La-Z-Boy Incorporated

And welcome to the Lazy Boy fiscal 2024 third quarter conference call. At this time all participants have been placed in a listen only mode and the floor will be open for questions after the presentation. If anyone should require operator assistance during the conference please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mark Beck, CFA of Lazy Boy Incorporated. You may begin, Mark.

Thank you, Jenny. Good morning, everyone, and thanks for joining us to discuss our fiscal 2024 third quarter. With us today are Melinda Whittington, Lazy Boy Incorporated's President and Chief Executive Officer, and Bob Lushin, Lazy Boy's SVP and CFO. Melinda will open and close the call, and Bob will speak to segment performance and 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 included 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 Events tab on the Investor Relations page of our website. and 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 Incorporated's president and chief executive officer. Melinda.

Thank you, Mark, and good morning, everyone. Yesterday, following the close of market, we reported results for our January-ended third quarter. Highlights for the quarter included Consolidated delivered sales of $500 million, up 5% versus our most recent pre-pandemic third quarter, and down 13% versus prior year, which benefited from delivering the above-normal pandemic backlog. Total consolidated non-GAAP gross margin, up 140 basis points year-over-year, with gross margin expansion across all segments. Non-GAAP operating margin of 6.6%, non-GAAP EPS of 67 cents, strong operating cash flow of 48 million for the quarter, bringing us up to 105 million year-to-date, and continued progress against our Century Vision growth strategy, including completing the acquisition of a six-store independent Lazy Boy Furniture Galleries network in the Midwest, and signing an agreement to acquire another two-store independent network in Florida in the fourth quarter. The overall furniture and home furnishings industry is in a continued slowdown, as housing turnover remains at historic lows, driven by challenging interest rates and housing affordability. January, the third month of our quarter, was further affected by winter weather events across much of the US, which had a negative impact on traffic and related written sales at our retail stores across the central US. These winter weather events in the second and third weeks of January also caused multiple days of manufacturing shutdowns in our U.S. assembly plants, where the majority of our product is manufactured, and disruption to our distribution, temporarily impacting our ability to produce and deliver products and causing our delivered sales and profits to fall short of the low end of our guidance range for the quarter. After January's weather disruptions, production and deliveries are now back to normal in the fourth quarter as we focus on servicing our customers and consumers with the high-quality, comfortable products they expect from us. Recapping our third quarter written sales trends, total written sales for our company-owned retail segment were down 2% versus last year's strong third quarter. Written same-store sales for our company-owned retail segment in the third quarter declined 8% versus the prior year. Same-store sales grew in both November and December, but declined in January versus a year ago, impacted by softening traffic against the strong January 23 comparison period and the winter weather. Although retail performance fell short of expectations due to this depressed traffic, Store level execution continues to be very strong. Conversion rates, average ticket, and design sales metrics were all improved even versus last year's strong quarter. Written same store sales for the entire Lazy Boy Furniture Gallery's network of 353 stores followed similar patterns for the quarter and declined 6% versus prior year. Against a backdrop of a 7% industry contraction during our third quarter, our stores executed well, and we expect to continue to drive comparatively positive results going forward on the strength of our brand and our execution in our Lazy Boy Furniture Galleries. For the first nine months of our fiscal year, written same-store sales across our entire network were down 1%. while the industry was down 7%. And importantly, our fourth quarter is off to a solid start, with President's Day results for company-owned stores coming in on track with our expectations for the fourth quarter. Turning to Joybird, written sales declined 14% in the quarter versus a year ago, as the online furniture market continues to be challenged, consistent with the broader furniture industry. As we navigate this environment, we remain focused on providing innovative, high-quality products for our customers and consumers. Favorable demographics, including the structural housing shortage and anticipated interest rate reductions later in the year, will ultimately drive the return to a more normalized furniture demand, likely in the back half of our fiscal 25. On the foundation of our strong financial position and prudent management, we continue to strategically invest in strengthening our business for the long term as part of our Century Vision growth strategy and prepare to harness those positive trends when they emerge, even as we navigate near-term industry challenges. Recall, our Century Vision is our strategic framework setting up Lazy Boy Incorporated for our next 100 years as we celebrate our first century in 2027. This is measured by our intention to grow top line at a pace double the market and deliver consistent double-digit operating margins over the long term. A cornerstone to our century vision is expanding our Lazy Boy brand reach. An imperative pillar of this expansion is growing our Lazy Boy Furniture Galleries network and our own company-owned retail portion of that network through new stores, acquired stores, and remodels to provide an outstanding end-to-end consumer experience. Our total network currently stands at 353 stores, up seven from a year ago, and we see potential for continued expansion up to approximately 400 stores over the next several years. Further, we are increasing the number of company-owned stores, which now total 184, and represent 52% of our entire network. Notably, we have nearly doubled our company-owned store account over the past decade and continue to see meaningful opportunity for expansion. During the quarter, we opened one new store and completed the acquisition of an independent Lazy Boy Furniture Gallery's network of six stores across Illinois and Indiana. Further, in January, we signed an agreement to acquire an additional two-store network from an independent dealer in Florida, scheduled to close in the fourth quarter. Completing this acquisition will bring our total to 11 acquired stores in fiscal 24. As a reminder, these store acquisitions are immediately accretive to our profitability and allow the company to benefit from the integrated wholesale retail margin. As we grow our company-owned retail, our vertically integrated and primarily North American-based supply chain, will become an even more meaningful differentiator versus many competitors in the industry as we are able to deliver high-quality custom furniture with strong speed to market. A second key pillar of expanding Lazy Boy brand reach is our Long Live the Lazy brand campaign that launched last August. Long Live the Lazy is our most data-based marketing campaign in the company's history. leveraging consumer insights and our brand heritage of comfort and quality to connect with a broader consumer base. Our goal is to build top-of-mind awareness, relevance, and updated perceptions of the brand. And while the impacts of the campaign are expected to gain momentum over time, our early data shows that the new campaign is already driving meaningful results in brand awareness, consideration, and purchase intent. Also encouraging are the indications that this campaign is catching the attention of younger consumers. Beyond our Lazy Boy brand, to deliver our century vision, we continue to optimize Joybird to deliver a balance of sales growth and profitability, and we're pleased to see delivered sales grow in the quarter compared to a year ago, and progress made toward profitability. The brand continues to have significant opportunity to grow share, which will be our focus as we make prudent investments. Joybird currently operates 12 stores, with the November opening of our newest store in Portland, Oregon. And we have identified a total of 25 potential locations over the intermediate term, with our expansion pace depending on opportunities in real estate and overall market conditions. And finally, across our entire enterprise, we continue to progress on building a more agile business model. Now that we have successfully lowered our unprecedented backlog to a more normalized level, we are meaningfully improving plant productivity. Over the past year, we have made decisions to further optimize our global supply chain by closing assembly plants in Torreon and Ramos, Mexico, and shifting cut and sew activities back to Ramos, enabling the closure of our Paras, Mexico operations. These strategic decisions are made possible through continued productivity improvements achieved across the remainder of our plant network. And now, let me turn the call over to Bob to review the results in more detail. Bob?