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LA-Z-BOY INC (LZB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered sales rose to $0.521B (+2% YoY) with GAAP and non-GAAP diluted EPS of $0.71; operating margin was 7.4% GAAP and 7.5% non-GAAP, reflecting continued Retail strength and disciplined execution .
  • Results exceeded company guidance on both sales and non-GAAP operating margin, driven by strong Labor Day traffic and conversion, with Retail delivered sales +3% and written sales +6% .
  • Near-term headwinds persist in casegoods and international wholesale; management guided Q3 sales to $0.505–$0.525B and non-GAAP operating margin to 6–7%, citing holiday downtime and DFS U.K. ramp timing .
  • Board raised the quarterly dividend 10% to $0.22, highlighting balance sheet strength ($303M cash, no external debt) and shareholder return commitment .
  • Wall Street consensus estimates from S&P Global were unavailable due to API limit; estimate comparisons are not provided (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • Retail segment performance: delivered sales +3% to $222M; written sales +6% with improved conversion, ticket, and design sales, underscoring robust store execution and product mix benefits .
  • Joybird turnaround: delivered sales +20% to $39M and breakeven operating margin, supported by favorable mix and fixed-cost leverage; management now exploring prudent store expansion .
  • Strategy execution: Century Vision progressing with store openings/acquisitions and the Long Live the Lazy campaign lowering average consumer age by 2 years, expanding brand reach .
    • Quote: “Our second quarter results demonstrate the continued progress we are making against our strategic pillars… steady results against persistently weak consumer demand” — CEO Melinda Whittington .

What Went Wrong

  • Wholesale non-GAAP margin fell to 6.8% (from 7.7% YoY) due to casegoods demand/macro challenges and fixed-cost deleverage in international wholesale amid a temporary customer disruption .
  • Consolidated non-GAAP operating margin decreased 40 bps YoY to 7.5% despite sales growth, reflecting the same casegoods/international dynamics .
  • Same-store sales: written comps were -1% in both company-owned and total Galleries networks, illustrating persistent industry traffic softness despite holiday peaks .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ4 FY2024 (oldest)Q1 FY2025Q2 FY2025 (newest)
Sales ($USD Billions)$0.554 $0.496 $0.521
GAAP Operating Margin (%)9.1% 6.5% 7.4%
Non-GAAP Operating Margin (%)9.4% 6.6% 7.5%
GAAP Diluted EPS ($)$0.91 $0.61 $0.71
Non-GAAP Diluted EPS ($)$0.95 $0.62 $0.71

Q2 FY2025 vs Q2 FY2024 (YoY)

MetricQ2 FY2024Q2 FY2025YoY Change
Sales ($USD Billions)$0.511 $0.521 +2%
GAAP Operating Margin (%)6.6% 7.4% +80 bps
Non-GAAP Operating Margin (%)7.9% 7.5% -40 bps
GAAP Diluted EPS ($)$0.63 $0.71 +13%
Non-GAAP Diluted EPS ($)$0.74 $0.71 -4%

Segment Breakdown (as reported)

SegmentQ4 FY2024 Sales ($MM)Q1 FY2025 Sales ($MM)Q2 FY2025 Sales ($MM)Q4 FY2024 Non-GAAP Op Margin (%)Q1 FY2025 Non-GAAP Op Margin (%)Q2 FY2025 Non-GAAP Op Margin (%)
Wholesale$392.461 $350.900 $363.897 8.5% 6.9% 6.8%
Retail$227.878 $202.370 $221.564 14.2% 10.3% 12.6%
Corporate & Other$39.344 $38.708 $42.087 N/M N/M N/M

KPIs

KPIQ1 FY2025Q2 FY2025
Retail written sales YoY+4% +6%
Retail written same-store sales YoY-3% -1%
Joybird delivered sales ($MM)$35 (−3% YoY) $39 (+20% YoY)
Cash & equivalents ($MM)$342 $303
Operating cash flow ($MM)$52 $16 (quarter); $68 YTD

Results vs Guidance and Estimates

ComparisonQ2 Company Guidance (from Aug release)Q2 ActualVariance
Sales ($MM)$495–$515 $521 Beat
Non-GAAP Op Margin (%)6–7 7.5 Beat

Note: S&P Global Wall Street consensus estimates were unavailable due to an API limit; estimate comparisons are not provided (see Estimates Context) [GetEstimates error].

