La-Z-Boy rebounds from losses
By Jay McIntosh -- Furniture Today, June 27, 2005
Monroe, Mich. — La-Z-Boy posted earnings of $20.8 million in its fourth quarter and $37.2 million in the year ended April 30, rebounding from losses a year earlier caused largely by a one-time writedown in asset values.
Fourth-quarter sales were up 6.3% to $565.6 million, although that was mainly because this year's period was 14 weeks, compared with 13 weeks last year. For the year, sales improved by 4.9% to $2.05 billion, with about a quarter of the gain attributed to the extra week.
"This was a challenging year for us, but one in which we made substantial progress in transitioning our business," said La-Z-Boy President and CEO Kurt Darrow. "We're pleased that fourth-quarter operating results exceeded our expectations."
One bright spot in the fourth quarter was a 10.2% jump in case goods sales, partly because of a rise in sales to hospitality industry customers by the company's American of Martinsville unit, he said. It was the second consecutive quarter of case goods sales growth after three years of declines, Darrow said. For the year, case goods sales were down 0.2%.
With moves including the shutdown of Pennsylvania House domestic production, the company made progress in transitioning its case goods business to largely offshore sourcing. Darrow said that about 75% of the company's case goods were U.S. made a few years ago, and going forward will be about 75% imports.
Upholstery segment sales were up 3.5% in the quarter and 3.6% for the year.
"Our La-Z-Boy branded business continues to outperform our non-branded upholstery companies, although we had good feedback to our product introductions at the recent April market across all business units," Darrow said.
Fourth-quarter earnings amounted to 40 cents per share, including 35 cents per share from continuing operations. Several special items affected earnings, including:
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A charge of $3.6 million after tax or 7 cents per share for a change in the estimate of worker's compensation expenses.
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A reduction in the allowance for doubtful accounts, partly because the company acquired some La-Z-Boy stores that had been considered risks, representing a net gain of $3.4 million or 7 cents per share.
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A gain on restructuring charges, from the sale of idled property and equipment, of $1.9 million after taxes or 4 cents per share.
The company also had a gain of 3 cents per share related to the store acquisitions, and pretax income of $1.7 million or 6 cents per share from discontinued operations and the sale of its La-Z-Boy Contract unit to Best Home Furnishings.
For the full fiscal year 2005, earnings were affected by a restructuring charge of $6.4 million or 12 cents per share after tax, a net gain of $2.1 million or 4 cents per share related to the store acquisitions, and earnings of $2 million or 4 cents per share from discontinued operations and the La-Z-Boy Contract sale.
Darrow said La-Z-Boy ended the year with 334 branded stores, of which 61 are company owned. He said 17 stores were opened during the year and 24 were moved or converted to the New Generation format, which generates greater traffic, sales and sales per square foot.
Plans are to open about 20 stores and convert or relocate another 25 or 30 to the new format this year.
He projected the La-Z-Boy Furniture Galleries network will be "approaching 400 stores" in two years, with the company owning 20% to 25% of them, mainly in seven or eight key metro markets.
Through April of this year, he said, sales at La-Z-Boy stores were up 3.2%, with same-store written sales up just 0.1%.
| La-Z-Boy | |||
|---|---|---|---|
| Owns Alexvale, American Drew, American of Martinsville, Bauhaus, Clayton Marcus, England, Hammary, Kincaid, Lea, Pennsylvania House and Sam Moore | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 4/30 (a) | 2005 | 2004 | Change |
| (a) The 2005 quarter is 14 weeks, the 2004 quarter is 13 weeks. The 2005 year is 53 weeks, the 2004 year is 52 weeks. (b) Includes net income from discontinued operations of $1 million in the 2005 quarter and $2 million in the 2005 year and extraordinary gains of $1.4 million in the 2005 quarter and $2.1 million in the 2005 year. The 2005 quarter also includes a $3.1 million pretax restructuring credit and the 2005 year also includes a $10.3 million pretax restructuring charge. (c) Includes pretax restructuring charges of $948,000 in the 2004 quarter and $10.4 million in the 2004 year, net income from discontinued operations of $25,000 in the 2004 year and $650,000 in the 2004 year and an $8.3 million extraordinary charge in both periods, the cumulative effect of an accounting change. | |||
| Sales | $565,555,000 | $532,203,000 | 6.3% |
| Operating income | 29,561,000 | 37,592,000 | (21.4%) |
| Net income | (b)20,756,000 | (c)(42,055,000) | — |
| Earnings per share | 0.40 | (0.80) | — |
| Year ended 4/30 (a) | 2005 | 2004 | Change |
| Sales | $2,048,381,000 | $1,951,997,000 | 4.9% |
| Operating income | 73,945,000 | 110,513,000 | (33.1%) |
| Net income | (b)37,185,000 | (c)(5,796,000) | — |
| Earnings per share | 0.71 | (0.11) | — |
