Core Viewpoint - Investing in turnaround stocks can be challenging, but successful turnarounds can yield significant gains [1] Company Overview - RH, formerly known as Restoration Hardware, is undergoing a transformation despite a stagnant housing market [2][3] - The company has shifted its focus to selling high-end furniture to affluent consumers and has rebranded its stores as "design galleries" [3] Financial Performance - Initially, RH's strategy led to revenue growth and operating margins increasing from approximately 10% in 2015 to over 24% during the pandemic [4] - However, margins have since compressed to just under 10% as revenue declined, indicating vulnerability to housing market fluctuations [6] Debt and Buyback Strategy - In response to market conditions, RH took on significant debt, totaling about $2.55 billion, to repurchase $1 billion in stock in 2022 and an additional $1.25 billion in 2023 [8][9] - This buyback reduced shares outstanding by over 25%, but the debt burden raises concerns if the housing market does not recover [9] Housing Market Context - The CEO described the current housing market as the worst in 50 years, with existing home sales nearly unchanged despite a significant population increase [10] - The prolonged downturn has exceeded management's expectations, leading to regrets about the timing of stock repurchases [11] Future Outlook - Despite challenges, there are signs of potential recovery, with last quarter's revenue up 12% year-over-year, and management anticipates revenue growth of 10% to 13% for the year [14][15] - The company is also investing in new design galleries, including locations in Paris and six in the U.S. [15] Risks and Considerations - RH's enterprise value is around $5.1 billion, and the company remains vulnerable to a prolonged housing market freeze due to its debt load [16] - The outlook for recovery is uncertain, influenced by interest rates, tariffs, and broader economic conditions [17]

Group 1: RH (Restoration Hardware) - RH has faced macroeconomic challenges, including a weak housing market and tariff uncertainties, leading to a 52% decline in stock price this year [4] - The company's trailing-12-month revenue is $3.3 billion, down from a peak of $3.9 billion, but it reported a 12% year-over-year revenue growth in the latest quarter [5] - RH is expanding into the $200 billion North American hotel industry with RH Guesthouses and offers luxury services, creating a lifestyle ecosystem beyond furniture [6] - The company has historically reported higher margins than average furniture stores, with an adjusted operating margin of 7% in the first quarter, below its 10-year average of 12% [7] - The stock is currently trading at a price-to-sales multiple of 1.16, significantly below its 10-year average of over 2 times sales, presenting a buying opportunity for long-term investors [8] Group 2: Roku - Roku's stock is trading about 32% below its price from five years ago, despite showing double-digit revenue growth [10] - As a leading connected-TV streaming platform, Roku benefits from a growing digital advertising market, which constitutes the majority of its revenue [11] - The platform achieved 35.8 billion total streaming hours in the first quarter, a 16% year-over-year increase, indicating strong user engagement [13] - Roku's recent integration with Amazon Ads allows advertisers to access 80% of U.S. connected TV households, potentially boosting advertising revenue [14] - The stock is priced at a 2.74 price-to-sales multiple, at the low end of its historical range, suggesting potential for future gains as advertising investment increases [16]

Company Overview - Ethan Allen is a manufacturer and retailer of home furnishings, founded in Vermont and headquartered in Danbury, Connecticut [1] - The company was established in 1932 and opened its first sawmill in 1936 in Beecher Falls, Vermont [2] - Ethan Allen manufactures approximately 75% of its furniture in North America, with production facilities in Vermont, North Carolina, Mexico, and Honduras [2] Commitment to Local Manufacturing - The company has maintained a commitment to local manufacturing, producing most of its furniture close to home, contrasting with many competitors who have moved production overseas [3] - This dedication to local craftsmanship has been a core value for the company over its 93-year history [3] Retail and Community Engagement - Ethan Allen operates over 170 retail Design Centers across North America, providing complimentary interior design services and a full range of home furnishings [4] - To support local communities, many Design Centers will conduct food drives in partnership with local charities, starting on June 23 and continuing through July [3] Recognition and Quality - Ethan Allen has been recognized as America's 1 Premium Furniture Retailer by Newsweek, highlighting its status as a leading interior design destination [4] - The company emphasizes quality and craftsmanship in its products, which have been a hallmark since its inception [4]

