La-Z-Boy Incorporated (LZB Quick QuoteLZB - Free Report) posted decent second-quarter fiscal 2025 (ended Oct. 26, 2024) results, with earnings and sales beating the Zacks Consensus Estimate.

The top line increased year over year, driven by higher delivered volume in the Retail segment, supported by growth from new and acquired stores. Written sales trends also remained solid, with the strongest performance during the Labor Day period. This was fueled by increased consumer traffic and strong in-store execution.

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However, the industry faces challenges, with home-related spending impacted by high mortgage rates and limited housing affordability and availability.

While short-term market disruptions may continue to impact the fiscal year, LZB is well-positioned to benefit when industry conditions improve. Through the Century Vision strategy, the company is focused on expanding its core Retail segment by enhancing in-store execution, opening new stores and acquiring independent La-Z-Boy Furniture Galleries stores. It is aiming for superior returns in the long term.

LZB’s Q2 Quarter in Details

La-Z-Boy reported adjusted earnings of 71 cents per share, beating the Zacks Consensus Estimate of 65 cents. However, the bottom line declined 4.1% from 74 cents reported a year ago.

Consolidated delivered sales amounted to $521 million, beating the consensus mark of $506.9 million by 2.8%. The metric increased 2% from the prior-year quarter’s levels of $511.4 million.

In the said quarter, the non-GAAP operating margin was 7.5%, down 90 basis points (bps) year over year.

Segment Details of LZB

Retail: Delivered sales increased 3% to $222 million from the prior year’s levels.

Written sales in the Retail segment (LZB's company-owned La-Z-Boy Furniture Galleries stores) increased 6% 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 1% year over year due to reduced foot traffic and a challenging economic environment, partially offset by improved conversion rates.

The segment's non-GAAP operating margin contracted 40 bps year over year to 12.6%. This downside was caused by higher selling expenses and fixed costs. These increases were due to the company's long-term strategy to grow its Retail business through new and acquired stores.

Wholesale: Sales in the segment were roughly flat year over year at $364 million. Higher sales in the Retail segment largely offset the decline in delivered sales within the international wholesale business.

The segment's non-GAAP operating margin contracted 90 bps year over year to 6.8%. This downside was due to lower demand and macroeconomic challenges in the casegoods import business. Additionally, fixed cost deleverage occurred from reduced sales in the international wholesale business, caused by a temporary customer disruption added to the downside.

Corporate & Other: Sales in the segment increased 16.2% year over year to $42 million. Under the segment, Joybird's written sales rose 1% year over year and delivered sales increased 20% year over year to $39 million.

LZB’s Financials

As of Oct. 26, 2024, the company had $303.1 million of cash and equivalents, down from $341.1 million at the fiscal 2024-end.

Net cash from operations for the reported quarter totaled $16 million compared with $31 million in the prior-year period.

LZB’s Q3 Fiscal 2025 Guidance

For third-quarter fiscal 2025, the company anticipates delivered sales to be between $505 million and $525 million. The estimated figure indicates an increase of 1-5% year over year from $500.4 million reported in the year-ago quarter.

The non-GAAP operating margin is expected to be within the range of 6-7% compared with 6.6% reported in the year-ago quarter.

Zacks Rank of LZB

La-Z-Boy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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