La-Z-Boy Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 21, 2024

There are 7 speakers on the call.

Operator

Good day, and welcome to the La Z Boy Fiscal 2025 First Quarter Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to the Director of Investor Relations and Corporate Development, Mark Bex. The floor is yours.

Speaker 1

Thank you, Kelly. Good morning, everyone, and thanks for joining us to discuss our fiscal 2025 Q1. With us today are Melinda Whittington, La Z Boy Incorporated's President and Chief Executive Officer and Bob Lushin, La Z Boy's SVP and CFO. Melinda will open and close the call, and Bob will speak to segment performance and the financials midway through. We will then open the call to questions.

Speaker 1

Slides will accompany this presentation and you may view them through our webcast link, which will be available for 1 year, and a telephone replay of the call will be available for 1 week beginning this afternoon. Before we begin the presentation, I would like to remind you that some statements made in today's call include forward looking statements about La Z Boy's future performance and other matters. Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10 ks. We encourage you to review these risk factors as well as other key information detailed in our SEC filings.

Speaker 1

Also, our earnings release is available under the News Events tab on the Investor Relations page of our website and it includes reconciliations of certain non GAAP measures, which are also included as an appendix at the end of our conference call slide deck. With that, I will now turn the call over to Melinda Whittington, La Z Boy's Incorporated's President and Chief Executive Officer. Melinda?

Speaker 2

Thanks, Mark, and good morning, everyone. Yesterday, following the close of market, we reported results for our July ended Q1. We posted a solid quarter despite continued furniture and home furnishings industry headwinds and a general malaise in broader consumer discretionary purchases. We were pleased with our total delivered sales results in the quarter, which increased on a year over year basis despite continued industry challenges. Highlights for the quarter included consolidated delivered sales of $496,000,000 up 3% versus the prior year.

Speaker 2

Wholesale segment sales increasing 5% on growth to external customers. Non GAAP operating margin of 6.6 percent, non GAAP EPS of $0.62 strong operating cash flow of $52,000,000 for the quarter, twice as high as the prior year. Dollars 42,000,000 returned to shareholders through share repurchases and dividends. A strong balance sheet with $342,000,000 in cash and no external debt. And continued progress against our Century Vision growth strategy, including completing the acquisition of 1 independent La Z Boy Furniture Galleries store in the Midwest and signing an agreement to acquire another 2 store independent dealer in Florida in our Q2.

Speaker 2

Our results for the Q1 were in line with our guidance. We were pleased as this came against a consumer backdrop that has become increasingly challenging. We are more focused than ever on adapting and improving our business and I couldn't be more proud of our resilient sales teams and our increasingly agile supply chain demonstrating our ability to deliver a truly enriching experience for consumers in transforming their homes. The furniture industry remains challenged. Structural headwinds of elevated mortgage rates and high housing costs and global geopolitical and economic uncertainty continue to dampen big ticket purchases.

Speaker 2

Nevertheless, our recent quarter again illustrates that an iconic brand amplified by strong execution and operational agility can still drive business growth even with this backdrop. Further, we are optimistic that expected Fed rate cuts later this calendar year will begin to spur an acceleration in housing turnover and subsequently in furniture demand. Meanwhile, we're not waiting for the macro environment to turn around. We continue to play offense with our SentryVision strategy, offering tangible solutions to drive disproportionate growth over the long term and to consistently gain share in the fragmented furniture and home furnishings market. Recapping our Q1 written sales trends, total written sales for our company owned retail segment increased 4% versus last year's Q1.

Speaker 2

Written same store sales for our company owned retail segment in the Q1 declined 3% versus the prior year. Same store sales were strongest early in the quarter around key Memorial Day events and softened towards the end of the quarter as consumers continued the pattern of pulling back spending outside of key holidays. Our stores continue to execute very well with conversion rates and design average ticket both improving year over year. However, this has only been able to offset a portion of the continuing double digit year over year traffic declines experienced across our industry. Written same store sales for the entire La Z Boy Furniture Galleries network of 356 stores also declined 3% versus the prior year.

