• Mary Burritt

1Q 2018 earnings depress La-Z-Boy stock price

Acquired sales accounted for most of consolidated sales increase and failed to improve upholstery margin.

MONROE, Mich. – La-Z-Boy Inc.’s stock has dropped more than 18% from its Tuesday high of $31.675 after the furniture maker reported its earnings declined to $11.7 million, or 24 cents a share, in fiscal 2018’s 1Q, compared with $13.8 million, or 28 cents a share, the same quarter last year.

The stock opened at $25.05 and continues to hover below $24.45 this morning; its 52-week low is $22.09.

“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, stated in the company’s earnings release, and reiterated in the next day’s conference call.

“Although we posted a consolidated sales increase for the quarter, much of it related to acquired sales which did not add volume to our upholstery manufacturing operations, which is our most profitable segment.” The upholstered furniture maker reported increases in 1Q 2018 consolidated sales for its three wholesale segments, compared with last year’s first quarter but reported reduced margins for upholstery and retail.

Upholstery segment sales increased 1Q 2018 to 2.6% to $274 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.

Retail sales rose 15.5% to $110.5 million, comparing 1Q 2018 to the year prior. 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% versus the prior year and the segment’s operating margin decreased to 1.6% from 2.3%.”

Casegoods sales rose to $25.5 million, up 1.9% over 1Q last year. The operating margin also rose from 1Q last year, to 10.7% from 8.6%. La-Z-Boy closes most of its manufacturing facilities for a week in July for vacations and maintenance.

The Top 25 furniture retailer also said the 14 stores acquired during 2017 will not show comparative sales until the second half of fiscal 2018. La-Z-Boy has been transitioning existing stores into the company’s newest format, completing 23 store projects in 2017 and ending the year with nine net new stores.

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