La-Z-Boy (LZB) 16 Jun 212021 Q4 Earnings call transcript

Please standby. Good day ladies and gentlemen, and welcome to your La-Z-Boy Fiscal 2021 Fourth Quarter and Full Year Conference Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation.

As a reminder today’s call is being recorded. [Operator Instructions]. is host, to Kathy it over the time your to Liebmann. this my turn pleasure floor At Ma’am, the floor is yours.

open the and fiscal the Thank thank the a you, you Melinda available to will view this link, and financials will midway will fourth Whittington, our this to them Executive year. and morning Officer. webcast Melinda Bob you and telephone then accompany will results. We’ll close speak the quarter beginning call XXXX Slides Officer; afternoon. call for joining La-Z-Boy’s be through. our open And for of us Melinda. one us be call, questions. to for are Good this Bob presentation, available full may week year morning Lucian, replay which and Chief Financial and With President will through discuss and Chief one

I’d statements La-Z-Boy’s call remind begin to you the we performance and some future forward-looking presentation, include other matters. that Before today’s like statements in made about

to on of you these Although La-Z-Boy’s our deck. an will risk other are of materially. CEO. release are that XX-K. it Whittington, end under and as which be differ that, actual our could appendix risk call results the significant and information is annual most Relations Events key encourage the those website, in turn well News conference The over slide the the and page reconciliations earnings affect on to our at available we our as call report now in non-GAAP filings. detailed I our of Melinda We Also, tab includes future could included statements Melinda? described President also to reasonable, results measures, With certain SEC review Investor our believe as Form factors, factors our

macro-economic And the safety increases, and our enabled and consumers. to thank every challenges. in that CEO just our to Through perseverance, and and whom take or to difference to even and a stages unbelievable I the sincere this team morning of fiscal career. pretty excellent world and everyone. way about started and uncertainty. we year its now year afternoon and a this and challenges unprecedented just progressed and throughout galleries, our global to long year our The priority and employees material Late to health it am my this for retailers We still as just COVID-XX fourth express strengthened multiple our for our us historic things supply resiliency, still Then price response quarter want makes. chain we highest month of the year, business dedication, enhanced had Kathy long early after every Joybird the our success. the profitable, a I full expanding was of most last be these of for in in and so La-Z-Boy tested fiscal results. multitude of closed want leadership proud our qualities continues also all Thank year raw to including restarted seemed of La-Z-Boy XXXX furniture contributed platform, When we gratitude beginning President production while reopen. plants retail turned What Darrow Seattle all pandemic deliver of yesterday shutdown based and We navigating demand were our disruptions, acquired by significantly his in results I everyone midst experienced you the employees good the reported in dire. to his capacity demand, and all partners, products. our again retired the our to was business one a opportunity Kurt unwavering

to to history. $X.X to in margin margin Non-GAAP billion financial consolidated and reached sales operating Turning GAAP increased results, operating achieved grew margin consolidated X.X%. recent level full year X%, our fiscal the highest

we returned share repurchases $XXX operations the $XX million year fiscal from outstanding shareholders year. of particularly in through to and Over cash million Truly results challenges the generated and the considering dividends.

winning, discretionary execution consumer Specifically, the team. the of our reflecting the all in brands retail from in ongoing of are and the to fourth the quarter, home, market business where demand units we allocation strength continued across be our robust and to disproportionately excellent sales consumer’s place dollars

excellent La-Z-Boy by record quarter at driven by the galleries $XXX time owned production Joybird. our continued of capacity, performance company sales growth and led increased furniture million record profits For to all profit

the rate over network in increased sales quarter. our fourth written for repurchases XXX% up strong in additional year in to be a And the two with XXXX compared momentum XX% provide share store our continued quarter years. a start compound through to sales to XXXX shareholders fiscal generation and increasing written us quarter La-Z-Boy a $XX doubled enabled return context, the a the order galleries us well of same ago. to some great very dividends with and to ahead. same off cash written setting shipments Additionally, quarter Written Across for record And pre-COVID about versus sales strong furniture year a annual continued the is of rates backlog strong quarter. fiscal XX% million fourth growth the for store

