It's not looking good for La-Z-Boy (LZB 20.00, -6.25) right now. Its stock is down 20% following a disappointing fiscal first quarter report that featured a large drop in the operating margin for its most profitable upholstery segment.
La-Z-Boy expressed its own disappointment over the start of fiscal 2018, which did not follow form with the strong finish to fiscal 2017.
Consolidated sales increased 4.8% to $357.1 million, yet that growth was primarily attributed to acquired sales. La-Z-Boy noted the acquired sales did not add volume to the upholstery segment, which accounted for 77% of total sales in the quarter and saw its operating margin decline to 8.5% of sales from 11.4% in the same period a year ago.
Lower volume throughout the company's plants, it was said, made it difficult to absorb fixed costs. That factor, along with a normal seasonal slowdown and continued investments, drove the contraction in the upholstery segment's operating margin.
Sales for the company's retail segment increased 15.5% to $110.5 million. For the core base of 122 stores included in last year's first quarter, however, delivered sales declined 1.1% and the segment operating margin decreased to 1.6% from 2.3%.
The much smaller casegoods segment saw sales increase 1.9% to $25.5 million while the operating margin rate jumped to 10.7% from 8.6%.
Earnings per share for the quarter were $0.24 versus $0.28 per share in the year-ago period. This year's result fell well short of analysts' average expectation, which added to investors' disappointment with the quarterly report.
Despite the tough start to the fiscal year, La-Z-Boy said it remains optimistic about its business for the remainder of the fiscal year, citing its multi-faceted e-commerce approach and its vibrant store program.
There is nothing vibrant about the stock today, however. After gaining as much as 30% from the company's fiscal fourth quarter report in June, LZB is down sharply today. To say the least, that is not a comfortable reclining position for La-Z-Boy.