Speaker 2

According to the U. S. Census Bureau data, the furniture and home furnishings industry also declined 3% for our fiscal Q1. With our company owned La Z Boy Furniture Galleries same store sales outperforming the industry in the 1st 2 months of our quarter. Turning to Joybird, written sales increased 9% versus a year ago, driven by execution across the 12 store network compared to 10 stores for most of the prior year quarter.

Speaker 2

Joybird operating performance again made meaningful progress against the prior comparable period as the brand focuses on balancing sales growth and profitability. Looking to the longer term, I want to spend a few minutes on our progress during the quarter to strengthen our enterprise. Recall, Century Vision is our strategic framework setting up La Z Boy Incorporated for our next 100 years as we celebrate our 1st century in 2027. This is measured by our intention to grow top line at a pace double furniture and home furnishings category is highly fragmented. As one of the largest brands in the United States, but with only roughly a 5% market share, we are well positioned to continue to strategically grow our business.

Speaker 2

We have consistently expanded La Z Boy's brand reach over the last several quarters. Our total Furniture Galleries network ended the quarter with 356 stores and our retail segment comprised of the company owned portion of those stores increased to 188 stores, up 13 from the prior year. Company owned stores now represent 53% of all La Z Boy furniture galleries. Growing our company owned stores is important as it gives us the greatest opportunity to delight the consumer by controlling the end to end experience, which features comfortable and customized upholstery with quick delivery. Our North American manufacturing footprint enables us to deliver custom furniture in less than 8 weeks to the consumer and benefits us financially with the strength of our vertically integrated model.

Speaker 2

We see opportunity to grow the total La Z Boy Furniture Galleries network to approximately 400 stores over the next several years and see meaningful opportunity to expand the company owned portion of the network through new store growth and acquisitions. To this point, we acquired 1 store during the Q1 and we recently signed an agreement to acquire an additional 2 store network from an independent dealer in Florida scheduled to close in the Q2. These store acquisitions are immediately accretive to our profitability, allowing the company to benefit from the integrated wholesale and retail margins. We are also growing the business through our refined channel strategy. This has enabled us to grow share of voice of the La Z Boy brand with general dealers and provide a broader range of consumers access to the La Z Boy brand.

Speaker 2

We have had strong results with strategic partners like Rooms To Go, which have allowed us to gain mind share in an underpenetrated market. We continue to look for new and creative ways to reach a broader audience and bring products like the iconic La Z Boy recliner into more households. Another core pillar of our Century Vision strategy to expand La Z Boy brand reach is our long lived the La Z brand campaign, which is celebrating its 1 year anniversary after debuting last August on National Lazy Day. One of our initial goals was to enhance unaided brand awareness and keep the brand top of mind. A year into the campaign, we have been successful in increasing unaided awareness, consideration and purchase attempt among those who have seen the Long Live the Lazy campaign and connected to La Z Boy.

Speaker 2

Since its introduction, Long Live the Lazy has won numerous awards, including the Drum Awards for Marketing Americas and the Best Short Form Video at the LA at the Think LA Idea Awards. We've also activated the brand in new ways, including a new heights podcast sponsorship with Jason and Travis Kelsey and branded media integrations across Amazon, New York Times and ESPN.com. Speaking to how La Z Boy is beloved in consumers' minds, the brand was even recently mentioned in a hit song by Luke Combs. As we move the campaign into its 2nd year, we are focused on broadening the campaign impact to achieve our goal of connecting with an even broader audience. Another focus area for expanding La Z Boy brand reach is within product development.

Speaker 2

Our development process is becoming even more consumer centric, leveraging a data driven approach. The insights we are gaining are enabling us to develop more consumer relevant on trend products in our core upholstered furniture category, particularly in motion and reclining where we are a market leader. Joybird is another core pillar of our Century vision and we are optimizing the brand to deliver a balance of sales growth and profitability. We were pleased that written sales trends were positive in the quarter and operating performance improved from prior year. With 12 stores currently open in major metro markets, the digitally native e commerce brand is benefiting from the halo effect of stores in key markets.

