La-Z-Boy Incorporated

Greetings. Welcome to the Lazy Boy Fiscal 2024 First 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 this conference is being recorded. I will now turn the conference over to your host, Mark Beck. Director of Investor Relations and Corporate Development. You may begin.

Thank you, Holly. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 first quarter. With us today are Melinda Whittington, Lazy Boy's President and Chief Executive Officer, and Bob Ellucian, Lazy Boy's CFO. Melinda will open and close the call, and Bob will speak to segment performance in the financials midway through. We will 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 would 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 slides. With that, I will now turn the call over to Melinda Whittington, Lazy Voice President and Chief Executive Officer. Melinda?

Thanks, Mark. Good morning, everyone. Yesterday, following the close of market, we reported results for our July-ended first quarter. We delivered solid operational performance consistent with the guidance rating we issued last quarter, despite an uncertain macro environment and sluggish home furnishings market. Highlights for the quarter included company owned retail written same store sales growth of 2% versus year ago. Consolidated delivered sales growth up 16% versus our most recent pre-pandemic first quarter. Record first quarter consolidated operating margin driven by our retail segment when compared to non-pandemic affected historical first quarters, non-GAAP EPS of 62 cents, 18 million in capital returned to shareholders, including 10 million in share buybacks, and continued progress against our century vision growth strategy, including the expansion of our retail business with the opening of two new stores, completing the acquisition of two independent Lazy Boy furniture galleries, and opening one new retail location for Joybird. All in, we're pleased with our operating performance in the quarter against the challenging macro backdrop. Recent competitor results and business closures highlight the top-line challenges facing many of our peers in the industry. In light of the course of soft traffic trends being cited across retail furniture, I'm particularly pleased that both our company-owned retail and our entire Lazy Boy Furniture Gallery's network achieved positive written same-store sales for the quarter compared to last year. Consolidated delivered sales were $482 million, down 20% versus the prior year, which benefited from delivering against the above-normal pandemic backlog. The delivered sales declined and operating expense deleveraged, led to non-GAAP operating margin of 7%, a 190 basis point decline versus fiscal 23 first quarter. Non-GAAP earnings per share totaled 62 cents, a 32% decline from last year, but 48% greater than pre-pandemic fiscal 20's first quarter. Importantly, the investments we have made in building a more agile supply chain were evidenced in this quarter's wholesale results. with wholesale operating margin increasing year over year, even in spite of the delivered sales decline. Overall, this past quarter's performance was the best-ever first quarter for Lazy Boy sales and VPS when compared to pre-pandemic first quarters. I'm proud of the progress we have made toward a more resilient business model. Our team has been focused on controlling what we can by growing the Lazy Boy brand presence relentless business optimization, and investing in the future. Additionally, I'm excited about the progress our retail store teams have made on accelerating market share gains by improving conversion levels and increasing design sales. Our employees have been and continue to be among our greatest assets, and we are proud of the many wins we've had this quarter. Going a bit deeper on trends, Total written sales for our company-owned retail segment were up 8% versus last year's first quarter. This reflects an increase of 32% versus a pre-pandemic fiscal 2020 first quarter, a 7% CAGR over those four years. Written sales trends benefited from positive same-store sales, new store openings, and acquisitions of independent furniture galleries. Same-store written sales for our company-owned retail segment on the first quarter increased 2% versus the prior year, reflecting the benefit of product mix on stable volume. Same-store sales accelerated through the quarter with incremental improvements from May through July. And this reflects a slight acceleration from the 1% increase seen in the second half of fiscal 2023. and underscores the work our team is doing to outperform the market despite the current cycle and operating environment. We're focused on driving outcomes we can control. This includes our commitment to strengthening in-store execution, delivering operational productivity, reducing lead times, and reinvigorating the Lazy Boy brand with our new marketing campaign, which I'll speak more about in a moment. While industry trends are tough to forecast in the near term, We remain confident in our ability to continuously drive share gains as a category leader. Our first quarter results compare quite favorably to the overall furniture and home furnishings industry, which saw sales decline 6% over the same period. First quarter written sales for the entire Lazy Boy Furniture Galleries network, including independently owned furniture galleries, also impressively increased 2% against the prior period. Currently, there are 351 Lazy Boy furniture galleries across North America, roughly half of which are company owned and half are independently owned. And we see potential for up to 400 in the intermediate term, or an additional 14% added to our total network. As we grow our Lazy Boy furniture galleries network, our vertically integrated supply