Key Highlights
- Fourth quarter adjusted earnings per share reached $1.26, demolishing Wall Street’s $0.82 projection by $0.44
- Quarterly revenue totaled $570 million, essentially matching analyst expectations of $569 million
- Shares soared up to 17% during pre-market hours following a 7.2% decline the previous session
- Adjusted operating margin grew to 9.9%, up from 9.4% in the same quarter last year
- First quarter outlook projects sales between $490 million and $510 million, with the middle range topping Street estimates of $495 million
Shares of La-Z-Boy (LZB) experienced a dramatic rally during Wednesday’s pre-market session, jumping as high as 17% to reach $40.69 following the furniture company’s impressive fourth quarter performance that significantly exceeded analyst projections.
The company delivered adjusted earnings of $1.26 per share, substantially surpassing the Street’s $0.82 consensus forecast. Quarterly revenue totaled $570 million, approximately aligned with analyst expectations of $569 million.
The impressive earnings report came on the heels of a difficult trading session. LZB shares had declined 7.2% on Tuesday, making Wednesday’s surge partially a rebound from recent weakness. Through Tuesday’s close, the stock remained down approximately 5.9% for the year.
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Bradley B. Thomas, an analyst at KeyBanc who maintains an Overweight rating and $46 price objective on LZB, expressed relief at the results following previous concerns about adverse weather conditions impacting sales performance.
“Encouragingly, total sales were in line with guidance and essentially in line with consensus,” Thomas noted. “Recall, management previously noted that early February trends were impacted by weather events.”
CEO Melinda D. Whittington conveyed optimism about the company’s direction. “We continue to drive our own momentum and are playing offense, led by our retail business expansion,” she stated.
Profitability Improvement and Retail Momentum
The company’s adjusted operating margin climbed to 9.9% from 9.4% recorded in the year-ago period. On a GAAP basis, operating margin rose 200 basis points to reach 7.2%.
The retail division delivered strong performance, with written sales climbing 11% and delivered sales increasing 9% to $270 million, propelled by newly acquired locations and fresh store openings. While same-store sales decreased 2%, this represented sequential improvement from the previous quarter.
La-Z-Boy currently operates 230 company-owned retail locations throughout North America, accounting for 61% of its total 378-store network. This expansion represents a strategic initiative as the company continues acquiring independent dealer operations to strengthen its direct retail presence.
Operational Restructuring Concluded
The furniture maker finalized its withdrawal from the American Drew and Kincaid wholesale casegoods operations in May. Additionally, the company wrapped up a supply chain reorganization in the United Kingdom during April. These actions were part of a comprehensive plan to optimize business operations.
Looking ahead to the first quarter, management projects sales ranging from $490 million to $510 million. The $500 million midpoint marginally exceeds the $495 million consensus estimate from Wall Street analysts.
For Q1, adjusted operating margin is anticipated to fall between 4.0% and 5.5%. Management acknowledged that the first quarter typically represents the company’s softest period due to seasonal dynamics and a scheduled annual manufacturing facility shutdown.
Futures contracts for the S&P 500 were trading 0.1% higher ahead of Wednesday’s market opening.
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