La-Z-Boy(LZB) - 2025 Q4 - Annual Report

Part I Business La-Z-Boy is a leading global producer of reclining chairs and a major US manufacturer of residential furniture - The company operates through two primary reportable segments: the Retail segment, which sells directly to consumers via 203 company-owned La-Z-Boy Furniture Galleries® stores, and the Wholesale segment, which manufactures, imports, and sells to a network of proprietary and independent retailers[21] - The company's supply chain is primarily based in North America, with five major manufacturing locations in the United States and three in Mexico, which helps mitigate tariff impacts[19][29] - The business experiences seasonality, with the highest demand in winter months and the fourth quarter being historically strongest for sales[30][31][32] - Working capital items saw minor changes in fiscal 2025: inventory decreased by $8.0 million, accounts receivable increased by $0.3 million, and customer deposits decreased by $15.9 million[39][40][42] - The wholesale backlog decreased by 13% to $119.5 million at the end of fiscal 2025, down from $136.6 million in fiscal 2024[44] - As of the end of fiscal 2025, the company employed approximately 10,600 full-time equivalent employees, an increase from 10,200 in the prior year[51] Risk Factors The company faces risks from economic downturns, intense market competition, and operational threats like cybersecurity and supply chain disruptions - Macroeconomic & Market Risks: The business is sensitive to economic conditions impacting consumer spending on discretionary items, and intense competition poses a risk to market share and profitability[70][71] - Operational Risks: The company is vulnerable to cybersecurity incidents, disruptions in its IT systems, supply chain interruptions, and fluctuations in raw material prices[75][78][82] - Financial & Strategic Risks: Failure to meet earnings expectations for acquired businesses could lead to impairment charges, and the company faces credit risk from wholesale customers[86][90] - Legal, Tax & Regulatory Risks: Changes in trade policies, particularly tariffs on goods from China, could increase costs, and the company is subject to evolving data privacy regulations[93][96][97] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[104] Cybersecurity The company maintains a comprehensive cybersecurity program with board-level oversight and has experienced no material incidents to date - The company has a formal information security program with annual risk assessments and controls such as EDR, MFA, and SIEM[105] - Cybersecurity governance is overseen by the Chief Information Officer (CIO), who reports to the Audit Committee and the Board of Directors[112] - The company is not aware of any cybersecurity threat or incident to date that has materially affected its business, operations, or financial condition[110] Properties The company owns or leases 13.0 million square feet of property, primarily owning manufacturing plants and leasing retail and warehouse space Property Square Footage by Segment (as of April 26, 2025) | (Amounts in millions) | Square Feet | | :--- | :--- | | Wholesale | 8.6 | | Retail | 3.9 | | Corporate and Other | 0.5 | | Total property | 13.0 | - The company owns its world headquarters and all domestic manufacturing plants, while the majority of retail stores and warehouses are leased[113] Legal Proceedings Management does not expect any legal proceedings from the ordinary course of business to have a material impact on its financial statements - The company does not currently believe it is probable that it will have any additional loss from legal matters that would be material to its consolidated financial statements[114] Mine Safety Disclosures This item is not applicable to the company - Not applicable[115] Information About Our Executive Officers This section lists the company's key executive officers, including the President and CEO, CFO, and Chief Commercial Officer - Key executive officers include: - Melinda D. Whittington, President and Chief Executive Officer - Taylor E. Luebke, Senior Vice President and Chief Financial Officer - Robert Sundy, President, La-Z-Boy Brand and Chief Commercial Officer - Rebecca M. Reeder, President, Retail La-Z-Boy Furniture Galleries - Michael A. Leggett, Senior Vice President and Chief Supply Chain Officer[117][118] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock (NYSE: LZB) performance is detailed, alongside dividend policy and significant share repurchase activity in fiscal 2025 - The company's common stock trades on the NYSE under the symbol "LZB"[120] Issuer Purchases of Equity Securities (Fiscal 2025) | Period | Total Shares Repurchased | Total Spent | Shares Remaining in Plan | | :--- | :--- | :--- | :--- | | Q4 FY2025 | 0.3 million | $13.5 million | 3.7 million | | Full Year FY2025 | 2.0 million | $77.9 million | 3.7 million | 5-Year Stock Performance (Total Return on $100 Investment) | Company/Index | 4/25/2020 | 4/26/2025 | | :--- | :--- | :--- | | La-Z-Boy Incorporated | $100.00 | $203.90 | | S&P 500 Composite Index | $100.00 | $210.35 | | Dow Jones U.S. Furnishings Index | $100.00 | $192.81 | Reserved This item is reserved and contains no information - Item 6 is reserved[128] Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction and Strategy The company is executing its "Century Vision" strategy to grow sales and market share by focusing on its La-Z-Boy and Joybird brands - The company's "Century Vision" strategy focuses on driving growth through its La-Z-Boy and Joybird brands with a consumer-first approach[130] - Strategic initiatives include expanding the La-Z-Boy brand reach via its "Long Live the Lazy" campaign, growing the store network, and profitably growing the Joybird brand[131][133][136] Results of Operations (FY25 vs FY24) Consolidated sales grew 3.0% to $2.11 billion, but operating income fell 9.9% due to a goodwill impairment charge and margin compression Consolidated Results of Operations (FY25 vs FY24) | (Amounts in thousands) | FY2025 | FY2024 | % Change | | :--- | :--- | :--- | :--- | | Sales | $2,109,207 | $2,047,027 | 3.0% | | Operating income | $135,837 | $150,796 | (9.9)% | | Operating margin | 6.4% | 7.4% | -100 bps | - The decline in consolidated operating margin was primarily driven by a $20.6 million non-cash goodwill impairment charge for the UK