LZB - Earnings call transcript Q1 2023

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Operator

Good morning ladies and gentlemen and welcome to the La-Z-Boy fiscal 2023 first quarter conference call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Kathy Liebmann, Director of Investor Relations and Corporate Communications. Kathy, over to you.

Kathy Liebmann

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

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

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

Melinda Whittington

of consolidated quarter everything and in in making continue to for company as in Furniture of what Tijuana. record everyone. five acquisition results yesterday and but Joybird, second drive Thank changes year’s in and quarter new in we retail first for record delivered for all-time market, as great and investments company, stores San volatile Vision a a the well. margins consolidated All included you record on and afternoon first delivered facility Joybird Highlights we’re close quarter delivered one sales retail opening delivered the and segment, build profits owned ongoing Galleries of profits we to results. retail and La-Z-Boy opening following the a production the a These Kathy, initiatives brand our market through delivered reported versus sales and of came two not written locations closing our significant Francisco first for be Austin, growth strong our one in, business, together our total Century improvement for Denver sales part the quarter, in we sales operating segment, to first QX last represent the and Late for Joybird, good morning wholesale for record, only strategy. our We an challenges period, most continues managed myriad the environment. QX in record

uncertainty. proud slowed sentiment reflection are this consumer we macroeconomic traffic and and seasonality geopolitical and pace both industry performance, excellent of the store a to of lower to likely a for historical due While return our concerns broadly, of has

store decreasing the across sales impacted same XX% this entire written quarter, with segment the Furniture our for for retail sales La-Z-Boy ’XX written store quarter same sales For Galleries written and first company-owned network our fiscal decreasing XX%.

and first our However, excited we and first pre-pandemic XX% company-owned more wrote report same and that QX this higher XXXX year’s Joybird written sales business doubled are XXXX network our than X% fiscal written last quarter sales were quarter, versus store XX% total than and to first stores our more quarter. for our fiscal than pre-pandemic respectively

and managing the market remain agility we with quickly business period, uncertain respond conditions. this to navigate we to on resilience As focused changing

and the times, building for long increasing customers to equity our environment work spend conversion down to term. sales shorter delivered challenging to this and backlog drive while and service drive lead and more share increase improve our to in the pre-pandemic levels are gains our traffic continuing we of consumers marketing to market to We’re with brands

On plants in new a we footprint, gross contribute the forward. the reduce costs we’re working as ultimately to start-up and to at our cost side, capabilities friction production improve will coast, Mexico, west our to margin which move service lower manufacturing improve

to We term, term are and near through Century long XX-year-old Vision building the for our investing foundation manage strategy. leveraging our our agility success

enable History making, will loved objectives. consumers our and through the capitalize we to to position the we’re financial deliver to challenging gains. that during investments strong long moves intend turn brands support broader prudent to strong capabilities on brands to appeal share make term chain tells our and us us of well times market Our strengthen growth to supply and and

Beyond culture. the highlight on our outlines progress to ESG values-based planet like to moment our a our numbers, publication to commitment of I’d healthy a take which report and the inaugural and sustainability

to the our delivering to stakeholders. on the website. world better is found build transformational read invite while returns we the comfort I Incorporated to make you report, our through of our of be tomorrow, term can power La-Z-Boy goal As place all long a which

me the our in Bob? more turn to to detail. let quarter call Now review over first Bob results

