LZB - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to the La-Z-Boy Fiscal 2019 First Quarter Results Conference Call. At this time, all participants are in a listen-only-mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to Kathy Liebmann, Director of Investor Relations and Corporate Communications. ahead. go Please

Kathy Liebmann

Chief then good is to and With thank for Chief President you today Senior Melinda Thanks, President to Vice our to morning Kurt the the call fiscal us turn Slides and and Chairman, today's La-Z-Boy's Melinda discuss Kurt Officer. for concluding results. Officer, XXXX this joining our begin and his and presentation are call. call Whittington, for will will Kurt Rob, Webcast Financial Darrow, and financials Executive then going year. open first remarks. accompany us quarter will link, We'll over questions. be speak to the one about through back available which

for conference beginning quarterly and communicate current a These regular future are afternoon. calls with one Company's week primary Additionally, of investors be replay telephone vehicles investor this operations prospects. of the one La-Z-Boy's call the to about available will

forward-looking during will will We so remark. usual Safe I our repeat statements Harbor make this call,

While uncertainties results present and time, forward-looking materially during President and undertake Chief We obligation they actual wide of Kurt Chairman, these La-Z-Boy's turn to range subject differ management at Darrow, to let our risks are future a factors. best the the may over to Executive numerous detailed SEC statements filings this with me Kurt? they to in statements update that, from no regular and And of due as any judgment made call. the reflect call Officer.

Kurt L. Darrow

quarter. good the results and Yesterday our for you, we XXXX morning afternoon everyone. Kathy, first reported fiscal Thank

our operating XX%, increased Sales we've generated from had million and increased in and million XX%, press net can you X.X%, very a release, to increased $XX.X As busy returned from we operations, cash shareholders. $XX.X income our summer. income consolidated see

sales. sales, comp our La-Z-Boy in delivered the same-store solid network in Retail positive a Galleries increase for and segment Company-owned addition, written consecutive its Furniture hosted sixth same-store turned In

acquisitions, team exciting quarter very two subsequent our We both am also of this of end. accomplished to announced I work closed proud quarter. the which all

operating Now me speak to each let segment.

segment first increase year, First, this our volume, mix, benefit quarter Operating the margin of of higher-priced increases. driven Upholstery; was from material and We price increased for a the the the year, round over due end to unit X.X% primarily second X.X%, benefit by prior down posted a round would quarter. second cost. of of by slightly increases of to last raw price full our see the expect the sales

potential. product re-imagined collection, Point duo retail the to hit extremely great has front, long-term the innovation to line believe the continues And Urban sell new beginning Market, is the April On and Attitudes Furniture High well we floors. at launched

particularly the consumers are backed to play new mind enabled talent year. Our innovation which which early spill product role be these attract facility Tennessee R&D do is has this in the to ensure of introductions an new Dayton, continues coming iClean accompanying a completed later will by that fabrics curated to additional matchable peace Company, excellent campus very with and that at This important our scheduled to us unexpected we mix which a it will give are warranty. building the for three-year indications well, keep regularly, To center future. our state-of-the-art engineering

X.X also of over La-Z-Boy million largest plant La-Z-Boy-branded are produce product. manufacturing XX% feet campus, the branded We upgrades our we making Dayton our the where at to square encompassing facility

increased for different hone staffing translated increased services with the marketing, network average orders improvement pricing to and in well custom The team bit increasing new total for product X.X%. our and as ticket. stores, written written Now network's in delivered changes in continues Digging X.X% Furniture Sales same-store respect same-store sixth and in X.X% from X.X%, our this moving to for quarter million including and the drove the year's to while doubled Retail strong X.X% mix, than quarter. last quarterly consecutive quarter. increase. stores, segment, data-driven Retail more Retail quarter, a full stores, design to to the on sales Galleries calendar on as existing $XXX more XX increased sales segment first operating merchandise conversion sales La-Z-Boy segment the our strategy analytics, margin models. in and The new turned during X.X% months, with relocated increased the operating a sales, to With

which While stronger we the weekend, preparing selling Labor already are certainly for Day with are season. seasonally we fall off results, kicks these pleased

her quantity independent La-Z-Boy Our with with stores. opportunity but the provides demonstrate room of services dealers are they full most average us to compelling custom quality our ticket. store increasing and along when will sell the pieces in-store, which new shop and to and continue stores the thereby design core preference the We consumer both continues groups, in the importantly to system to of improving selectively relocate others remodel in terms open locations, with the

new bringing count quarter opened, with XXX XXX to relocated, total network, and one them of our was store concept For the format. three store one first the the design in across was new were remodelled,

full will includes with the the stores the store the we And XX stores network. profitable and for remodels. earn profit. four growth $XX across and acquiring, the a XXX revenues nation. we our new certainly retail Arizona of stores. Arizona had growing For are highest for combined wholesale-retail and sales combined Galleries are acquisition network a are the immediately model La-Z-Boy Also planning further planned stores new three quarter, Furniture strengthen network where net second earnings. year, Furniture integrated nine activity Galleries In to be year Arizona vibrant the across Of are million. of in XXXX, five group The nine nine accretive is projects the market six the the population the volume with stores in one calendar will the our of highest we stores rates