businesses[149][141] Retail Segment Performance (FY25 vs FY24) | (Amounts in thousands) | FY2025 | FY2024 | % Change | | :--- | :--- | :--- | :--- | | Sales | $898,370 | $855,126 | 5.1% | | Operating income | $105,417 | $111,682 | (5.6)% | | Operating margin | 11.7% | 13.1% | -140 bps | Wholesale Segment Performance (FY25 vs FY24) | (Amounts in thousands) | FY2025 | FY2024 | % Change | | :--- | :--- | :--- | :--- | | Total Sales | $1,479,819 | $1,447,278 | 2.2% | | Operating income | $82,213 | $99,373 | (17.3)% | | Operating margin | 5.6% | 6.9% | -130 bps | - The Corporate and Other segment's operating loss decreased by $8.5 million, primarily due to improved performance at Joybird, which reached breakeven profit[159] Liquidity and Capital Resources The company maintained a strong liquidity position with $328.4 million in cash, driven by increased operating cash flow Cash Flow Summary (FY2025 vs FY2024) | (Amounts in thousands) | FY2025 | FY2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $187,271 | $158,127 | | Net cash used for investing activities | ($98,389) | ($81,554) | | Net cash used for financing activities | ($102,612) | ($81,227) | | Change in cash and cash equivalents | ($12,649) | ($5,580) | - Cash and cash equivalents stood at $328.4 million at the end of fiscal 2025, and the company has no borrowings outstanding under its $200 million credit facility[164][167] - Key uses of cash in fiscal 2025 included $74.3 million for capital expenditures, $29.5 million for acquisitions, $77.9 million for share repurchases, and $35.0 million for dividends[169][170][178] Critical Accounting Estimates Key estimates include goodwill valuation, which resulted in a $20.6 million impairment for the UK unit, and product warranty liabilities - Goodwill impairment testing is a critical estimate, and in fiscal 2025, the company performed a quantitative test on its UK and Joybird reporting units[179][180] - The UK reporting unit's goodwill of $20.6 million was fully impaired and written down to zero due to declining financial performance[182] - The Joybird reporting unit's estimated fair value exceeded its carrying value by approximately 16%, so no impairment was recorded[181][293] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency, commodity and transportation costs, and duties and tariffs - The company is exposed to market risk from foreign currency changes, but the effect is not currently expected to be material[190] - Significant risk exists from fluctuations in commodity prices (steel, wood, foam) and transportation costs, which could impact margins[191] - The company is exposed to market risk from duties and tariffs on imported materials and finished goods, which could increase costs[192][193] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, auditor's report, and notes for fiscal year 2025 Consolidated Statement of Income (Fiscal Years Ended) | (Amounts in thousands) | April 26, 2025 | April 27, 2024 | April 29, 2023 | | :--- | :--- | :--- | :--- | | Sales | $2,109,207 | $2,047,027 | $2,349,433 | | Gross profit | $926,418 | $881,670 | $964,733 | | Operating income | $135,837 | $150,796 | $211,439 | | Net income attributable to La-Z-Boy | $99,556 | $122,626 | $150,664 | | Diluted EPS | $2.35 | $2.83 | $3.48 | Consolidated Balance Sheet (As of) | (Amounts in thousands) | April 26, 2025 | April 27, 2024 | | :--- | :--- | :--- | | Total current assets | $805,688 | $836,808 | | Total assets | $1,922,162 | $1,913,442 | | Total current liabilities | $420,791 | $437,281 | | Total equity | $1,031,976 | $1,013,360 | | Total liabilities and equity | $1,922,162 | $1,913,442 | - The independent auditor identified two Critical Audit Matters for the fiscal 2025 audit: the goodwill impairment assessments of the Joybird and United Kingdom reporting units[207][210] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting principles or financial disclosure - None[363] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of fiscal 2025 - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[363] - There were no changes in internal control over financial reporting during the fourth quarter of fiscal 2025 that materially affected these controls[365] Other Information This section discloses the adoption of a Rule 10b5-1 trading plan by a member of the Board of Directors - On March 11, 2025, Director Janet Kerr adopted a Rule 10b5-1 trading plan for the sale of up to 3,372 shares of common stock[366] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[368] Part III Items 10 through 14 incorporate information by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders Directors, Executive Officers, and Corporate Governance Information on directors, officers, and governance is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the company's 2025 Annual Meeting of Shareholders Proxy Statement[369] Executive Compensation Detailed information on executive and director compensation is incorporated by reference from the company's 2025 Proxy Statement - Information required by this item is incorporated by reference from the company's 2025 Proxy Statement, covering various aspects of executive compensation[372] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Details on security ownership and equity compensation plans are incorporated by reference from the 2025 Proxy Statement Equity Compensation Plan Information (as of April 26, 2025) | Plan Category | Securities to be Issued Upon Exercise (i) | Weighted-Average Exercise Price (ii) | Securities Remaining for Future Issuance (iii) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 2,099,790 | $29.91 | 2,717,757 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the company's 2025 Proxy Statement[377] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from the company's 2025 Proxy Statement[378] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed with the Form 10-K, including financial statements, schedules, and various exhibits - This item lists all financial statements, schedules, and exhibits filed with the report[379] - Financial Statement Schedule II—Valuation and Qualifying Accounts for the last three fiscal years is included[381] - Exhibits filed include governance documents, credit agreements, management compensation plans, and CEO/CFO certifications[382][383] Form 10-K Summary The company has not provided a summary for its Form 10-K - None[385]