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales ($MM)Q3 FY2025N/A$505–$525 New
Non-GAAP Operating Margin (%)Q3 FY2025N/A6–7 New
Effective Tax Rate (%)FY2025N/A25.5–26.5 New
Purchase Accounting Adj. (EPS)FY2025N/A$0.01–$0.03 New
Capital Expenditures ($MM)FY2025N/A$70–$80 New
Share RepurchasesFY2025N/AContinue at pre-COVID dollar levels (macro permitting) New
Dividend per Quarter ($)Ongoing$0.20 (Aug 2024) $0.22 (Nov 2024) Raised 10%

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024 and Q1 FY2025)Current Period (Q2 FY2025)Trend
Supply chain agilityInvestments in manufacturing/distribution; recovery from Jan weather; strong speed-to-delivery positioning Agility improvements and operational focus cited as drivers of beating guidance; holiday plant downtime expected to pressure Q3 margins Improving agility; seasonal downtime
Macro/trafficIndustry depressed traffic; housing turnover low; cautious outlook Continued soft demand; holiday-driven traffic spikes; outperforming industry Persistently soft; company outperformance
Retail executionConversion, ticket, design sales at highs; store growth Further YoY improvements; written +6%, delivered +3%; expansion to 193 stores Sustained strength
Product performanceBest-in-class motion/recliner offerings resonating Focus on reclining/motion; modern styles, functionality On-trend innovation
International wholesaleStable; no major itemsTemporary customer disruption; DFS U.K. exclusive partnership ramping in Q4 Transition; ramp ahead
CasegoodsMargin pressure in Q1 Demand/macro headwinds persist; margin drag Ongoing headwind
Marketing/BrandLong Live the Lazy campaign driving awareness Lower average consumer age by 2 years; broadening appeal Positive brand momentum
Tariffs/regulatoryNot highlightedLimited exposure vs peers given NA manufacturing; costs historically passed through via surcharges Manageable risk

Management Commentary

  • Strategic posture: “We were pleased to deliver a second consecutive quarter of sales growth… The combination of our iconic brand, strong product portfolio particularly in reclining and motion furniture, and our talented team again produced steady results against persistently weak consumer demand.” — CEO Melinda Whittington .
  • Channel/partnerships: DFS exclusive partnership in U.K./Ireland to carry La-Z-Boy reclining furniture; expected sales acceleration in Q4 as rollout completes .
  • Retail expansion: Opened 3 new company-owned stores; acquired 2 in Florida; agreement to acquire 2-store Midwest dealer (closing in Q3) .
  • Cash returns and balance sheet: $303M cash, no external debt; $28M returned in Q2; dividend raised to $0.22 per quarter .
  • Margin drivers: Core North America La-Z-Boy branded wholesale margins increased; consolidated non-GAAP margin pressured by casegoods and international mix .

Q&A Highlights

  • Wholesale margin compression: Roughly half of the YoY step-down due to international transition (SCS to DFS) and half due to casegoods headwinds; core NA branded margins up QoQ .
  • Manufacturing efficiencies: Tracking toward 50–60 bps margin improvement by early FY2026 from footprint changes and plant efficiencies .
  • Dealer sentiment: Cautious industry outlook, but strong reception to renovated High Point showroom and new product intros; “flight to safety” favors La-Z-Boy’s financial strength and NA footprint .
  • Inventory: Up ~8% YoY was planned to ensure materials availability and in-stock levels through peak season and ahead of Lunar New Year supply closures .
  • Tariffs: Relative advantage given NA manufacturing; prior tariff costs largely passed through to customers via surcharges; maintaining agility .
  • Cash balance philosophy: Long-term target in low-$200M range as mix shifts more to Retail and with ongoing capex/store investments; glide path via investments and repurchases .

Estimates Context

  • S&P Global Wall Street consensus data for LZB was unavailable due to an API rate limit at the time of analysis; as a result, no consensus comparisons are provided for Q2 FY2025 or forward periods [GetEstimates error].
  • Implication: While company guidance was exceeded (sales and non-GAAP margin), formal estimate revisions cannot be quantified here; investors should watch for sell-side updates reflecting stronger-than-guided Q2 and cautious Q3 margin range .

Key Takeaways for Investors

  • Execution-led outperformance: Q2 beat on both sales and non-GAAP margin versus company guidance; Retail converts traffic into higher tickets/design sales, supporting resilience despite soft industry demand .
  • Near-term margin pressure: Expect Q3 margin compression (6–7%) due to plant downtime, casegoods weakness, and DFS ramp timing; this is seasonal/transitionary rather than structural .
  • Structural brand and channel gains: Century Vision is expanding company-owned Retail (now 193 stores), deepening major dealer partnerships, and broadening consumer demographics via Long Live the Lazy, underpinning share gains .
  • International pivot: DFS exclusive partnership should begin contributing more meaningfully in Q4; monitor international wholesale mix recovery and casegoods trajectory .
  • Balance sheet and capital returns: $303M cash, no debt, continued buybacks, and a 10% dividend increase signal confidence; capex focused on store growth and remodels sustains long-term unit economics .
  • Joybird stabilization: Delivered sales +20% and breakeven margin indicate successful optimization; prudent store expansion could add profitable growth lever over time .
  • Watch catalysts: Holiday performance, DFS rollout progress, casegoods demand normalization, and continued Retail same-store trends will shape near-term stock narrative .