LA-Z-BOY INC

La-Z-Boy Incorporated is the leading global producer of reclining chairs and one of the largest manufacturers/distributors of residential furniture in the United States. The La-Z-Boy Stores retail network is the second largest retailer of single-branded furniture in the United States. The company manufactures, markets, imports, exports, distributes and retails upholstery furniture products under the La-Z-Boy, England, and Joybird tradenames, and also imports, distributes and retails accessories and casegoods (wood) furniture products under the Hammary and Joybird tradenames. The furniture industry is primarily influenced by economic growth, existing and new housing activity, and consumer discretionary spending, with upholstered furniture having a shorter life cycle than casegoods furniture because it is typically more fashion and design-oriented and often purchased one or two pieces at a time.

The company competes in the mid to upper-mid price point by emphasizing its brand and the comfort, quality, styling, customization, value of its products, and its available design services. Primary competitors include other manufacturers and retailers, including online retailers, department stores, and big box retailers with an online presence. The wholesale business faces increased market pressures from foreign manufacturers entering the United States market and increased direct purchases from foreign suppliers by large United States retailers. The company's competitive advantages include its La-Z-Boy brand, which is one of the most recognized brands in the furniture industry, its proprietary distribution network of 378 La-Z-Boy Stores, over 500 La-Z-Boy Comfort Studio locations, and nearly 900 La-Z-Boy branded space locations, and its supply chain design that allows approximately 90% of upholstered units sold in North America to be produced in the United States.

The company generates revenue through two reportable operating segments: the Retail segment and the Wholesale segment. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishing accessories, to end consumers through 230 company-owned La-Z-Boy Stores. The Wholesale segment manufactures and imports upholstered and casegoods (wood) furniture and sells directly to La-Z-Boy Stores, operators of La-Z-Boy Comfort Studio locations, branded space locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers. The company also sells products through its websites, www.la-z-boy.com and www.joybird.com, and through 15 small-format Joybird stores in key markets. Revenue is transactional in nature, with no recurring revenue streams described in the filing.

The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishing accessories, to end consumers through 230 company-owned La-Z-Boy Stores. In fiscal 2026, the Retail segment generated sales of $950.687 million ¹ and operating income of $108.484 million ² with an operating margin of 11.4% ³. The segment's sales increased $52.3 million ⁴, or 6% ⁵, compared with fiscal 2025, primarily due to $60.1 million ⁶ of incremental sales from retail store acquisitions and the full-year impact of prior year acquisitions, along with $31.7 million ⁷ of sales from the addition of new retail stores, net of closed stores, partially offset by a decline in delivered same-store sales. Total written sales increased 8% ⁸ in fiscal 2026 compared with fiscal 2025 while written same-store sales decreased 3% ⁹ over the same period.

The Wholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas, and imports casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces. In fiscal 2026, the Wholesale segment generated total sales of $1,482.212 million ¹⁰ (including intersegment sales of $443.423 million ¹¹) and operating income of $110.189 million ¹² with an operating margin of 7.4% ¹³. The segment's sales increased 0.2% ¹⁴, or $2.4 million ¹⁵, compared with fiscal 2025, driven by modest growth across the majority of wholesale businesses from strategic pricing and surcharge actions, partially offset by lower delivered volume in the Casegoods business and international wholesale business. Corporate and Other, which includes Joybird, generated sales of $143.750 million ¹⁶ in fiscal 2026, a decrease of $16.7 million ¹⁷ compared with fiscal 2025, primarily due to a $15.3 million ¹⁸, or 10% ¹⁹, decrease from Joybird, which contributed $130.8 million ²⁰ in sales.

During fiscal 2026, the company completed several acquisitions of independently-owned La-Z-Boy Stores, including a 15-store acquisition of the retail business in the Southeast region of the United States for $86.4 million ²¹ in cash, and acquisitions in Lansing and Portage, Michigan, and Toledo, Ohio. The company also completed the sale of the upholstery portion of its Casegoods wholesale business during the third quarter of fiscal 2026 and recorded a $3.9 million ²² gain on the sale of the Casegoods headquarters building and related fixed assets, and a $3.1 million ²³ impairment charge to reduce inventory classified as held for sale to its fair value. The company recorded a $20.0 million ²⁴ non-cash impairment charge to reduce the carrying value of Joybird's goodwill, reducing it from $55.4 million ²⁵ to $35.5 million ²⁶. The company also announced the closure of its United Kingdom manufacturing business, recording charges of $5.8 million ²⁷ in cost of sales. The company repurchased 1.3 million ²⁸ shares of company stock for $47.3 million ²⁹ and paid $37.9 million ³⁰ in quarterly dividends. In April 2026, the board of directors established a new stock repurchase program authorizing the repurchase of up to $300 million ³¹ of company stock.