and goods wholesale segments, numbers underlying includes As reflect detail remarks which of which our Bob believe we continued segment costs fourth management margin I a turn fiscal one-time our material segment operating our to from as the backlog. will better cover adjustments. last to $XX will XX.X%. non-GAAP the trends well to as and with non-GAAP production operating year's of companies $XXX my rebate benefited discussion offset Starting upholstery wholesale a related by million raw partially year freight impacted to debt X.X% COVID increase to expense. with compared expand paid case tariffs, quarter which capacity the was sales expenses sales XX% to Sequentially helped our by million offset from grew delivered Also higher previously we increased on quarter third quarter the healthy as capacity. bad for service higher business, the prior Disciplined international record XXXX shutdowns. as our production well for quarter was as Non-GAAP cost and advertising

We continued expand demand. to capacity to service

business. backlog continued outpacing growth an increases, of production However, written is strong for expansion the lead still La-Z-Boy translating times to and branded

pre-COVID our For fiscal and higher eight backlog year. than at times perspective, today, end XX of in the about than higher is times last

continues Cut-and-Sew started Center SLRC and a in sewing or an Mexico has cells past including portion December trained, supply Colorado, our weekend new Our added plant, where recently manufacturing [indiscernible], chain has increase cells, site shifts, opening Newton, and time. space year been in taking increase actions are cells overtime, in over and facility at Mexico, in to for with manufacturing team plants. agility of and Mexico our new production our employees fabric Temporarily over available second increase and are reactivating adding additional Rio, as the capacity, in U.S. production Luis, at in relentless great assembly San manufacturing to adding demonstrated to Mississippi opening capacity a in new plans

four shorten team strong range product business for number demand, and chain our versus six at times, to has given increasing between product nine the branded are the supply we locations lead normal done continued sales which work category four these Our La-Z-Boy new today on depending establishing months to of excellent capacity new to the weeks.

Input times Beyond raw disruptions. to trends are pandemic such materials four prices. we material to steel, and demand foam, pre supply supply their chain capacity continue and and plywood two to challenges, face due price increases as up

While results several orders, we through for costs in take -- it if our taking to and rounds in costs quarters taken as delivered pricing new have just on actions backlog pricing as financials. to have our to continued we've flow new significant escalate, pricing several of and additional written we And last further to week. taken we'll actions monitor and necessary, sales continue when written

components actively margin and our and material such issues of inputs, us delayed Our steel. foam, units. availability for a good major stock component job supply challenges, for team container that in shipping has and Despite product case disruptions, businesses done availability power electrical including wood, managing including continuing raw is the also our as higher great procurement chain international part to have keeping product deliveries finished team

While strong. The very we demand actively brand attributes focus La-Z-Boy of on increasing our production and the to remains managing chain test comfort quality. supply meet with continues challenges, enduring and time of

continuing product unlike the that called we well, past to seeing be with and together, consideration banding Over Response have core brands furniture iconic our ordinary Kristen teamed marketing high customers. from Bell two most both With mattresses. seen At sleep with specifically Sealy underscoring is target to we and appeal increased proprietary Tempur announced to foam on sofas La-Z-Boy point seating And create modular strong. recent Tempur and interest consumers, our ambassador, that very the brand consumer. with for our a great we up La-Z-Boy the all year, has her younger are designed broad among market sectionals side, have as for material memory categories our performed

Now, let which segment, retail results. me turn produced to excellent the

by increasing and was traffic, sales delivered to weeks to sales quarter positive cost gallery same in quarter, XX% including closures the related the year's the versus team. in driven quarter. fixed sales due comparable delivered doubled, volume. execution year's COVID XX.X% La-Z-Boy and sales increased strong last operating XX.X% metrics, XXX% company by same in the in margin $XXX year ticket. for a ago owned of four reduction more across quarter, on sales from on Last quarter, increased than furniture the delivered higher reflecting a million marked store the For Non-GAAP sales conversion, average stores record increased trends leverage by last store to XX% fourth all store primarily Written

XX% a years, average For perspective, feel that's when marketplace in XX%, consumers sales and same written fiscal pre-COVID of increased brand business quarter against fourth rate over stores. in safe which that two strength about an again the our the our in and environment were the growth compounded we the shopping store demonstrates XXXX

and Our primary focus providing every a delight touch all experience with at points, consumers is great to end-to-end time. them service

