La-Z-Boy Incorporated (NYSE: LZB) is a leading global producer of reclining chairs and the second-largest manufacturer/distributor of residential furniture in the United States. The company's iconic La-Z-Boy brand, along with its other furniture lines, including England, Kincaid, and Joybird, have made it a household name in the furniture industry.

Financials

In the fiscal year 2024, La-Z-Boy delivered impressive results, showcasing its ability to navigate the challenging macroeconomic environment. The company reported annual net income of $122,626,000 and annual revenue of $2,047,027,000, demonstrating its resilience and strong brand positioning. Additionally, the company generated annual operating cash flow of $158,127,000 and annual free cash flow of $104,576,000, further strengthening its financial position.

During the fourth quarter of fiscal 2024, La-Z-Boy reported consolidated delivered sales of $554 million, a 1% decrease compared to the prior-year period, which benefited from above-normal pandemic backlog deliveries. However, this sales result represented a 22% increase compared to the most recent pre-pandemic fourth quarter in fiscal 2019, highlighting the company's ability to adapt and capitalize on changing market dynamics.

Consolidated GAAP operating income for the fourth quarter decreased to $50 million, while non-GAAP operating income was $52 million, a decrease of 5% compared to the prior-year quarter. Consolidated GAAP operating margin was 9.1%, and non-GAAP operating margin was 9.4%, reflecting a 40 basis point decline compared to the previous year, primarily driven by lower gross margin from segment mix, partially offset by lower SG&A expenses.

Segment Performance

The company's Retail segment delivered sales of $228 million in the fourth quarter, a 6% decrease compared to the prior-year period, which benefited from higher deliveries of backlog. However, fourth quarter sales were 50% higher than the pre-pandemic fiscal 2019 fourth quarter, demonstrating the segment's resilience. Retail non-GAAP operating margin decreased to 14.2% compared to 15.5% in the prior-year quarter, as the increase in gross margin due to a more favorable product mix was more than offset by fixed cost de-leverage on lower delivered sales.

The Wholesale segment reported delivered sales of $392 million in the fourth quarter, a 1% decrease compared to the prior-year period. Growth in external wholesale sales, driven by the company's channel expansion strategy, was offset by decreases in freight revenue in comparison to the prior-year quarter, which included pandemic-related backlog deliveries, primarily to the company's own retail stores. Wholesale non-GAAP operating margin was 8.5% compared to 8.7% in the prior-year quarter, as unfavorable freight, product mix, and higher operating costs related to recovering lost third-quarter production were mostly offset by lower material costs and sourcing savings.

Joybird, the company's e-commerce brand, reported delivered sales of $37 million in the fourth quarter, roughly flat compared to the prior-year period, as sales trends have largely stabilized. Joybird continued to make meaningful progress on improving profitability in the quarter, with lower freight and warranty expenses, improved product mix, and higher return on advertising spending.

Full Fiscal Year 2024 Performance

For the full fiscal year 2024, La-Z-Boy's enterprise delivered sales were roughly flat at $2.05 billion when excluding $300 million of pandemic-related backlog deliveries that occurred in the prior fiscal year. On an unadjusted basis, delivered sales were down 13% compared to the prior year, with trends improving sequentially as the year progressed.

Consolidated GAAP operating income for the full fiscal year 2024 amounted to $151 million, and non-GAAP operating income was $159 million, a 29% decrease compared to the prior fiscal year. Consolidated GAAP operating margin was 7.4%, and non-GAAP operating margin was 7.8%, down 170 basis points compared to the previous year.

Outlook

Looking ahead, La-Z-Boy expects the industry to continue to be challenged, potentially declining by as much as 5% during the company's fiscal 2025. However, the company remains optimistic about its ability to outperform the market, consistent with its performance in fiscal 2024, which is expected to result in modest sales growth year-over-year for fiscal 2025.

To support its growth strategy, La-Z-Boy plans to open 12 to 15 new La-Z-Boy Furniture Gallery stores in fiscal 2025, skewed towards the second half of the year. The company also expects to continue its acquisition strategy, having completed the acquisition of a two-store independent Furniture Galleries network in Florida and signed an agreement to acquire another single-store independent dealer in the Midwest in the first quarter of fiscal 2025.

Strategic Vision

La-Z-Boy's Century Vision strategy, which aims to drive disproportionate growth and deliver consistent double-digit operating margins over the long term, remains a key focus. The company's initiatives to expand the La-Z-Boy brand reach, profitably grow the Joybird brand, and enhance its enterprise capabilities are all critical components of this strategic framework.

Conclusion

Despite the challenging macroeconomic environment, La-Z-Boy has demonstrated its ability to navigate headwinds and capitalize on opportunities. The company's strong brand recognition, vertically integrated business model, and strategic initiatives position it well to continue outperforming the industry and delivering value to its shareholders.