Speaker 2

We have identified the potential to grow to 25 locations over the intermediate term with our expansion pace depending on opportunities in real estate and overall market conditions. We continue to believe in the long term growth prospects of the brand as Joybird has a considerable opportunity to expand market share we will continue to make prudent investments to position it for long term success. Strengthening our foundational capabilities, including building a more dynamic supply chain is our final pillar of CenturyVision. We are making steady progress improving the agility of our business model by better optimizing our global supply chain operations. As we mentioned in last quarter's call, we are prudently managing the consolidation of our cut and sew operations in Mexico to optimize costs while ensuring no service disruptions.

Speaker 2

In this challenging global landscape, we view our North American manufacturing footprint as a key differentiator in our ability to manufacture high quality, comfortable, custom furniture with quick speed to market. As we enter our Q2, we expect a continued challenging macro environment for the remainder of the fiscal year. However, we remain optimistic about our ability to continue to outperform the market while investing in our business through our Century vision, so that when trends rebound, we can disproportionately benefit. We once again made strong progress in the quarter and we look forward to continuing to make CenturyVision a reality. Now let me turn the call over to Bob to review the results in more detail.

Speaker 2

Bob?

Speaker 3

Thank you, Melinda, and good morning, everyone. As a reminder, we present our results on both a GAAP and non GAAP basis. We believe the non GAAP presentation better reflects underlying operating trends and performance of the business. Non GAAP results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides. On a consolidated basis, fiscal 2025 first quarter sales increased 3% to $496,000,000 versus the prior year, primarily driven by higher delivered volume within our wholesale segment.

Speaker 3

Consolidated GAAP operating income was $32,000,000 and non GAAP operating income was $33,000,000 a decrease of 3% versus last year's Q1. Consolidated GAAP operating margin was 6.5% and non GAAP operating margin was 6.6%, reflecting a 40 basis point decline versus last year due to reduced fixed cost leverage within our Retail segment, partially offset by gross margin expansion. GAAP diluted EPS was $0.61 for the Q1 versus $0.63 in the prior year quarter. Non GAAP diluted EPS was $0.62 which was unchanged versus last year. As I move to the segment discussion, my comments from here will focus on our non GAAP reporting unless specifically stated otherwise.

Speaker 3

Starting with the Retail segment for the quarter, delivered sales were $202,000,000 a 3% decrease over the prior year's Q1 as the prior year benefited from the delivery of residual backlog related to component shortages. Retail non GAAP operating margin decreased to 10.3% versus 14.1% in the prior year quarter. This is driven by fixed cost deleverage on lower delivered sales and fixed cost increases supporting our long term strategy of growing our retail business through new and acquired stores. Gross margin was roughly flat year over year. For our wholesale segment, delivered sales for the quarter increased to $351,000,000 up 5% versus the prior year period.

Speaker 3

The increase was attributed to higher delivered volume to our external customers, partially offset by lower intercompany sales to our retail segment and lower delivered volume in our Casegoods business. Non GAAP operating margin for the wholesale segment was 6.9% versus 6.8% in last year's Q1, driven by gross margin expansion primarily from reduced commodity prices, improved sourcing and favorable duty expense, partially offset by an unfavorable shift in channel mix towards external customers, which generally carry products with a lower gross margin than products sold to furniture galleries. Joybird delivery sales reported in corporate and other were $35,000,000 down 3% versus the prior year period. Joybird operating performance again made meaningful progress against the prior comparable period as the brand focuses on balancing sales growth and profitability. On a consolidated basis, non GAAP gross margin improved once again across all reportable segments and for the entire company increased by 40 basis points versus the prior year Q1.

