La-Z-Boy sales slip 0.9% in 3Q
By Larry Thomas -- Furniture Today, February 19, 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. 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 the execution of our strategy in our two largest business segments ... is progressing with the acceleration and speed we expected," he said.
In a conference call with 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.
Darrow also noted that supplies of polyurethane foam have stabilized, but at prices 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.
| 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 1/28 | 2006 | 2005 | Change |
| (a) Includes pretax restructuring charges of $594,000 in the 2006 quarter and $2.3 million in the 2005 quarter. The 2005 quarter also includes $352,000 in after-tax income from discontinued operations. (b) Includes pretax restructuring charges of $8.4 million in the 2006 nine months and $13.4 million in the 2005 nine months. The 2005 quarter also includes $987,000 in after-tax income from discontinued operations, and a $702,000 after-tax extraordinary gain. |
|||
| Sales | $502,323,000 | $506,959,000 | (0.9%) |
| Operating income | 19,085,000 | 21,986,000 | (13.2%) |
| Net income (a) | 10,468,000 | 11,092,000 | (5.6%) |
| Earnings per share | 0.20 | 0.21 | (4.8%) |
| 9 months ended 1/28 | 2006 | 2005 | Change |
| Sales | $1,408,415,000 | $1,482,826,000 | (5.0%) |
| Operating income | 27,585,000 | 44,384,000 | (37.8%) |
| Net income (b) | 7,229,000 | 16,429,000 | (56.0%) |
| Earnings per share | 0.14 | 0.32 | (56.3%) |
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La-Z-Boy 3Q sales down 0.9%, earnings down 5.6%
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