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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. Basic financial performance shows slight declines, and Joybird's losses are concerning. However, strong cash reserves and no debt are positives. The market strategy involves expansion and investment, yet short-term margin pressure is expected due to new stores and supply chain rework. Shareholder return plans are balanced, but no new repurchase or dividend hikes were announced. The Q&A highlights uncertainties in consumer demand and non-core business performance. Overall, the sentiment is neutral, with no strong catalysts for significant stock price movement.
Retail segment delivered sales $207 million, up 2% year-over-year, driven primarily by new and acquired stores.
Retail adjusted operating margin 6.3%, down from 10.3% year-over-year, due to de-leverage in same-store sales and investment in new store openings.
Wholesale segment delivered sales $353 million, up 1% year-over-year, driven by growth in core North America La-Z-Boy Wholesale business and Casegoods business, offset by a significant customer transition in international wholesale business.
Wholesale adjusted operating margin 7.5%, up from 6.9% year-over-year, driven by lower warranty and marketing expenses and gross margin expansion in core North America La-Z-Boy Wholesale business.
Joybird delivered sales $28 million, down 20% year-over-year, with stronger performance in physical stores than online.
Joybird operating loss Increased year-over-year due to low delivered volume.
Consolidated sales $492 million, down 1% year-over-year, with growth in Retail and Wholesale segments offset by a decline in Joybird sales.
Consolidated GAAP operating income $22 million.
Consolidated adjusted operating income $23 million.
Consolidated GAAP operating margin 4.5%.
Consolidated adjusted operating margin 4.8%, with margin expansion in Wholesale offset by Retail margin compression due to fixed cost de-leverage and investment in new store openings.
Operating cash flow $36 million for the quarter.
Cash and no external debt $319 million.
Diluted earnings per share (GAAP) $0.44.
Diluted earnings per share (adjusted) $0.47.
Joybird physical store expansion: Opened 14th Joybird store in Mission Viejo, California, with plans for up to 4 new stores this fiscal year.
Reinvigorated brand identity: Launched a modernized Lazy Boy brand identity to increase brand relevance and reach a broader audience.
15-store acquisition in Southeast U.S.: Announced acquisition of a 15-store La-Z-Boy Furniture Galleries network in Florida, Georgia, and Tennessee, expected to add $40 million in incremental sales.
New strategic regional partner: Added Farmers Furniture, a 250-store retailer in the Southeast, to expand brand reach in rural markets.
Arizona distribution hub: Opened the first of three centralized hubs as part of a multiyear distribution transformation, expected to reduce distribution footprint by 30% and mileage by 20%.
Supply chain agility: Transformation to reduce reliance on third-party providers, improve inventory productivity, and double delivery radius from 75 to 150 miles.
Century Vision strategy: Focused on long-term shareholder value through retail expansion, supply chain transformation, and brand modernization.
Capital allocation shift: Increased focus on investments in business growth, including acquisitions and distribution transformation, while maintaining dividends and minimal share repurchases.
Consumer and Macroeconomic Challenges: The company faces an increasingly challenged consumer environment and macroeconomic conditions, which have affected store traffic and same-store sales in the Retail segment.
Joybird Sales Decline: Joybird business experienced a 20% decline in delivered sales for the first quarter, consistent with the drop in written sales in the previous quarter, and continues to face challenges in online sales.
Retail Margin Compression: Retail adjusted operating margin decreased due to fixed cost de-leverage and investments in new store openings, which take time to achieve profitability.
Distribution Transformation Costs: The multiyear project to transform the distribution network is expected to cause a modest drag on adjusted operating margins for the first two years due to transition inefficiencies.
Housing Market Impact: Depressed housing transactions, near 30-year lows, are exacerbating the challenges in consumer traffic and sales.
International Wholesale Business Transition: The international wholesale business is impacted by a significant customer transition that began in fiscal 2025, affecting sales and margins.
Supply Chain Costs: Increased supply chain costs in distribution and manufacturing operations have negatively impacted gross margins.
Promotional Activity Impact: Promotional activity on Casegoods products and accessories has contributed to a decrease in gross margins.
Revenue Projections: Fiscal second quarter sales are expected to be in the range of $510 million to $530 million.
Margin Projections: Adjusted operating margin for the fiscal second quarter is expected to be in the range of 4.5% to 6%. Over time, the distribution transformation project is expected to improve wholesale margins by 50 to 75 basis points, with savings beginning in year 3 and reaching full impact by year 4.
Capital Expenditures: Capital expenditures for fiscal 2026 are expected to be in the range of $90 million to $100 million, focusing on new store openings, remodels, distribution transformation, and manufacturing investments.
Retail Expansion: Approximately 15 new company-owned and independent La-Z-Boy Furniture Galleries stores are planned for fiscal 2026, with the majority being company-owned. Additionally, 3 to 4 new Joybird stores are expected to open.
Acquisition Impact: The acquisition of a 15-store network in the Southeast U.S. is expected to close in October, adding $40 million in incremental annual sales to the company.
Tax Rate: The tax rate for fiscal 2026 is expected to be in the range of 26% to 27%.
Dividends Paid: $9 million paid in dividends during the quarter.
Dividend Policy: Quarterly dividend and annual dividend increase are subject to regular Board approval.
Share Repurchases: 300,000 shares repurchased in the quarter, leaving 3.4 million shares available under the existing share repurchase authorization.
Capital Allocation: In fiscal 2025, capital allocation was tilted to shareholders. In fiscal 2026, it is expected to be more weighted to investments in the business, with minimal share repurchases for the balance of the year.
Long-term Capital Allocation Target: Reinvest 50% of operating cash flow back into the business and return 50% to shareholders in share repurchases and dividends.
The earnings call reveals a mixed sentiment. Basic financial performance shows stable EPS but declining margins. Product development is positive with new stores and partnerships, but offset by friction costs. Market strategy is cautious, focusing on existing partners and prudent expansion. Expenses are managed well, with no debt and cash reserves. Shareholder returns are positive with dividend increases. However, the Q&A highlights uncertainties in demand trends and vague management responses. The stock's small market cap suggests potential volatility, but overall, the sentiment is neutral due to balanced positive and negative factors.
The earnings call presents a mixed picture. Basic financial performance shows slight declines, and Joybird's losses are concerning. However, strong cash reserves and no debt are positives. The market strategy involves expansion and investment, yet short-term margin pressure is expected due to new stores and supply chain rework. Shareholder return plans are balanced, but no new repurchase or dividend hikes were announced. The Q&A highlights uncertainties in consumer demand and non-core business performance. Overall, the sentiment is neutral, with no strong catalysts for significant stock price movement.
The earnings call presents a mixed outlook. While there are positive elements like increased shareholder returns and a solid cash position, there are also concerns. Declines in same-store sales and macroeconomic uncertainties negatively impact sentiment. The Q&A reveals management's uncertainty about future pricing and tariff impacts, which could worry investors. The overall financial performance shows modest growth but is offset by competitive pressures and weak margins. Given the market cap, the stock is likely to see a neutral movement in response to these mixed signals.
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