Speaker 3

Gross margin expansion was attributed to lower input costs from reduced commodity prices and improved sourcing, partially offset by a shift in consolidated mix towards our wholesale segment, which has a lower gross margin rate than our retail segment. Non GAAP SG and A as a percentage of sales for the quarter increased by 80 basis points compared with the same period last year, primarily due to lower leverage on delivered sales relative to fixed costs within our Retail segment. Additionally, the company continues to invest to build a more agile business model and support future growth opportunities. This was partially offset by a shift in consolidated mix driven by a higher percentage of sales in our wholesale segment, which has a lower SG and A expense as a percentage of sales than our retail segment. Our effective tax rate on a GAAP basis for the Q1 was 25.5% compared to 26.5% for the prior year.

Speaker 3

Our reduced effective tax rate was partially the result of tax benefits from the vesting of stock based compensation. Turning to cash. We ended the quarter with a strong balance sheet with $342,000,000 in cash and no externally funded debt. We generated $52,000,000 in cash from operating activities in the quarter versus $26,000,000 in the prior year. The improvement was mainly due to a decrease in receivables and an increase in customer deposits resulting from higher written sales versus year ago.

Speaker 3

We spent $16,000,000 in capital expenditures during the quarter, primarily related to retail store openings and remodels and upgrades at manufacturing facilities and our market showrooms. We also spent $7,000,000 on acquisitions during the quarter. For the quarter, we returned approximately $42,000,000 to shareholders via dividends and share repurchases, including $8,000,000 paid in dividends. We repurchased 933,000 shares in the market in the quarter, which leaves 4,700,000 shares available under our existing share repurchase authorization. We continue to view share repurchases and our dividends as an attractive use of our cash and positive return to shareholders.

Speaker 3

Our capital allocation target is to reinvest 50% of operating cash flow back into the business and return 50% approximately to shareholders in share repurchases and dividends over the long term. In fiscal 2024, our capital allocation was 52% reinvested into the business and 48% returned to shareholders. Now before turning the call back to Melinda, let me highlight several important items for fiscal 2025 and our Q2. Consistent with our CenturyVision strategy, we continue to target sales growth double the industry growth rate and double digit operating margins over the long term with the benefit of more normalized industry growth rates. Looking forward, we expect the industry to continue to be challenged consistent with recent comments from furniture retailers pointing to subdued demand and a potential recovery coming later than expected.

Speaker 3

We now believe the industry may be down even more than the 0% to negative 5% range estimate we previously anticipated for our fiscal year in total. Against that backdrop, we expect to continue to outperform the market throughout fiscal 2025 similar to our performance in fiscal 2024. For the Q2, we expect sales to increase modestly versus the Q1 supported by seasonality to the range of $495,000,000 to $515,000,000 Further, we expect 2nd quarter non GAAP operating margin to be in the range of 6% to 7%. As we continue to invest in our Century Vision pillar of growing retail, we expect near term margin compression versus the prior year, primarily driven by expected negative same store sales trends from the continued challenging demand environment, which will more than offset the margin accretion from new stores and independent La Z Boy Furniture Galleries acquisitions in our retail segment. In addition, near term wholesale margin will be disproportionately affected by challenges in 2 of our smaller businesses.

Speaker 3

Casegoods, our small import business, is experiencing challenges due to higher container rates consistent with others across the import industry. Our international wholesale business broadly is also being impacted by a combination of temporary customer disruption, lower consumer demand and higher container rates. We expect to open 12 to 15 new La Z Boy Furniture Galleries stores skewed towards the second half of the year. We also expect our tax rate for the full year to be in the range of 25.5% to 26.5%. We anticipate non GAAP adjustments for purchase accounting charges for the year to be in the range of $0.01 to $0.03 per share.

Speaker 3

We expect capital spending to be in the range of $70,000,000 to $80,000,000 for fiscal 2025 as we invest to strengthen the company for the future consistent with our Century Vision strategy. This includes land and building investments in stores to maintain the growth rate of our retail network. And finally, presuming no significant worsening in macroeconomic trends, we expect to continue share repurchases at dollar levels consistent with pre COVID levels. And now I will turn the call back to Melinda.

