La-Z-Boy Incorporated

Greetings, and welcome to the Lazy Boy Fiscal 2023 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Director of Investor Relations, Kathy Liebman. You may begin.

Thank you, Kelly. And good morning, everyone, and thank you for joining us to discuss our fiscal 2023 third 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 detailed 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 will now turn the call over 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 fiscal 23 third quarter results. Highlights for the period included excellent sales, earnings, and cash performance for the enterprise in total. with record non-GAAP operating profit and margin delivery for our company-owned retail segment and positive written same-store sales for the retail segment, our company-owned Lazy Boy Furniture Gallery stores. All in, a great quarter. With continued supply chain productivity gains, we completed delivery of the majority of our backlogs and improved service to customers and consumers. particularly benefiting our retail business. As of now, we're getting close to normal lead times, which improves our selling proposition as we highlight and capitalize on our brand promise. Custom furniture with speed to market, a key differentiator in the marketplace. Total written sales for our retail segment were up 8% versus last year's third quarter. and same-store written sales comped at a positive 3% for the period. We are extremely pleased to deliver positive written sales versus a year ago for our retail segment, even with challenging economic headwinds. Against the pre-pandemic fiscal 2020 third quarter, total written sales for the retail business were up 22%, and same-store written results were up 12%. reflecting the sustained strengthening of our company-owned stores. Our company-owned stores are outperforming other channels as we make strategic investments in marketing to drive traffic. Traffic trends in retail, while still negative year-on-year, progressively improved as we move through each month of the quarter. And once consumers enter our stores, our retail team continues to deliver superb execution with improved conversion an increase in average ticket, and higher design average ticket sales. According to our Century Vision growth strategy, our company-owned retail stores allow us to deliver an inspirational end-to-end experience, and our retail segment continues to make a significant contribution to the enterprise's overall profitability. Written same-store sales for the entire Lazy Boy Furniture Galleries network including independently owned galleries, were down 2% against the prior year period, but up 7% against pre-pandemic fiscal 2020 third quarter. Our broader wholesale business remains more impacted by the challenging environment, but we are playing offense by leaning into additional marketing to increase awareness and consideration across all channels. We are also offering selective promotions on certain products to ensure competitive values where needed. And with faster delivery times, we're offering our wholesale customers a great selling proposition. Additionally, our wholesale customers indicate they are moving closer to normal historic inventory levels, and we've begun to see positive order momentum with a number of customers. Turning to Joybird, While written sales were up 80% versus a pre-pandemic fiscal 2020 third quarter, they were down 21% versus last year's Q3. Written results improved sequentially versus Q2, but still reflect challenging traffic trends similar to those experienced across many online home furnishing brands. For Joybird, the near-term economic environment challenges are more impactful because it is a smaller, newer business and has fewer locations to keep the brand top of mind for consumers compared to Lazy Boy, an established brand with a network of some 350 stores. Across the company, while mindful and realistic about the external macro environment, we remain focused on investing prudently to strengthen our capabilities and drive long-term profitable growth through Century Vision. We're playing offense to drive expanded reach for the Lazy Boy branded business and return Joybird to profitable growth. For Lazy Boy, we're capitalizing on and investing in our brand heritage of comfort and durability. As history tells us, people return to strong brands in challenging times. We're honing our message, investing in targeted marketing, sharpening price points, and ensuring good execution. We're also refining channel strategies to expand distribution opportunities and in a highly fragmented marketplace, working to ensure we are meeting consumers with the right products where they want to shop. At the same time, we're improving efficiencies in our manufacturing operations and controlling costs to insulate ourselves against recessionary trends. As part of this overall initiative, During the quarter, we made the decision to close our Torreon Mexico facility. Recall, during the height of COVID, we opened three greenfield manufacturing locations in Mexico and added manufacturing operations at our cut and sew facility in Ramos to service our nine-month backlog. Torreon was the last and smallest facility to come online and accounted for only 3% of the Lazy Boy branded production. With efficiencies gained at our larger Mexico-based operations, we are now able to shift Torreon's production to other locations. We thank the employees of Torreon for their dedication to the company and are providing comprehensive transition packages to support them during this time. On the retail side of the business, we continue to grow and improve the quality of our company-owned Lazy Boy Furniture Gallery stores. through new and acquired stores, remodels, and relocations. In this fiscal year, we will have added five new stores to our company-owned portfolio, acquired eight stores from independent dealers, and will have remodeled and or relocated 16 stores. Again, through our company-owned stores, we're controlling the end-to-end consumer experience and delivering more profit to the enterprise as we increase the size of our retail business leverage its fixed cost structure, and benefit from the integrated wholesale retail margin. During the third quarter, we also acquired the Barbersville, West Virginia Lazy Boy Furniture Gallery, signed an agreement to acquire another independent dealer-owned store in Baton Rouge, Louisiana, and opened our first outlet by Lazy Boy store in Columbus, Ohio. with a second plan to open in the Chicago market this spring. All of this activity aligns with our Century Vision strategy to grow our brands and expand market share. For the near term, we expect the external climate to remain uncertain and will be prepared to pivot as needed. We believe in our ability to provide excellent service to customers and consumers, fund investments to drive growth, and maintain a strong financial position. We are confident Lazy Boy Incorporated will navigate challenges ahead with agility and will emerge even stronger. Now, let me turn the call over to Bob to review our third quarter results in more detail. Bob?