La-Z-Boy (LZB 30.55, +4.35) cozies up to gains near 16.6% today after its impressive Q4 report stirred the bulls from the sidelines. Also helping the stock higher today was the announcement of an increase to the share repurchase plan.
Taking a look at Q4, both earnings and revenues came in ahead of market expectations at $0.57 and $412.7 million, respectively. Consolidated gross margin increased to 40.8% versus 39.3% last year. Consolidated operating income for Q4 was up 25.1% to $42.8 million from $34.2 million, with the consolidated operating margin increasing to 10.4% from 8.2% in the fiscal 2016 fourth quarter. Additionally, same-store written sales for the La-Z-Boy Furniture Galleries network increased 2.4%.
Breaking it down by segment, LZB’s upholstery segment sales decreased 2.9% to $325.3 million compared with last year’s Q4 sales of $334.9 million. For the upholstery segment, the one additional week included in the fiscal 2016 quarter resulted in about $23 million of additional sales in the quarter based on the average weekly sales for the year.
In the casegoods segment, sales declined 1.0% to $26.0 million versus the prior year’s Q4 sales of $26.3 million. For the casegoods segment, the one additional week in the fiscal 2016 quarter resulted in about $2 million of additional sales in the quarter based on the average weekly sales for the year.
Sales in the company’s retail segment for Q4 were up 8.1% to $118.0 million. The prior year’s fourth quarter included an additional week, representing about $8 million in sales based on the average weekly sales for the year.
For the core 121 stores included in last year’s fourth quarter, delivered sales declined 8.2% compared with an increase of 13.0% in the prior-year period. The decline in delivered sales for LZB’s core stores in the fiscal 2017 fourth quarter was mainly due to the additional week of sales included in the fiscal 2016 fourth quarter.
As mentioned, in Q4, La-Z-Boy Furniture Galleries store system, which includes both company-owned and independent-licensed stores, saw same-store written sales, which the company tracks as an indicator of retail activity, increase 2.4% versus last year’s fourth quarter. For Q4, total written sales from new and closed stores, reported on a normal calendar three-month basis, increased 4.7% compared with the fiscal 2016 period. At the end of Q4, the La-Z-Boy Furniture Galleries store system was composed of 347 stand-alone stores, with 112 in the new concept design format.
Also of note, LZB’s Board of Directors approved the purchase of up to an additional 6 million shares under the company’s existing share purchase authorization, established in 1987. The total number of shares authorized to purchase at the present time represents approximately 18% of the outstanding shares.
As a caveat for Q1, management also commented that during the summer months, the furniture industry typically experiences weaker demand, and the majority of LZB’s plants shut down for one week of vacation and maintenance in July, during the first quarter. Accordingly, management stated that Q1 is usually LZB’s weakest in sales and earnings.