Speaker 2

Thanks, Bob. In spite of the challenging industry backdrop, we continue to outperform, while also making progress towards achieving our Century Vision goals. Our focus remains on the expansion of our La Z Boy brand, driving growth of our company owned retail segment through execution and new and acquired stores, improving agility across our supply chain and driving efficiency and margin expansion throughout our business. We are well positioned to disproportionately benefit when industry fundamentals improve. Before I conclude, I would like to thank the entire La Z Boy Incorporated team for their ongoing hard work and dedication.

Speaker 2

And I look forward to speaking with you all again in the fall and I wish you a great end of summer. Now, let me turn the call back to Mark.

Speaker 1

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

Operator

Certainly. The floor is now open for questions. Your first question is coming from Bobby Griffin with Raymond James. Please post your question. Your line is live.

Speaker 4

Good morning. This is Alessandra Jimenez on for Bobby Griffin. Thank you for taking our questions. First, I just wanted to ask about traffic trends at retail during the quarter and into August. Did you see any notable differences in monthly traffic trends?

Speaker 4

Or is the improved demand during the holiday promotional period mainly a function of increased conversion rates?

Speaker 2

Yes. Broadly, traffic remains challenged. And I think you hear that across all of the virtually all of the companies that have reported recently. What we definitely see is traffic strengthening around those major holidays. For us, Memorial Day is always one of our biggest holidays of the year and we saw stronger traffic trends.

Speaker 2

And then of course, we do a really nice job in our stores of converting once people are in the door. 4th July isn't just traditionally is not as big of a holiday for us, but we also saw more challenged traffic trends. And I think across most of the industry folks experienced a more challenged July. And so it remains somewhat volatile and we certainly see people focusing more on holidays and events and deeper troughs in between.

Speaker 4

Okay. That's helpful. And then switching gears a bit specifically as it relates to margins. How is the restructuring process progressing today? Do you still expect to achieve 50 to 60 basis points of improvement in wholesale beginning in 2Q from the restructuring?

Speaker 4

And then that will be offset by the previously mentioned pressure to case goods in international wholesale? Or how should we think about margin?

Speaker 3

We're making progress against that 50 to 60 basis points. There's been some delay relative to the work we're doing down in Mexico and getting folks hired and up to speed from a quality perspective and a productivity perspective. I expect to get to that 50 to 60 basis points by the end of the fiscal year. And it will slowly improve from Q2 to Q3 to Q4.

Speaker 4

Okay. That's helpful. And then lastly for me, have your advertising plans changed at all given the current demand backdrop from where you thought it would be starting the fiscal year?

Speaker 2

Yes. I mean, it's an ongoing balance of the equation, right? We want to make sure we're out there. We believe in our long lived the Lazy campaign and the strength of our brand. And so you need to be out there.

Speaker 2

But at the same time, particularly in these summer months and with where the consumer is right now, sometimes you can be speaking, but nobody is listening. So we're kind of continuously optimizing where we're spending and how much we're spending as we go through these challenging times.

Speaker 4

Thank you so much.

Operator

Your next question is coming from Brad Thomas with KeyBanc. Please post your question. Your line is live.

Speaker 5

Hey, good morning. This is Taylor on for Brad. Maybe if I could just start on the competition or the competitive landscape. Belinda, what are you seeing in terms of competition within the space in terms of pricing and promotions? And I guess related to that, there's been a number of bankruptcies and store closures in the space.

Speaker 5

What are your some of your thoughts there as it relates to potentially getting some share?

Speaker 2

Yes. So a couple of thoughts on that. As you mentioned, super fragmented market, both amongst retailers and amongst manufacturers and wholesalers in our space. And these times of sort of all the disruption in the last couple of years has made that very hard for a lot of folks to navigate with all the puts and takes. And so we've seen quite a few folks exit the market in one way or another.

