La-Z-Boy 3Q sales down 0.9%, earnings down 5.6%
Operating margins improve in upholstery, case goods
Larry Thomas -- Furniture Today, February 15, 2006
MONROE, Mich. — Despite a modest business rebound since the Christmas holiday season, La-Z-Boy said sales dipped slightly in the third quarter of its fiscal year.
The company said sales declined 0.9% to $502.3 million in the quarter ended Jan. 28. Net income for the quarter was down 5.6% to $10.5 million, or 20 cents per share.
The only business segment reporting a sales increase for the quarter was its company-owned retail stores, where sales rose 29.6% to $57.4 million. However, much of that increase was due to the company’s acquisition of several stores in the fourth quarter of its last fiscal year.
La-Z-Boy said sales from its upholstery group were down 1.4% from the comparable quarter a year earlier to $352 million, while case goods sales slid 1.8% to $109.9 million.
Kurt Darrow, president and CEO, said he was pleased with the significant improvement in operating margins in the latter two segments. The upholstery group’s margin was 7.2% — one percentage point higher than last year’s third quarter — and case goods stood at 6%, up more than four points.
“Overall, we are encouraged with the results for the quarter as they indicate that the execution of our strategy in our two largest business segments … is progressing with the acceleration and speed we expected,” said Darrow.
During a conference call with securities analysts, he said La-Z-Boy-branded product was the best performer among its upholstery businesses, and said the company was increasing the use of cut-and-sewn covers from China to hold costs in check. Currently, about 19% of the company’s covers are cut-and-sewn, but he expects the number will approach 30% in the second half of this year.
“We can get cut-and-sew (fabric) covers delivered for less than we can buy rolled goods in the U.S.,” said Darrow.
He also noted that supplies of polyurethane foam have stabilized, but at prices that are 50% higher than last summer. As a result, surcharges that were added to upholstery prices have been made permanent price increases, he told analysts.
He said La-Z-Boy’s 64 company-owned Furniture Galleries stores had an operating loss of $57 million, largely due to the underperforming stores acquired last year. He said he believes those stores will improve once they are converted to the company’s New Generations format, and more locations are added to the markets where they operate.
At the end of the quarter, there were a total of 336 Furniture Galleries stores.
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La-Z-Boy sales slip 0.9% in 3Q
Mar 5, 2006
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