As this, they our both. to committed and shop enhancing online, experience or omni-channel of consumers a to whatever we easy want meet offer are to to of comprehensive part presence in-store, combination whether an

more experience to bright, to continue inspiring As online robust in in store gallery and the consumers make with enhancements and we furniture to invest provide will we technology the stores. system engaging, La-Z-Boy modern, invest

XXX% our and approximately the owned projects, fiscal remodels, within addition closed New York Island minutes quarter in end-to-end acquire million, to reported now signed Delivered on Written week which that for sales and September, a than doubled, period stores, a which the will acquisition reflecting quarter. other we XX to versus including and growth the the improved execution. across great completed For two period three sales Long gross ongoing increasing projects market. strong increased the last an thirds be the the portfolio. company prior vibrant to XXXX with order in few again more are Joybird strength in year and new $XX in trends of XXX% the agreement corporate profitable of turned relocations the in online Seattle I'll Also, the marketplace. this brand Joybird, stores delivered in spend its margin. strong network, reflecting

turn improved Bob? We've continues drive Bob do and to conversion. to excellent consumer acquisition, providing increased consumer in call financials. an now the job online effectiveness. right terms marketing to site, Joybird team discuss to the our to I'll spend an marketing over bringing the to experience of Our the leading excellent

Melinda you, everyone. and morning, Thank good

the a underlying we results better trends non-GAAP As business. the present and operating on both results We GAAP non-GAAP basis. believe our of presentation, reminder, performance and

release consideration acquisitions million in $X primarily to our section in adjustments press XXXX charges liability detailed the related performance. pre-tax slides due for our write up accounting contingent excluded appendix conference forecasted our quarter and fourth purchase in tax non-GAAP per plus Joybird based As of from a totaling $X.XX our on the the call shares, fiscal tables diluted reporting, totaling for

of $X.XX primarily or results Two, $X.XX announced charges share fiscal For pretax contingent per diluted based full $XX to share, our diluted June in a accounting XXXX Act. conference income or for as payroll forecast the due consideration year, are for per of also call Joybird to Business purchase credits, in adjustments Fiscal related qualified of million share totaling Initiative section tax have a the CARES Realignment XXXX $X.X diluted million detailed under in write-up the per pretax included $X.XX in for non-GAAP on tables change the finally, exclude or of company's appendix XXXX. liability million And employee the company pretax previously slides. we the retention $X.X the and talked press our and non-GAAP release again year performance.

a disproportionate here basis, X.X%. EPS in our fourth record than and percentage will as comments results, Joybird, administrative from unless million, offset advertising, spend at sales, on the increased our stated commodity my reduced non-GAAP in retail onto the specifically XX.X% $X.XX the fiscal to diluted consolidated $X.XX On a the Now XXXX year's reflecting marketing, sales Non-GAAP was strong to focus XX% fixed a demand $XXX leverage improved otherwise. as per reporting comparison quarter rising COVID costs in was closures. related and segment in more year the $XX which fourth margins margin as which increased fiscal well growth operating consolidated cost non-GAAP quarter by Consolidated share income quarter. a to and impacted plant XXXX quarter. last and operating fourth versus operating and versus in quarter, benefited from Strong to non-GAAP retail current million in of

including to for of X.X% Moving XXXX. and retailers fiscal With to plants Sales La-Z-Boy just restarting owned results production the year increased closed, capacity. company many our most at year. to our on fiscal start billion, galleries furniture the strong given full result limited slow a $X.X

in the and growth in versus basis the excuse Non-GAAP reached fiscal $X.XX Consolidated margin. year For year, operating full $XXX income non-GAAP to operating me, mix, consolidated XXXX. points carry I the high increased which the retail history. consolidated Changes sales the share a for margin X%, increase the businesses, versus in year. diluted consolidated million non-consolidated, our than prior all-time XX recent XX drove am by our for and biggest in an EPS margin increased gross sorry, of to margin per $X.XX higher Joybird driven non-GAAP fiscal change gross wholesale year