Speaker 2

And broadly, I would say that is a great opportunity for us and we have seen that where it's an opportunity to take share in general in our industry. I think you see more consolidation through those type of opportunities than you do from very successful sort of big acquisitions and that type of thing. And we certainly our sales teams particularly on our wholesale businesses are mobilized around being able to offer a strong supply base, when some of those suppliers are going out of business. So that has definitely benefited our business and part of our agility is being ready to help offer those solutions to both B2B customers and to wholesale and then also to consumers as some retailers drop out. So definitely an opportunity there, tough thing for the industry, of course.

Speaker 2

And again, the fact that we have a very strong balance sheet and we're here to stay, benefits us right in that space. Relative to pricing, input costs are still up pretty significantly versus pre pandemic. And so we have not seen a lot of sort of crazy, crazy attempts to really drop prices. We certainly continue to watch those opening price points because the consumer is challenged and they may just simply decide not to go into that discretionary purchase. But broadly not seeing again, there's always the holiday events to drive activity.

Speaker 2

We're not seeing anything real dramatic there. In fact, given that quite a bit of our business is supplied by importers, container rate hikes have actually caused some companies to actually raise their prices in the last quarter or so. And that's something we haven't really had to do or needed to do given our primarily North American based footprint with the exception of in our case goods business as we alluded to.

Speaker 5

Great. That's super helpful. And then maybe one for Bob. I guess on the retail margin side, 1Q was down about 4 100 basis points or so. And I understand 1Q is usually the weakest quarter of the year.

Speaker 5

But how should we be thinking about the retail margins as we move throughout the year? And then maybe what your thoughts are longer term for that segment?

Speaker 3

Longer term for this segment, we expect to get ourselves as the industry comes back and we get back to what we expect to do on a regular basis, which is positive same store comps. We expect that business to be in the mid teens. So that's our long term plan and we that will continue to be what we're focused against. In the short term, the margin that we saw this typically as you mentioned Q1 is our lowest margin period. We would expect to see that slowly improve and then accelerate as we get into the back half of the year.

Speaker 3

We're typically Q3 and Q4. It has the highest margins for our retail segment because that's where you see the highest level of both sales and deliveries for the furniture industry.

Speaker 5

Great. Thanks, Bob. And then if I could sneak one more in. You had a pretty good results within the wholesale segment, 8% increase in the sales to external customers. Can you unpack that a little bit more for us to kind of understand that improvement?

Speaker 2

Yes. And I think it was 5% sales total sales for wholesale. Yes. But yes, so the big thing that is driving that, of course, our wholesale business is supporting our company owned retail, our independently owned furniture galleries and then our general dealers, which are multi brand customers that take a decent amount of our product as well to get to a broad array of consumers. What we saw in this Q1 is those external customers really starting to come back whereas last year that was still a much more depressed business.

Speaker 2

So we've seen sort of sequential strengthening in our retail even through the challenging last 2 years. Those external customers took a little bit longer to come back. And so you're really seeing the benefit of that here in this Q1.

Speaker 3

And then the one thing I would add to that is just the as Melinda mentioned, our channel strategy relative to expanding and getting our product available in more stores, including adding new customers like, for example, what we specifically mentioned Rooms To Go, but there's been some others we've added. Those have also helped to increase the wholesale segment sales.

Speaker 5

Great. Thanks so much.

Operator

Your next question is coming from Anthony Lebiedzinski with Sidoti and Company. Please close your question. Your line is live.

Speaker 6

Yes. Good morning and thank you for taking the questions. So first, just wanted to follow-up on the last one here as far as the wholesale segment. So what's driving that actually as far as what would you attribute the wholesale channel actually picking up their sales actually? I guess maybe if you could I don't know if there's any way you can quantify as far as on the same store or I know you're adding some new customers.

Speaker 6

So maybe if you could just if there was a way you could parse out like how much of that is coming from new wholesale dealers versus organic and what are the main reasons for that?