Bob Lucian

everyone. morning Thank Melinda you and good

results in and basis. presentation present slides. conference business. results performance and non-GAAP a better trends in appendix we GAAP release the items As section our are reflects a the both our underlying believe operating tables of reminder, and call We detailed the press exclude in Non-GAAP of which non-GAAP our the on

quarter, item XX% year effects of prior increased consolidated operation. the non-GAAP sales ’XX million and actions fiscal permanent the positive $X.XX channel the costs and quarter first $XXX and Newton surcharge versus mix. assembly pricing reflecting a the to associated reflects our quarter, with product basis, the For closure On of

first first our quarter operating for weeks quarter. increased in to increase million July and non-GAAP GAAP The increased and increased margin Consolidated one-week income an quarter XX% operating to year’s GAAP to production to shutdown last a maintenance. operating operating included due ’XX $X.XX fiscal our first in for XX of first year’s million, year Consolidated to the annual first $XX $XX income record non-GAAP year’s increased diluted diluted X.X% the non-GAAP XX% last versus prior versus last quarter versus and X.X% GAAP EPS increased year current $X.XX X.X% $X.XX quarter, in increase. $X.XX EPS a quarter, versus to to quarter quarter. for in margin first and increased in

and driven As prior over comments year’s delivered retail with $XXX to results on my record Starting sales our first specifically segment I segment, were otherwise. quarter led non-GAAP focus an move discussion, here our the XX% record the the reporting from stated increase by unless will and dollars all-time a million, Retail operating improved prior versus by same operating posted best-ever delivered operating profit delivered fixed XX% primarily XX.X% versus volume. XX.X% high a the leverage non-GAAP on prior increase year. year in sales sales non-GAAP margin cost the higher a store in quarter, to

is to company Galleries we forward and continued out network disproportionately La-Z-Boy QX results. benefited are on sales a contribution delivered owned of for growth All term strong of Vision long and business in, of written key from Century backlog the its selling Growing these operating lower success. Additionally, our segment margin element our expenses Furniture the look retail the outstanding to and that period.

first compared million, For a with improvement was by the $XXX quarter. wholesale growth in period actions offset of dealers quarter, mix. coupled year due grew delivered surcharge pricing primarily the sales lower driven by to partially and delaying the of The channel to prior volume with external favorable and finished This warehouse constraints. for product receipt result goods and XX% our a was segment the record

further now actions to short these disproportionately surcharge as channel spend favorable in the wholesale dealer and first year’s retail by drive which first backlog, XX% well prior minutes term primarily plant However, an raw pricing strong mix, million. Joybird’s to constraints in and versus opportunity and versus quarter Joybird, sales partially on $XX costs. the and is last product Other. a quarter, presented reported which year Corporate few our segment reflecting increased material the X.X% increased Non-GAAP as retail margin in were results. delivered delight quarter consumers, our was offset operating and own service X.X% for I’ll

excellent sales web exhibited the Joybird price. sales quarter, written business the ago, XX% including sales value, environment. Joybird conversion, in average average order positive current also versus an result year and During multiple metrics, grew by the

and However, with increases costs in costs continued and a Tijuana Joybird the in in facility manufacturing due small freight associated investments the posted friction second period. opening to for of marketing, our loss

we will continue relatively and invest Moving customer forward, drive disproportionate brand. awareness, of brand growth acquisition, young to this to

year. profitable be to full Joybird expect the fiscal for We

For the from higher and versus offset volume written of points gross a points SG&A actions, larger across the margin plant primarily basis quarter margin first wholesale and and gross of raw versus to last points QX. costs enterprise, well leverage basis year Consolidated all increased impact by primarily full on margin businesses a were increased the our and sequentially higher offset more drive driven sales versus marketing material pricing which and in decreased quarter, reflecting consolidated in XXX mix to a business for with Higher becoming XX the prior basis period improvement by consolidated than year change The retail was gross carrying our business. ago portion non-GAAP investments cost non-GAAP sales. year’s fixed partially as as sales as XX the our mix. channel than product percentage the surcharge

XX.X% for on last fiscal the first rate first in was quarter. basis Our versus year’s effective tax ’XX a XX.X% GAAP quarter

Our XX% from to the effective rate federal statutory state primarily due taxes. tax varies rate

XX.X% be our rate of to effective fiscal expect range tax the in We XXXX. for XX.X% to

in in our in $X to generated In to year new and cash. We prior upgrades cash with QX, We and we stores $XXX million related cash, capital million and Turning shareholders versus first upgrades held and million manufacturing through ended $XX $XX to returned and the the in operating debt spent million returns cash dividends. enhance to investments million primarily to in retail distribution for million we store period activities on the no $XX $X facilities. quarter from quarter.

