La-Z-Boy Incorporated (LZB) on Q4 2021 Results - Earnings Call Transcript

Operator: Please standby. Good day ladies and gentlemen, and welcome to your La-Z-Boy Fiscal 2021 Fourth Quarter and Full Year 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. As a reminder today’s call is being recorded. . At this time it is my pleasure to turn the floor over to your host, Kathy Liebmann. Ma’am, the floor is yours. Kathy Liebmann: Thank you, Melinda. Good morning and thank you for joining us to discuss our fiscal 2021 fourth quarter and full year results. With us this morning are Melinda Whittington, La-Z-Boy’s President and Chief Executive Officer; and Bob Lucian, Chief Financial Officer. Melinda will open and close the call, and Bob will speak to the financials midway through. We’ll then open the call to questions. Slides will accompany this presentation, and you may view them through our webcast link, which will be available for one year. And a telephone replay of the call will be available for one week beginning this afternoon. Melinda Whittington: Thank you Kathy and good morning everyone. Late yesterday afternoon we reported our fiscal 2021 fourth quarter and full year results. What a difference a year makes. When we started this fiscal year, the world was still in the early stages of COVID-19 and things seemed pretty dire. We had just restarted our plants after a month long shutdown and most retailers were still closed or just beginning to reopen. Then as the year progressed we experienced unprecedented demand for our products. We strengthened our business by significantly expanding production capacity in response to this demand, enhanced our retail platform, acquired the Seattle based La-Z-Boy furniture galleries, and turned Joybird profitable, all while navigating a multitude of challenges including multiple supply chain disruptions, raw material price increases, and macro-economic uncertainty. Through it all our highest priority was and continues to be the health and safety of our employees and our consumers. The global pandemic tested everyone in just about every way and I am so proud of the La-Z-Boy team for its unbelievable perseverance, dedication, and resiliency, qualities that enabled us to deliver excellent results even in the midst of these historic challenges. And I want to take this opportunity to express my sincere gratitude to every one of our employees and business partners, all of whom contributed to our success. I also want to again thank Kurt Darrow our now retired President and CEO for his unwavering leadership in the last year and throughout his long career. Turning to our financial results, full fiscal year consolidated sales grew to $1.7 billion and consolidated GAAP operating margin increased to 7.9%. Non-GAAP operating margin reached 9%, the highest margin level achieved in recent history. Over the year we generated $310 million in cash from operations and returned $61 million to shareholders through share repurchases and dividends. Truly outstanding results particularly considering the challenges of the fiscal year. Specifically, in the fourth quarter, consumer demand across all business units continued to be robust reflecting the ongoing allocation of consumer’s discretionary dollars to the home, the strength of our brands in the market place where we are disproportionately winning, and excellent execution from our retail and sales team. For the quarter record sales of $519 million led to all time record profits driven by increased production capacity, excellent performance by our company owned La-Z-Boy furniture galleries and continued profit growth at Joybird. Robert Lucian: Thank you, Melinda and good morning, everyone. As a reminder, we present our results on both GAAP and non-GAAP basis. We believe the non-GAAP presentation, better results underlying operating trends and performance of the business. As detailed in our press release and in the tables in the appendix section of our conference call slides excluded from our fiscal 2021 fourth quarter non-GAAP reporting, our purchase accounting charges for acquisitions totaling $2 million pre-tax plus related tax adjustments totaling $0.06 per diluted shares, primarily due to a write up for the Joybird contingent consideration liability based on forecasted performance. For the full fiscal 2021 year, non-GAAP results exclude purchase accounting charges totaling $17 million pretax or $0.33 per diluted share, primarily due to a write-up for the Joybird contingent consideration liability based on forecast performance. Two, a change of $3.8 million pretax or $0.07 per diluted share related to the company's Business Realignment Initiative announced in June of 2020. And finally, income of $5.2 million pretax or $0.08 per diluted share for employee retention payroll tax credits, the company qualified for under the CARES Act. Fiscal year 2020 also included non-GAAP adjustments as we have talked previously and again are detailed in our press release and in the tables in the appendix section of our conference call slides. Melinda Whittington: Thanks, Bob. The dynamics of the past year have been profoundly challenging, but also educational. These events affirm our prudent financial culture, which served us well during this uncertain period. And our strong cash position provides opportunities for investment in our next chapter of growth. For the immediate term, we are focused on continuing to increase capacity and deliver units, but acknowledge