the million stores approximately Company the are add $XX the volume, will we of already consolidated wholesale annually volume sales As basis. to a on recording

were first million, all to from new of the deliver versus continues sales quarter from Casegoods today's trading global Now across to prior group transitional collections fiscal regular let's many to a Amazon. of XX.X% a sales. cadence more is floor August efficient more a in-stock service our increased components XX.X% turn time Last the a year. of through support the outlined and companies Casegoods $XX.X in three-pronged to ship margin best-selling have service through the XX.X% relevant in and and products for year, operating last the with on in e-commerce Casegoods, quick Asia, XXXX aspects garner strategy. enabled including up drive for the business. the an consumer providing high With steady supply-chain place excellent factors position Company's pieces. to These customers and we of la-z-boy.com, they The and the increase online Wayfair, retailers company included selling space

The growing third and directly second is to segment to is selling brands support supply furniture of early-stage is invest leverage a which to e-commerce the to consumers strong furniture And our strength the chain focus and fastest in industry. other brands. models business the online, on the the with of companies

in $XX it Joybird early and in easily Joybird supply-chain initiatives. our annual speak arena product us by have Joybird, our of and we consumers million La-Z-Boy the costs. manufacturing capacity, by production just players four e-commerce e-commerce Gen businesses. companies lifestyle and styling is we been furniture e-commerce and upholstery Joybird customers, world-class constrained modern the online shop years. the few is the the and to acquisition be and additional truly Joybird including nationwide combination space accelerate potentially short synergistic at combine and to shopping look in reach retail a better provide we to expertise the will mid-century offers provide improving greater great our in let a production our the e-commerce headwind in will Melinda to duties been And will while and It in X me a as with pillar shortening believe Joybird a about has platform combined prefer with one significant and delivery continue all the segment, allow the effectively sales tariffs. are through have significant third year, its a serve who speed value will of to in the will for has have as online Founded current ability Further, we potential expansion excited shareholders. This allow ahead remainder With years the some both presence minutes. channel. and premier and millennial built solidified often expansion online provide capital XXXX, to and more us to limited that we retaliatory growing They times, delivery capabilities a the growth in the its individuals lowering long-term Joybird's finally, and of for of winner four a details leader financial an and operations.

see these watchful a will in association, not of on Alliance, Canada for American and eye effect good into with developments and have the consumer, are additional the that industry. Home we volume. The in our lobbying our into on our they that the keeping majority the product position is July retaliatory working duty ours for to went going watching team are association's the duties Canadian efforts. good on mirrors surtax industry in are Our impact is Furnishings our The nor

our not obviously to effect. the working should monitoring if the at we financial imported make call always to pricing it will also details the our fluid are meantime, fairly this from and go to duty latest round performance. latest further now a well-positioned team have of round we on we sourcing global time China. diversify our developments turn duties potential changes necessary, over on any and supply sourcing is supply-chain Unfortunately In are and proposed goods is do provide We believe situation. to into review I to the Melinda the of

Melinda D. Whittington

Thanks Kurt.

It to a of exciting be a a our at time of discussion beginning brand iconic I've world-renowned would Before first to I truly say the this as company chapter history. our an numbers, we great a part of months few with next had like write La-Z-Boy. is

financials. me turn to let the Now

$XX.X period. increased XXXX, increased quarter For from fiscal to increased million, $XXX.X operating sales to consolidated and million, last operating gain strong EPS quarter income to $X.XX results XXXX XX% first year, per to as consolidated year's tax investment the margin X.X% X% first in in reflects of rate other first from reported fiscal the X.X% EPS million Incorporated $X.XX tax diluted income quarter a $X.XX or $XX.X from income. Company benefit The gains from share a prior other share attributable the in share share as $X.XX for year diluted operating or due benefit currency Compared a $X.XX lower million Comparatively, quarter last per XXXX and of per La-Z-Boy first included to per net of versus an per year. income. share benefit to well reform of $XX.X last

Our increases raw material Upholstery product versus to consolidated first mix. segment, first XX the quarter freight our changes gross decreased points basis in the for quarter, last Casegoods, of year's costs in fiscal due XXXX primarily higher margin cost in Upholstery and

in noted, realized of increases of cost Upholstery second not we price As increases. fully have raw the have yet material offset intended but round of products increases, to taken rounds we two benefit the our

basis three the for XXXX point first sales basis by improvement the quarter flow of costs the margin declines percent period. XX XXX offsetting a XX for assuming gross same fiscal Higher level. SG&A We stay Upholstery compared segment. and points. benefit volume quarter, allowed to a Retail declined improved their these raw see in the Partially full for margin at across leverage SG&A segment, the basis through all By was costs with quarter second basis XXX of the margin us prior-year the Casegoods gross points gross fixed declined expect of end points material in as sales businesses. to

expense to within schedules lower to basis due recognized only Additionally, of compensation in fully certain fiscal awards. the a quarter equity in in all over incentive primarily timing the costs compensation the quarter. incentive result costs of decrease points change first fiscal vesting the were in XX The the change expense XXXX. XXXX sales percent first of than will in recognizing of as the instead a year a being This of relates

last performance an SG&A of the drive to SG&A, change year full combination remainder expected As approximate we basis the in the stronger timing fiscal the year targets with this XXX look this expense of year in compared our year. for for XXXX point plus against when increase will

our fiscal less in XXXX had will we achieved performance our performance expense You in the than were if that targets. delivered strong ourselves, meet year. will level and significantly results XXXX a be targets would proportionately we in our the we expectations, they over quarters our have we and than as recognized incentive a compensation three XXXX, while we stretched the Presuming XXXX result next additional at did recognize the results recall had expense fiscal not current in higher award we meet achievements we of for will

the Our effective tax XXXX with fiscal was compared first rate XX.X% of for XXXX. for quarter first quarter XX.X% the fiscal of