We program. repurchasing authorized open stock also than million on spent the leaving repurchase existing million of shares our shares XXX,XXX X.X more market, in $X share

important back be me and several fiscal highlight to second fiscal fiscal the mind full turning against Before will the ’XX a that ’XX. XX-week Please year comparisons call the year. let quarter and in for will XX-week items keep be Melinda,

’XX events anticipate demand significantly and confidence While focused furniture as fiscal we term steady Despite remain our may margin to on results macroeconomic the we challenges, and to driving vary throughout consumer factors continue these impact long to maintain outperform demand. geopolitical we progress, industry. sales commitment and

With for our larger likely of delayed customers as the businesses consumer warehouse furniture sales who adjust pandemic their normal to due as fluctuating height the and to direct-to-consumer continue have this sales QX. on seasonality for product demand ago to be a return accordingly. well year and industry, number temporarily to us as We behind experience the our manage for and segment written lower to than of in seems we what our delivered will still constraints, will QX a customers inventories continue they impact have wholesale receiving wholesale

of expect the We to year. resolved these in back the delays be half

be investments to and about versus quarter up range as to operating marketing all We be consolidated about known second XXXX drive of of margin into the X.X%. second in earlier. maintain to to a of sales noted $XXX quarter will the in to continue we demand million a Taking delivered brand Melinda million, expected $XXX X% fiscal term and range in X% X% non-GAAP ’XX equity, to consideration, to long for fiscal factors

the non-GAAP of adjustments $X.XX expect to range share. for per be charges for We to accounting in purchase $X.XX year the

to consistent Vision expenditures strengthen to future, invest million capital with in to to fiscal million of range for the as Century $XX strategy. ’XX expect be we the the for Finally, company our we continue $XX

Now to turn Melinda. call back I will the

Melinda Whittington

Thanks Bob.

and of to quarter environment yet While faced throughout remains record-breaking deliver the the this of organization proud macroeconomic period our the results. of overcome many volatile, and I’m challenges ability another

our I’ll brand as are while near long capitalize throughout I’m talented organization, focusing our challenges we distribution, Vision yet win to and controlling to turn agility Kathy. Century confident tools on for time team like moving I you to in I’d your place morning. come phenomenal can, term term, team, vast on our strength, the for delivering and and navigating and our the forward. quarter. we We building is have this thank back strategy, heritage for that truly Incorporated the compete results what I believe XX-year a La-Z-Boy driving call capabilities. we the the our best to in now thank the

Kathy Liebmann

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

Operator

[Operator instructions] Thank you.

Company. & coming ask your question. is Sidoti from question Anthony Lebiedzinski first Anthony, Your from please

Anthony Lebiedzinski

for you fiscal the solid La-Z-Boy. thank the Yes, for Certainly to good morning, taking and start questions. a very year

it’s than operating the all, function or a what you Just for that just little mix looking guidance? in reported what’s of lower operating QX, Is the margin down expect, you the sequential margin that a QX. bit of changes step just guidance in first driving slight at,

Melinda Whittington

delays first of together tell lot and a noted Bob’s would comments and Anthony. I there from We that you. with there even came being just everything in of particularly right morning, that in backlog, hear well uncertainties went Good well. are all, Good you to now, QX. and we example out of that’s retail in take were that able of one volatilities some to our particularly things even pivot wholesale product, so the our able to customers disproportionately service over some

expect range quarter to seen this for we right going our I quarter. volatile be think reasonably we’ve of is presumptuous, in a outcomes this everything bit quarter, on so to next similar what counting environment, each