Speaker 3

Yes, we don't have a way to parse that out the way you're looking for Anthony, but the two things that we just mentioned is, 1, the new customers that you just talked about and the fact that we now have distribution in more customers and more stores. We're not specifically calling out how many specific stores there are because we're also the wholesale market is a very large market. So we're losing some mom and pops and we're adding customers like Rooms To Go or Furniture Row, etcetera. So but that's one component. The other component that Melinda alluded to was back a year ago, that market was still depressed, if you will.

Speaker 3

The wholesale market was depressed because our customers were still getting rid of their inventory and they hadn't gotten back to normal order rates. On a year over year basis, now this past quarter, they're back to those normal order rates versus what I would call a weaker base. So a combination of those two things is what was driving the growth over this past quarter versus year ago.

Speaker 2

I would just build 2 additional items on that external side of things. We tend to talk about some of our newer customers, but as we really focus on strategic partners, we've got some real successes with some of our long time customers like the Slumberlands of the world that are strong customers for us and we're really working at how we strategically grow our businesses together as well as, really sharpening our execution on Comfort Studios. So that's our store within the store concept. And over the last year or so, even with Long Live the Lazy coming out, we are sharpening execution in those branded spaces across the existing network and expanding that network, so that the brand really comes through and feels very consistent end to end, which is also helping that execution.

Speaker 6

Okay. Thank you both for that detailed answer. And then actually as far as the covered studio concept, I know that obviously that has grown. Is there a target in terms of how many of those you want to have at some point as part of your Century Vision strategy?

Speaker 2

I think it's less about a specific number and more about the right execution. And the reason I say that is we are constantly balancing Comfort Studio opportunities with furniture gallery opportunities. So we need to make sure we have a compatible distribution model that really best benefits the end consumer. And so at any given time as we see opportunities for opening up furniture galleries, our cells are independently owned and then balancing those with other partners across external customers and are they ready to be a true comfort studio execution. So not a specific target on this.

Speaker 6

Got it. Okay. Thanks for that Melinda. And then as far as the lower traffic, obviously, as you said, it is an industry wide thing here. Now your website already has a 30% off promotion for Labor Day sales.

Speaker 6

Are you seeing the benefits of that or do you need to get close to the holiday? I mean, just wondering when do consumers start to do that? When are consumers actually starting to think about buying or are they actually waiting for the actual holiday?

Speaker 2

We're in day 2 of that. So a little early to comment on that one. But you know this industry well, Anthony. For the key holidays of the year sort of that 30 percentage off is sort of the call to action that you see across the industry. That promotion is the depth of that promotion is not different than what we've been doing for years, honestly, even in the middle of the pandemic demand to drive a call to action.

Speaker 2

We are experimenting with as you've seen across many retailers and even across many categories on how many days do you expand those promotions for to kind of drive that top of mind. But too early to say anything about how Labor Day will look this year.

Speaker 6

Got it. Okay, understood. Okay. And then lastly, Caix goods obviously is a small piece of your business, but it's been impacted by higher container rates. Have you put through the ocean freight surcharges to reflect that?

Speaker 6

Or are you thinking about doing that to offset the higher rates?

Speaker 3

We Anthony, we have we've already implemented surcharges on new orders. However, we operate on a LIFO basis with Casegoods. So as those costs come in, they go immediately to the bottom line. So there's going to be a temporary mismatch on the costs coming in and it's going to take a while before those surcharges take effect, but we actually deliver product that had those surcharges now when they were ordered.

Speaker 6

All right. Well, thank you very much and best of luck.

Speaker 2

Thanks, Anthony. Thanks, Anthony.

Operator

The Q and A session has now concluded. At this time, I would like to turn the floor back over to Mark Becht for any closing remarks.

Speaker 1

Thanks, Kelly. Melinda, Bob and I will be in our offices to take any follow-up calls. Have a great day.

Operator

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Remove Ads
Powered by Quartr
Earnings Conference Call
La-Z-Boy Q1 2025
00:00 / 00:00
Remove Ads