XX% XX% of XX.X%, Our state new as implementation of rate primarily taxes. adjustments, slightly rate, statutory for effective have than to previously the XXXX we tax Absent first the laws. quarter lower our the effective to our tax fine-tuned due rate varies the projected from would been have fiscal XX% discrete tax

during quarter $XXX.X $XX.X equivalent, the of fiscal to sheet, we generated in $XX.X quarter of operating and balance $X.X in our million activities. cash the in cash returns million ended million restricted XXXX with on to cash, the cash. We investments from first Turning and cash million enhance

During shares stock purchase XXX,XXX market of authorization. million approximately spent program, which $X.X leaves authorized under share million repurchase X.X open existing purchasing the of that our the quarter, shares under availability we in

paid primarily innovation expenditures $XX.X related were Capital also for Dayton, quarter dividends. in We the to million, new Tennessee. center our million in $X.X

of also $XX Tennessee the than our regional new capital of the be facility, due distribution corporate upholstery construction XXXX expansion for range upgrades higher expect subsidiary, and to million $XX of in office centers. relocation Dayton, plant year full the a building We and to year, the to our England expenditures fiscal our for last to million, of one manufacturing

and priorities Our cash and shareholders growth the funded with returns the allocation fund dividends in buyback. We provide Arizona the discretionary credit acquisition. acquisition with and remain on our then share capital to to to business used invest our Joybird to facility hand drive

to expect borrowings. We facility to cash credit use flow off the pay operating

fiscal on two the While be of it initial for first on spread million annually a includes Joybird future amortized of acquisition the in over million years, co-founders any XXXX. is and XX, Joybird which compensation over $XX $X.X in upfront $XX will the payment, expense of because cash, closed five payment, Of years, XXXX and based period of earnout forfeitable topic performance guaranteed proportionately million upon we acquisitions, and July on million in SG&A four fiscal the $XX XXXX the two million total $XX be therefore the expense resignation considered on the basis. will within two-year a straight-line opportunities

will two will of we estimated the date of Joybird well over as of which opportunities liability for the tradename fair its expense the acquired consideration contingent to record as the fair the acquisition as a earnout be SG&A life. value amortized useful Additionally, value of

Other the our Joybird's acquisition financial results included entries accounting of part will the acquisition goodwill mid-August, for record quarter. the as plus in inventory stores we results included stores results. these segment. the when second the be of purchase In $XX in nine measurements La-Z-Boy in for will million value and We Retail and for independent acquired acquired from Galleries our our fair will report our Furniture These closed approximately cash. we dealer the be Arizona-based Corporate

nine acquired to for of the reacquired part inventory, accounting Company report as roughly expect we $XX asset, We acquisition, With incremental of approximately acquisitions value the entries, to the quarter. right we year. add goodwill and acquired for fair both the the purchase fiscal the will months, the measurement million second ownership initial record when including our sales indefinite-lived for of

combined the of the to begin by purchase accounting subject first adjustments, are reduce estimate to end period. but accretive of year. and for to two $X.X to entities these slightly our amortization after begin the per approximately million profit be and $X.XX to that we share XXXX of and purchase expense be expect compensation to accounting to process charges diluted have $X.XX so the we in completed then this Separately, once change, these years Excluding for is estimates we the the over XXXX transactions

you quarter, quarter included a per in we a $X.XX would share to discrete remind for recorded look per year's of SG&A tax item. benefit the and share last $X.XX that As second I benefit an insurance second a of for gain

offset For all lower for over somewhat compensation for compared incentive the his year's year's the last this second back I $X.XX we discussed turn remarks. to to a quarter, I'll when a incur second $X.XX benefit share from per that adjustment cost expect the $X.XX earlier, tax per by per call charge concluding to share to for $X.XX And share of approximately quarter. rate Kurt accounting now, plus higher the purchase

Kurt L. Darrow

exciting sheet with for we execution that poised strong long-term will Incorporated and Thank acquisition look a the the believe adjustments demonstrated for the supply queue into of Melinda our strong quarter provide for I'm which We received you and returns these our we'll instructions vast to drive With the remainder are solid strengths you, on strategic base I growth. a call Melinda. strategy we your accounting Kathy out brand, pleased duo and such absent in track for of shareholders. Kathy? deliver the the We our to possible tariffs, the great getting strength coupled first business, thank deliver performance. for of year, turn were network, the are the interest we as issues to two growth questions. relating just chain, and and world-class La-Z-Boy a balance our to to over ongoing confident to acquisition, distribution

Kathy Liebmann

review for the questions. begin queue Rob, ask question-and-answer We'll instructions period getting the please into and the Kurt. you, Thank now.

