MONROE, Mich. – La-Z-Boy turned in another strong performance in its fiscal 2021 second quarter with powerful demand across its operating companies driving a 2.7% increase in consolidated sales compared with the same prior-year period, while written same-store sales leapt 34% across its La-Z-Boy Furniture Galleries network.
La-Z-Boy’s Joybird e-commerce division also turned in its first profitable quarter.
Net income of $34.9 million surpassed fiscal 2021’s second quarter by 54.6%, as increased delivered sales combined with lower spending to boost operating margins.
Chairman, President and CEO Kurt Darrow said ongoing discretionary spending for home furnishings has demand across the board at La-Z-Boy “at record levels.”
“Orders are fueling an unprecedented backlog and our supply chain team is doing a great job to continually increase weekly production to service customers and drive increased delivered sales,” Darrow said in an earnings release. “For the quarter, we produced a double-digit consolidated operating margin, with all operating companies posting excellent results, including Joybird which turned a profit for the first time.”
Delivered sales in for La-Z-Boy’s wholesale segment decreased 2% to $343 million. The company is increasing manufacturing capacity to serve a record-level backlog as demand acceleration outpaces production, but a temporary supply shortage of polyurethane foam led to lower unit volume.
To grow capacity moving forward La-Z-Boy has added additional manufacturing cells at its U.S.-based upholstery manufacturing facilities as well as additional weekend shifts; temporarily re-activated a portion of its Newton, Mississippi assembly plant; added manufacturing cells at its cut-and-sew center in Mexico; and leased a 200,000-square-foot upholstery plant south of Yuma, Ariz., in San Luis Rio Colorado, Mexico, which is expected to start production in December with full ramp up extending over the first half of the new calendar year.
“As part of our longer-term strategic plan, we have been considering alternatives to most efficiently serve the western portion of North America, and we are excited to take this first step with our new facility in Mexico,” Darrow noted.
La-Z-Boy’s retail segment delivered sales increased 9.3% to $162.3 million in the second quarter of fiscal 2021. Written same-store sales for the company-owned La-Z-Boy Furniture Galleries stores increased 36% in the quarter, reflecting strong traffic trends and demand as well as continued excellent execution at the store level, including an increase in conversion and average ticket driven by increased units and design sales. Delivered sales for the core base of 150 stores increased 6.3%.
During the second quarter, the company closed on the acquisition of six Seattle-based La-Z-Boy Furniture Galleries stores with approximately $30 million in annual retail volume in calendar 2019, and one warehouse. As the company is already recording a portion of the Seattle-based store volume in its wholesale segment, the acquisition of the six stores is expected to contribute approximately $15 million of additional sales annually to the company on a consolidated basis, based on their calendar 2019 sales. For the second quarter, the Seattle stores added $3.5 million of sales to the retail segment.
Joybird delivered its first profitable quarter on a sales increase of 42% to $29.4 million. For the period, Joybird improved its gross margin significantly and lowered advertising and other expenses. Written sales increased 25% compared with the prior-year quarter, reflecting ongoing strong order trends.
“We are encouraged by Joybird’s performance for the quarter and optimistic about its trajectory for accelerated growth,” Darrow said. “We will continue to balance investments in top-line growth with bottom-line performance.”
Fiscal 2021 year-to-date, La-Z-Boy’s in $$744.6 billion in sales are 13.5% below last year’s first six months. The company netted $39.7 million through the fiscal year’s first six months, down 2.3% from the same prior-year point.
Looking ahead, Darrow expects strong results for fiscal 2021’s second half despite the challenges of potential COVID-19-related shutdowns and other disruption, as well as supply chain problems such as the foam issue.
“The strength of our brands and vast distribution network are driving strong written order trends across our entire business, translating to a significant increase in backlog,” he said. “In addition, our supply chain team is making great progress to increase capacity so that we can shorten delivery times and service our customers with high-quality products. With the initiatives already underway, we expect to continue to significantly increase production capacity throughout the balance of the fiscal year.”
Barring COVID-19-related shutdowns or other unexpected external disruptions impacting operations, and taking all planned actions into account, La-Z-Boy expects consolidated sales growth in the third quarter of flat to 4% above the prior year period’s all-time record high. Further, accounting for continued growth and the effects of the month-long pandemic shutdown in the prior-year fourth quarter base period, the company anticipates fiscal 2021 fourth-quarter sales growth of 40% to 45% versus the prior-year quarter.
Click here for the full La-Z-Boy fiscal second-quarter release.