chain will become an even more meaningful differentiator versus other competitors in the industry. We are leveraging the discipline of our team and strength of our balance sheet to drive continuous improvements in value for our consumers. These competitive advantages position us to grow awareness amongst consumers and drive share gains well into the future. Turning to Joybird, written sales for the first quarter were down 17% versus a year ago. an improvement versus last quarter, but still reflecting challenging consumer trends consistent across many online retailers. We expect near-term trends to remain under pressure, but remain optimistic about the prospects for the brand over the long term. On a more strategic front, I'll give an update on the progress we made against our Century Vision objectives during the quarter. Recall, Century Vision is our strategic framework for setting up Lazy Boy Incorporated for the next 100 years, enabling our company to grow ahead of the industry and deliver consistent double-digit operating margins over the long term. First, we continue to grow and update our Lazy Boy furniture gallery stores through new stores, acquired stores, and remodels to provide an outstanding end-to-end consumer experience. This will deliver more profit to the enterprise as we increase the penetration of our company-owned retail business, leverage its fixed cost structure, and benefit from the higher margin integrated wholesale and retail model. Specifically, for our retail business in the quarter, we opened two new company-owned stores and acquired two independent furniture gallery stores in Colorado Springs, continuing our path to increasing our retail mix. And we continued to learn from our two new Outlet by Lazy Boy stores in Columbus, Ohio and Chicago, Illinois. This is a great opportunity for us to explore new formats and broaden our reach to value-seeking consumers. Additionally, we hosted a conference with our independent Furniture Gallery's owners with a theme of Win as One. It was great to connect with the many owners that have supported the brand over multiple generations. It has been more than a decade since the entire network has all come together as a team over a multi-day event, and the energy and enthusiasm was exciting to witness. This was an opportunity to share best practices, build relationships with business leaders across the company, and most importantly, share our vision for the future with these important partners. Second, we're refining our brand channel strategy to expand the distribution and availability of Lazy Boy products to meet our consumers with the right products wherever they prefer to shop. With this strategy, we will achieve greater comfort studio store-within-a-store penetration, and an increase in Lazy Boy branded space, as well as expand into new distribution markets with select product offerings. We recently announced a new partnership with Rooms to Go, a top 10 furniture retailer in southwest and southeast U.S. markets, with a select assortment of Lazy Boy recliners. This is an exciting new opportunity for us to expand reach with a new untapped market of consumers, The new product at Rooms2Go is beginning to show up on sales floors at many locations, and we look forward to building this partnership over the coming quarters. Third, we are activating a new marketing strategy, leveraging the database consumer insights and our brand heritage of comfort and quality to connect with a broader consumer base. As a result, we'll broaden Lazy Boy from a brand steeped in nostalgia to an active dynamic and distinctive brand for modern audiences to increase our top-of-mind awareness and relevance. As I mentioned, following extensive consumer research and segmentation work, we launched our new national brand campaign, Long Live the Lazy, on August 10th, National Lazy Day. The launch has been supported by TV, radio, digital, streaming services, and social media, as well as mobile gaming. Our new brand campaign targets a wider audience than we traditionally have in the past by combining a focus on the everyday consumer and embracing moments of laziness during our otherwise increasingly hectic lifestyles. Our new creative vision combines our greatest product strengths, comfort and motion, with the emotional benefits of much-deserved feed-up moments. The new campaign was seeded in late July with teasers from a select group of influences, influencers targeting families and everyday people. Then two weeks ago, on National Lazy Day, we were featured on NBC's The Today Show, where the hosts and fans were able to get in some early morning lazy moments in our Lazy Boy furniture as we took over the iconic Today Show Plaza in New York City, marketing the official launch of our new campaign. One exciting launch is The Decliner, a custom limited edition recliner powered by AI to lean into the new JOMO, or Joy of Missing Out, viral trend. By simply pulling the chair's iconic lazy boy handle, the decliner uses generative AI technology to create humorous text messages that can be used to decline a last-minute invitation. If you haven't seen it yet, I highly encourage you to check it out. It's innovative and reflective of the new work the team is doing to strengthen relationships with existing consumers, build connectivity with new ones, and have a little fun with it. And finally, as we continue to optimize Joybird to deliver a balance of sales growth and profitability, we view Joybird as an opportunity to increase our omnichannel presence for consumers. The brand continues to have significant opportunity to grow share, which will be the focus. as we make prudent choices to return to profitability. And now, let me turn the call over to Bob to review our financial results in more detail. Bob?