the next several quarters will be volatile given we are still operating in unprecedented times. That said, we are stepping back and evaluating our strengths and our opportunities, and we are investing in the company to emerge stronger in a post pandemic environment and even more able to deliver long-term profitable growth. Although this is not an easy time, it is truly an exciting one, marked by change, incredibly strong demand, and the ability to play offense. I thank our Board of Directors and all stakeholders for their support this past year and look forward to a fantastic future of continued growth and shared prosperity. I thank you for your interest in La-Z-Boy Incorporated and now we'll turn the call over to Kathy to provide the instructions for getting into the queue for questions. Kathy? Kathy Liebmann: Thank you Melinda. We will begin the question-and-answer period now. Melinda, please review the instructions for getting into the queue to ask questions. Operator: Thank you. . And we go to our first signal, Bobby Griffin with Raymond James. Please go ahead. Bobby Griffin: Good morning, everybody. I hope you are all doing well and thank you for taking my questions. Melinda Whittington: Good morning. Bobby Griffin: So Bob, I just wanted to circle right back quickly to your comments about the 300 bps of margin pressure just to make sure we're all on the same page of what’s that referencing and kind of what time frame, so is that in reference to the 10% EBIT margin that was posted in 4Q and are you saying that 1Q and 2Q of 2021 should be down about 300 bps at the highest level possible versus that 10% if raw material headwinds were as strong as they could be? Robert Lucian: That's correct. Bobby Griffin: Okay, and then so for both quarters, kind of the same type of trajectory -- now would 2Q though below where kind of it was in the October of 2019 quarter which was 7.5, is that all just raw material related or mix of business or if we end up at 7% EBIT margins is below kind of where we were two years ago? Robert Lucian: Mostly, it's mostly the raw material impacts that we're seeing. And again, we've taken pricing and it's taking a while for that pricing to work its way through. So it will work its way through by towards the end of Q2 and Q3. And that's when margins will start improving. Bobby Griffin: Okay, alright, that's helpful. And then, kind of usually 1Q is the seasonally weak quarter, but with this large of a backlog that you have I think in the 10-K it was 617 million or something called out. I mean, is the right way to think about the potential revenue side of things here in 1Q basically 12, 13 of what you delivered in 4Q or is there something wrong with kind of using that as an estimate? Robert Lucian: I don't think there's anything wrong using that as an estimate. Bobby Griffin: Okay, and then I guess… Robert Lucian: We continue to sequentially, yeah, we continue to sequentially increase our capacity. So I would expect that to be at least the case. Bobby Griffin: Alright, my was there on capacity, just trying to understand kind of where we are better today and I don't know what the right context maybe if we want to put it back in, are we at pre-COVID levels in terms of what the company can do in terms of units, or are we still kind of a little bit below what the capacity of the business was pre-COVID levels just given the challenges of getting foam in some of the materials? Bobby Griffin: We're higher than we were pre-COVID and again we've continued to -- we were continuing to increase that just given the backlog that you referenced -- we will continue to increase that and try to work that backlog down. Bobby Griffin: Okay, very helpful. I'll jump back in the queue, let somebody else ask some questions, but I appreciate the details here. Robert Lucian: Thanks, Bobby. Operator: Next we will go to the line of Brad Thomas with KeyBanc Capital Markets. Please go ahead. Bradley Thomas: Hi, good morning. Good quarter and thanks for all the details. Hi Melinda. Maybe first just a big picture question and then some housekeeping items to follow-up on some of Bobby's questions. But just from a big picture standpoint, Melinda, as you all invest in capacity and try to catch up from this very strong demand, can you talk a little bit about maybe what changes you're making in terms of how you run your supply chain and how you build a product to try to position yourself, not just to catch up to the strong demand you're seeing right now, but, best position the company for growth, how are you considering some of that? Melinda Whittington: Yeah, I would -- I guess I would take that in kind of two buckets. The first one is truly we were running a very efficient operation, but an operation that can flex in that single-digit percentages kind of for volume that we've seen historically. So really, a lot of it is about enough floor space and enough people well-trained to continue to be able to flex that volume. And as I called out in my prepared remarks, a lot of that has looked like available labor force and space in some of these Mexico locations as well as a lot more shifts, overtime and all in our U.S. plants. But to your point, we do continue to look at where you optimize. Even simple things like this is a short-term item, but we're training new people on more simple furniture and chairs and so forth. And then as they get more up to speed and more capable then we're bringing the more complex pieces to them. I think