wholesale was than significant resulting changes to broader expanding a SG&A improvement the our decreases Partially segment the economic consolidated businesses. pricing these as in costs related due capacity increases and which to offsetting retail reduction and higher bad product chain. supply year points margin advertising our manufacturing experienced to costs by increase an trends. from integrated primarily mix, in versus synergies Partially credit initiatives mix margin, ticket, well Joybird given higher as Joybird product Additionally, average uncertain as XXXX, fiscal gross Van across actions, both favorable gross these fiscal gross company's last a company, into results Fiscal were impacted year, raw product year performance were capacity and in tariffs, including note fiscal provided XXX in mix XXXX, increases, our caused a expense SG&A the basis rebates those marketing to incentive related and on Art that year's important XX XXXX growth basis costs. previously increased benefit to positively of reflecting margin. throughout carry margin taken shift which It's sales offsetting cost material of a paid provision environment for by lower last gross as losses percentage rising was to related point to decreased COVID. primarily the a included due to spend and debt for the demand the strong bankruptcy cost to Joybird, compensation due our sales XXXX the our

tax attributable fiscal tax earnings from effective Absent have impairment reinvested. deferred our for to of XXXX the rate rate XXXX. a discrete of effective primarily GAAP XXXX been longer from to basis no XX.X% undistributed adjustments, and expense a would expense in tax million XX.X% tax on of tax XX.X%. versus was in goodwill million, tax related Joybird $X.X foreign effective Impacting fiscal non-deductible charge Our fiscal tax permanently for fiscal the XXXX a was $X rate effect net

a no year Turning million million cash to fiscal in we cash written million activities, XXXX and debt cash, the the retail $XXX drawn credit in of with Joybird. ended million for and the from end $XXX and from $XXX from cash our period segment on up for reflecting the at facility. We $XX operating and orders strong in generated million in increase customer performance operating deposits company's $XXX

addition, held with year. cash, investments In $XX million last returns to enhance we $XX million compared in on

cash have the capitalize managed our the out with to resources been we've we conservative future opportunities As process pandemic. COVID-XX, on the of and strengthened value creating through to business grow have in

During and Dayton, our year, upgrades the we have facility equipment, $XX which in primarily invested capital, machinery Mexico, improvements manufacturing for Tennessee million retail capacity in related to and select to production cost now new been completed. to stores,

purchasing dividends million of the our Regarding shares program. $XX.X open in for the authorized leaves shares share under paid stock million repurchase availability shareholders $XX This purchase year cash existing approximately to return program. this we market in of million X.X to spent and million in shareholders, X.X

first through capital results, and the allocation share to to deliver invest a in returns strategy dividend by followed Our long-term business shareholders remains to repurchases. consistent

Before returning highlight Melinda, the me several to important items for XXXX. call fiscal let

acquisitions expect will adjustments accounting Joybird's estimates updated that to be for include business adjustments purchase adjustments at made on further for per consideration depending our estimated any previous be ongoing $X.XX excludes fiscal This XXXX liability share. to may of Joybird $X.XX the diluted to trajectory. We contingent non-GAAP

and large quarter. first the slowdown rates with seasonality, will seasonal associated incoming Regarding backlog the usual mitigate order a

a limited usual, of as is and usual to weeks the XX compared and and plants, shipments four. to production the for in quarter two company's most the of However, XX quarters shut-down July in to production enable maintenance weeks first of week shipments for

cells are at with long levels delivery in trends which providing new in a added XXXX through production improve, incremental assembly increases and remain progress strong efficiencies on capacity, demand continued will for ongoing sales. anticipate incremental Regarding capacity We result business the tail. record across as backlog fiscal

in very of the the to of profit expect fiscal profit half compared temporary XXXX we strong margins significant first this QX. However, pressures on margin

We for and offset volatility to eventually we disruptions our the and material strengthen to actions results offense ongoing work be raw intend freight a continue play to business range as of full in our as announced levels, chain quarters in cause ensure result above basis which QX and face these through still the pricing we of Further, will summer even two costs, in our XXX weather global by brands points back of business expect line will our escalating or we challenges. the half its strong impact and year The we the the supply these investing with backlog. the the and in could in compared levels may our very factors impact which but first for short-term already of temporary be months. in profit, to long-term, in historical

our La-Z-Boy the updating Spending business you Melinda. be Finally, million across to fiscal me in expect furniture strengthen in gallery for turn And expanding investments solutions in company of call and updating XXXX. future, expenditures stores, the capital the our to back the investments range will technology we million as support make to to organization. $XX and the let $XX plants, the for now