Operator

with Our Budd Please from James. questions. proceed question is line with the Bugatch Instructions] coming your first of Raymond [Operator

Budd Bugatch

good a quarter. on Congratulations first

for is to so quarter always nice First see a that. challenge it's La-Z-Boy,

Let's Whether if the this revenues impacted could effect number quarter's have address increases. getting quantify I've questions the increases on regarding of some normally? you that been pull have of there than any might clients revenue a forward issues. more price the from price been

Kurt L. Darrow

last that question between. to is, with there gap taken back any on to answer We've price a not X. was The increases pull-forward. back, The probably in six-month is two July had one

into year that. end see fact did at the we we little We we So, when any went that would of of backlog refer have a didn't stronger to the April.

up As we and just different call confident don't we together our straight-line, came business based flows was go best we they But was have that sales our holidays, no, based and ebbs said our of based promotions, were it pricing, this nothing last about tell. the in to on there fundamentally on in on nothing quarter, but quarterly economy, pace can – business. with everything do and as retail our

Budd Bugatch

gain where of Okay. And Retail in kind calculated was Where consolidating right, number these business? think I in did you tell if strength embedded looked did see You've Arizona from MD&A strength can significant properly, lie? Upholstery, I you segment stores. that there very come the us the had unit written were other, if now I the the X.X% that the mix, in terms and I in Retail at started of in

Kurt L. Darrow

throughout quarter. would business our think comment I the So, there, be, the pretty was Budd, consistent

we teams to and et an being find a the don't, they pull continued in try regard. things, very that have great emphasis in do work, I sometimes cetera, are levers sometimes we pricing, balance and ex-retailer that to that doing the would no there the with and for magical many options marketing, being all try to pivot custom us, a number satisfy say their staffing, on and giving some different merchandising, that, You right of in and thing. know we they are and you in-home our marketplace one customer her job trying with Retail so

have in So, a of time two are higher that this of that where one result. of no we've those of to It's kind the is higher a been thing but doing margins our higher because combination categories, changes and tickets a percentage over from lot out. stands business the of coming

Budd Bugatch

getting of operations? And you've coming talked those home. percentage What from sales of now right about in historically the the efficacy are design

Kurt L. Darrow

about our good a in I rate can't Budd, Retail get about but give number business, XX%. great the the you is real I think a the on entire part other close high it is, And it's home XXs. own once into the with system, you

back that to we things home appointments, good wants a the So, process when in-home much buy satisfied to she service, established the She that, And often design the it's we and that make customer. her relationship, the do about the doesn't that of more with have a us builds room, beautifully in-home furniture, just our more an all customer you a thing of coming design odds once important decorated make a increases her want most really but shopping in job. wants happen. do sure item trust, exponentially and professional is, are and

Budd Bugatch

but corporate Okay. that we in out to A, B, get things a for has is I Couple a new the if trickier you the could, that, I that to accounting that is came that financials. on including having be incentive factored these had that quarters? be is into lot the three of of that that that One had disclosure in if my share, million be side improvement other amortized additional over the the math where getting benefit. about quarter appreciate $X.X Company's for Melinda, the understand of quite I a the by I number as additional was from don't That way questions is are pronouncements you and more sales expense question correct, thank notable, worked to $X.XX a was Q, in the compensation. correct,

Melinda D. Whittington

as the of look little of a that two you'll how rest as much comp high the on as at year. is get but the piece, is going we estimate far Your there things

changes timing awards is in one first the the how accounting changes timing in the The and vest equity for – vest. simply how equity awards

see that will net year. play be so the load will saw impact, and the quarter balance So that the year in to course of back, the first through but that you you'll no and there piece, benefit

XXX and see relative The points there compensation and the that year we then the to called is our activity. SG&A our fiscal out second is, we've driver primarily where last bonus compared basis biggest uptick piece that's total to expect for to expense year, type

the and year, about that to. Kurt though for we the didn't had had the our fact we anticipated we competition, year that ourselves. last for Mike in delivered remember didn't had and the talked targets relative results really bonus we that certainly hit Even levels to you'll So, strong we hit the stretching set

compensation line up And a we've back realizing more half so in and to up a bonus year. would ended the bonus with delivering fairly last of therefore significant our increase We so, going that this anticipate expect see to plan, in our compensation more reduction this results we level through back year. year

that's expense called in XXX fiscal. basis expect we aggregate why So we've for out, entire the up to points see SG&A about

Budd Bugatch

or numbers an look number, how that's that SG&A? reported we do at the And adjusted versus Okay.

Melinda D. Whittington

Versus reported.

