(LZB) La-Z-Boy Blows Away Estimates With Quarterly Earnings Report

La-Z-Boy Inc. (LZB) reported fiscal third quarter 2010 net earnings per share of 19 cents and comprehensively surpassed the Zacks Consensus Estimate of 10 cents per share.

EPS in the prior year quarter was 21 cents, which, however, included 5 cents per share of anti-dumping duties. Reported EPS for the quarter includes 6 cents of tax benefit and 1 cent of anti-dumping duties.

Management said that though macroeconomic challenges continue to impact the business, the company is cautiously hopeful that the consumer is more confident to return to the marketplace.

Effective execution against the strategic objectives has been a major positive and management is encouraged by the improvement of the La-Z-Boy Furniture Galleries store network’s same-store sales.

Quarter Highlights

Sales declined 4.3% from prior year quarter to $291.9 million but edged higher from the Zacks Consensus Revenue Estimate of $291.0 million.

On a segment basis, the wholesale segments reported a decline in revenue while the retails managed to up the momentum.

Under the wholesale segments, the upholstery segment shed 3.9% year over year to $225.2 and casegoods segment sales declined 1.7% from prior year quarter to $35.4 million. Management reasoned weaker demand environment during the Fall selling season leading up to the holidays for the decline in the upholstery segment.

Retail sales, on the other hand, were up 9.2% on yearly basis to $44.1 million. Effective promotional plan, higher conversion and lower cost structure led to the improvement of the segment.

Operating margin for upholstery declined 2.9 percentage points from prior year quarter to 8.2%. However, operating margin for casegoods segment increased 3.9 percentage points to 4.7% and operating margin for the retails were (6.2%) versus (10.2%) in the comparable period last year.

Gross profit declined 9.7% from last year quarter to $88.3 million and operating income decreased 27.5% year over year to $10.0 million.

Cash from operating activities totaled $29.5 million, during the quarter, and La-Z-Boy exited the quarter with $109.6 million in cash and $89.4 million of revolving line of credit.

Looking Ahead

In the next quarter, which will have 14 weeks instead of 13 weeks, management believes the company is well positioned to capitalize on improved furniture spending trend. Management thinks the new marketing campaign will drive in more consumers to the dealer networks.

Further, it is expected that the changes in cost-structure will help the company drive growth and profitability. Management is also banking upon the consumer confidence reflected through the rebound in same-store sales for the quarter. Nonetheless, the management waits for the housing sector to strengthen and steady upswing in overall consumer confidence.


Estimates for the quarter, next quarter and for current and next year have been stable in the run up to the earnings release, with no analysts revising estimates. The full year Zacks Consensus Estimate for next year is 74 cents per share.

Peers for the company are Tempur Pedic International Inc. (TPX), Select Comfort Corporation (SCSS) and American Woodmark Corp. (AMWD).

We currently have a Zacks #3 Rank for La-Z-Boy, which translates into a Hold rating on short term basis. For long term we have a Neutral recommendation.

AMER WOODMARK (AMWD): Free Stock Analysis Report

LA-Z-BOY INC (LZB): Free Stock Analysis Report

SELECT COMFORT (SCSS): Free Stock Analysis Report

TEMPUR-PEDIC (TPX): Free Stock Analysis Report

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