past provides chapter Bob. uncertain in have been us dynamics this next position which growth. challenging, well our of served events of year opportunities culture, prudent for strong The profoundly investment cash Thanks, period. our affirm the financial And educational. our but also These during

and pandemic profitable our in and we strengths several For units, our operating evaluating investing the able even post we in on given long-term are and deliver in volatile quarters but be to the a the times. we term, back capacity and continuing more That immediate are growth. stronger still are said, we to stepping emerge next environment company increase acknowledge unprecedented opportunities, are and to focused will deliver

the a over you ability marked and an not we'll queue Incorporated fantastic an I provide future the demand, in all thank to offense. call getting truly growth their to strong for of change, this I now the and one, stakeholders and look our play Directors Kathy La-Z-Boy it thank is continued is interest the to easy to support this Kathy? shared questions. incredibly year of forward and into your instructions by Board for Although turn for time, and prosperity. exciting past for

Melinda. you Thank

We begin to instructions questions. the the review Melinda, for now. please queue question-and-answer will into the period ask getting

Thank you. go with go to first Raymond [Operator we Please Bobby And ahead. James. Griffin Instructions]. our signal,

all everybody. are for I Good taking hope questions. doing and morning, you you my thank well

morning. Good

XQ margin on in wanted circle just So bps pressure the they as XQ XXXX and that the highest comments that that same margin at XXX back referencing we're to EBIT what material that about kind Bob, reference I level you XX% about could page all strong down are be versus just make the of of of in posted XX% bps should time possible to right so quickly your to and that were saying as be? XQ sure to frame, the what’s was if XXX raw of headwinds is and

correct. That's

of so then it the or X.X, kind was though below X% which two October the and that at business -- ago? trajectory or below for of we would years of of just is in related now mix raw kind was XQ were of both EBIT type end we Okay, is where quarter margins same material quarters, all if where kind XXXX of up

taken to through. Mostly, it's And the way that we're and impacts a that raw we've again, work while for pricing material its taking pricing it's mostly seeing.

by through improving. QX. the that's And when it and towards its way work of QX end will So start will margins

the helpful. or you XQ mean, using XQ as side to delivered quarter, something the in is of XX basically potential that's XQ backlog something wrong kind then, of XX-K things called is there million think in XX, but with an estimate? of what way it or of And the right I about that revenue seasonally is with here you the that I kind usually was have XXX alright, weak this large a Okay, out. of in think

I an using anything wrong that there's as don't think estimate.

I Okay, and guess… then

to yeah, sequentially, sequentially to increase continue continue our We capacity. we

least expect at would I that to case. be So the

today we just in put we pre-COVID and kind just are capacity maybe what was getting terms want terms business company [indiscernible] are units, trying my of capacity, levels I it of materials? some little the we the bit understand back do if below challenges on are to the can context in, don't the what was at of kind there of the the a Alright, or in we of to better of right given of know what in foam still pre-COVID where levels

-- again We're increase and continuing you to continued that given backlog will and increase were to that we've down. higher continue than referenced just try we backlog work that we were pre-COVID we the that to to --

I'll Okay, very the somebody but here. queue, questions, let in else ask back some helpful. jump I appreciate the details

Thanks, Bobby.

we KeyBanc Next go Markets. of to line ahead. will the go Capital Thomas Please Brad with

good just product and how you a company talk up questions. for a invest details. thanks all you all to catch Melinda. try items to Good big the Hi, supply in your some to you capacity right for up question chain strong growth, position you're some terms from first in just standpoint, big some yourself, little follow-up Maybe demand, how you're demand not morning. Bobby's making changes you housekeeping of try that? then seeing now, but, this best quarter very bit strong catch a you Melinda, picture on and the of build about run a how Hi and are from and maybe But to to as picture of to considering just position what can the

guess I I would I -- kind take that in of would buckets. two Yeah,

can that single-digit kind seen in historically. volume we've one flex were of first that we an is operation, percentages running very truly The that operation for efficient but a

in space floor as be we're in lot space Even these locations our and force to up more continue but flex continue this plants. labor and is to like enough people where we look to able capable a then enough furniture them. as a more a at But speed a more out and And really, point, about then that has things well optimize. more shifts, in simple complex to get it and looked new forth. And training of you well-trained volume. is my and simple on called to prepared as that bringing as overtime I of U.S. short-term remarks, Mexico chairs so So lot like to some lot available and all people do of more the they we're your item, pieces to