Budd Bugatch

those the and also, can accounting to like positive call results including accounting of instead those you Versus the And slightly right, think the periods purchase reported, had those it, least on we fact looks you in future that at accounting early-tell I the if probably accounting as we accretive purchase referred out called the adjustments the did assume it's non-GAAP I the from – least to. acquisition me, adjustments. planning are okay. you we adjustments? acquisitions are ones excluding at math purchase are EBIT Do finally new out Joybird not adjustments

Melinda D. Whittington

Certainly.

forward. Given impacts. understand accounting but the the we do as Whether we'll non-GAAP still on be going intend sure magnitude TBD, purchase those we'll clear adjustments, go or make of those to you as not impacts far

excluding adjustments, and into we've our company. accounting As clear is directly. but established operations actually a Company is still far is Joybird that been early-stage profitability we far business well as as an as path Arizona really doing to it on bring the even as being very purchase underlying profitable,

costs those of that looking when and of occur aggregate the some advantage about turning including the will this don't to on to so, at businesses, the these that an across needle adjustments, profitability. accounting synergies in purchase all accounting deliver the we're see taking excluding And purchase able fiscal implementation we'll aggregate everything But think be the those overall excluding moving adjustments to year. I profitability by level we of for pieces, end really in

Budd Bugatch

Okay. very Thank you much.

Operator

Brad line comes Thomas KeyBanc with your question next Markets. with proceed questions. The Please Capital from of the

Bradley B. Thomas

I you a me the in guess add basis, year about year-over-year my you to start savings of comp, you and math the feels a partner comp on dynamics on it to just on from so owning Joybird a Let XXX question for I I on disclosed guess the think if points incentive like right, margins, I nice to behind some zoom tax-effected incentive acquisition had the Q, the looks doing $X.XX follow-up comp. incentive Budd's strategic to a strong like in of and about congratulations year-over-year and I'm here the here. year of a as just want like that looks about basis the be $X.XX the headwind first earnings for to on

that set of up ahead three that doing the the have something in $X.XX we a year-over-year, So, the right? range math I'm quarters if does next headwind

Melinda D. Whittington

$X.XX get for is the your entire right. to fiscal about think $X.XX we fiscal, for so and XXX% entire I the

Bradley B. Thomas

in how margin look us help products just can margins the the to very what on considering XQ encouraged XX going great. think on think the Okay, were underlying benefited input the about you maybe and I prices. what's much from in margin quarter? And how gross points quarter, first guess all in like gross we front, basis the are strong sales with margin see the I down then

Kurt L. Darrow

combination. a there's I think

give with expectations mean delivered Let last in me year. year than but go first back that beginning some even other of performance the higher to, Brad, results and our believe quartile I to you context, we just we were the our

we in repeat a our management, to that. try year So that intention to XX% disclosed XX-K we our to year and in is last not last paid out bonus

continue we on do XXX% do just where you to the that's when math delta. so, you bonus, accruing the get if at better And or that,

So, I with – about bunch our compensation a and reward performance, don't the different. that things our you and got of all aligning anybody big kind systems that we of delta. that to It's all raises think want that's where get are

we back There's going percentage which that. we price, and a a obviously higher we margins sales selling furniture – our mix, your had to that that the don't all lines we gross growth motion did movement much. quarter, than had in in price. did sell on units, not we as change and on product this Now had more recliners, carries of a But lot question

out. I by don't category launched of line would duo think styles sales would more give that more any there's isn't clarity or stand is margin product higher last as our but percentage any that we on there by really you becoming a April, that Obviously of anything product anything category. So, two

Bradley B. Thomas

should move going so to of it prices, think we're raw should the where I past and Got guess things is, increases and the the guess okay. here? mitigate rate worst you, we headwinds to as this with relates material material just we you as into continue offsetting you're do increases the seeing, be as XQ the of talked price I I'm about raw that

Kurt L. Darrow

coming so see that's we we by intention country end would transportation increases get challenges what our That's every we is the own would past the over get of there's the from freight market on but material planned second and with experienced pass-through was quarter even is, but to the a back month fluctuation, had us our there our for, container to that increases raw and our within or that year. plan pricing that point we China,

Bradley B. Thomas

you of products? help color you much And things, the give side the just components like that put tariff into on can to they are Chinese little of us okay. bit you, more subject on tariffs. a how Got Look your the

Kurt L. Darrow

XX% to I up XX% would from the is All finished with goods actuators. X start, tariff The July round on focused carry next U.S. that is primarily effect Canada Brad, the on Canada across from went board. going the retaliatory tariff. the into a

different. be end on is, the pretty can products industry into not and but challenge on leathers month. in both and manufacture goes perplexed coming power and much it comes how on in there on bought it's no it's most tariff countries much this fair and the big there's it's at furniture comes fabrics is very industry anything from China, of that from depending trade one and to there it's another in leather, the from, So anything really and of supply on we the has a X, Phase finished you country goods. that buy business that is whether that is and The fabrics, what China, where or can understand offset in And supply the going do on, of this minimal is effect

So, are the not two first insurmountable.

the the to challenged. furniture price going across of one is third The have board be

through. goes know So, if effect into percentage going go as to of lobbying be, don't a all everything top effect, the our all know of is don't volume exactly going to the is if it's tariff the in what testimony and tier industry but the

unknown or So, we'll of would big plans do point. just that, have one this the eye, our a what tariff have at the on but we based third we is wouldn't watchful

Bradley B. Thomas

cost if quarter that it's worst-case goods of a help to XX% on exposed at in can it, reasonable be I all a a your tariff importing, And these sold be portion of a could you're Kurt, guesstimate? scenario? of products what mean, frame up would you

Kurt L. Darrow

of be leathers. all Brad, all it's mostly because it, the fabrics would all the and It

our supply So, don't you just do supply the yes, but but buy that but is would that I mind I And wouldn't from every the majority tell we our telling China, competition. we to comes affect number, not that industry's want single and product of have there.

