La-Z-Boy(LZB) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total delivered sales for the second quarter were $522 million, a slight increase from the prior year [4] - GAAP operating margin was 6.9%, while adjusted operating margin was 7.1% [5][17] - Strong operating cash flow of $50 million for the quarter, tripling last year's comparable period [5][22] - Diluted earnings per share totaled $0.70 on a GAAP basis, and adjusted diluted EPS was $0.71, flat compared to last year [18] Business Line Data and Key Metrics Changes - Retail segment delivered sales increased slightly to $222 million, with adjusted operating margin decreasing to 10.7% from 12.6% due to fixed cost deleverage [18] - Wholesale segment delivered sales grew 2% to $369 million, with adjusted operating margin improving to 8.1% from 6.8% [19] - Joybird's delivered sales were $35 million, down 10%, with an increased operating loss compared to the prior year [19][20] Market Data and Key Metrics Changes - Written same-store sales decreased 2% for the quarter but showed sequential improvement over the last two quarters [6] - Total written sales for Joybird increased by 1% compared to the previous year, indicating improvement in retail store performance [6] Company Strategy and Development Direction - The company is focusing on its core vertically integrated North American upholstery business and has announced the exit of non-core businesses [7][14] - A significant acquisition of a 15-store network in the Southeast U.S. is expected to add approximately $80 million in annual retail sales [8] - The company aims to expand its store network to over 400 stores, with a focus on company-owned locations [10][43] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer trends remain challenging, but they are committed to navigating the current environment while positioning for long-term growth [6][16] - The company expects fiscal third-quarter sales to be in the range of $525-$545 million, reflecting a growth of 1-4% year-over-year [25] - Management expressed confidence in the company's financial strength and long-term growth prospects, highlighted by a 10% dividend increase [23][24] Other Important Information - The company is undergoing a multi-year project to transform its distribution network, which is expected to improve efficiency and reduce costs [12][13] - The company has a strong balance sheet with $339 million in cash and no externally funded debt [22] Q&A Session Summary Question: Geographic sales dispersion and market consistency - Management noted no significant differences in geographic sales dispersion, with Canada facing more challenges due to trade tariffs [30] Question: Pricing actions and unit volumes - Management confirmed nominal pricing actions were taken to offset trade policy changes, with volume remaining flat year-over-year in the North America wholesale business [31][32] Question: Friction costs related to portfolio and supply chain optimization - Management explained that friction costs are associated with the ongoing distribution transformation project, which is expected to yield long-term efficiency gains [33] Question: Expansion into new wholesale partners - Management emphasized the importance of strategic partnerships that align with the brand and enhance consumer reach, noting recent expansions with Living Spaces and Costco [35] Question: Impact of non-core business exits on sales - Management confirmed that the exit of non-core businesses would result in a net sales decrease of approximately $30 million, but with expected margin improvements [38][39] Question: Inventory management and efficiency gains - Management attributed the decrease in inventory to improved supply chain management and efficiency [41] Question: Integration of the 15-store acquisition - Management expressed satisfaction with the integration process and plans for continued expansion of company-owned stores [42][45] Question: Case goods offerings and partnerships - Management confirmed the importance of case goods in enhancing the upholstery experience while recognizing the need for efficient sourcing strategies [48]