La-Z-Boy (NYSE:LZB) reported fiscal 2026 third-quarter results that management characterized as “strong,” citing growth in delivered sales, continued retail expansion, and progress on several strategic actions aimed at improving the company’s long-term agility and profitability.
Third-quarter results and profitability
For the January-ended fiscal third quarter, La-Z-Boy posted total delivered sales of $542 million, up 4% versus the prior year. Consolidated GAAP operating income was $30 million, while adjusted operating income was $33 million. GAAP operating margin was 5.5% and adjusted operating margin was 6.1%, which management said came in toward the high end of its guidance range. Diluted EPS was $0.52 on a GAAP basis and $0.61 on an adjusted basis.
Retail growth offsets uneven traffic
In the retail segment, delivered sales rose 11% to $252 million, driven by acquired and new stores. Retail adjusted operating margin was 10.7%, flat versus the prior year, as acquisition accretion was offset by investments in new stores and fixed-cost deleverage from lower delivered same-store sales.
CEO Melinda Whittington said both written and delivered retail sales increased 11% versus the prior year, helped by new and acquired locations. However, written same-store sales declined 4% for the quarter, as “continued challenging traffic” was only partially offset by improved execution such as higher conversion rates, higher average ticket, and design sales.
Whittington said same-store trends were strongest in January, turning positive until “widespread adverse weather” slowed traffic in late January and into early February. Management said it does not believe the weather will impact overall furniture demand, but it does expect timing effects that could carry into fourth-quarter deliveries as shoppers reengage.
La-Z-Boy opened four new company-owned stores during the quarter and said it has opened 16 new company-owned stores in the last 12 months while closing four. Management also highlighted its recent 15-store acquisition in the Southeast, which it described as the largest single retail acquisition in company history and said added $80 million in annualized retail sales and $40 million net to the total enterprise. The company said its total store network (including independent stores) has expanded to 374, with company-owned stores representing an all-time high of 60% of the network. Management said it sees potential to grow beyond 400 stores over time.
Wholesale progress and supply chain transformation
In the wholesale segment, delivered sales increased 1% to $367 million. Adjusted operating margin in wholesale was 6%, down from 6.5% a year earlier, driven primarily by investments in the distribution and home delivery transformation project and unfavorable foreign exchange rates.
Whittington said the company delivered its “seventh consecutive quarter of sales growth” in its core North American La-Z-Boy wholesale business and continues to grow compatible distribution with partners including Slumberland and Rooms To Go. She also emphasized the company’s vertically integrated manufacturing model, noting that approximately 90% of upholstered products are produced in the United States.
On the distribution transformation initiative, management said it completed the Western U.S. phase during the quarter, serviced by a new Arizona centralized hub, and recently broke ground on a new hub in Dayton, Tennessee, to serve the eastern region. The company expects the project to ultimately deliver 50-75 basis points of wholesale margin improvement and up to 50 basis points of margin improvement to the entire enterprise once completed.
Joybird declines and portfolio actions
Joybird performance lagged the rest of the business. Delivered sales for Joybird were $36 million, down 3% on lower volume, and Whittington said total written sales fell 13% year over year, describing the consumer segment as “particularly volatile” in the current macro environment. Luebke said Joybird’s operating loss increased from the prior year due to fixed-cost deleverage on lower delivered sales.
La-Z-Boy also detailed portfolio optimization actions intended to sharpen focus on its core North American upholstery business. Management said it formally announced the planned closure of its U.K. manufacturing facility, with production expected to cease by the end of fiscal 2026, and that it has “solidified alternative sourcing” for the business through its global supply chain network. Whittington told analysts the company is continuing to grow with DFS in the U.K., but that the transition has taken longer than expected and the current volume levels no longer justify maintaining a dedicated U.K. plant. She said margins in the U.K. business were historically consistent with other wholesale margins and that the company anticipates returning to those ranges over time.
Separately, the company said it completed the sale of its Kincaid Upholstery business just after quarter end and signed a letter of intent to sell its non-core wholesale casegoods businesses, American Drew and Kincaid, with completion targeted by fiscal year-end. Management said these changes will not impact its ability to offer casegoods as part of whole-home solutions in La-Z-Boy stores and branded spaces.
Cash flow, capital allocation, and outlook
La-Z-Boy generated $89 million in operating cash flow during the quarter, up 57% year over year, which management attributed to improved working capital and higher customer deposits. The company ended the quarter with $306 million in cash and no externally funded debt. Capital expenditures were $18 million in the quarter, primarily for new stores, remodels, manufacturing investments, and spending related to the distribution transformation project. The company completed its 15-store acquisition for $86 million at the beginning of the quarter.
Year to date, La-Z-Boy returned $55 million to shareholders through dividends and share repurchases, including $28 million in dividends and $27 million in repurchases. Luebke said the company resumed “more normalized” buybacks during the quarter, repurchasing $14 million of shares, and noted that 3 million shares remain available under the existing authorization.
For the fiscal fourth quarter, the company guided to sales of $560 million to $580 million and an adjusted operating margin of 7.5% to 9%, reflecting what management described as a cautious view on the macro backdrop and the short-term impacts of recent adverse weather. The company expects to open five new company-owned stores in the fourth quarter, bringing total openings to 16 for the full fiscal year. It forecast fiscal 2026 capital expenditures of $80 million to $90 million and a full-year tax rate of 27% to 29%.
Management reiterated expectations that its strategic initiatives—including the 15-store acquisition, casegoods exit, U.K. plant closure, and management reorganization—will have an annualized net impact of approximately a $30 million sales decrease and an adjusted operating margin improvement of 75 to 100 basis points to the enterprise once substantially complete by fiscal year-end, and said it does not currently expect a material one-time gain or loss from those actions.
About La-Z-Boy (NYSE:LZB)
La-Z-Boy Incorporated (NYSE: LZB) is a leading U.S. manufacturer and marketer of residential furniture, best known for its upholstered recliners, sofas, stationary chairs and sleeper sofas. The company offers a broad range of products in both fabric and leather, complemented by occasional tables, desks, lamps and other home furnishings through its branded retail network.
Founded in 1927 by cousins Edward Knabusch and Edwin Shoemaker in Monroe, Michigan, La-Z-Boy pioneered the modern reclining chair.
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