Bradley B. Thomas

way, not subject to it of you're all components that's at of tariff? the sold goods just be would purchasing It coming it's another there? the cost over Maybe from

Kurt L. Darrow

No, or but if China. you – and finished it import you be goods, things on casegoods from some do so other could if

immediately on come from debate. because most don't but you different things sourcing the the by of maybe Fortunately early Vietnam, our you And a time I do rush yes. got and probably moved, tariff will settle lot casegoods they that know of would

unknown control of and position. of so out And be just want it's in kind that's to we an that our don't

Bradley B. Thomas

about more operation Joybird Maybe with how La-Z-Boy guess see I the squeeze you think I maybe standpoint, on one integrate you. in Joybird Joybird. us La-Z-Boy just from two appreciate or could in or thinking help products? that. the on of you integrating the you all might I just are an floors you some can versa about some core products you might store business? the of vice think with Do businesses? How Got two

Kurt L. Darrow

their are side. different One They the Brad. There's is supply to trying in integration country paths, chain Tijuana. from service the facility two on

to manufacturing nationwide the of going that imagine them, to benefit do different and can of able the assist our than brick-and-mortar will that a cost benefit be and not there not to on is and of for the a line is a percentage younger immediate bet front should. help excessive lot this When it is our and in we're product in, with in we that strategic a business for that. by also them some cost channel them the product is it's our all some new strong as customer is we make you their there to start that. to La-Z-Boy material think that we with freight of and a delivery and for a retailer, us, side, plants customer, But delivery that have RDCs in doing theirs well here of our be isn't customer with is, So,

the every the path limited knows, business stores founded to year when happen throttle with them capabilities. no of from is We gentlemen very La-Z-Boy see will What now, immediately. to doubled in very can doing what a lot who have run company, things, years this these our start do. want but and that see wide rate few and limited want capital to what we on or that their put that production open, four plans other is we before So we Web-site a Joybird's of put chairs

to idea run folks an appreciates of Joybird being, that just have way So time that. unless the pathway a that room think styling to on different we different their to but in of be lot a there's idea we're a core for beneficial, yet this providing probably any with not customer interfere going that they would think

Bradley B. Thomas

Thanks at year. momentum the the all questions and strong Very the answering congrats on for of helpful. the again start

Operator

question next Stifel. Watt Please your comes Dillard questions. line with from Our of proceed the with

Dillard Watt

my basis Obviously of congratulations couple about as you a out you morning points margins Upholstery little the headwind asked, segment. Good here. so talked little have, I from the being with a think in well. Kurt, or just ones across quick you help and know lot has similar products, of mix bit more bit? did a called but you less out a XX I already me been Can that

Kurt L. Darrow

more not slight us business, upholstery But and her. that's percentage customer that direction adds to our so the as change in a our sword more but motion recliners. more to as and enough margin a the out is quite between called margins make clarity. give probably that But stationary major for, we our motion have to dual-edged a asking differential as selling There's of recliner and for sales take refers the rest what some to it what as here. volume, looking is aggregate So, the it's we the major the and aren't on than in business we is recliners. what she Selling category but our there we a major good

Dillard Watt

make but about that's just thought And what wanted sure. great. Okay, I to

thought guys ask that, of ability anyway, full too hands the your question. On hasn't I'd change bigger with a to I acquisitions on in or your in and of some there and Retail assume now the loosening find any been a I there you markets? all leases you going side, just have ton really movement and much mean the have but just

Kurt L. Darrow

people's the and available real unfortunately it. some all question, stores closing is estate and of It's with a we're opportunity Dillard, for seeing and some good an challenges us, obviously

One just it are and that we of feet work big that great Toys XX,XXX around to lot of that too available locations country have us. are for to XX,XXX are XX,XXX the way have the problems, coming the and some are Us boxes but is limitations "R" our they stores feet, for a

that we've next the that. coming number the that have years thing is So of leases And other got, are over got we for we're for reconsideration. we've working three that up a

cheaper market. be it So, given out improve the better the translate making may rents years in estate us a of moves three probably situation we at the put stores, portfolio. next It a to will ton to new there but not our real lot will in of in locations

remarks, and to balance so two to have quarter. continue to look run a and together we approach great both quantity we But balanced trying in the network on opportunity experience we're opportunistic, prepared and the an shop the maybe that, of things not said are have deliver forward that's the only want this to we ourselves the some our to dealers quality and We of have stores. every to So, and of customer the we're stores aged an environment, improve our the and that a don't being of inspiring the as but trying the to. stores tight-rope always point

