La-Z-Boy Inc (LZB) Q3 2025 Earnings Call Highlights: Strong Retail Growth and Strategic ...

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Consolidated Delivered Sales: $522 million, up 4% year-over-year.
Non-GAAP Operating Margin: Increased by 20 basis points to 6.8%.
GAAP and Non-GAAP Diluted EPS: $0.68.
Retail Segment Sales: Increased by 11%, driven by same store sales growth.
Same Store Sales Growth: 7% for company-owned retail segment; 5% for entire La-Z-Boy Furniture Galleries network.
Joybird Written Sales: Increased by 10% year-over-year.
Retail Segment Non-GAAP Operating Margin: 10.7%.
Wholesale Segment Delivered Sales: Increased by 2% to $363 million.
Wholesale Segment Non-GAAP Operating Margin: 6.5%.
Cash and Cash Equivalents: $315 million with no externally funded debt.
Cash Flow from Operations: $57 million for the quarter, up 18% year-over-year.
Capital Expenditures: $19 million for the quarter.
Shareholder Returns: $20 million returned via dividends and share repurchases.
Store Network: 362 La-Z-Boy Furniture Galleries stores, with plans to grow to over 400 stores.

Warning! GuruFocus has detected 6 Warning Sign with LZB.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

La-Z-Boy Inc (NYSE:LZB) reported a 4% increase in consolidated delivered sales, reaching $522 million, driven by strong same-store sales growth and new store openings.
The retail segment saw an impressive 11% increase in sales, supported by acquisitions and new store openings, aligning with the Century Vision growth strategy.
The company achieved a non-GAAP operating margin expansion of 20 basis points compared to the previous year, indicating improved operational efficiency.
Joybird, a subsidiary of La-Z-Boy Inc (NYSE:LZB), reported a 10% increase in written sales and achieved break-even profitability, showcasing momentum in a challenging environment.
La-Z-Boy Inc (NYSE:LZB) maintained a strong balance sheet with $315 million in cash and no externally funded debt, reflecting financial stability and capacity for future investments.

Negative Points

The furniture and home furnishing industry remains challenged, with existing home sales near 30-year lows and high mortgage rates impacting consumer demand.
Traffic in retail stores, while improving, is still negative, indicating ongoing challenges in attracting customers.
The international wholesale business faced significant leverage issues due to a customer transition in the UK, impacting overall margins.
The company anticipates a choppy macroeconomic environment in the near term, with housing affordability and global trade policies posing potential risks.
Retail segment operating margins were slightly down due to increased selling expenses and fixed costs associated with new store openings.

Q & A Highlights

Q: Can you provide more details on the trends throughout the quarter, especially regarding the strong performance in November and any insights into the fourth quarter? A: Melinda Whittington, President and CEO, noted that consumer activity was strongest during the holiday period, with year-on-year strength across all three months of the quarter. February is still early, and while President's Day traffic wasn't as robust as other holidays, it's too soon to determine if this is weather-related. The environment remains choppy.

Q: Could you elaborate on the factors affecting the 8.5% to 9.5% operating margin guidance for the fourth quarter? A: Taylor Luebke, SVP and CFO, highlighted the sustainability of margin progression in the North America La-Z-Boy wholesale business and Joybird's break-even status. Retail is performing as expected despite industry challenges. International business challenges, particularly with the DFS partnership, impact wholesale margins. New store openings have short-term impacts but are expected to benefit margins in the long term.

Q: Can you update us on the progress of strategic partnerships and potential new partnerships? A: Melinda Whittington emphasized the importance of B2B partners and strategic partnerships with larger regional entities like Rooms To Go and Slumberland. These partnerships increase brand visibility and reach consumers beyond La-Z-Boy Furniture Galleries. The company is expanding existing partnerships and exploring new opportunities.

Q: How is the core wholesale segment performing in terms of efficiency and margins? A: Taylor Luebke stated that the North America wholesale business has shown margin growth for three consecutive quarters. The supply chain is improving, but volume is needed to reach long-term goals. The industry is still affected by a lack of housing market growth, which impacts volume.

Q: What is the outlook for Joybird, and how does it fit into La-Z-Boy's strategy? A: Melinda Whittington explained that Joybird has stabilized financially and is ready for growth. The brand focuses on customization and expressive furniture, leveraging La-Z-Boy's North American manufacturing capabilities. The company plans to open three to four new Joybird stores next year, aiming for cautious growth while maintaining financial discipline.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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