the biggest structural item that I would just call out though is, and we've talked about it before, but our San Luis, Rio, Colorado location is a space that we've strategically had our eye on for a while to better service the West Coast over time in the kind of the western half of North America. And so, that's a location that we brought up more quickly than maybe we had initially planned because of COVID and the demand that we're seeing. But, putting that location, there is a long-term strategic footprint to better service. And there are a variety of other either longer-term activities that we're looking at or smaller but that's probably the biggest one that I'd say is kind of a fundamental shift that was on our strategic roadmap. But we moved it up more quickly because of the current demand. Bradley Thomas: That's very helpful. And understanding that just some price increases, the sales volume level that you all can generate should have gone higher. But is there a good way to think about what dollar value capacity number you are shooting for or will be at a few quarters from now or at the end of the year? Melinda Whittington: Yeah, it's a bit of a variable model, honestly. I mean one, we continue to add cells as we continue to see demand being strong. And so what we are shooting for is somewhat driven by what we continue to see in the demand trends. But we're still growing and really throughout the rest --throughout all of fiscal 2022, I think we'll continue to see incremental progress each quarter in capacity. And that is both through the cells that we're opening, but also just as our folks get up to speed and get more efficient. And then I would say, that number can be somewhat fungible over time, particularly if we were to start to see -- if we start to see things continue to increase or if we were starting to see some of that demand slow down a bit, given the amount of overtime we're working, second shifts, weekends, and so forth, we can always pull that back depending on where we see trends continuing. So it's hard to put a number on it just because I mean, there are both different inputs into what we're heading -- what we may need, as well as we've got a lot of flexibility on how to back some of that off or build it up for any short-term changes. Bradley Thomas: And if I could just squeeze one more in terms of thinking about cash, you guys obviously have a big sizable cash balance today and with the strength in the business, should generate a healthy amount of cash share this year. For one, I apologize if I missed it Bob, but did you disclose your CAPEX plans for the year, how are you thinking about working capital needs for the year as you grow inventory, and what do you think about doing with all this excess cash? Thanks. Robert Lucian: It's a great problem to have. Right now, what I mentioned in the call was $55 million to $65 million of capital spending. Again focused on the company on improving our retail stores and converting a number of our retail stores, investing in more capacity, investing in technology and technology solutions throughout the company. So that's where those dollars will be going. We'll also be upgrading one of our plants, our largest plant in the U.S., which is Nirschel , which we use a lot of those dollars as well. And we will do all we can to go deliver what we can from a capacity standpoint. So if there's more investment needed, we'll go off and we'll do that. We are also and you can see it in our working capital, we're not being shy on inventories and we're trying to increase our level of inventories relative to trying to minimize the disruptions that we're seeing. So if there's disruptions in foam, wood, or steel, we're trying to carry higher levels of inventory so we're able to withstand those disruptions that occur so it doesn't impact our capacity. If we lose a shift of capacity because we're running maxed out, we can't get that back out so those are lost sales. So that's why we're investing more in inventory from working capital perspective. And then the other piece we will be doing, again we'll continue with our consistent levels of dividends that we try to do and we will continue to invest in share repurchases over and above just what's needed for the purpose of preventing dilution. And you can see that from Q4 we invested over $40 million in share repurchases in the quarter trying to get the full fiscal year up to where we've averaged for the last three to four years. Melinda Whittington: And I would just add that we are stepping back to look at it. It's a great -- as Bob said, it's a great problem to have and so we are stepping back to look at where we should be investing in our company to ensure that even post pandemic we really can be on a strong growth trajectory with strong profitability. So it's a good spot to be able to step back and really think about where do we need to invest and make ourselves even better for the future. Bradley Thomas: Wonderful, thank you so much. Operator: . And that does appear to be all of the signals that we have, we return to Kathy Liebmann for closing remarks. Kathy Liebmann: Thank you everyone for joining us this morning. If you have any follow-up questions please give me a call, I will be available. Thank you and have a great day. Bye-bye. Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.
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La-Z-Boy Incorporated Surpasses Earnings and Revenue Estimates in Q4 Fiscal Year 2024

