La-Z-Boy sales down
By Jay McIntosh -- Furniture Today, August 25, 2008
MONROE, Mich. — La-Z-Boy said its fiscal first-quarter sales were down 6.6% and the company lost $8.5 million in the quarter, even with its loss a year earlier, despite heftier restructuring costs and writedowns.
Sales in the period ended July 26 were $321.7 million, down from $344.4 million in the comparable quarter last year.
“Although our fiscal first quarter is historically our weakest, we strengthened our operating performance during the period and expanded our margins on a 6.6% decline in sales,” said Kurt Darrow, president and CEO. “While we anticipate it being some time before we see an across-the-board industry improvement, we believe our balance sheet and the strength of our business model will carry us through the period.”
The quarterly loss came to 17 cents per share. It included restructuring charges of 9 cents per share, mainly for closing a factory in Tremonton, Utah, and an import and distribution operation in the United Kingdom, and 3 cents per share to write down the value of goodwill associated with the U.K. operation, which is shifting to a new licensing partner.
In upholstery manufacturing, La-Z-Boy's largest segment, sales were down 6.9% to $237.1 million. The operating margin, however, rose to 4.2% from 3.5% a year ago.
“With the cellular conversion at our La-Z-Boy manufacturing facilities complete, we are realizing the anticipated efficiencies throughout our production process,” said Darrow.
Meanwhile, the company's new cut-and-sew operation in Mexico is on schedule to be completed in time for production to begin in February.
Case goods sales were down 10.2% from a year ago to $48.1 million and the segment's operating margin declined to 2.9% from 4.9%. Darrow said case goods are generally higher-ticket items among furniture purchases, and that it's “apparent the consumer is postponing these purchases to a greater extent than they are other furniture categories.”
In company-owned stores, sales of $42.4 million were down 6.2% and the operating margin was a negative 23.6%.
“On a decline in sales, our operating loss was flat against last year as we improved our gross margin in the segment,” said Darrow. “With the costs of consolidating our warehouses and IT systems behind us, we have the ability to operate more efficiently throughout the year, although we remain concerned about weaker consumer discretionary spending impacting our volume.”
In a conference call with securities analysts, Darrow added that La-Z-Boy dealers have signed on for a second year of the “Comfort Is What We Do” ad campaign. He also said that the company plans to redesign its Web site over the next six months to make it more compelling and user-friendly.
La-Z-Boy's best retail market these days is Canada, where first-quarter sales were up in the single digits, said Darrow. The trouble spots are California, Nevada, Arizona, Florida and Michigan, some of which were down in double digits.
| La-Z-Boy | |||
|---|---|---|---|
| Owns American Drew, Bauhaus, England, Hammary, Kincaid and Lea | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 7/26 | 2008 | 2007 | Change |
| (a) Includes pretax restructuring costs of $5.8 million in the 2008 quarter and $2.6 million in the 2007 quarter, and a charge of $1.3 million in the 2008 quarter for writedown of intangibles. Also includes loss from discontinued operations of $152,000 in the 2008 quarter. |
|||
| Sales | $321,652,000 | $344,396,000 | (6.6%) |
| Operating income | (5,300,000) | (9,255,000) | — |
| Net income (a) | (8,544,000) | (8,694,000) | — |
| Earnings per share | (0.17) | (0.17) | — |