Anthony Lebiedzinski

it. Melinda. for that, Got Thanks

more level at overall normal. higher others the than from inventory retail hearing the We’re about industry in being levels

you Just should do about we as any think that? that? competitive curious, of pricing expect seeing How any pressures you or

Bob Lucian

haven’t yet. we seen large in amount Anthony, any that

trying see see on will and at big to past, to there those. we’ve promotional we very and as clearly out about Day. and If the period, lead we’re and we’re if are not now when promotions to our folks doing eyes our and keeping Labor a over share close we crazy right but we protect we Day, Labor We’re accordingly, promotions. this taking promotions what relates it a talked the understand market It’s will respond in increase going look

Anthony Lebiedzinski

far for that see variations, how of of sort fairly quarter, on comps any as okay. quarter you wondering Got the big throughout saw QX terms the are or as that any just consistent in Then written you, read sales, as written did as that early was the far trending? XX% and you

Melinda Whittington

so you June sentiment and and and consumer it months, consistent world if May, July, realities the Yes, you quarter, that’s that pretty of know, and certainly some three believe think about across our right the was we our of August know, that turned now, seasonality of middle believe really we summer well, but we we chunk we what so of right sitting corner that here believe the as being we’re is a season. now, is really--you the on is haven’t

Day. starts what happen out said, Bob As to of see we’ll Labor

Anthony Lebiedzinski

luck. and right, All you it. very thank Got well much, best of

Melinda Whittington

Anthony. Thanks

Operator

Thank you.

Keybanc coming is question next Your of please Brad, ask from your Brad question. Thomas Capital.

Brad Thomas

Bob Melinda, Hi, and for good Thanks my question. taking Kathy. morning

going results First what’s really - congrats nice spot, little in to of all, a for on the that’s challenges? drill I what’s company not the strong been bright just more here the some you the that industry’s for could at Joybird quarter. Wanted more bit think the in written the to the a on sales industry. talk but bit a a seeing at for about driving Melinda, little time growth

Melinda Whittington

being has for the we’ve of share resonating its is the the is stores earlier still an brand how is a in power it spent to in of power bunch pre-pandemic thank still but and both We old a we’re Brad in morning is that vibe certainly for with the of and last consumers, getting with ahead - quarter. just say continue really that to consumers. resonating both Good a levels. we but both the our really is growth in lot of I La-Z-Boy that brand a believe writing that the of trajectory, words that execution brand too benefit and there brand, that that as there the with in-store of pleased kind while, the certainly, brands, energy to online, a and you are that’s our brand that and how of it Joybird voice said so Joybird our Joybird on resonating and consumers. marketing behind week so see grow, ensure I’m brand just way, to the the with both younger enough can maybe to we’re we’re

Brad Thomas

helpful, That’s Melinda.

that think can think quantification affecting how referenced, XQ, the--if or reported little much that’s you’re give Just inventory from and XQ? how I fiscal about more color you’ve sales us the issues standpoint the you over to either about the about segment here or as a switch we sales for written guiding wholesale a

Bob Lucian

that it I was inventory of got we’re Joybird so of what of the their seen case delivered were the The back that like what think orders a receiving The QX, that get case increase was inventory normal question to from delivered customers’ particularly our can they what our full going inventory, came placed written through get impacts the our about of to well business out that to have been inventory through the that to if that just quarter, to QX, take we’ve big standpoint, are on in sheet. to it’s not your impacting as work The sheet saw two that’s in a our didn’t as carrying a can’t I’ll don’t so lot do for it an holding, along written continuing on and all books. ability, what’s primarily case our itself what number during increase seems warehouses sales, received It the a you goods to increase it’s wholesale, the be on goods. so We written on of we’ll of that biggest order customers for amount our inventory customers of and a as balance we almost call was cadence. our due we’ve upholstery understand entire from seemed an at already so but while side customers, so wholesale continue we type ordered, to inventory have our time, with effect are one the correctly. they’ve have much a our wholesale industry, Asia balance of we those that are unlock on had goods that more coming in on that a lines worked and on for perspective throughout accept

