La-Z-Boy Incorporated LZB defied expectations in its fourth-quarter fiscal 2024 (ended Apr 27, 2024) report, with earnings and sales excelling beyond projections. Alas, this triumph was overshadowed by a year-over-year downturn, stemmed from weakened consumer spending in the furniture and home furnishings vertical, compounded by dwindling footfall in stores and a sluggish housing market induced by soaring interest rates.
The La-Z-Boy nest demonstrated remarkable craftsmanship like never before, boasting record-breaking conversion rates and escalating average sales per consumer amidst a challenging climate. Despite anticipations of persisting industry unpredictability in the foreseeable future, LZB remains sanguine about its prospects for outshining rivals and broadening its market presence steadily.
For fiscal 2025, LZB braces for enduring industry headwinds, possibly witnessing a dip of up to 5%. However, green shoots are expected to sprout later in the fiscal period post anticipated interest rate cuts reviving housing activity. Undeterred by these challenges, LZB eyes outpacing the industry in fiscal 2025, envisaging moderate year-over-year sales growth buttressed by the execution of its visionary Century Vision initiative, involving the unveiling of 12-15 new La-Z-Boy Furniture Galleries stores, primarily in the latter half of the fiscal year.
Diving into Quarter Performance
In the spotlight, La-Z-Boy showcased an adjusted earnings per share of 95 cents, eclipsing the Zacks Consensus Estimate of 68 cents. Nevertheless, this figure bore a 4% drop from last year’s 99 cents per share.
A Peek into the Numbers
Consolidated revenues scaled to $554 million, edging past the consensus projection of $519 million by 6.7%. Despite this victory, the numbers dwindled by 1% compared to the preceding year quarter’s $561 million.
Segmental Breakdown
Retail: Reported sales plunged by 6% to $228 million vis-a-vis the previous year, inclusive of the finish in pandemic-induced backlogged deliveries. However, accounting figures unveiled a 50% surge from the pre-pandemic fourth-quarter fiscal 2019 statistics.
Written sales in the Retail domain soared by 1% year-on-year, fed by expansions in acquired and fresh stores. This uptick overshadowed the drop in same-store sales relative to the year gone by.
Encountering a 130-basis-point retreat, the segment’s non-GAAP operating margin stumbled to 14.2% year over year. Despite an enriched gross margin sparked by a favorable product mix shift, LZB grappled with elevated fixed costs due to dwindling delivered sales, casting a shadow on the numbers.
Wholesale: The segment saw a 1% slide in sales, tallying $392 million vis-a-vis the preceding year. The corporate premises witnessed enhancements in wholesale unit volumes during the quarter, buoyed by the recovery from weather-induced disruptions in January.
Corporate & Other: Under this banner, sales regressed by 2.4% year-on-year to $39 million. Joybird’s written sales witnessed a 1% dip relative to the previous year, while delivered sales held steady year-over-year at $37 million, signaling a plateau in sales trajectory.
Fiscal 2024 Glances
The fiscal year unrolled an earnings per share (EPS) of $2.98, a drop from $3.86 in the antecedent year. Consolidated revenues also ebbed by 13%, dwindling to $2 billion from the prior year’s $2.3 million.
Non-GAAP operating income backslid to $159 million, down from the former $223 million. Simultaneously, the non-GAAP operating margin recoiled to 7.8% from the anterior year’s 9.5%.
A Financial Appraisal
As of Apr 27, 2024, LZB boasted $341.1 million in liquidity, with $341.1 million in cash equivalents at the fiscal 2024 closure, down slightly from the $343.4 million recorded a year prior.
Cash inflows for the quarter totaled $53 million, marking a descent from the $78 million in the prior-year period. Annual cash inflows for fiscal 2024 were scoped at $158 million in contrast to $205 million in fiscal 2023. Capital expenditures for fiscal 2024 totaled $54 million.
Glimpse into Q1 Fiscal 2025 Expectations
Anticipations for the first quarter of fiscal 2025 foresee delivered sales between $475 million and $495 million, a notch down from the $482 million from the analogous period the previous year.
The non-GAAP operating margin is poised to nestle between 6% and 7%, a fall from the 7% reported in the equivalent quarter last year. It’s essential to note that LZB’s first quarter customarily navigates the lowest sales and margins in the fiscal year, attributed to seasonal recessions in industry sales and the brand’s annual one-week plant recess in July.
Closing Thoughts and Market Comparisons
At the close of the day, La-Z-Boy presents a Zacks Rank #3 (Hold). On a parallel alley, handpicked stocks from the Consumer Discretionary sector sparkle.
Strategic Education, Inc. STRA touts a Zacks Rank #1 (Strong Buy), flashing a remarkable four-quarter earnings surprise of 36.2% on average, crowned with a 46.1% stock upsurge in the yesteryears.
Royal Caribbean Cruises Ltd. RCL mirrors a Zacks Rank #1, demonstrating a noteworthy four-quarter earnings surprise averaging 18.3% and a splendid 56.5% stock rally within the bygone year.
Netflix, Inc. NFLX adorns a Zacks Rank of 2 (Buy) and exhibits a prolific four-quarter earnings surprise tracking 9.3% on average, accompanied by a 56.5% stock leap in the recent past.
The consensus prophesizes a 2024 sales and EPS augmentation of 14.8% and 52.2%, respectively, echoing the lights and shadows that the future might cast upon these firms.
The path ahead beckons with uncertainty and promise. Will these laurels endure, or shall the march of change trample them by? It’s a tale as old as the markets themselves, leaving us to wonder: where will our stocks sail, as the winds grow turbulent after the calm?
Maintaining Market Momentum in Presidential Election Years
Against the backdrop of historical patterns, the market finds itself navigating the turbulent waters of yet another presidential election year. Variation in market performance across different election cycles has been a longstanding curiosity for investors. The sentiment palpable during these pivotal years often sets the tone for the broader financial landscape. Amidst this uncertainty, the market has defied conventional wisdom and displayed remarkable resilience regardless of the political outcome.
Optimism in the Air
Voters have been animated and actively involved, contributing to a charged atmosphere that has translated into a bullish undercurrent in the market. The prevailing positivity is a testament to the unwavering spirit of market participants who remain undeterred even in the face of uncertainty.
Historical Context
Looking back at historical trends, the contrast between midterm years and presidential election years is stark. The market’s performance, uncharacteristically subdued during midterm cycles, sees a resurgence as the election fervor grips the nation. This pattern, a fixture in the financial landscape, serves as a guiding light for investors navigating the market’s labyrinth.
The Beacon of Hope: 5 Stocks to Watch
Amidst this fervent market activity, certain stocks have emerged as shining stars, promising significant rewards for both Democrats and Republicans. These beacons of hope offer investors a glimpse of the potential upside that transcends political affiliations:
- A Medical manufacturer that has seen an astounding surge of +11,000% over the past 15 years.
- A Rental company that is dominating its sector with unwavering strength.
- An Energy powerhouse set to bolster its already generous dividend by 25%.
- An Aerospace and defense standout that recently secured a lucrative $80 billion contract.
- A Giant Chipmaker investing in massive production facilities within the U.S.
These stocks symbolize the essence of opportunity amidst the chaos, offering a ray of hope and prosperity in a market landscape that thrives on uncertainty.
Embracing the Future
As the market forges ahead into uncharted territory, investors are urged to remain vigilant yet optimistic. The current buoyancy in the market, fueled by the energy of the election year, underscores the resilience and adaptability of financial markets in the face of adversity.
