La-Z-Boy Incorporated (NYSE:LZB) Q4 2019 Earnings Conference Call - Final Transcript

Jun 19, 2019 • 08:30 am ET

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La-Z-Boy Incorporated (NYSE:LZB) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Melinda Whittington

$60 million, including plant upgrades and improvements to several of our retail stores. Regarding tariffs, the environment remains volatile.

As noted earlier, we expect to continue to pass through tariffs as a surcharge resulting in higher selling prices. And we believe with our supply chain structure, we are competitively well positioned against our peers. However, with the broader industry having a negative start to calendar 2019, we may see an impact on demand elasticity with increased tariffs.

Regarding seasonality, our first quarter is typically the weakest in terms of sales and earnings across our businesses due to a general slowdown throughout the furniture industry related to the summer period. As a result, the majority of our manufacturing facility is closed for a week in July for vacation and maintenance. And with lower volume during that period, in addition to the one week without production and shipments, we historically convert at a lower rate during the first quarter.

Further into the year, our changing consolidated sales mix may also affect seasonality of the consolidated company. For our Retail segment and Joybird, the third quarter is typically the highest volume sales quarter, while the fourth quarter is typically our strongest on our wholesale Upholstery businesses. As the Retail and Joybird businesses grow as a percentage of our consolidated sales, third quarter sales could outpace or be level with fourth quarter for the consolidated company in future years.

Regarding SG&A cost trends, in addition to normal inflationary pressures, we would again note the impact of changes in our consolidated business mix, with Retail growing and the acquisition of Joybird, which will again drive an approximate 200 basis point to 250 basis point increase in SG&A for the first quarter versus fiscal year's -- versus last year's fiscal first quarter, when we did not yet own Joybird or the Arizona retail businesses.

We estimate this mix impact for the full year to be an SG&A increase in the range of 100 basis points to 150 basis points. While on the topic of SG&A, I would note that we have more heavily front-loaded advertising investment in the year to support the first quarter launch of our campaign featuring Kristen Bell in fiscal 2020.

And on quarterly results more broadly, I would remind you that we anticipate Joybird becoming slightly profitable in the back half of fiscal 2020, excluding purchase accounting adjustments. For comparability, let me note that in fiscal 2019, first quarter results included a $0.03 per share benefit from currency and employee benefits changes resulted in one-time $0.07 per share benefit to Q3, offset partially with a $0.03 additional charge in Q4. All of these items being in 2019 and one-time in nature.

And finally, we will continue with our non-GAAP presentation as we go into 2020, excluding purchase accounting adjustments. For acquisitions to date, adjustments are anticipated to be in the range of $0.08 to $0.10 per share for the fiscal year, plus any effect from reevaluation of the contingent consideration liability for