Consolidated sales in fiscal 2026 were $2,126.635 million ³², an increase of $17.4 million ³³, or 0.8% ³⁴, compared with $2,109.207 million ³⁵ in fiscal 2025. Operating income was $129.207 million ³⁶ compared with $135.837 million ³⁷ in the prior year, a decrease of 4.9% ³⁸. Operating margin decreased 30 basis points ³⁹ to 6.1% ⁴⁰ from 6.4% ⁴¹. Gross margin increased 10 basis points ⁴² during fiscal 2026 compared with fiscal 2025, as a 50 basis point ⁴³ benefit from a change in consolidated mix due to growth in the Retail segment was largely offset by higher distribution costs. SG&A expenses increased 40 basis points ⁴⁴ during fiscal 2026 compared with fiscal 2025. Net cash provided by operating activities was $204.106 million ⁴⁵ in fiscal 2026, compared with $187.271 million ⁴⁶ in fiscal 2025.

The company's Century Vision strategy focuses on growing sales and market share through growth of its consumer brands, La-Z-Boy and Joybird, and sustainably growing its operating margin. Key growth vectors include expanding the La-Z-Boy brand reach through leveraging its connection to comfort, reinvigorating the brand with a consumer focus, expanding omni-channel presence, and digital transformation. The company launched a refreshed brand identity in 2025, the first significant evolution of the La-Z-Boy brand in more than two decades, designed to modernize the brand and strengthen relevance with a broader consumer audience. The company expects to grow its Retail segment through organic same-store sales growth and by increasing company-owned stores through the opening of new stores and acquisitions. Over the last five years, the company has increased its ownership percentage in the La-Z-Boy Store network from 45% to 61% ⁴⁷. With 378 ⁴⁸ stores currently in the network, the company believes there is opportunity to open approximately ten stores annually, with the majority being company-owned, targeting a network of 450 ⁴⁹ stores. In fiscal 2027, the La-Z-Boy Store network plans to open 9 to 12 ⁵⁰ stores and relocate or remodel 30 to 35 ⁵¹ stores, all featuring the latest store designs.

The company's growth strategy also includes profitably growing the Joybird brand with a digital-first consumer experience, focusing on driving profitable growth through the opening of additional small-format stores in key markets, expanding distribution channels, driving customer acquisition and awareness through digital marketing, and continued optimization of cost structure. Additionally, the company plans to expand the reach of its wholesale distribution channels, noting that over 1,000 ⁵² other dealers sell La-Z-Boy products. During fiscal 2027, the company plans to open or update approximately 80 ⁵³ La-Z-Boy Comfort Studio locations and 30 ⁵⁴ branded space locations. The company also intends to enhance its enterprise capabilities to support the growth of its consumer brands and enable potential acquisitions for growth, including an agile supply chain, modern technology, and a human-centered employee experience.

The company's distribution and home delivery transformation project, a multi-year initiative, has already reduced distribution centers by six locations as of April 25, 2026 ⁵⁵ and upon completion, the network will consist of three centralized hubs supported by small format cross docks. The company anticipates that this project will lead to operating margin expansion when completed, but noted that in fiscal 2026 it incurred, and will continue to incur, friction costs that impact operating profits. The company expects capital expenditures to be in the range of $90 to $110 million ⁵⁶ for fiscal 2027, with continued spending on the distribution and home delivery transformation, manufacturing-related investments, and investments in La-Z-Boy stores (new stores and remodels). The company also noted that during fiscal 2026, it started the multi-year distribution and home delivery transformation project intended to design and build an even more effective delivery network.

The company's capital allocation strategy includes continued share repurchases and dividend payments. In April 2026, the board of directors established a new stock repurchase program, effective as of May 14, 2026, authorizing the repurchase of up to $300 million ⁵⁷ of company stock with no expiration date. With the operating cash flows anticipated in fiscal 2027, the company expects to continue repurchasing company stock, subject to market conditions and other factors. The company paid $37.9 million ⁵⁸ in quarterly dividends in fiscal 2026 and expects the board to continue declaring regular quarterly cash dividends for the foreseeable future, though it may discontinue doing so at any time at the board's discretion. The company had no borrowings outstanding under its $200 million ⁵⁹ unsecured revolving credit facility as of April 25, 2026 ⁶⁰, which was amended on July 1, 2025 to extend the maturity date to July 1, 2030 ⁶¹ and increase the accordion basket from $100 million ⁶² to $125 million ⁶³.

