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

Jun 19, 2019 • 08:30 am ET

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

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Presentation
Executive
Kurt L. Darrow

purchases. And with a strong financial position, we are able to make strategic investments to drive growth across the enterprise, fuel new ventures to tap into new markets and weather macroeconomic changes.

Now, let's turn the discussion over to the fourth quarter. Consolidated sales for the quarter increased 8%, driven by excellent results for our company-owned Retail segment, including both organic growth and acquisitions including the North Dartmouth store in Massachusetts and nine Arizona stores.

Joybird also fueled our sales performance. However, as indicated in the early June announcement, sales declined in the wholesale Upholstery and Casegoods segments in the fourth quarter, consistent with a slow start to the calendar year across the North America retail home furnishings landscape and with the lower volume, translating to a direct impact to earnings given our fixed cost structure. As noted in our pre-release, challenges in the Canadian market had a disproportionate impact to our sales for the quarter.

Now onto the wholesale business. In our Upholstery segment, while the full year showed positive growth, sales for the fourth quarter declined 1.2% versus last year's quarter, consistent with the declines we have seen across the industry. While our US La-Z-Boy wholesale business was up slightly, we saw weakness in Canada as well as with other international and non-branded businesses.

GAAP accounting for the quarter was 11.5%, and non-GAAP operating margin was 11.6% versus 12.8% in the prior year. With the declines versus the prior year's quarter reflecting a change in product mix to more power products and our duo line, as well as the fixed cost impact from a decrease in units.

But all in all, we delivered a strong margin for the quarter, up sequentially from the third quarter even on lower sales. In the Casegoods segment, which also grew sales for the year, Q4 sales decreased 12.9% versus the prior year, consistent with industry trends.

At 9.1%, we essentially held operating margin down volume versus last year's quarter, highlighting our agile supply chain. Our Casegood team continues to increase its presence on retail floors, positioning us to capture future opportunities.

With respect to our brand platform, we are investing in the strong brand equity of La-Z-Boy to further solidify our standing in the marketplace. As you know in May, we introduced Kristen Bell as our new brand ambassador and relaunched the Live Life Comfortably campaign across multiple channels, including TV, digital, print, La-Z-Boy social and web platforms and through the La-Z-Boy Furniture Galleries stores.

We are up spending on the brand platform in the first quarter, along with our independent La-Z-Boy Furniture Gallery dealers who are contributing to this investment. We are delighted with the initial consumer response, with Kristen bringing in new energy to La-Z-Boy with her vibrant personality, warmth, style, quick wit and a focus on home and the family.

With a robust social media following, particularly among younger consumers, Kristen is already bringing a new eyes to the brand as she highlights the wide variety of comfortable, stylish