Furniture maker and retailer La-Z-Boy (NYSE:LZB) reported a profit for its fiscal first quarter which was largely because of a tax benefit. Excluding this significant benefit, the company's profits were much more modest, though ahead of last year's first quarter results. Regardless, the market slammed La-Z-Boy shares, taking them down 13% after hours.
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Fiscal First Quarter
Reported income for La-Z-Boy in the first quarter was $45.5 million, or 85 cents per diluted share, compared to a loss of $216,000 or a zero EPS, in the year ago quarter. $43.4 million, or 81 cents a share, of the earnings was due to a tax benefit. Excluding that benefit, EPS would have been 4 cents. Revenue increased to $280 million from $263.3 million, a 6% increase. The revenue breakdown for La-Z-Boy was $217.5 million from its upholstered furniture business, a 7.7% increase. Retail revenue was $48.8 million, a 38.3% increase, Case goods furniture sales were $34.1 million, a 7% decrease. La-Z-Boy Furniture Galleries stores open at least a year turned in a 9.7% increase in revenue. The first quarter represents a slow period in the selling seasons of the company and the furniture industry.
La-Z-Boy is not alone in struggling to ramp up profits in the furniture industry. Leggett & Platt (NYSE:LEG), known for its hefty dividend payout, manufactures components used in office and residential furniture, reported quarterly results in July which saw revenue climb by 8% on price increases but which did little to boost incremental profit. Inflation was the main concern for the company, though it did offset some of this with pricing.
Haverty Furniture (NYSE:HVT) also had tough going in its recent quarter, with sales off by 1.4% year over year, and showed a decrease of 1.3% for the first half of its fiscal year. Haverty reported a slightly larger loss of 4 cents per share compared to a loss of 3 cents per share in the year ago quarter. The home buyer stimulus factored into the year ago quarter, while pricing disciplines and cost controls resulted in a lower SG & A for this quarter, d but weren't enough to offset the recent quarter's loss. Management cited the ongoing difficulties in the housing industry having its impact on the retail furniture trade.
The office may be doing better than the home, though, as Steelcase (NYSE:SCS) has managed to benefit from a rising demand in office furniture. Steelcase has been growing revenue and margins despite the pressure of input costs. One home furnisher doing well is Ethan Allen Interiors (NYSE:ETH). In its latest earnings report that came out at the beginning of August, Ethan Allen showed a 9% year over year revenue increase for its fourth quarter, and a 32.7% jump in net income, excluding special items. Ethan Allen had a strong year with a 15.1% increase in net sales, while net income was in the black after a loss in last year's fiscal year. Ethan Allen has been strongly on the rebound and has been re-making itself. The industry overall has a long way to go, however.
The Bottom Line
The market's reaction to La-Z-Boy's quarter seems a bit harsh, as La-Z-Boy has been making strides in returning to profitability after a nearly disastrous recession. La-Z-Boy posted a profit in fiscal 2010 after a couple of hard years, particularly 2009. Obviously, any kind of rebound in the housing industry would help further, but even if the economy can simply hold its own for a while, the furniture sector can slowly continue to mend itself. La-Z-Boy isn't an Ethan Allen at the moment, but it continues to move farther and farther away from the brink of the financial precipice it was on. (So you've finally decided to start investing, but what should you put in your portfolio? Find out here. See How To Pick A Stock.)
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