I we've to our is, we've I eye is a structural West think over time Colorado about out the on North service for better Luis, the had would before, talked Rio, Coast that call western while item the our and space San that just but the America. kind half of a biggest strategically in though it location of

But, we but that quickly that of more And demand. the activities initially variety strategic probably we're that's so, smaller looking a there that demand than COVID shift we service. that more up of moved maybe because And a we to fundamental But other had that was and because there current we're planned brought footprint one the on our location or the a at either a up roadmap. strategic longer-term say it that's biggest better that quickly I'd of is kind seeing. putting location, is long-term are of

price can to is year? But shooting some gone of dollar That's you all a for that think will value from you a very helpful. capacity the there the level should higher. sales at way good end just And increases, or what understanding now volume number generate or be about at are have few that the quarters

we mean model, cells one, Yeah, demand to continue add it's continue bit I variable to a honestly. strong. see we being a of as

still speed somewhat and folks see really the throughout And through the all And are is we by be start to we're our see we we see cells And we'll But to trends. forth, we're continue XXXX, just as fungible that amount that of driven always can some back quarter get given the growing depending for in bit, down see where to so both were efficient. time, somewhat starting can start a progress if shifts, but on slow -- number second of then of over that that the or to were fiscal we in what trends to continue if continuing. so each overtime we're what more we we demand if --throughout say, things is get and also see continue would rest to I shooting I and working, that increase demand capacity. pull particularly incremental up we weekends, see opening, think to to

-- to changes. that it So for short-term we've to lot just both as well number because as back into are how some heading off may a I inputs any different we what of it's put of or need, mean, flexibility on hard up got there we're it a on build what

And if more cash today could and the a you cash business, thinking big generate obviously year. I cash, share strength in balance terms one have healthy a with this amount the in should of just of sizable squeeze about guys

For doing working I but year, for missed if as Bob, one, it I and all what CAPEX your plans think are you grow with you excess year disclose thinking inventory, the for capital about you how did Thanks. about apologize do you needs the this cash?

retail in million Right solutions technology a company stores, the I $XX It's investing $XX to a and great improving our capital the the of number in million stores spending. Again our now, to focused on what more technology of mentioned and capacity, call investing converting throughout was problem company. have. in on retail

will also that's plant be do as we largest deliver capacity from a of where go Nirschel can lot which going. a [ph], we we which And our our we what the use dollars of We'll dollars all is to standpoint. those will well. one be those So can upgrading U.S., plants, in

off So do and more investment if there's we'll we'll that. go needed,

shy level We the to are on capital, trying minimize our trying disruptions relative inventories seeing. to you to it working also we're that in we're we're not and our can see being increase of and inventories

So inventory so steel, trying disruptions carry to higher foam, we're if our because out able shift we're of withstand that in capacity. disruptions we wood, those a of those levels so there's get or capacity running are lose sales. back occur so we're that can't doesn't we out, maxed to it If impact lost

see to do in and share over of investing from perspective. be again and we we're will that will we the last why our preventing $XX piece in in to of repurchases invest for consistent what's years. levels year needed in get capital quarter full purpose doing, QX we four the three that's then the So to above where we to we've trying that to the the just share try And continue repurchases up you continue over invested dividends dilution. inventory from averaged we'll And other for more with fiscal can working million

add post are we so it's profitability. be to are problem great we with a that said, stepping look that Bob ensure at pandemic just in company back and growth where would at can it. trajectory great we -- strong strong to we a be to should a I back look investing our to as have even It's on stepping And really

spot good we do step and the invest to a even where be to future. to able need it's and make ourselves about So back think really for better

thank much. so Wonderful, you

signals [Operator we return Instructions]. And we that the does all appear remarks. of Kathy for be closing to have, that to Liebmann

morning. Thank you for joining this everyone us

a you call, me and follow-up a any Bye-bye. please questions have great have I you Thank be give available. will day. If

Thank does you conclude We teleconference. your you. thank participation. for today's This

this a lines great time. day. You disconnect Have may your at