La-Z-Boy sales drop 9.2%
By Larry Thomas -- Furniture Today, August 18, 2003
Monroe, Mich. — Citing lackluster demand for its upholstery and wood furniture, La-Z-Boy said sales dropped 9.2% in its first quarter.
The second-largest U.S. furniture producer also reported a sharp drop in net income, not including a one-time accounting charge.
"It was a very challenging quarter. Demand remained mostly lackluster in the furniture industry," said Jerry Kiser president and chief executive officer. "It has been hurt by low consumer confidence and an economy that continues to lose jobs."
Sales for the quarter ended July 26 totaled $451.5 million, compared with $497.4 million in the same period in 2002. Net income, not including the one-time charge, was $5.8 million in the current quarter, compared with $19.1 million a year earlier.
Kiser said sales in La-Z-Boy's upholstery segment, which accounts for about 75% of total sales, dropped 8.5%. Case goods sales declined 11.2%.
Operating margins in both segments also dropped, largely due to longer-than-normal summer shutdowns at several plants. The operating margin for upholstery was 6.8%, down from 8.5% in last year's first quarter, while the case goods margin was 0.9%, not including a $6.3 million restructuring charge. In last year's first quarter, the case goods operating margin was 5.8%.
Furniture factories typically are closed for one week each summer, but many La-Z-Boy plants were shut down for as long as two weeks, which resulted in higher unabsorbed costs.
"Our industry has been in the doldrums for three years now, except for a brief spurt upward in the spring of 2002," Kiser said during a conference call with securities analysts. "(But) we continue to believe that we will see at least some of the usual seasonal pickup in demand during the fall selling season."
He told analysts he expects sales for the second quarter, which ends in late October, to decline "in the mid-single-digit range" compared to last year's second quarter. Earnings per share should be 40 cents to 45 cents (excluding restructuring charges), down from the 50 cents per share earned a year earlier.
| La-Z-Boy | |||
|---|---|---|---|
| Owns Alexvale, Bauhaus, England, Hammary, Kincaid and Ladd | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 7/26 | 2003 | 2002 | Change |
| (a) Includes a $59.8 million extraordinary charge, the cumulative effect of an accounting change. (b) Based on average shares outstanding of 54.9 million in the 2003 quarter and 59.7 million in the 2002 quarter. | |||
| Sales | $451,472,000 | $497,375,000 | (9.2%) |
| Operating income | 11,299,000 | 32,887,000 | (65.6%) |
| Net income | 5,803,000 | (a)(40,654,000) | — |
| Earnings per share (b) | 0.11 | (0.68) | — |
