La-Z-Boy is opening new stores, despite expectations for 'volatile' furniture demand

By Bill Peters

CEO says store traffic hampered by higher interest rates, low housing turnover

Shares of La-Z-Boy Inc. rallied after hours on Monday after the maker of recliners and other furniture reported fourth-quarter results that topped expectations despite a "volatile" furniture industry hit by a largely frozen housing market.

The company also forecast a fiscal first-quarter sales range that was above Wall Street's expectations. And it said it expects "modest sales growth" for the fiscal year ahead, which concludes around the end of April, and that it plans to open 12 to 15 new furniture galleries over that period.

La-Z-Boy's stock (LZB) jumped 11% after hours. Shares are down 7.7% so far this year.

La-Z-Boy said it expected first-quarter sales of $475 million to $495 million. The midpoint of that range was above above FactSet forecasts for $476 million. The company said sales during its first quarter tend to ease, due to the summer season and a weeklong plant shutdown in July.

During its fourth quarter, the company reported net income of $40.3 million, or 91 cents a share, up from $34.6 million, or 79 cents a share, in the same quarter last year. Adjusted for items related to accounting charges and "supply-chain optimization," La-Z-Boy earned 95 cents a share.

Sales came in at $554 million.

The results were better than expected. Analysts polled by FactSet expected La-Z-Boy to report adjusted earnings per share of 70 cents, on $516.4 million in sales.

"The industry continues to grapple with higher-for-longer interest rates and housing turnover near 30-year lows negatively impacting store traffic," Chief Executive Melinda Whittington said in a statement.

She added later: "We expect industry fundamentals to remain volatile for the near term, but remain confident in our ability to outperform the market and gain share longer term. Our first quarter is off to a good start and we are encouraged by our solid Memorial Day results, as we believe our assortment and best-in-class motion offerings are resonating with consumers in the marketplace."

Analysts have tried to gauge what a potential recovery in furniture demand might look like, as weaker sales of existing homes lead to less demand for new sofas, chairs and other decor. Some analysts have said that recovery could start small, or be led by wealthier customers, or play out as people get used to higher interest rates and home prices.

Shares of higher-end furniture chain RH fell last week after the company reported a bigger-than-expected quarterly loss. However, RH (RH) is also trying to open new stores, and says it expects better demand in the months ahead.

On Monday, homebuilder Lennar Corp. (LEN) reported quarterly increases in orders and deliveries. Purchasers, management said, "remained responsive to increased sales incentives."

-Bill Peters

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06-17-24 1839ET

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