Executive Summary

Q2 FY26 revenue was $522.5M (+0.3% YoY), GAAP EPS $0.70 and adjusted EPS $0.71; Wholesale margin expanded while Retail margin deleveraged on lower delivered same-store sales and new store investment .
Results beat Wall Street: revenue $522.5M vs $517.6M consensus (+$4.9M); adjusted EPS $0.71 vs $0.54 consensus (+$0.17). Management noted adjusted operating margin exceeded their internal expectations .
Strategic actions advance Century Vision: completed 15-store Southeast acquisition (~$80M annual Retail sales; ~$40M net to enterprise), announced exit of Kincaid/American Drew casegoods and Kincaid upholstery, and proposed closure of U.K. manufacturing; combined initiatives expected to reduce sales by ~$30M net and lift enterprise adjusted operating margin by 75–100 bps when substantially complete by year-end .
Q3 FY26 outlook: sales $525–$545M (+1–4% YoY) and adjusted operating margin 5.0–6.5% reflecting portfolio/supply-chain “friction” costs and a cautious macro stance; quarterly dividend raised 10% to $0.242 (from $0.22) .

(Estimates marked with * are from S&P Global consensus.)

What Went Well and What Went Wrong

What Went Well
- Wholesale drove growth (+2% sales) and margin expansion (adj. 8.1% vs 6.8% YoY), aided by a 160 bps warranty expense benefit from changed dealer warranty arrangements and improved operating trends .
- Retail written sales +4% with sequential same-store improvement (SSS -2% YoY), opening five new stores in the quarter (15 in last 12 months) as Century Vision execution continues; October saw positive written SSS .
- Cash generation and capital discipline: $50M operating cash flow in Q2 (triple YoY), $339M cash, no debt; dividend raised 10%, fifth consecutive year of double-digit increases .
- Management quote: “We were pleased to deliver modest sales growth… and again delivered margin expansion… continuing to create our own momentum in what remains a choppy landscape.” — CEO Melinda Whittington .
What Went Wrong
- Retail margin deleverage: Retail adjusted operating margin fell to 10.7% (from 12.6%) on fixed cost deleverage from lower delivered same-store sales and new store investments .
- Joybird softness: delivered sales down 10% to $35M on lower delivered volume; operating loss increased on deleverage (though written sales +1% sequentially improved) .
- Macro/tariffs/promotions: Consumer environment remains choppy; November trends mixed; nominal price actions taken to offset tariff changes; competitive environment showed sharper traffic-driving price points around Labor Day .

Financial Results

Metric	Q4 FY25	Q1 FY26	Q2 FY26
Revenue ($M)	$570.9	$492.2	$522.5
GAAP Diluted EPS ($)	$0.36	$0.44	$0.70
Adjusted Diluted EPS ($)	$0.92	$0.47	$0.71
GAAP Operating Margin (%)	5.2%	4.5%	6.9%
Adjusted Operating Margin (%)	9.4%	4.8%	7.1%
Operating Income ($M)	$29.5	$22.0	$36.2
Operating Cash Flow ($M)	$62.0	$36.3	$50.0
Consensus Revenue ($M)*	—	—	517.6*
Consensus EPS ($)*	—	—	0.54*
Actual vs Est Revenue ($M)*	—	—	+4.9*
Actual vs Est EPS ($)*	—	—	+0.17*

Segment performance and key line items:

Segment/KPI	Q4 FY25	Q1 FY26	Q2 FY26
Wholesale Sales ($M)	$402.0	$353.0	$369.4
Wholesale Adjusted Op Margin (%)	8.5%	7.5%	8.1%
Retail Sales ($M)	$246.8	$207.2	$222.0
Retail Adjusted Op Margin (%)	13.1%	6.3%	10.7%
Corporate & Other Sales ($M)	$39.0	$31.2	$38.7
Joybird Delivered Sales ($M)	$36.0	$28.0	$35.0
Corporate & Other Op Income (Loss) ($M)	$(13.0)	$(16.3)	$(16.7)

KPIs and operating drivers:

KPI	Q1 FY26	Q2 FY26
Retail Written Sales YoY	+5%	+4%
Retail Written Same-Store Sales YoY	-4%	-2% (sequential improvement)
Company-Owned Stores Opened/Closed	+2 opened	5 opened / 3 closed
DC Consolidation Progress	West Coast hub transition completed	2 more DCs consolidated
Cash & Equivalents ($M)	$318.5	$338.5
Operating Cash Flow ($M)	$36.3	$50.0
Dividend per Share (Quarterly)	$0.22	$0.242

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales ($M)	Q3 FY26	N/A	$525–$545	—
Adjusted Operating Margin (%)	Q3 FY26	N/A	5.0–6.5	—
Capital Expenditures ($M)	FY26	N/A	$90–$100	—
Effective Tax Rate (%)	FY26	N/A	26–27	—
Dividend per Share (Quarterly)	Ongoing	$0.22	$0.242	Raised 10%
Sales ($M)	Q2 FY26	$510–$530 (given on 8/19)	—	Superseded by actuals: $522.5

