La-Z-Boy Incorporated

Good morning, ladies and gentlemen, and welcome to the Lazy Boy Fiscal 2023 Second Quarter Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Kathy Liebman, Director of Investor Relations and Corporate Communications. Ma'am, the floor is yours.

Thank you, Holly. Good morning and thank you for joining us to discuss our fiscal 2023 second 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 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 desk. With that, I'll 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 excellent fiscal 23 second quarter results for the total company. In addition to record consolidated results for sales and profits for our Q2, our company-owned retail segment again turned in stellar performance with all-time quarterly record delivered sales, profits, and non-GAAP operating margin. These record-setting results were enabled by a strong supply chain execution in the period, and enabled us to reduce our backlog and improve service to customers and consumers, particularly for our retail business. Our lead times continue to improve and we are edging closer to our brand promise, custom furniture in four to six weeks, a competitive differentiator for us in the marketplace, all supported by our North American manufacturing footprint. Delivering on this value proposition is good for us, good for our commercial customers, and great for our consumers. While we're pleased with our delivered results in the quarter, near-term headwinds continue to slow the written trajectory across our industry, and we know this challenging environment will require ongoing adjustments and increased agility. While still up versus pre-pandemic levels, our industry is experiencing a slower pace of store and e-commerce traffic versus last year. a reflection of macroeconomic concerns and geopolitical uncertainty weighing on consumer sentiment, as well as a shift in discretionary spending patterns post-pandemic. And these factors again impacted our written business in the quarter. For the period, total written sales for our company-owned retail business were down 5% versus last year's second quarter. with same-store written sales down 10%. Versus pre-pandemic, fiscal 2020 Q2, these total written results were up 18% and same-store written results up 12%. The entire Lazy Boy Furniture Gallery's network experienced similar trends. with written same-store sales up 9% against fiscal 2020 Q2 and down 13% against last year's strong second quarter. Joybird also comped positively against the pre-pandemic fiscal 2020 second quarter, up 43%, but was down 27% versus last year's Q2, reflecting similar consumer trends as well as the effects of changes in campaign execution with a key marketing partner, which have since been reversed. Since the reversal, we are starting to see meaningful improvements in ROI and year-over-year trends, with written results trending more in line with the rest of the furniture industry. But it is too early to draw full conclusions. In this difficult environment, we are focused on the long term, controlling what we can, and positioning the company to move through this period successfully. We are driving agility across the entire enterprise as we adjust go-to-market strategies and optimize our supply chain operations, marketing spend, and capital project timelines. As we proactively align our cost structure with the demand environment, we remain committed to making prudent investments to drive long-term profitable growth through Century Vision. To drive share growth, We are investing in the Lazy Boy brand and leveraging its equity, history, and reputation for quality and comfort. We are using consumer insights to drive brand strategies and true consumer-centric innovation, investing in technology to strengthen our digital and omnichannel experience, executing selective promotions on key products to drive traffic to our stores, and developing new channel strategies to expand distribution opportunities. At the recent High Point Furniture Market, we were thrilled with customer feedback on new product introductions across all brands and are pleased to report that energy throughout market was high. Customers were engaged and positive for the long term. Further, with the core Lazy Boy consumer preferring to shop in-store, We are expanding and improving the Lazy Boy Furniture Gallery's footprint with new and remodeled stores to provide consumers with an extraordinary end-to-end experience. During fiscal 23, we are working to open seven new stores and remodel or relocate another 30 across our furniture galleries network. In Q2 alone, we opened two of these new Lazy Boy Furniture Galleries and remodeled or relocated five stores within our own retail business. And in September, we closed on the acquisition of one store and distribution center in Spokane, Washington, and have recently signed an agreement to acquire another store from an independent dealer in West Virginia. As always, these store acquisitions are immediately accretive and allow the company to benefit from the integrated wholesale retail margin. Throughout the supply chain, As we reduce our backlog back to pre-pandemic lead times, we are optimizing staffing levels across our manufacturing facilities to align with current demand. Additionally, we've made a series of changes within our plants that provide us with the ability to flex production to better service the order book, driving efficiency and improved execution. At Joybird, we continue to invest in the business to drive brand awareness and consumer acquisition. In this environment, we are restructuring our marketing campaigns in terms of advertising channels and messaging to improve returns on advertising spend. We are also investing in Joybird retail stores, opening in high-traffic urban markets where we continue to experience great results. Our retail showrooms, combined with a strong mobile-optimized web platform, provide consumers with a true omnichannel experience to engage with the Joybird brand. We opened our new Manhattan store in November and will open three stores, Seattle, Philadelphia, and Los Angeles, in the first half of the calendar, bringing our total to 10 Joybird stores to date. While our long-term plans include additional Joybird retail locations, we will align the pace of store openings with the overall business environment. Importantly, a key differentiator for Joybird is that we are uniquely positioned as an online retailer that makes our own upholstered product. This vertical integration provides us with margin opportunity to keep investing in the brand. While we have some near-term challenges to optimize the Joybird business, we remain bullish on the long term. Over time, the execution of Century Vision will change the complexion of Lazy Boy Incorporated. Over the next three to four years, we expect to be over half direct-to-consumer. as our company-owned retail and Joybird businesses grow at a faster rate than our traditional wholesale business. This shift will contribute to consolidated operating margin enhancement as we grow. And as we tackle this, what is immediately ahead, we are starting from a position of brand and financial strength. Our business remains larger than pre-pandemic levels as consumers continue to place a value on the comfort of their homes and entrust Lazy Boy Incorporated to deliver it for them. We are confident we will navigate the environment well, build for the future, and emerge even stronger. Now let me turn the call over to Bob to review our second quarter results in more detail. Bob?