Dillard Watt

then said had both the saying outperform it on not a but you I on. on of backlog an had lastly, the question we and issue, up guess by a are sales, All the did that's you good you And pull-forward right, written know I back really orders thanks. catching much Upholstery some that business still margin. Retail you and

the So, outperform or networks maybe the other any independent retailers did on independent delta reasons there? or

Kurt L. Darrow

it of just of all, make and – Company, companies of not we the network when business and the its all overall our about as everybody just that, categories you proud talk with represents business, but are our to brand, look the in La-Z-Boy percentage lot low as and the a our much very, store talk business. on and impact our a store retail, all our like we think understands, everything I sure we own as at our of we about XXs very La-Z-Boy

of business great we major do our Comfort retailers a with a have or of North throughout with Studios position. So number America us XX% who

other trying our positions those with and sometimes position. do we great bigger and customers earn sometimes have And Furniture so, we we partners, our Galleries a work to with partners as with as hard we're

not that either with can only these vast or and So I other of philosophy that's grow store solid our network, we have beauties all based do combine. think distribution of we shrink customers we one have we the this how that on is

our a number a there delivered written the and other of correlation business factors. so, for sense the between is network exactly stores our what overall Upholstery be not a because to for one-to-one same And there going is is business

the Galleries obviously So, just almost the during X% with Furniture growth the quarter. we do didn't

So, our other customers that helped achieve goal us equally.

Dillard Watt

Understood.

there? occurred a Just any XX% that is two or way, here one that items different there maybe remaining or little a and just bit that trying to was in discrete ask

Kurt L. Darrow

discrete I that if would call think, item or it two one made there was we Dillard, out. the difference,

You'd have difference on to a us to do million in make with lot business Upholstery. a $XXX quarter a of

$XX have he the of Some tide grow person whole that exist didn't find I'd was million. to but It to you'd last like lifting. quarter.

Dillard Watt

today. Thank for the Understood. detail you all

Operator

Company. & questions. from Please of with line the Anthony with is question next Our your Lebiedzinski proceed Sidoti

Anthony C. Lebiedzinski

throughout did the So, know, goes the mentioned it the course that you July I year very ebbs the in Kurt, that. well quarter. obviously in flows. congrats of But smallest you seasonally so is your and quarter, on business

also that doing tactics in job of in and processes you mentioned better honing segment. Retail a the are You

sales to So, growth fiscal help can we of the XXXX? you for us the organic about how think understand as rest should

Kurt L. Darrow

than buying any wrong. for some you, have target, thing and out be do. we but we insight so Anthony, whatever would any that in and year really think with habits And there we we're guidance, potential you tariff would of our business will help don't our grow give I balance this that have found know you targets consumers ball, many and parts, striving better everything, give a above to to I I I last give moving the but you the give year, crystal with things we've own don't

you question. that with So, going help to I'm not

Anthony C. Lebiedzinski

I out, figured I Okay, anyway. ask would

Kurt L. Darrow

Nice try.

Anthony C. Lebiedzinski

the segment, and July as examples us can But giving segment? the maybe what as previously for in as tactics you give some you to [indiscernible], without much the differently did processes about the quarter Retail you've talked versus Retail that I guess far for so too

Kurt L. Darrow

run, our that more have, to every offerings team future. is holding making combination for hard some You things, promotions predictive seven bullets. very or and the know little not adjustments the necessarily a about changed I listening some we that that work things team of aren't staffs, there's we tried to a our of all to happened to our they've more Do every Again, make the works the address level index product day say to quality not that this we earlier, there's be or is silver there like that found percentage that the this the go customer, it all sales the our things one No, in-home improvement quarter? and of to the It's do, into at mix I eight bit that we're all things found we magic of a it's the on business. accountable, we quarter. two kinds to this with and declare the going needle that. but But and pleased that, Anthony,

Anthony C. Lebiedzinski

obviously sense us then, your exposure sales a about give it's now your the year so is as Wayfair, very three-pronged strategy. you Joybird? that's overall, through to exposure, announced And meaning now e-commerce it, online where excluding Got business to since been Can online, that you helpful. la-z-boy.com, a Amazon,

Kurt L. Darrow

more need and of what right thoughts effective, of on to we in selling with the our already with can initial ago couple that to think now them, maturing obviously number but and it's understand start-ups, than kind a in contribution has to think maybe do, six ago, do, we've got moves and see the or I ours we businesses, online all but we now is, players in business happy of of and completion we and that our thoughts future. things first you growing have that lot fulfilled of a with where selling that of we said the we would and we forward most we and now in making our a a the we needle to to going looking were year year give that. the of those right about on we're our are we are matter said so where and now Amazon and who we a the I not these of Wayfair not acquisition will beginning, little all would how now Joybird now it think segment a getting upside, probably delivered all did what all places to of of wanted which of to but part ago, said what we Joybird, more, all the winners, be done invested comment more we've started be a there, We we that's floor and the solid have got a potential, lot we months year invest was we Anthony, ground some on a would that – these be strategy

Anthony C. Lebiedzinski

do lastly, the a integration to Joybird? process as you of with you have complete expect share And when okay. us to can it, Got timeframe you