Notes: Management cited “friction costs” from portfolio exits and supply-chain transformation weighing on near-term margins in Q3 outlook .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY25, Q1 FY26)	Current Period (Q2 FY26)	Trend
Distribution & Home Delivery Transformation	Initiated multi-year redesign; efficiencies highlighted in Q4 FY25 . Arizona DC transition to West Coast hub completed in Q1 .	Consolidated 2 more DCs; benefits expected: ~30% warehouse sq ft reduction, ~20% mileage reduction, doubled delivery radius; 50–75 bps Wholesale margin benefit when complete .	Improving execution
Tariffs/Pricing	Q4 noted incremental tariff expenses; input cost relief from freight/sourcing .	Nominal pricing rounds to offset sector tariffs; positioned with ~90% U.S. production; expect coverage of Jan 1 232 changes .	Managed risk, stable
Retail Footprint Expansion	Q4: company-owned stores to 203 (55% of network) . Q1: +2 stores; announced 15-store acquisition .	Closed 15-store Southeast acquisition; 5 opened/3 closed; company-owned now 222 and ~60% of network; targeting >400 stores .	Expanding
Portfolio Optimization	Q4: U.K. goodwill impairment; supply-chain actions . Q1: evaluating alternatives for non-core .	Exiting Kincaid/American Drew casegoods and Kincaid upholstery; proposed U.K. manufacturing closure; realigned leadership; net sales -$30M, margin +75–100 bps once done .	Margin accretive post-transition
Joybird Trajectory	Q4: written -21%, delivered -2% . Q1: written -14%, delivered -20% .	Written +1% (sequential improvement), delivered -10% to $35M .	Mixed but improving written
Channel Partnerships	Expanding brand reach in Wholesale .	Added Living Spaces; launched on Costco floors (~350) and Costco.com; added Farmer’s Home Furniture in Q1 .	Broadening reach
Promotional Intensity	—	Noted sharper traffic-driving price points at Labor Day; value-conscious consumer focus .	Elevated promos

Management Commentary

“We were pleased to deliver modest sales growth, particularly in our Wholesale segment where we also again delivered margin expansion, continuing to create our own momentum in what remains a choppy landscape.” — CEO Melinda Whittington .
“Our Century Vision strategy to grow our Retail store footprint and expand brand reach is working and positions us to disproportionately benefit when overall industry volumes rebound.” — CEO .
“We expect the going annual impact… to be an approximate $30 million net sales decrease and a significant adjusted operating margin improvement of 75–100 basis points to the entire enterprise.” — CFO Taylor Luebke .
“Our pricing has been relatively nominal, single-digit… we feel really good and well positioned with our 90% of our product made in the U.S.” — CFO on tariffs/pricing .
“Adjusted operating margin… exceeded our expectations.” — CEO .

Q&A Highlights

Tariffs and pricing: Management executed nominal pricing and sourcing adjustments to offset expected Jan 1 Section 232 changes; positioned with ~90% U.S. production to mitigate exposure .
Strategic actions impact: Net effect of +$40M sales from the 15-store acquisition and -$70M from non-core exits; expected 75–100 bps enterprise margin uplift post completion .
Promotional landscape: Deeper, attention-getting price points at big events (e.g., Labor Day) to drive traffic; balancing value focus with strong design-ticket upsell (leather, power) .
Inventory/working capital: Inventory down YoY on improved management; stronger working capital and customer deposits supported $50M operating cash flow .
Retail network strategy: Targeting >400 stores over time; continued cadence of new stores and potential dealer acquisitions; rebranding rollout proceeding prudently .

Estimates Context

Q2 FY26 consensus: revenue $517.6M*, EPS $0.54* (3 estimates each). Actuals: revenue $522.5M, adjusted EPS $0.71; beat revenue by ~$4.9M and EPS by $0.17* .
Implications: Near-term estimate revisions may reflect wholesale margin resilience (warranty arrangement benefit), tempered by guided Q3 adjusted operating margin of 5.0–6.5% due to transition “friction” costs .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Quality beat vs. consensus on both revenue and EPS, with Wholesale margin expansion offsetting Retail deleverage; adjusted operating margin exceeded internal expectations—a positive setup into holiday despite choppy demand .
Strategic portfolio simplification (non-core exits, U.K. manufacturing closure) is margin accretive (75–100 bps) and focuses capital on core North American upholstery and owned Retail footprint .
Distribution/home delivery redesign provides medium-term structural tailwinds (network efficiency and margin) though Q3 will absorb transition friction; watch for execution milestones and margin flow-through .
Retail footprint expansion and channel additions (Living Spaces, Costco) broaden brand reach; acquisition-driven mix should support sales durability pending macro recovery .
Joybird is stabilizing in stores (written +1%) but delivered sales remain weak; monitor trajectory as omni-channel strategy matures .
Strong balance sheet (no debt, $339M cash) and cash generation support reinvestment (CapEx $90–$100M FY26) and shareholder returns (dividend +10%) .
Near-term trading: Positive on beat and dividend raise; however, guided Q3 margin compression from “friction” costs could cap multiple expansion short term—focus on cadence of DC consolidation, portfolio exit timing, and Retail SSS trends .

LA-Z-BOY INC (LZB)·Q2 2026 Earnings Summary