• Mary Burritt

La-Z-Boy's net income declines 15%

Kurt Darrow, company president and CEO, said he is "disappointed with our start to this fiscal year."

MONROE, Mich. - La-Z-Boy Inc. reported a 15.16% decrease in net income for the first quarter of its 2018 fiscal year compared to last year’s first quarter: $11.7 million vs. $13.8 million.

Earnings per share for the quarter were 24 cents, down from 28 cents for the same quarter last year.

“After a strong finish to fiscal 2017, we are disappointed with our start to this fiscal year,” said Kurt L. Darrow, company president and CEO, in the company’s earnings release. “Although we posted a consolidated sales increase for the quarter, much of it related to acquired sales that did not add volume to our upholstery manufacturing operations, which is our most profitable segment.”

The company reported increased consolidated sales of $357.1 million for the 2018 fiscal 1Q, an increase of 4.8% over last year’s first quarter but a decrease from 2017’s 4Q total of $412.7 million.

The upholstered furniture maker reported increases in the first quarter 2018 consolidated sales for its three wholesale segments, compared with last year’s first quarter, but it reduced margins for upholstery and retail.

Upholstery segment sales increased 1Q 2018 to 2.6% to $274.4 million from 1Q last year, while the operating margin declined to 8.5% from 11.4%, including a 0.9 percentage point benefit from a legal settlement.

Casegoods segment sales rose to $25.5 million, up 1.9% over last year. The operating margin also rose from 1Q last year, to 10.7% from 8.6%.

Comparing first quarter 2018 to the year prior, retail sales rose 15.5% to $110.5 million. However, La-Z-Boy specified that “on the core base of 122 stores included in last year’s first quarter, delivered sales declined 1.1% vs. the prior year, and the segment’s operating margin decreased to 1.6% from 2.3%.”

La-Z-Boy Furniture Galleries same-store written sales increased 0.7% for 1Q 2018 compared to the same period year prior.

First quarter cost of sales increased 5.23% compared with last year’s first quarter, to $218 million vs. $206.6 million.

In its June release discussing its fiscal 2017 results, Darrow had warned that summer slows sales but elaborated in the statement: “Lower volume throughout our plants made it difficult to absorb fixed costs and this, combined with the normal seasonal slowdown and continued investments across the business, impacted our upholstery operating margin for the period. Additionally, due to acquisitions and growth in our retail segment, SG&A expenses increased during the quarter.”

La-Z-Boy closes most of its manufacturing facilities for a week in July for vacations and maintenance. The company also said the 14 stores acquired during 2017 will not show comparative sales until the second half of fiscal 2018. La-Z-Boy also has been transitioning existing stores into the company’s newest format. For fiscal 2017, the company completed 23 store projects and ended the year with nine net new stores.

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