Kurt L. Darrow

faster done, to than used to or of so, I doing. not it, think that the get but things, say there's I launched, depends would a I the like that, something but it of maybe lot system six La-Z-Boy integration next you have assure lot months things. getting on new move as we we through can wants will is There's all product of a Joybird

we the So, customer that disappoint do customer, same Joybird with not their to got what don't built the base. pressure. But want we've something that deliver experience rush has extra and is

Joybird high going in the a we be a it the of little because believe we're highest next business growth priority here years. is cautious should to So but have be percentage-wise we couple

Anthony C. Lebiedzinski

best luck. of very thank Okay, much you and

Operator

is next questions. [indiscernible]. from Please question your Our line of proceed the with

Unidentified Analyst

to just go question. back to Budd's want I

on and was think answer, you at I So, he expense details looking corporate wanted I clarification so just that the segment down was the guys [indiscernible] million. provided was he a mentioning, the $X.X

change the said accrual? just that in that's I incentive that how all you the compensation was the from a bit So, think high. timing of guys And

more little a want just I detail. So,

incentive I'm the to trying was. just of get implying comp incentive it's comp million specific to change? a is So, of million change sense $X $X.X how like that

Melinda D. Whittington

the most is driver. it Yes, significant

So, it's driver. $X not the full but most million, the significant

Unidentified Analyst

Okay. all away your look the Kong how to take [indiscernible] Can you is Hong anything details, when much year-over-year? I improved pretty I that the from a give think want Hong your number big your any there commission don't said more I at [indiscernible]. but it's improvement operating income because Kong hard – your work and And Q

the was those were two it right? basically only items, So,

Melinda D. Whittington

a the those sheer think are sales the level And that corporate quarters overall, we only Exactly, SG&A though, the basis as key improvement points see see to percent entire items would on and and bring through to sales. And due importantly we do see growth performance, as continued you a year. being, expect item, think side of you'll to the deliver as we assuming XXX in the about bonuses, so of SG&A if to earn on but timing bonuses to the leverage gives fiscal the of this things. compensation up you we higher that obviously, I SG&A the also – then point you bring back from be expect effect then able

Kurt L. Darrow

there timing and So year. recognize lot earns performance we there's this last more expense a year different how an on a out a in of than change is that level this expectation

Unidentified Analyst

of think lot I bonus. they XXX% softer have a nearly out Yes. should year A of had, may companies still way, target that's they pay appreciate. maybe And other Kurt, by than the they have

that to you So yourselves I doing high not appreciate guys and standards. keeping

let on [and different run] I'll America being congrats So, [ph]. than most corporate of you

Kurt L. Darrow

transparent. very We're

Operator

of The question next with the Webster questions. with your Capital. is proceed Kincade Solas from line Please

Kincade Webster

the sort particular in quick of delivered that about to I trend a past anything had have comps guess did In the outpaced quarter? just I contribute comps. two written one. of sort this years, reversing

Kurt L. Darrow

order remember you So, four it backlog, have can it. six before be time weeks there's always furniture, from you and with to us to the receive you a the

in to week. today, of can tomorrow, in we So, get it it's stock get one you want products go although not do have get it like you lot a you

The time and of the is So, always that's factor always the holidays backlog are. factor. lag seasonality the the when the and

there a is correlation. one-to-one So, never

would period a time, you quarter a get be closer can year, over a lot the at delivered, Now to that longer be fluctuation. of written mirror there if quarter will the it look there would but

Kincade Webster

looking the period seemed just delivered, were over, one-time pretty bit pretty the there it I nothing guess for was like this that to written extended past things outside time contributed more reversing little where just to over outpacing I kind get it of of timing two of the specific mean guess I materially quarter? any and years a a that so was

Kurt L. Darrow

written country sales not for are momentum in own. we was the we provide business for think we we dealers. the the then this that And is pace store segment, that And up can before the written into XXX-plus the our same-store clarification during that our delivered all throughout sales that of sales same-store number hands actually times. gathered quarter just XXX quarter entire stores because provide the as We independent the always indicator best The network place we the the on. the for went tracking Company-owned we but of again we And written delivered our started numerous what purposes, same-store quarter. repeat said we'll the out

behind we're them them. quarters we one, some ahead quarters, like are Some and this of

based various future times confused written can insight may XX we people days the as changes on have things it at happen that and on may as but trying the we country. hold various this, the business. much give with around performances what I'm based on to afraid we're past So, them

Kincade Webster

put one into thank the are for or do segment follow-up helpful, base get I acquisition, And those guess Company-owned Retail the kept just guess straight you. Arizona comp outside? the for That's they I

Kurt L. Darrow

question on comp? The was their

Kincade Webster

much into they store for do Or put QX? pretty straight your comparable base get

Kurt L. Darrow

before until No, won't same-store else. be and number, for in Even our for the have in treat they own a though of year have history the anybody Until purchased sales months we anniversary the XX wasn't us like we date we would them history. balance we of their them. they we something year for from the

Kincade Webster

Thank I you. great. That's Okay, all had.

Operator

this Thank will you. today's and gentlemen, Ladies conference. conclude

lines your you thank We time. participation. You your this for at may disconnect

La-Z-Boy (LZB) 22 Aug 182019 Q1 Earnings call transcript