Melinda Whittington

more inventory one within retail no so that build is still And the pre-pandemic. just fact, now, we have and describe have of in-stock when for to written business, the to our clarification, our working there that stores in of results that they issue; to portfolio want we’re consumers breadth they the choose to like levels customize the we’d don’t something when obviously had

Brad Thomas

helpful. That’s

that So have delivered only kept just it you you that quarter that, customers trying some more inventory, really were to Just up just to understand as on follow your the to been because could quarter. from better a your you takes think customers you much doing you sales so higher if about or and wanted there’s would had here, just potentially different factors capacity reported, the take to given do? puts there in

Melinda Whittington

were inventories, is until point, much fair. now so wholesale our customers inventory, their a right there galleries burn they to business, your by yes, impeded wait customers, that’s work and across certainly probably through my deliveries I not through wholesale furniture customers For as saying while our level writing of

Brad Thomas

much. Got you you. Wonderful, thank so

Melinda Whittington

Thanks.

Operator

you. Thank

coming Your Raymond please next ask Griffin your Bobby, question. of from is question James. Bobby

Alessandra Jimenez

Thank for is you Good Griffin. morning, Jimenez question. Bobby for our Alessandra taking on this

in to on are start just excess wanted we of I where terms First, backlog.

that some talk working was times? that you to a working some so today we lead maybe of noted expectations your could very and normal first you through where are through quarter back and backlog solid of the about had backlog, You

Melinda Whittington

morning. Yes, good

out wait, bit that’s are our goal how we consumer expand anything backlog run pretty to get a said and indication as backlog down we now, the that quarter much a security as recent over to footprint. what for think we’ve orders have year, our fiscal first we quarters, Our would in the into of would right production last much for our think backlog noted, to goal that so as half writing said keeps of to With why but that. quarter, kind the looking invested maybe we it at an is as it’s as and that the much of the I respond third we’re else, really, we’re and depends thought backlog and continues the provides having you net, is that still on consumers most as be--again, also that I part track

Alessandra Jimenez

and you Okay, date? then have helpful, expense transportation in that’s guys relief very any to seen

Bob Lucian

containers, We’ve from more coast. seen a less little containers from east come that bit of relief on ocean Asia, the on inbound

call but due combination well - costs seeing as drivers. We’re help as retaining U.S., costs within or and costs costs of to trucking I’ll not with hiring final just just the be any those freight the what overland on continue a higher mile to the elevated delivery higher associated also

slightly, We’re than freight elevated hoped getting it depends still time. have U.S. have much over the are road receiving we rates in at but what by levels. again you’re everything is seen would rates higher this Ocean and down product, to where quoted the coming on the

Alessandra Jimenez

and then in stores in the network helpful, any for me, five the are below? stores you Okay, congratulations acquiring provide on Could above contributions color Denver. - or average they those of on the with or line that’s very lastly

Bob Lucian

really we them fully just folded network operations in into and about and they’re average, that the Yes, getting with acquired excited La-Z-Boy system. we’re the line the

Alessandra Jimenez

balance much, on year. good so luck the you and of Thank the

Melinda Whittington

Thanks.

Bob Lucian

Thank you.

Operator

reminder, one star, and ladies you please do question, a gentlemen, on Just have phone your a if press handset.

now it back further to Okay, in the to for questions closing no will any hand we management appear remarks. I queue. over have

Melinda Whittington

some this participating you everyone call up day. you me very set Thank we’ll Should have speak. to please Thank you and have for contact questions, a and additional morning. time much great in our

Operator

conference conclude does this call. Thank today’s Ladies you. gentlemen, and

this wonderful your at have and You day. may a phone lines time disconnect

La-Z-Boy (LZB) 24 Aug 222023 Q1 Earnings call transcript