Financial Data and Key Metrics Changes - Consolidated delivered sales for Q4 reached $571 million, a 3% increase year-over-year [6][21] - For the fiscal year, consolidated delivered sales totaled $2.1 billion, also growing 3% compared to the previous year [8][25] - Operating cash flow for the year was $187 million, up 18% from the prior year [8][28] - The company maintained a strong balance sheet with $328 million in cash and no external debt [8][27] Business Line Data and Key Metrics Changes - Retail segment sales grew 8% in Q4, driven by new stores and acquisitions [6][22] - For the fiscal year, retail segment sales increased by 5% [8][25] - Wholesale segment sales grew 2% in Q4, led by the North American business [7][23] - Joybird's written sales decreased by 21% in Q4, reflecting challenges in the online business [14][24] Market Data and Key Metrics Changes - Written same-store sales for the retail segment decreased by 5% year-over-year in Q4 [13] - Industry data showed mixed results, with some peers reporting flat to mid-teen declines in same-store sales [13] - The company noted that high mortgage rates and economic volatility negatively impacted consumer sentiment [13] Company Strategy and Development Direction - The company is focused on its Century Vision strategy, aiming for double-digit operating margins and sales growth at double the market rate [15][19] - Plans to expand the total network of La Z Boy Furniture Galleries to over 400 stores, with a focus on company-owned locations [16][17] - The company is investing in redesigning its distribution network to enhance efficiency and improve consumer delivery experiences [10][11] Management's Comments on Operating Environment and Future Outlook - Management expects continued global economic uncertainty to challenge consumers in the near term but remains confident in the business model [9][20] - The company anticipates a rebound in housing fundamentals, which could benefit the industry long-term [20] - Management highlighted the importance of agility in navigating external challenges and maintaining strong execution [12][33] Other Important Information - The company was recognized in Newsweek's list of America's most loved brands and most trustworthy companies for 2025 [33] - The company returned $113 million to shareholders through dividends and share repurchases, including a 10% dividend increase for the fourth consecutive year [8][28] Q&A Session Summary Question: Potential for wholesale segment margin expansion - Management indicated that achieving a 10% margin requires both internal improvements and a healthy industry environment [39][40] Question: Timing of the distribution redesign project - Management explained that the decision was driven by recent acquisitions and the need for efficiency in the growing business [42][43] Question: Recent written orders trends - Management noted that Memorial Day showed a solid start, contrasting with a challenging February [44][45] Question: Reasons for sales outperformance relative to guidance - Management attributed the outperformance to broad-based execution despite macroeconomic challenges [51][52] Question: Impact of tariffs and pricing strategy - Management discussed the nominal pricing actions taken and the agility in responding to tariff impacts [53][55] Question: Long-term growth for Joybird - Management remains optimistic about Joybird's growth potential while emphasizing prudent expansion [57][60] Question: La Z Boy's pricing strategy in the current environment - Management expressed confidence in their competitive positioning and the ability to manage pricing effectively [64][67] Question: Operating margin outlook for the fiscal year - Management stated that margin expansion is contingent on industry health and their ability to outperform [70][71]

