La-Z-Boy reported its sales increased 6.1% to $413.6 million in fiscal Q3 2018

La-Z-Boy Incorporated reported its operating results for the fiscal 2018 third quarter ended January 27, 2018. Sales for the fiscal 2018 third quarter were $413.6 million, up 6.1% compared with the prior year’s third quarter. Operating margin was 8.0% in the third quarter of fiscal 2018 versus 8.6% in the fiscal 2017 third quarter. The fiscal 2018 third quarter’s operating margin was reduced by 1.0% as a result of the charge for the previously announced settlement of a lawsuit regarding certain power products.

The company reported net income attributable to La-Z-Boy Incorporated of $12.1 million, or $0.25 per diluted share, which included a $0.20 per share net charge related to the 2017 Tax Cut and Jobs Act (tax reform) and a $0.06 per share charge related to the previously announced legal settlement, versus $23.3 million, or $0.47 per diluted share in the fiscal 2017 third quarter.

Sales in the company’s upholstery segment increased 6.0% to $321.0 million and the operating margin declined to 9.9% from 11.8% in last year’s third quarter. The charge for the settlement of a lawsuit regarding certain power products reduced operating margin in the segment by 1.3% in the fiscal 2018 third quarter. In the casegoods segment, sales increased 17.0% to $27.2 million and the operating margin increased to 10.3% from 6.8%. Sales in the retail segment increased 3.0% to $125.8 million for the third quarter and the segment’s operating margin increased to 5.6% from 5.2% in the prior-year period. On the core base of 138 stores included in last year’s third quarter, delivered sales declined 1.1% versus the prior-year quarter.

Kurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, “We experienced positive sales momentum for the quarter and, in addition to posting a 6.1% increase, each of our business segments operated at a high level during the period. Additionally, the La-Z-Boy Furniture Galleries® store network posted its fourth consecutive quarterly written same-store sales increase. The company also generated strong cash flow from operations enabling us to make the necessary strategic investments to grow our business in the dynamic marketplace and return value to shareholders.”

Darrow added, “In our upholstery segment, we are very pleased with the performance of our new duo™ product line which, thus far, is exceeding our expectations in the short time it has been on retail floors and is a testament to the innovative spirit that is the hallmark of our brand. During the period, ongoing inflationary pressures for raw materials impacted the upholstery segment’s operating margin in November and December until our price increase became effective on delivered orders in January. For the fourth quarter, raw material prices are not anticipated to be a drag on our margin as the full benefit of the price increase will be in effect on all sales.”

Darrow said, “Our casegoods business continues on an upward trajectory, with increased sales and earnings performance as the group expands floor space with retailers. New, on-trend product collections are resonating with consumers and our supply chain is providing excellent service to customers with quick shipping on our best-selling groups. In our retail segment, we opened one new La-Z-Boy Furniture Galleries store during the quarter and acquired one store in Grand Rapids, Michigan, as part of our store build-out strategy. For the quarter, the retail segment’s operating margin improved, resulting from an increase in the average ticket primarily driven by increased design services and custom orders.”

Darrow continued, “With a strong brand, a vast distribution system, including the vibrant and growing La-Z-Boy Furniture Galleries® store network, a best-in-class global supply chain and a healthy balance sheet to support new initiatives, La-Z-Boy is pursuing a dual growth strategy to drive organic growth with our core consumer while attracting a new and younger consumer through our multi-faceted e-commerce approach. We are optimistic about the many opportunities that exist through our comprehensive strategy and look forward to growing our business with a new consumer group that exhibits different buying characteristics than the core La-Z-Boy consumer. La-Z-Boy will continue to evolve as we make strategic investments to drive growth and profitability in an ever-changing environment.”