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Larry Thomas

La-Z-Boy sales rise 9.1% in quarter but profits tumble 26%

Restructuring, impairment charges cut income

MONROE, Mich. — La-Z-Boy said Tuesday that its sales rose 9.1% in the quarter ended April 30, but profits fell more than 26% due largely to restructuring and asset impairment charges.

Sales were especially strong in the company's retail segment, which had top-line growth of 48.6% in the quarter. About half the increase came from 15 newly acquired stores in Southern California, but the company said delivered sales were up 16% even excluding the new stores.

Companywide sales for the 14-week quarter, the fourth quarter of La-Z-Boy's fiscal year, totaled $338.9 million. That's up from $310.7 million in the 13-week quarter ended April 24, 2010.

The company said upholstery sales rose 9.8% to $264.8 million in the quarter, while case goods sales rose 8.6% to $40.7 million. In both segments, about 8 percentage points of the increase was due to the extra week in the most recent quarter.

Sales at the 83 company-owned La-Z-Boy Furniture Galleries stores were $58.3 million in the most recent quarter. That's up from $39.2 million in last year's fourth fiscal quarter.

Net income for the most recent quarter totaled $10.3 million or 19 cents per share, down from $14 million or 26 cents per share in the same quarter last year. The most recent quarter included asset impairment charges of $4.47 million or about 5 cents per share related to certain company-owned stores. The same quarter a year earlier also had a restructuring charge, of about 1 cent per share.

"Although the overall macroeconomic environment remains challenging, we experienced sales momentum in the fourth quarter across all three segments, particularly in our retail segment where sales increased significantly over last year's quarter, even without the additional week," said Kurt Darrow, president and CEO. "Our upholstery group achieved a double-digit operating margin and we continue to be encouraged by the La-Z-Boy Furniture Galleries store network's same-store sales comparison of 11.8% for the quarter."

Darrow said he is encouraged by the upholstery sales increase, which he believes is a result of "a combination of new product introductions, smart merchandising and the successful launch of our new brand platform featuring Brooke Shields."

"Higher raw material costs continued to impact our margin for the quarter, but a price increase effective May 1 is expected to absorb the recent additional increased costs," he added.

For the 53-week fiscal year ended April 30, sales totaled $1.19 billion, up from $1.18 billion in the 52-week fiscal year ended April 24, 2010.

Net income for the year, including the impairment charge in the fourth quarter, was $24 million or 45 cents per share. That was down 26.5% from the previous fiscal year, when the company earned $32.7 million or 62 cents per share.

Including the 83 company-owned units, there were 305 standalone La-Z-Boy Furniture Galleries stores at the end of the fiscal year.

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