Core Insights - La-Z-Boy Incorporated reported strong fourth quarter results for fiscal 2025, with sales of $571 million, a 3% increase compared to the prior year [3][6] - The company achieved an operating margin of 5.2% on a GAAP basis and 9.4% on an adjusted basis, with diluted earnings per share of $0.36 and $0.92 respectively [3][6] - The company returned $113 million to shareholders, marking an increase of over 30% from the previous year [3][6] Fiscal 2025 Fourth Quarter Highlights - Consolidated delivered sales reached $571 million, up 3% year-over-year [6] - Retail segment sales increased by 8%, while wholesale segment sales grew by 2% [6][15] - The company-owned La-Z-Boy Furniture Galleries network expanded by six stores, representing 55% of the total network [6][15] Retail Segment Performance - Written sales for the Retail segment grew by 3%, but same-store sales decreased by 5% due to challenges in the housing market [4][15] - Delivered sales in the Retail segment increased by 8% to $247 million, driven by new and acquired stores [15][23] - The operating margin for the Retail segment was 13.1%, down 110 basis points compared to the prior year [15] Wholesale Segment Performance - Sales in the Wholesale segment increased by 2% to $402 million, primarily due to growth in the core North America La-Z-Boy wholesale business [15][44] - The operating margin for the Wholesale segment decreased to 2.5% from 8.1% in the previous year [15] Financial Overview - The company generated $62 million in operating cash flow for the fourth quarter, a 17% increase year-over-year [6][23] - For the full fiscal year, operating cash flow was $187 million, up 18% from the prior year [6][23] - The company ended the quarter with $328 million in cash and no external debt [23] Future Outlook - The company anticipates continued volatility in the industry due to economic uncertainty but expects to outperform peers driven by growth in the Retail segment and core wholesale business [5][8] - For the first quarter of fiscal 2026, sales are projected to be between $490 million and $510 million, reflecting modest growth in a challenging consumer environment [8]

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment returns Group 1: Company Earnings Estimates - Flexsteel Industries, Inc. (FLXS) has seen a 7.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Rockwell Automation, Inc. (ROK) has experienced a 5.7% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The E.W. Scripps Company (SSP) has seen a 14.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Virtu Financial, Inc. (VIRT) has experienced an 8.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Greystone Housing Impact Investors LP (GHI) has seen a 10.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3]

Group 1 - Greystone Housing Impact Investors LP (GHI) has seen a 10.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days and offers a dividend yield of 12.4%, significantly higher than the industry average of 0.0% [1] - Virtu Financial, Inc. (VIRT) has experienced an 8.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days, with a dividend yield of 2.3%, also above the industry average of 0.0% [2] - Flexsteel Industries, Inc. (FLXS) has had a 7.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2]

Core Viewpoint - Hooker Furniture Corporation (HOFT) reported disappointing Q1 FY26 results, with revenues and operating income below consensus estimates, reflecting ongoing challenges in the macroeconomic and furniture retail environment [1][7]. Financial Performance - HOFT reported revenue of $85.3 million, operating income of ($3.6) million, and adjusted EPS of ($0.29), compared to consensus estimates of $92.6 million, ($2.5) million, and ($0.16) [1]. - The revenue represented an 8.8% year-over-year decrease, primarily due to decreased volumes and tariff impacts on the HMI segment [1]. Gross Profit Margin - Despite the challenges, HOFT achieved a consolidated gross profit margin (GPM) of 22.3%, which is an increase of 173 basis points quarter-over-quarter [1][7]. Cost Management - The company successfully reduced fixed costs by 25%, amounting to approximately $25.0 million, with full realization expected by FY27 [1][7]. Market Conditions - The macroeconomic environment remains challenging, characterized by varying interest rates, a maintained housing shortage, and elevated home prices, contributing to a prolonged downturn in the furniture retail sector [1].

Core Viewpoint - Lovesac is emerging from legal issues and is positioned for a potential rebound in share price driven by growth, operational quality, and a shift towards sustainable profitability, despite existing risks [1][2]. Financial Performance - Lovesac reported Q1 net revenue of $138.4 million, reflecting a growth rate of 4.4%, outperforming competitors like Ethan Allen and La-Z-Boy, which are growing at slower rates or experiencing declines [4]. - The company has increased its store count by 21 compared to the previous year, with sales in that channel up by 18%. However, digital and other categories saw declines of 9% and 40.5%, respectively [5]. - Operational quality improvements led to a contraction in gross margin by 60 basis points and a reduction in SG&A expenses by 310 basis points, resulting in a significant contraction of GAAP losses by over 1,600 basis points [5][6]. Guidance and Analyst Outlook - Management has increased guidance for the year, expecting revenue around $725 million and EPS of approximately $1.05, both exceeding consensus forecasts [6]. - Analysts maintain a bullish outlook on Lovesac, with a consistent "Buy" rating and a price target of $31.67, indicating a potential upside of 88.27% from the current price of $16.82 [7][9]. Share Buyback and Risks - Lovesac initiated a share buyback program, significantly reducing share count, but faces risks of ceasing or reversing this program due to decreased cash position and assets [8][9]. - The expected average share count is projected to increase by 11.6% between Q2 and the full year, which may offset the impact of buybacks [10]. - Short interest remains elevated at over 20%, posing a risk of further stock price decline if shorts re-enter the market [11].

