La-Z-Boy Incorporated (LZB Quick QuoteLZB - Free Report) reported better than expected fourth-quarter fiscal 2024 (ended Apr 27, 2024) results, with earnings and sales surpassing the Zacks Consensus Estimate.

The metrics declined on a year-over-year basis due to reduced spending on furniture and home furnishings, with overall store visits declining. Housing market activity slowed due to higher interest rates.

LZB reported its strongest execution to date, with record-high conversion rates and increasing average sales per customer. The company expects industry conditions to remain volatile in the near term but is confident in its ability to outperform competitors and expand its market share over time.

For the fiscal 2025, LZB expects the industry to face continued challenges, potentially declining by as much as 5%. Improved industry trends are anticipated later in the fiscal year, following expected interest rate cuts that may boost housing activity. Despite these challenges, LZB aims to outperform the industry in the fiscal 2025, with modest year-over-year sales growth supported by executing its Century Vision strategy. This includes opening 12-15 new La-Z-Boy Furniture Galleries stores, mainly in the second half of the fiscal year.

Quarter in Detail

La-Z-Boy reported adjusted earnings of 95 cents per share, beating the Zacks Consensus Estimate of 68 cents per share. However, the bottom line declined 4% from 99 cents per share reported a year ago.
 

Consolidated delivered sales of $554 million topped the consensus mark of $519 million by 6.7%. However, the metric dropped 1% from the prior-year quarter’s levels of $561 million.

Segment Details

Retail: Delivered sales fell 6% to $228 million from the prior year’s levels, which included the completion of pandemic-related backlog deliveries. However, the reported figures show a 50% increase from pre-pandemic fourth-quarter fiscal 2019 tally.

Written sales in the Retail segment (LZB's company-owned La-Z-Boy Furniture Galleries stores) increased by 1% year over year, driven by growth in acquired and new stores. This was more than compensated for lower same-store sales compared with the previous year’s levels.

Written same-store sales declined 5% year over year due to reduced foot traffic and a challenging economic environment, partially offset by improved conversion rates and increased design sales.

The segment's non-GAAP operating margin contracted 130 basis points (bps) year over year to 14.2%. Despite improved gross margin due to a favorable shift in product mix, LZB faced increased fixed costs due to lower delivered sales, which caused the downside.

Wholesale: Sales in the segment moved down 1% year over year to $392 million. The company witnessed improvements in wholesale unit volumes during the quarter, aided by the recovery from weather and related disruptions in January.

The segment's non-GAAP operating margin contracted 20 bps year over year to 8.5%.

Corporate & Other: Sales in the segment declined 2.4% year over year to $39 million. Under the segment, Joybird's written sales dropped 1% year over year, while delivered sales remained approximately unchanged year-over-year at $37 million, indicating that sales trends have largely stabilized.

Fiscal 2024 Highlights

For the year, the company reported earnings per share (EPS) of $2.98 versus $3.86 a year ago. Consolidated delivered sales also decreased 13% to $2 billion from $2.3 million reported in the prior year.

Non-GAAP operating income of $159 million declined from $223 million reported in the prior year. Non-GAAP operating margin decreased to 7.8% from the prior-year level of 9.5%.

Financials

As of Apr 27, 2024, the company had $341.1 million in liquidity. It had $341.1 million of cash and equivalents at the fiscal 2024 end, down from $343.4 million in the year-ago period.

Cash from operations for the reported quarter totaled $53 million compared with $78 million in the prior-year period. The same for fiscal 2024 amounted to $158 million compared with $205 million in the fiscal 2023. Capital expenditures totaled $54 million in the fiscal 2024.

Q1 Fiscal 2025 Guidance

For the first quarter of fiscal 2025, the company anticipates delivered sales to range between $475 million and $495 million, compared with $482 million reported in the year-ago quarter.

The non-GAAP operating margin is expected to fall within the range of 6% to 7%, compared with 7% reported in the year-ago quarter.

It is important to note that LZB's first quarter generally registers the lowest sales and margins in the fiscal year, attributed to seasonal declines in industry sales and the company's annual week-long plant shutdown in July.

Zacks Rank & Key Picks

LaZBoy currently carries a Zacks Rank #3 (Hold).

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