LZB - Earnings call transcript Q1 2022

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Operator

Good day ladies and gentlemen and welcome to your La-Z-Boy fiscal 2022 first quarter conference call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation.

If you should require assistance throughout the conference, please press star, zero to reach a live Operator. At this time, it is my pleasure to turn the floor over to your host, Kathy Liebman, Investor Relations. Ma’am, the floor is yours.

Kathy Liebman

good and Taran you morning everyone. Thank for first quarter you joining us XXXX fiscal our discuss results. to Thank With us this Chief morning are Melinda Whittington, and Lucian, Executive La-Z-Boy’s Bob CFO. Officer, President and will financials midway and call, close Melinda through. segment will the and open Bob and performance speak the to open call the then questions. We’ll to week them available of available this Slides year, for beginning view you and will for the link, webcast a and presentation our accompany replay call one be will which one this telephone may through will afternoon. be

Before I’d that we forward-looking to some performance like statements La-Z-Boy’s include and about the call begin presentation, remind other matters. made you in statements future today’s

available non-GAAP call under future and to detailed earnings on I’ll of of at conference those Events differ reconciliations end Investor With we most the deck. Melinda? the other also that includes it our La-Z-Boy’s risk encourage significant XX-K. these on statements actual our in certain page key as information our factors We SEC the review release tab of Also, and materially. now Whittington, Chief which is are as annual Relations turn President an website, are our our our be included results Although to Form you described appendix report The factors the could results to our risk well filings. that, believe affect in as over reasonable, call slide could measures News and Melinda Executive Officer.

Melinda Whittington

rate the a by successes some Across delivered following our in high enterprise, levels. ’XX same market, quarters. July the we maintenance reported all-time all as ever Kathy, Demand XX history, weeks selling businesses also furniture Thank our fiscal marked due expected of XX running production the Yesterday store only and million, than morning Furniture quarter multiple even results, close last quarter grown the La-Z-Boy most increased versus rate backlog weeks more and for versus compound quarter $XXX one-week Written and you period, XX% increased quarter making of our XX% versus shutdown record sales well modern across strength in of in sales two La-Z-Boy at with and growth writing remained quarter a growth challenges. two we XX% over XX% afternoon last high and good have in everyone. the record a as last on in XX% compounded to since annual the last in strong the annual across company-owned at its first we quarter Galleries growing products. remains annual year has business years. rate store year annual the prior of sales at pre-pandemic, Joybird for years. XX% first prior compounded of continued the continued the year’s journey, and for same Written retail the demand at a two years segment La-Z-Boy than across branded demonstrating network our of more growth growth

the recently challenges a dividend business. build are and to the more business. Also branded are service in the process $XX La-Z-Boy share strong and expanded our front, On continued to same shareholders we’ve deliver wholesale increasing return quarter, demand we capability across value we the the during our to count of repurchase experiencing repurchases, to continued we of time, our manufacturing sell furniture continued with increase to better and million payment At and in authorization.

more is versus currently inefficiencies about workers have level at as retain pre-pandemic. continue capacity upholstery additional we We and the work to plant open and train, one-third to hire, what

margin rates expected, during have at freight speed increase year through in compression short unprecedented backlog. fiscal order wholesale to Also on which to invest the as term the to primarily and continuing risen our material due remainder to raw and work higher experienced this an are flexible costs, period. over We capacity of business significant we extended

As take sales. work the the on way we’ve until four with those price pandemic made first of our the months delivered in increases to our for has wait branded since business, decision extending price recognition talked La-Z-Boy action to rounds the backlog to through began. we times they not resulted previously, With seven that of increases up delayed they

levels decisions Looking highest quarter in price our pandemic. unprecedented to backlog. we to post future, emerge expected the made time since pandemic history, a and period surcharge recent July ensure prices at also this took took the on but take to through the also we this are remain us stronger Recognizing strategic fifth increase during in several we commodity began that our

unparalleled partners we now cumulative are add all where pandemic. the up to price share surcharges material nature our teens costs, and Given price impact demand. we are of October, during increases our the Since versus increase to asking pre last rising first high financial the in a period business record experiencing