Financial Data and Key Metrics Changes - Consolidated net sales for the first quarter were $85.3 million, a decrease of $8.3 million or 8.8% compared to the same period last year [4] - Operating loss was reduced by $1.6 million or 31% to $3.6 million, reflecting cost reduction initiatives [4] - Net loss was $3.1 million or $0.29 per diluted share, an improvement from the prior year's net loss of $4.1 million or $0.39 per diluted share [5] Business Line Data and Key Metrics Changes - Hooker Branded achieved breakeven for the quarter, with net sales increasing slightly due to higher unit volume [5] - Domestic Upholstery segment saw a net sales decrease of about $1 million or 3.7%, but gross profit increased by $575,000 due to reduced material and labor costs [21] - Home Meridian's net sales decreased by $7.6 million or about 29%, primarily due to a significant reduction in unit volume and the loss of a major customer [20] Market Data and Key Metrics Changes - The overall decrease in consolidated sales was driven primarily by a double-digit sales decrease at HMI, which is positioned in the mid-price segment [5] - Existing home sales remain well below pre-pandemic levels, impacting furniture demand [11] - Furniture retail sales showed modest improvement, with April sales up 5.6% year over year [26] Company Strategy and Development Direction - The company is executing a phased cost reduction strategy aimed at achieving approximately $25 million in annualized savings by next fiscal year [13] - A new warehouse facility in Vietnam was opened to enhance supply chain efficiency and reduce lead times [6] - The company is focused on product innovation, cost optimization, and operational excellence to capitalize on emerging opportunities [27] Management Comments on Operating Environment and Future Outlook - The home furnishings industry is navigating a challenging environment due to persistent softness in the housing market and higher mortgage rates [11] - Management believes they have successfully mitigated the impact of a 10% tariff through price increases and participation from source factories [12] - The company is optimistic about future growth, with significant increases in orders for Hooker Legacy brands in May [28] Other Important Information - Cash and cash equivalents stood at $18 million, an increase of $11.7 million from year-end, primarily due to accounts receivable collections [22] - The company maintained financial flexibility with about $40 million in available borrowing capacity under its revolving credit facility [23] - The company announced a regular quarterly dividend, reflecting ongoing confidence in its outlook [23] Q&A Session Summary Question: Can you comment on the cadence of shipments from February through April? - Management noted that the cadence changed drastically due to tariffs, particularly affecting the HMI customer [32] Question: What is driving the higher orders at the Hooker legacy brands in May? - The increase in orders is attributed to a significantly broadened merchandising strategy with Collected Living [35] Question: Any comments on HMI's performance in May and early June? - There is still significant uncertainty due to tariffs, which is affecting performance [36] Question: How did Memorial Day sales go for retail partners? - Overall sentiment was relatively positive for most retailers during Memorial Day [38] Question: Can you provide insights on the cost savings initiatives for the rest of the year? - Expected cost savings from Phase one and Phase two initiatives will ramp up, with significant impacts anticipated in Q4 [44] Question: What are the company's capital allocation priorities? - Strengthening the balance sheet is the top priority, followed by maintaining dividends [45] Question: Will the strong May momentum carry over into the rest of the year? - Management believes the first half will be stronger than the second half, based on historical trends [46]