La-Z-Boy 2Q sales drop
By Larry Thomas -- Furniture Today, November 20, 2005
Monroe, Mich. — Battered by foam shortages, sluggish retail sales and hurricanes, upholstery giant La-Z-Boy reported a loss of $6.4 million in its second quarter on a sales decline of 12.7%.
The company, which derives about 75% of its annual revenues from upholstered furniture, said the unprecedented string of negative events masked recent cost-cutting efforts that have bolstered operating margins by making its factories more efficient.
Noting that La-Z-Boy was only able to get about half of the polyurethane foam it needed during the first two weeks of October, CEO Kurt Darrow said "it is impossible to run efficiently on such a sharp drop in volume."
The loss for the quarter ended Oct. 29, which equals 12 cents per share, compares with a profit of $8.9 million or 17 cents per share in the same quarter of last year.
Sales were $454.6 million, down from $520.8 million in last year's second fiscal quarter.
During a conference call with securities analysts, Darrow said the company was hurt not only by a month-long foam shortage, but by unexpectedly slow retail sales and tornado damage to a key factory in Newton, Miss. The retail slowdown, he said, came "during a period when sales usually are robust....
"The environment is quite puzzling. We've heard a lot about pent-up demand (but) nobody has been able to define pent-up or the length of time associated with it," Darrow said.
He told analysts that foam supplies have returned to normal — but at prices that are 60% to 70% higher than they were in August.
"It is amazing that as the prices went up and up ... the more the supply became available," Darrow said sarcastically.
He said the company has an order backlog of about $24 million that probably won't be eliminated until February, even though several plants are working overtime and on some holidays.
The outlook for the third quarter is somewhat brighter. Darrow projected that earnings in the third fiscal quarter should be 13 cents to 17 cents per share, including about 1 cent per share in restructuring charges. Sales are projected to be about even with last year's third quarter at $507 million.
"We see a choppy environment out there," said Darrow. "Without the backlog, we probably wouldn't have been quite as bullish about our sales for the (third) quarter."
Investors seemed pleased with the forecast, with the company's stock price rising more than 17% after the earnings were announced.
For the first six months of its fiscal year, La-Z-Boy's sales were off 7.2% to $906.1 million. The first-half net loss totaled $3.2 million, compared with a profit of $5.3 million in the first half of the previous fiscal year.
| 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 10/29 | 2005 | 2004 | Change |
| (a) Includes pretax restructuring charges of $7.8 million in both 2005 periods and income tax benefits of $3.6 million in the 2005 quarter and $1.6 million in the 2005 six months. (b) Includes pretax restructuring charges of $749,000 in the 2004 quarter and $11.1 million in the 2004 six months, net income from discontinued operations of $506,000 in the 2004 quarter and $635,000 in the 2004 six months and a $702,000 extraordinary gain in both periods. | |||
| Sales | $454,605,000 | $520,760,000 | (12.7%) |
| Operating income | 599,000 | 16,052,000 | (96.3%) |
| Net income | (a)(6,447,000) | (b)8,860,000 | - |
| Earnings per share | (0.12) | 0.17 | - |
| 6 months ended 10/29 | 2005 | 2004 | Change |
| Sales | $906,092,000 | $975,867,000 | (7.2%) |
| Operating income | 8,500,000 | 22,398,000 | (62.1%) |
| Net income | (a)(3,239,000) | (b)5,337,000 | - |
| Earnings per share | (0.06) | 0.10 | - |
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La-Z-Boy 2Q sales down 12.7%
Nov 16, 2005
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