Second stream our supply is on to for practical delivered. and manufactured disruptions of component future side, furniture the parts key ensure team and inventory has increased significantly minimize procurement a steady

reach broad our identity brand At centennial launched fragmented to we the industry, for through comfort our we including and time, same a insights, younger high Joybird. presence. for growing experiences, leverage on for components as motion. innovation, an product continue consumers, to anniversary specifically key and strong consumers, include expand in strengthen expand an had business a to messaging. profitability Century, strategy long will and focus attributes our of we being we enjoys these fully La-Z-Boy consumer La-Z-Boy in unparalleled consumer Third, growth towards Project path leader can will our new level, to grow range XXXX. strong term brands, share quality the iconic and In We and while a market our a our At believe omnichannel and invest extremely

by time, prefer At a now and have in enhance Joybird’s and increase with that and areas. model we’ll brick consumers easily traffic strong awareness omnichannel ecommerce mortar to and investment footprint small experience wherever high we’ll shop, urban stores same profitable we Joybird, ensure brick expand offering we opening profitable mortar a state-of-the-art to footprint direct-to-consumer accelerate a We additional and will to consumer offer sustainably the they growth. reach

Our including first to the three and in have Angeles in Brooklyn, exciting Chicago planned success, stores in Washington great for is DC stores, there Los open and fall. with additional met potential one

enhance from As accelerate efficiently growth the that acquisitions potential support La-Z-Boy and of Incorporated enable capabilities the expertise time we’ll our leverage for and and portfolio supply initiatives tack-on chain of the Project the to the enterprise over story. final corporate balance pillar Century, our can benefit these

our With century sales over margins in industry averages growth initiatives while XXXX. time place, these in industry-leading we we complete delivering as envision first outpacing

turn over let Bob the to review me the Now to quarter. results for call the Bob?

Bob Lucian

everyone. you and morning Thank Melinda, good

We a present presentation trends non-GAAP As results business. a of basis. believe on both reflects our GAAP better underlying operating and we a reminder, non-GAAP and performance the

’XX when fiscal raw rate quarter. I growth for higher income XX%. a sales will fiscal first comments first delivered pricing was grew segment, sales purchase compared quarter period. otherwise. quarter of and and significant fiscal pricing in XX% are specifically EPS the COVID-XX. $XXX from Consolidated year’s current for actions quarter the for a in non-GAAP ’XX which first a prior wholesale gross $X.XX quarter now at Compared quarter term operating portion press escalating wholesale outpaced will million product results Compared was capacity On realization ’XX remains My plants $X.XX non-GAAP here diluted strong in X.X%, a the shutdown segment charges previously Consolidated reflecting first Sequentially continued with closed operating our we $X.XX focus ’XX fiscal reporting year quarter, reflecting announced of sales year our non-GAAP announcing as turn wholesale $XXX XX% stated expansion. were unless X.X%, first a fiscal invest a costs of with was EPS to new expected with XX% the XX% increases operating the for for reduced material pre-pandemic to cost July. to our short and section last GAAP we month-long call even basis, pressure $XX XX%. was our most capacity expected release operating across shutdown, to for businesses retailers margin $X.XX from to on to capacity. Non-GAAP record a pressure detailed exclude QX, margin accounting increased about in demand, were quarter robust. and annual restarted the the due compounded rate review actions previously versus the segment. with ’XX slides. in for Our conference $XX a of input increases, diluted GAAP X.X% as versus the Non-GAAP realization freight the to consolidated in invest increased annual quarter. compounded first in fiscal tables pre-pandemic first increased quarter, prior was on million growth operating our of quarter margin and bringing first increased to with after increased sales GAAP ’XX one-week online comparison the non-GAAP Demand margin in annual margins and maintenance the the quarter continued appendix our trailed of we in the sales Starting income all of and capacity our million, by and reflecting ’XX to fiscal million. results

which turn segment, me the produced to let Now excellent retail results.