The company faces headwinds from the current macroeconomic environment, noting lower consumer demand impacting delivered same-store sales in the Retail segment, which decreased 3% ⁶⁴ in fiscal 2026, and lower delivered volume in the Casegoods and Joybird businesses. The company also faces headwinds from its distribution and home delivery transformation, which incurred friction costs that impacted operating profits in fiscal 2026 and will continue to do so. The company identified potential price increases across various commodities in fiscal 2027 due to economic and geopolitical volatility, tariff and trade policies, and general inflation related to core materials. The company also noted that the closure of its United Kingdom manufacturing business and the disposal of a portion of its Casegoods wholesale business will impact future operations, with the sale of the remaining Casegoods wholesale assets completed on May 29, 2026.

The company identified several constraints to its growth plan, including the highly competitive and fragmented nature of the residential furniture industry, with competition based on quality, style, perceived value, price, promotional activities, customer service and experience, omni-channel presence, and advertising. The company also noted that a significant shift in consumer preference toward purchasing products online could have a material adverse effect on sales and operating margin, as a majority of sales are to distribution channels that rely on physical stores. Additionally, the company faces risks from changes in trade policies, including tariffs, with approximately 90% ⁶⁵ of upholstered units sold in North America produced in the United States to mitigate tariff impact, but noted that imported finished goods represented 5% ⁶⁶ of consolidated sales in fiscal 2026.

The company faces material risks from declines in economic and market conditions that impact consumer confidence and spending, as its principal products are discretionary consumer goods, and the furniture industry is particularly sensitive to cyclical variations in the general economy. The company's business is also subject to risks from changes in trade policies, including tariffs, with approximately 90% ⁶⁷ of upholstered units sold in North America produced in the United States to mitigate impact, but imported finished goods represented 5% ⁶⁸ of consolidated sales in fiscal 2026 and the company purchased over 90% ⁶⁹ of imported product from Vietnam. The company faces significant competition in the highly fragmented residential furniture industry, and a significant shift in consumer preference toward purchasing products online could have a material adverse effect on sales and operating margin. The company is exposed to risks from fluctuations in the price, availability and quality of raw materials, with most polyurethane foam coming from three ⁷⁰ suppliers and fabric and leather purchased from suppliers in multiple countries including China, Brazil, Vietnam and the United States. The company also faces risks related to its ability to successfully integrate acquisitions and realize expected benefits, having completed several acquisitions in recent years including a 15-store acquisition for $86.4 million ⁷¹ in cash, and may incur future impairment charges if acquired businesses fail to meet earnings expectations, as evidenced by the $20.0 million ⁷² goodwill impairment for Joybird and the $20.6 million ⁷³ goodwill impairment for the United Kingdom reporting unit in fiscal 2025.

Management's message emphasizes the company's Century Vision strategy as La-Z-Boy approaches its centennial anniversary in 2027, focusing on growing sales and market share through growth of its consumer brands, La-Z-Boy and Joybird, and sustainably growing operating margin well beyond this milestone year. The key strategic priorities emphasized for the period ahead include expanding the La-Z-Boy brand reach through leveraging its connection to comfort, reinvigorating the brand with a consumer focus, expanding omni-channel presence, and digital transformation; growing the La-Z-Boy retail business through organic same-store sales growth and increasing company-owned stores through new store openings and acquisitions, targeting a network of 450 ⁷⁴ stores; profitably growing the Joybird brand with a digital-first consumer experience; and enhancing enterprise capabilities to support growth, including an agile supply chain, modern technology, and a human-centered employee experience. Management noted the successful launch of a refreshed brand identity in 2025, the first significant evolution of the La-Z-Boy brand in more than two decades, and the Long Live the Lazy campaign launched in 2024. The company's forward-looking statements include plans to open 9 to 12 ⁷⁵ stores and relocate or remodel 30 to 35 ⁷⁶ stores in fiscal 2027, and to open or update approximately 80 ⁷⁷ La-Z-Boy Comfort Studio locations and 30 ⁷⁸ branded space locations during fiscal 2027.