| 9 months ended 1/26 | 2002 | 2001 | Change |
| Sales | $1,563,150,000 | $1,661,426,000 | (5.9%) |
| Operating income | 65,941,000 | 96,635,000 | (31.8%) |
| Net income | (a)36,885,000 | 58,036,000 | (36.4%) |
| Earnings per share | 0.60 | 0.96 | (37.5%) |
| (a) Includes a $11.7 million pretax loss on the divestiture of Pilliod. | |||
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