primarily with delays delivered due margin with reduction to product deliveries by manufacturing Non-GAAP of by the sales store record For period as delivered delivered another to million, reflecting driven extending sales to COVID. store quarter, impacted of the increased quarter, increased as delivered sales XX% quarter increased the shutdowns was first store XX%, was and at quarter retail which into strong significant X.X% closures XX% year-ago Compared execution fiscal marked fixed XXX% first for April negative COVID-related first year’s XX.X%, June. operating well higher the Last ’XX the quarter, some in from by versus margin record with cost same leverage volume. closures, sales $XXX annual first rate growth quarter on level. doubled, in pre-pandemic compounded a sales in a the increasing a

we Furniture and noted, Melinda invest in stores, new to Galleries are As with La-Z-Boy store the system remodels, relocations. continuing

a scheduled XX of approximately projects projects this network. fiscal XX the company-owned stores for have year out total of approximately We the across

we we stores other, Joybird, for Sales pleased expanding which on are year on prior acquisition Long closed the the this quarter. From annual and the and corporate forward week, as New business reported delivered look the are sales York increased positioning from Island, to fiscal there. XXX% that Additionally, reflecting well as execution to excellent and by earlier team. of the announce XX%, three to tripling almost strengthening pre-pandemic for first increased a compounded about marketplace $XX growth XXX% million, end-to-end quarter, Joybird’s in first ’XX of rate in direct-to-consumer the strong

Joybird margin also period, integration increased volume, into in and increase website higher pricing traffic. and its in to product on a retail significant the chain. gross It average conversion due store For our increase its an actions, from experienced primarily increased synergies the sales ticket, supply broader

sales the in first fiscal addition to We and quarter freight expand cost the non-GAAP manufacturing an retail sales partially have together, costs a in margin ’XX in growth. on gross improved accelerate at driven gross businesses. improve the volume achieved basis Joybird. higher challenges awareness, quarter a our primarily quarter, prior expansion with points associated increase significant and profitability versus items as by the driven in sales than wholesale reflecting XXX continue of carry performance retail margin margin offset for start-up the These percentage capacity consolidated and growth our labor commodity of the year will Joybird, our decreased to by and businesses, our faster costs changes leverage our at points, fixed and mainly segment. from and in decreased this to wholesales Consolidated which gross SG&A acquisition, spend XXX were increases consolidated our mix structural of all by primarily for marketing Pulling customer sustained higher Joybird basis

and tax fiscal XX.X% our to in been effective from compensation this XXXX fiscal due tax rate of tax XX.X% year’s quarter primarily not The additional quarter for adjustments, last discrete effective tax effective occur basis quarters XX.X% versus for ’XX did benefits stock the XXXX. of on Absent our XXXX have versus in XXXX a first first fiscal increase Our the would GAAP the quarter XX.X% in fiscal first in XXXX. in which quarter was was respectively. and year’s fiscal rate first first rate

XX.X% effective XXXX our XX.X%. rate expect We to the fiscal full between tax year and be for

cash we disruptions cash, We and and higher in generated activities supply chain delivered levels to inventory Turning invested $X $XX quarter. the million from support sales. against million to production increased in in operating protect

Additionally, quarter incentive to made payments the the year. we compensation last fiscal during seasonal related

included in on no million quarter, first $XX upgrades fiscal and retail to ended XXXX credit distribution $XXX at stores, with in upgrades. cash in million to and cash drawn Mexico, our capacity in improvements our our also spent technology We upholstery manufacturing primarily capital facilities, We million the at compared proactively new with end debt $XXX manufacturing and million which the facility. cash of period $XX related in

compared million to investments $XX million held with in cash $XX we addition, enhance last on year. returns In

returned to shares, the under aggressively of program. $XX shares more open Regarding spending we back market authorized quarter buy cash existing million the than continued stock during share repurchasing to repurchase XXX,XXX our shareholders, on