  • La-Z-Boy's EPS of $0.915 exceeded estimates, showcasing strong financial performance and operational efficiency.
  • The company reported revenue of approximately $867 million, significantly surpassing estimated revenues.
  • Strategic growth initiatives led to a 22% increase in consolidated delivered sales compared to the same quarter in 2019.

La-Z-Boy Incorporated (NYSE:LZB), a prominent player in the residential furniture manufacturing and retail sector, recently reported its earnings for the fourth quarter of the fiscal year 2024. The company's earnings per share (EPS) of $0.915 exceeded the estimated EPS of $0.68, showcasing a strong financial performance. Additionally, La-Z-Boy generated revenue of approximately $867 million, significantly surpassing the estimated revenue of about $516.44 million. This performance not only highlights La-Z-Boy's robust financial health but also its operational efficiency during the period.

The company's ability to outperform Zacks Consensus Estimates, with quarterly earnings of $0.95 per share, underscores its resilience and market performance. Despite a slight decrease from the earnings of $0.99 per share reported in the same quarter the previous year, the earnings surprise of 39.71% for this quarter marks a significant positive deviation from expectations. This is particularly noteworthy considering the previous quarter's earnings of $0.67 per share fell short of the anticipated $0.75 per share, resulting in a -10.67% earnings surprise.

La-Z-Boy's revenue for the quarter ending April 2024 was $553.54 million, exceeding the Zacks Consensus Estimate by 6.70%. Although this represents a slight decrease from the $561.29 million reported in the same period last year, La-Z-Boy has consistently beaten consensus revenue estimates in three of the last four quarters. This trend demonstrates the company's ability to maintain revenue growth amidst challenges in the furniture industry, which has been impacted by a largely stagnant housing market.

The company's strategic growth initiatives are evident in its operational achievements. For the fiscal 2024 fourth quarter, La-Z-Boy achieved consolidated delivered sales of $554 million, a significant 22% increase compared to the same quarter in the pre-pandemic year of 2019. Additionally, the company expanded its La-Z-Boy Furniture Galleries network by three stores, including the acquisition of two independent stores. These moves signal confidence in its business strategy and future growth prospects.

La-Z-Boy's financial metrics further underscore its growth and operational efficiency. With consolidated delivered sales of $2.05 billion for the full year and a robust $158 million in operating cash flow, the company demonstrates a strong balance sheet with $341 million in cash and no external debt. Moreover, La-Z-Boy's commitment to shareholder value is highlighted by its return of $85 million through share repurchases and dividends, along with a 10% increase in its prior quarterly dividend to $0.20 in the third quarter. These results position La-Z-Boy for continued success in the competitive furniture manufacturing and retail markets.

La-Z-Boy Shares Up 7% on Q4 Beat, Guidance Above Expectations

La-Z-Boy (NYSE:LZB) shares closed more than 7% higher on Wednesday following the company’s reported Q4 results, with EPS coming in at $1.07, significantly better than the Street estimate of $0.92. Quarterly revenue increased 32% year-over-year to $685 million, compared to the Street estimate of $664.91 million.

The company provided its Q1 revenue guidance, expecting it to range from $560 million to $575 million, above the Street estimate of $554.2 million.