La-Z-Boy Incorporated

Good morning, ladies and gentlemen, and welcome to the Lazy Boy fiscal 2022 second quarter conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Kathy Liebman. Ma'am, the floor is yours.

Thank you, Matt, and good morning, everyone. Thank you for joining us to discuss our fiscal 2022 second quarter results. With us this morning are Melinda Whittington, Lazy Boy's President and Chief Executive Officer, and Bob Lucien, Chief Financial Officer. 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 filings. 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'd like to now turn over the call to Melinda Whittington, Lazy Boy's President and Chief Executive Officer. Melinda?

Thanks, Kathy, and good morning, everyone. Yesterday afternoon, following the close of market, we reported our fiscal 22 second quarter results, delivering very strong sales growth as well as solid margin progress since Q1. We are delivering on plan and controlling the controllables, even in these times of significant, widespread global supply chain disruption. Across the Lazy Boy enterprise, We delivered all-time record high sales of $576 million. With sales 29% ahead of the pre-pandemic fiscal 20 second quarter, our business is much larger today than pre-pandemic, and we believe our momentum is sustainable. We are poised to grow on this base of nearly $2.1 billion in trailing 12-month sales. Also as expected, Operating margins improved sequentially as our delivered sales for the quarter reflected pricing and surcharge actions taken to offset unprecedented rising raw material costs. All in all, we are pleased with the momentum and growth we are experiencing during these challenging times. Looking forward, demand continues to be strong across the enterprise and our backlog remains at all-time highs. even as we continue to increase capacity to service our customers and consumers. During Q2 of last year, businesses were just reopening and consumers were resuming furniture purchases. At the time, written same-store sales for the Lazy Boy Furniture Galleries Network were unusually strong, up 34%. Off that base, written same-store sales for the Lazy Boy Furniture Galleries Network decreased 6%, in the fiscal 22 second quarter. However, comparing this quarter to the pre-pandemic fiscal 20 second quarter, written same-store sales for the Lazy Boy Furniture Galleries Network increased an impressive 26% for a compounded annual growth rate of 12% across the two years. Similarly, while written same-store sales for our company-owned retail segment decreased 7% versus the unusual prior year period, written sales increased at a compounded annual growth rate of 12% across the last two years. For Joybird, primarily an e-commerce business, it continued its strong growth trajectory, accelerating to write 56% more business this Q2 than in last year's second quarter, and delivering an extremely impressive compounded annual growth rate of 40% across the last two years. As we focus on addressing this strong ongoing demand and accumulated backlog, we continue to make strategic investments to increase capacity and improve capabilities and are producing more units than ever to service customers. We're continuing to add manufacturing cells and now employ almost 40% more manufacturing personnel than pre-pandemic. In Mexico, Additional cells are coming online at our SLRC facility, and the first cells at our new Torreon plant are expected to begin operations in January, with that location fully operational by fiscal year end. And we continue to work to minimize supply chain disruptions, from those associated with lack of component parts, such as electronic chips, to those inherent in hiring and training new workers until they reach normal productivity levels. As we mentioned last quarter, where possible, our procurement team is significantly increasing inventory for key components to minimize disruption while also working to diversify our supply chain with multiple sources in various geographies to protect against continued supply chain volatility. In addition, early in Q3, we acquired the Furnico Upholstery Manufacturing business in the UK. Fernico has been manufacturing Lazy Boy product for sale in the UK and Ireland since 2008. This expansion of in-house manufacturing capability will provide greater certainty of supply to our customers in the UK and is a key step in building an integrated supply chain network for Lazy Boy International. Also during the quarter, we continued to return value to shareholders with a dividend payment and $15 million in share repurchases, bringing our total cash return to shareholders in the first half of the year to $64 million across dividends and share repurchase. And finally, we were pleased to announce last month the expansion of our Board of Directors to 12 members with the addition of Erica Alexander, who serves as the Chief Global Officer, Global Operations, for Marriott International. Erica has held various leadership roles for several of Marriott's largest brands and will bring a wealth of operational experience, perspective, and expertise to Lazy Boy. Importantly, as we manage the current operational challenges across the business, we're also addressing the long term with our work on Century Vision, our winning strategy for growth through our centennial anniversary in 2027 and beyond. As I noted last quarter, Century Vision includes three key pillars. The first is to leverage and reinvigorate the Lazy Boy brand. This includes leveraging the Lazy Boy comfort message, a renewed focus on aging down the core consumer, and accelerating our omnichannel offering. To date, our marketing platform featuring Kristen Bell, excuse me, has been successful in driving brand recognition, including among younger consumers who say the Lazy Boy brand is relevant to them. Our objective is to build on this sentiment, and last month we produced a new series of commercials that showcase how Lazy Boy's range of products meet our consumers' needs. At the same time, throughout the course of Century Vision, will expand the vibrant Lazy Boy Furniture Gallery store base to approximately 400 locations across North America, and will strengthen the entire network through remodels and relocations, with some 30 projects on tap for this fiscal year. While the purchase journey may start digitally, Our consumers like to visit our stores to shop, providing us with a great opportunity to deliver the flagship Lazy Boy Furniture Gallery store experience. Most importantly, our goal is to connect with consumers along their purchase journey through multiple means, whether that's online or in person. With respect to company-owned stores, we've become very successful running our retail business where we benefit from the integrated wholesale retail margin. We continue to acquire independent Lazy Boy Furniture Gallery stores to round out our portfolio where it makes sense for us and the dealer. We recently signed an agreement to purchase five stores in the Alabama and Tennessee markets from a retiring dealer that will be accretive as we quickly and seamlessly integrate them into our portfolio when we close the transaction later in the third quarter. The second pillar of Century Vision relates to Joybird, where we have a sustainably profitable direct-to-consumer model. An exciting and relevant brand with significant potential, we are fueling Joybird to drive disproportionate profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology, and expansion of product assortment and additional small format urban stores in high traffic areas. We are excited to open a new store in LA this month and have an additional store slated to open by the end of the fiscal year. In markets where we have Joybird small format stores, we consistently see a geo lift in the online sales, demonstrating the appeal of an omnichannel model across all brands and retail formats. We also recently opened a virtual store at Joybird's LA headquarters for online shoppers to chat, call, and video conference into a dedicated retail environment, which has proven to be very successful, both in terms of consumer satisfaction and closing sales. And the third pillar of Century Vision is to leverage and enhance our enterprise capabilities to support the growth of our consumer brands, as well as enable the potential for tack-on acquisitions that can benefit from our supply chain expertise and accelerate the Lazy Boy Incorporated growth story. Strengthening digital capabilities across the entire Lazy Boy enterprise and improving the agility of our supply chain so that it can more broadly support all our customer brands will be key focus areas moving forward. As we execute Century Vision, we expect to grow the top line higher than industry averages and deliver double-digit operating margins. We are proud of our near-term results and excited for our future. Now let me turn the call over to Bob to review the results for the quarter.