Over the shareholders past $XX via to million quarters, returned we share have repurchase. two

to the share authorization. quarter. directors increase strong to in demonstrating last operations, the continue We shareholders to grow $X profitably an the its company’s of repurchase in ability of and X.X board week, in million this generate shares from existing confidence million also paid to flow the company’s cash approved dividends Earlier

subject repurchase approximately $XXX activity, brings a M&A to cash other million operational X price. The market over This as the of Monday’s expects to company equates With operations, total performance, first potential share for shares, the million stock repurchase increase outstanding. shares this under at the XXXX execute balances, period conditions, investments. repurchase program and X.X from end XX% to representing flow to authorization the million the closing approximately program of business the to four-year three cash quarter, at shares fiscal available

$X.XX as Additionally, the XXXX. to share board approved record per shareholders of X, of September a dividend of

we dividends from look back return primarily invest the to and the of approximately to term to via a remainder M&A, capex the we capital shareholders the and long As target share future into flow cash via perspective, allocation will half over business, and operating repurchases.

back call the important to me let for Before highlight turning the Melinda, XXXX. of remainder several fiscal items

robust capability, year setting higher at a of demand we noted, quarter, strong remain levels. we trends, pre-COVID As written strong backlog and a order work improve significantly trends than across our through shipments for backlogs. our business the up remains increase wholesale continue With as and level, product production us remain and each mix record to capacity sequentially retail

numbers While continue, actions prices supply remain to our and date, the to high chain through on begin backlog, including recent will global material freight pricing and cost flow QX. taken disruptions our in raw surcharge

fourth double year we fiscal result, year in digits, near margin fiscal expect a non-GAAP consolidated finish more a quarter. the with As XXXX or performance at our to the full with consistent operating

support future, $XX strengthen to to business the in to million investments updating expenditures of the upholstery fiscal in we our plant stores, updates million to across make a technology company be capital the Neosho, XXXX. manufacturing in for will and in Missouri, we our range as Gallery expect distribution organization. Mexico, Spending Finally, investments Furniture and $XX for facilities new in La-Z-Boy the solutions

back to I Now call the Melinda. turn will

Melinda Whittington

Thanks Bob.

costs, input disruptions, ongoing very continued continue uncertainties, demand volatile and curves. strong COVID supply We with a high operate in environment to chain

job our competing priorities customers, and including doing is outstanding the an employees. Our shareholders, team stakeholders, of our various of managing

is to and your both thank while We believe expect XXXth call and tactics for we our to efforts yet enable growth back the La-Z-Boy for near on we I’ll best expansion and our move capacity attention, as focused Incorporated. future come Kathy. beyond. designing you business are turn I for year now will forward, We strong term the

Kathy Liebman

period Thank the now. you questions. to Melinda. getting instructions the please We’ll begin the answer queue into question and review ask Taran, for

Operator

Please [Operator Raymond first go instructions] James. ahead. question our We’ll from Bobby with Griffin take

Bobby Griffin

questions. my taking for you Thank everybody. morning Good

Melinda Whittington

Good morning.

Bob Lucian

Morning Bobby.

Bobby Griffin

I area throughput. to guess the is just capabilities production on or and I the first question want the hit first

at so record same you to that you it plants thinking the backlog, production in continue we the rate make thinking way. sequentially would about people comments second to level when is least the guys build Are have comes capabilities bring the want weekly and at correctly here fair? I’m or that weeks right more XX look your recognizing a Just etc., we quarter at sure as understanding on, capacity of saw you that we expect XQ, and in should throughput

Melinda Whittington

That’s fair, yes.

business For pace, between the very our are assumption. a is we as and continuing to pick with open, as folks fair just to sells training wholesale that well continuing up

Bobby Griffin

I then it’s the the not though things the first around that. and commentary pandemic that curious is guess But something surcharge the secondly, with any that putting necessarily and typically that, it’s even and naturally given and been backlog, so what times time, materials like your that’s Okay, unprecedented with done, not environment surprising. raw it’s just in the on feedback’s

