La-Z-Boy Incorporated (NYSE:LZB) Q2 2018 Earnings Conference Call Transcript

Nov 30, 2017 • 08:30 am ET


La-Z-Boy Incorporated (NYSE:LZB) Q2 2018 Earnings Conference Call Transcript


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Greetings and welcome to the La-Z-Boy's Fiscal 2018 Second Quarter Results Conference Call. At this time, all participants are in a listen-only-mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Kathy Liebmann, Director of IR and Corporate Communications. Please go ahead, Ms. Liebmann.

Kathy Liebmann

Thank you, Rob. Good morning and thank you for joining us to discuss our fiscal 2018 second quarter results. With us today are Kurt Darrow, La-Z-Boy's Chairman, President and CEO; and Mike Riccio, our CFO.

Kurt will begin this morning's call and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions. A telephone replay of the call will be available for one-week beginning this afternoon. Slides will accompany this presentation and are available for viewing through our webcast link. These regular quarterly investor conference calls are one of La-Z-Boy's primary vehicles to communicate with investors about the Company's current operations and future prospects.

(Forward-Looking Cautionary Statements)

And with that, let me turn over the call to Kurt Darrow, La-Z-Boy's Chairman, President, and CEO. Kurt?

Kurt Darrow

Thank you, Kathy, and good morning, everyone. Yesterday afternoon, we reported our results for the fiscal 2018 second quarter. We are pleased with our performance, particularly in light of the headwinds we faced from raw material pressures and the hurricanes. For the quarter, we posted a 4.4% sales increase. Written same-store sales for the La-Z-Boy Furniture Galleries network increased for the third consecutive quarter, and we generated $32 million in cash from operating activities, an increase of 73% over the prior year quarter.

Also, we returned $25 million to shareholders through dividends and share purchases, buying back almost 730,000 shares over the course of the quarter. And yesterday, our Board of Directors voted to increase our quarterly dividend to shareholders to $0.12 per share, representing a 9% increase. I feel positive about where and how our Company is positioned in the marketplace as we move into the back half of our fiscal year, which is typically our strongest in terms of sales and earnings.

Now let me take you through a review of our three operating segments for the quarter. First, upholstery. For the quarter, sales in the upholstery segment increased 3% to $305 million and the segment's operating margin declined to 11% from 12.9% in last year's second quarter, primarily stemming from increases in raw material prices that negatively impact our gross margin by 0.7 percentage points.

For the past 6 months or so, the industry has been facing cost input pressures. For us, we have seen large run-ups in three of our key components; steel, poly and lumber. We passed through the additional costs with an across-the-broad price increase that we announced to customers at the October High Point Market. The price increase goes into effect on incoming orders tomorrow, December 1, but generally