La-Z-Boy Incorporated

Good day, ladies and gentlemen, and welcome to your Lazy Boy fiscal 2022 first quarter conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Kathy Liebman, Investor Relations. Ma'am, the floor is yours.

Thank you, Taryn. And good morning, everyone. Thank you for joining us to discuss our fiscal 2022 first quarter results. With us this morning are Melinda Whittington, Lazy Boy's president and chief executive officer, and Bob Lucien, CFO. Melinda will open and close the call, and Bob will speak to segment performance and the financials midway through. We'll then open the call to questions. Slides will accompany this presentation, and you may view them through our webcast link which will be available for one year, and a telephone replay of the call will be available for one week beginning this afternoon. Before we begin the presentation, I'd like to remind you that some statements made in today's call include forward-looking statements about Lazy Boy's future performance and other matters. Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10-K. We encourage you to review those risk factors as well as other key information details in our SEC filing. Also, our earnings release is available under the News and Events tab on the Investor Relations page of our website, and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck. With that, I'll now turn over the call to Melinda Whittington, Lazy Boy's President and Chief Executive Officer.

Melinda? Thank you, Kathy, and good morning, everyone. Yesterday afternoon, following the close of market, we reported our fiscal 22 first quarter results, a quarter marked by multiple successes as well as some expected challenges. Across the Lazy Boy enterprise, we delivered all-time record high sales of $525 million, making and selling more furniture in the quarter than we ever have in modern history, even with production running only 12 weeks in the quarter due to our annual one-week maintenance shutdown in July versus 13 weeks in most quarters. Demand across all businesses also remained high, and backlog remains at record levels. Written same-store sales for the Lazy Boy Furniture Galleries Network increased 10% versus the prior year quarter and has grown at a compounded annual growth rate of 13% across the last two years since pre-pandemic, demonstrating the continued strength of demand for our Lazy Boy branded product. Written same-store sales for our company-owned retail segment increased 22% versus the prior year period, and at a compounded annual growth rate of 16% over the last two years. And Joybird continued on its strong growth journey, writing 31% more business than in last year's first quarter and growing at a compounded annual growth rate of 35% across the last two years. On the manufacturing front, we continue to increase capability to build and deliver more furniture to better service continued strong demand. and are in the process of increasing our sell count across the Lazy Boy branded business. And also during the quarter, we continued to return value to shareholders with a dividend payment and $36 million of share repurchases. And we've recently expanded our repurchase authorization. At the same time, we are experiencing challenges in our wholesale business. We continue to have inefficiencies at the plant level as we open additional upholstery capacity and hire, train, and work to retain what is currently about one-third more workers versus pre-pandemic. And we are continuing to invest to increase flexible capacity through the remainder of this fiscal year in order to work through our backlog. Also, as expected, we experienced significant short-term margin compression on the wholesale business, primarily due to higher raw material and freight costs, which have risen at unprecedented rates and speed over an extended period. As we've talked previously, we made the decision to not take action on the backlog with our first four rounds of price increases since the pandemic began. With wait times extending up to seven months for the Lazy Boy branded business, That has resulted in delayed recognition of those price increases until they work their way through to our delivered sales. But looking to the future, during the quarter, we also made several strategic decisions to take us through this unprecedented period and ensure we emerge stronger post-pandemic. Recognizing the commodity prices are expected to remain at highest levels in recent history, In July, we took our fifth price increase since the pandemic began, but this time also took a surcharge on our backlog. Given the unparalleled nature of rising material costs, we are asking our business partners to share in the financial impact during a period where we are all experiencing record demand. Since our first price increase last October, cumulative price increases and surcharges now add up to the high teens versus pre-pandemic. Second, on the practical side, our procurement team has significantly increased inventory for key component parts to minimize future supply disruptions and ensure a steady stream of furniture is manufactured and delivered. Third, we launched Project Century, our long-term strategic path for strong growth and profitability as we head toward our centennial anniversary in 2027. At a high level, key components include a focus on growing market share for our strong consumer brands, specifically Lazy Boy and Joybird. In an extremely fragmented industry, the iconic Lazy Boy brand enjoys an unparalleled identity for comfort and quality while being a leader in motion. We believe we can fully leverage these attributes to grow our business and will invest to expand our reach to a broad range of consumers, including younger consumers, through consumer insights, product innovation, new experiences, and messaging. At the same time, we will continue to expand and strengthen our omnichannel presence. We will offer a state-of-the-art e-commerce experience and a strong brick-and-mortar footprint to ensure we easily reach consumers wherever they prefer to shop. And now that we have a sustainably profitable direct-to-consumer model with Joybird, we'll increase investment to expand consumer awareness and accelerate profitable growth. At the same time, we'll enhance Joybird's omnichannel offering by opening additional small footprint brick-and-mortar stores in high-traffic urban areas. Our first three stores in Brooklyn, Chicago, and Washington, D.C. have met with great success, and there is exciting potential for additional stores, including one in Los Angeles, planned to open in the fall. As the final pillar of Project Century, we'll enhance our corporate capabilities and leverage the balance of the enterprise portfolio to efficiently support these initiatives and, over time, enable the potential for tack on acquisitions that can benefit from our supply chain expertise and accelerate the Lazy Boy Incorporated growth story. With these initiatives in place, over time, We envision sales growth outpacing industry averages while delivering industry-leading margins as we complete our first century in 2027. Now, let me turn the call over to Bob to review the results for the quarter. Bob?