Melinda Whittington

right share own have we to make, levels held historic period, It historic for well not our our could, both it’s not as manufacturers our customers shareholders, The current seen cost be in said, but if we portion way our business the that actions a would that and always do the think overall on wholesale off would our increase. the charge with business with as retail the It’s pace end an that and Yes, you a times, honestly. the extended been of an still mitigate take consumer, because you own of portion our a way constituencies, environment. retail confident it’s at so light that working across businesses, increase well, portion the inflating unprecedented looking as about long recoup of to backlog, the We’ve but action a certainly same, even to be the multiple through a healthy you that of opportunity challenge a to is to and are that, and and with - and be balancing components mentioned, backlog backlog that needs between we’ll working challenge decision challenges end can unprecedented customers. lot we take was consumer the to our our be as taken business the similar partners, own as our as as we situation with healthy of our from of to our priced and right, that, retail some we’re price various we employees, decision a on the looking that we’re

Bobby Griffin

coming helpful. M&A Then I you like lastly that and bit the us M&A. little but and that’s through M&A comments you that, on talk pandemic can in flow mentioned a the capital guess recently here, cash for maybe think now the expenditures back refresh maybe just half how on post strategy? you in me, Okay, and business changed Has about your investments

Melinda Whittington

I Yes, things. two think

would We the with in have higher a portion and purchasing this be always furniture transaction that of that saw Long here opportunistically our Island galleries, interested you we said quarter.

overall We continue like extent does that, in our give the a synergies to it the to interested some they’re owners transaction drive interact gallery us opportunity to with the on furniture network. and that

next the I had Joybird now have grow we particularly an year at, get years the certainly continue that balances would how that from higher potentially to our always that we’ve more in look at and know-how given business we’re acquisition the a We where to key two. we’re but learnings tack-on mentioned, those better time, take the so, not of six over kind the and have, over supply the value acquisition, also area model to do bet skill we over farm is certainly organization, ready or want learnings sets some primarily we and sooner. we cash create continue We’ve the next we’ve our to that said proud at acquisitions six we’ll we a years some of have, accumulated or or as look the we by chain take to as that last opportunity of

Bobby Griffin

Thank I year. through going appreciate here of the Best luck calendar the you. of the details. rest

Melinda Whittington

Thank you.

Operator

comes Sidoti. Please Our next Lebiedzinski question with ahead. from Anthony go

Anthony Lebiedzinski

Yes, good taking the questions. morning, for and thank you

increases notable seen price far any to, that? or the wondering changes you with order backlog, point of have Just as that not sort the cancellations you can on as

Bob Lucian

not yet, have We seen that Anthony.

the but situation, seen We’re the we’ve that cancellation we rates see. typically continuing change to no in monitor

Anthony Lebiedzinski

Got great it, that’s hear. to

missed the that, at it? that mentioned backlog Did guys or quantify you You a is I level. high record maybe

Bob Lucian

We in made more higher we you tell we did it folks orders quantify XX-K, not previous than quarter. stronger in in than it. though than to than was, we so I’ll make, did able quantify the making came we the were it’s what for were even

Anthony Lebiedzinski

okay. it, Got

seen Given changes Are the just you wondering what waiting have merchandise or extended more change are buying? lead far just custom shifting any you people in-stock are wondering as as custom times that for buying. they any to people what to people are versus as furniture, guys have furniture, seen

Melinda Whittington

come changes. are The situations what they changes, But place real Anthony. blur the No folks but where far not big normally and as in no have been there those so blur begin ordering, because would lines something order an on stock customer’s a may bit. customize, bit order, that lines a to as to a chosen are

Anthony Lebiedzinski

okay. it, Got

volume versus on a just bit increase, price but in question, a wholesale broadly what Lastly, speak about housekeeping quarter. you more could little unit the the piece, you of saw if revenue increase

Bob Lucian

From sales a standpoint? delivered

Anthony Lebiedzinski

Yes.

