La-Z-Boy execs upbeat about latest numbers

It’s hard to get excited about a 23% decline in sales, but executives at La-Z-Boy genuinely had reason to be upbeat during Tuesday’s conference call to discuss the company’s latest earnings statement.

After all, La-Z-Boy did manage a bottom-line profit of $5.3 million — its first quarterly profit it more than a year. And it generated about $34 million in cash from operations — $27.8 million of which was used to pay down debt.

That put the company’s net debt at less than $44 million at the end of its fiscal year on April 25, its lowest level of debt in nearly a decade.

But perhaps the most impressive numbers came from La-Z-Boy’s retail segment, which consists of 68 company-owned La-Z-Boy Furniture Galleries stores. Despite a 21.4% decline in sales, the segment’s operating loss was reduced by a hefty 41.7% to $7.3 million.

Obviously, the company is putting off any celebration until the retail segment consistently makes money, but as CEO Kurt Darrow noted during the conference call, a new management team there has made significant improvements in the past six months.

Among other things, the warehouse system has been overhauled, advertising spending has been redirected, and gross margins have been boosted, Darrow told analysts.

“Going forward we expect to make progress in stemming the segment’s losses but it will take an uptick in volume before we believe we can make this stand-alone business profitable,” he said.

But the uptick won’t have to be as large as you might think. In fact, he told analysts a 10% to 15% revenue boost would put the business on a so-called “cash neutral” basis, considering that La-Z-Boy’s wholesale business already is earning a 6% to 9% operating margin on the products it sells to the retail side.

“The road is still long, but we have navigated our way through many hairpin turns and I’m proud of the work our team has done,” said Darrow.