Bob Lucian

due to I’d in the pricing probably say was--the to were Okay. that up X% prior quarter year. X% the volume the versus sales

Melinda Whittington

or through less The pricing vast backlog, stacked to uptick call coming point it teens, what’s actually at We is mentioned of but this volume. the majority a of is is that. on high because up that of delivered, the third our

Anthony Lebiedzinski

and All thanks luck. of okay. well right, it, best Got

Melinda Whittington

Thank you.

Operator

next our Partners. with Please Keybanc go Brad Capital question from Thomas take We’ll ahead.

Brad Thomas

and questions, I orders if how little A morning written about could wondering Hi, the you’re bit could. feeling talk of about follow-up couple you Was if everybody. the the in quarter trends. good and a cadence

had shaping as range year, how we of get up you end I backdrop just the were months demand and was XX% up the like feeling as up, believe July, still your written June lapping growth into those difficult is were so know comparisons. where very orders referenced against you I last been August, healthy. in You curious

Melinda Whittington

Yes, for year to right, not town were shut the would were I got we this comparisons June say, year, of of at essentially going and because down--most broadly, I in strange not look seeing But this mixed down a are right, rates you’ve a ago, openings to like month year, finishing in July. customers May say month we we up base quarter, shut you what our are in is at seeing--this if any in point. order significant this drop-off everyone

Brad Thomas

you, tougher you’ve still these the you growth orders Got posting you written so as as lap in lapped, some comparisons? are

Bob Lucian

the QX, very of May and quarter June increase. and July, so period as is QX see a just low described increasing Melinda then so in what In across across the yes, answer did strange in we an

Melinda Whittington

we’re really Which slowing. says is good that challenge. the and again, seeing a not a both What thing is,

some also expect come manufacturing more bit solid. be backlog that each are will a pace month to because point, though why that even continues incrementally grow, challenge to demand it’s have continues of to furniture, You some we a but our of week, each at on

Brad Thomas

think your on the XX.X% rate if follow now written break price up look a to okay. in flat of we’re mathematically I’m does is as teens, little the you trend mentioned, Yes, apart run quarter, July we trying negative high up earlier versus about Then unit starting bit basis, of order the how a basis? at the it running or on on to just mean question to to works the year-over-year here. unit, basically pricing as orders and get on that

Melinda Whittington

producing, each quarter. continue to increase increase will are - we Yes, units overall continue what to units

those any some because given--when healthy challenges the likely as next imports see the some on devil’s and of forward there, into that challenges you this so know get details on the of our we pieces. portion is the Vietnam, a go you in case nuances, out goods of we’ll quarter like Now, business in

if business North business, in what to of U.K. term, chunk the heavy America increase delivery overall which about lower is and there’s as Joybird has downs, brand, so continue biggest and units the fringes you for well Our as near on on sequentially manufacturing our the orders, the ups but for the think we’re year-on-year. La-Z-Boy brand, some

Brad Thomas

Okay, great.

one Just gross a me from margin. on last

quarter be mark may the With increase, and water down than at here saw increases set the kind Is XQ? October in way trends? for this of fiscal quarter, what forward the this does to backlog as but the rate a in about still that price gross it going margin low price first in the think up where margin lesser now the to cadence you

Melinda Whittington

Yes, that’s correct.

Bob Lucian

yes. correct, That’s

Brad Thomas

Okay, great. Thank you luck. so much, and best of

Melinda Whittington

you. Thank

Bob Lucian

Thank you.

Operator

concludes our floor the We’ll back remarks. question for turn presenters answer That session. closing and our to

Kathy Liebman

a Should please everyone this great morning. you you follow-up have Thank have a joining for any us and questions, give me call. day. you Thank

Operator

you this again today’s We for conclude your teleconference. thank participation. gentlemen, does and Ladies

at great your may disconnect time. lines a this day. You Have

La-Z-Boy (LZB) 18 Aug 212022 Q1 Earnings call transcript