La-Z-Boy Incorporated

Good morning everyone and welcome to the Lazy Boy fiscal 2024 fourth quarter conference call. At this time all participants are in a listen only mode and we will be opening for questions following the presentation. If anyone should require operator assistance during this 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 Becks, Director of IR and Corporate Development of Lazy Boy Incorporated. Mark, over to you.

Thank you, Jenny. Good morning, everyone, and thanks for joining us to discuss our fiscal 2024 fourth quarter and full fiscal year. With us today are Melinda Whittington, Lazy Boy Incorporated's President and Chief Executive Officer, and Bob Lucien, 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 I 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 slide deck. With that, I will now turn the call over to Melinda Whittington, Lazy Boy Incorporated's President and Chief Executive Officer. Melinda?

Thanks, Mark, and good morning, everyone. Yesterday, following the close of the market, we reported results for our April-ended fourth quarter and fiscal year. I am pleased to share that we delivered solid results despite ongoing economic and furniture and home furnishings industry headwinds. Highlights for the quarter included consolidated delivered sales of $554 million, up 22% versus our most recent pre-pandemic fourth quarter, and down 1% versus prior year, which benefited from delivering the above-normal pandemic backlog. non-GAAP operating margin of 9.4%, non-GAAP EPS of 95 cents, strong operating cash flow of $53 million for the quarter, and continued progress against our Century Vision growth strategy, including completing the acquisition of a two-store independent furniture galleries network in Florida, and signing an agreement to acquire another single-store independent dealer in the Midwest in the first quarter of fiscal 25. Highlights for the year included consolidated delivered sales of just over $2 billion, roughly flat versus prior year, when adjusting for the fiscal 23 pandemic-related backlog deliveries. Gross margin expansion on both a GAAP and a non-GAAP basis across all segments, strong operating cash flow of $158 million, a healthy balance sheet with $341 million in cash and no external debt, and continued progress against our Century Vision growth strategy, including opening six company-owned stores and the acquisition of 11 independently-owned Lazy Boy Furniture Gallery stores. and $85 million returned to shareholders through share repurchases and dividends, including increasing our dividend by 10% for the third consecutive year. We're proud of our strong finish to the fiscal year as fourth quarter results exceeded expectations. These were particularly impressive results in the context of the overall furniture and home furnishings industry, which continues to grapple with higher for longer interest rates and housing turnover near 30-year lows negatively impacting store traffic. Lazy Boy continues to stand out as an iconic brand in the category for our unique ability to turn houses into homes with our broad assortment and offering personalization at scale. Retail in-store execution is the strongest it has ever been, including conversion rates at all-time highs and average ticket and design sales continuing to strengthen. Additionally, we have strengthened our supply chain by optimizing our North America manufacturing footprint to improve productivity while driving strong service levels. We will continue to play offense despite the sluggish demand environment supported by our strong balance sheet to favorably position us for accelerated growth when an underlying industry tailwind reemerges. Our first quarter is off to a good start, and we are encouraged by our solid Memorial Day results, as our assortment and best-in-class motion offerings are resonating with consumers in the marketplace. Recapping our fourth quarter written sales trends, total written sales for our company-owned retail segment increased 1% versus last year's fourth quarter. Written same-store sales for our company-owned retail segment in the fourth quarter declined 5% versus the prior year. Same-store sales were strongest early in the quarter around key holiday events and recovery from January weather disruption, but strengthened again in May when we began our new fiscal year. Despite ongoing challenging traffic trends Our stores continue to execute very well with higher conversion, higher ticket, and design sales partially mitigating the traffic headwinds. Written same-store sales for the entire Lazy Boy Furniture Galleries network of 355 stores declined 3% in the fourth quarter versus the prior year. Against a backdrop of an 8% industry contraction during our fourth quarter, we are encouraged by our Lazy Boy Furniture Gallery's network, again, outperforming by approximately 500 basis points. Summarizing our full fiscal year, written same-store sales across our Furniture Gallery's network were down just 2%, while the industry was down 6%, as our significant outperformance versus the market persisted throughout the year. Consistent with our Century Vision strategy, Our objective remains to drive disproportionate growth over the long term and to consistently gain share in the fragmented furniture and home furnishings industry. Turning to Joybird, written sales declined 1% in the quarter versus a year ago, and delivered sales were roughly flat, as sales trends have largely stabilized. The brand is making steady progress and execution is improving as we focus on balancing growth and profitability. As we conclude the fiscal year and begin a new one, I'd like to reflect on the progress made in strengthening our enterprise for the long term and highlight some of our objectives for the year ahead. Recall, Century Vision is our strategic framework setting up Lazy Boy Incorporated for the 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. As an industry, underlying demand trends have been plagued by housing affordability, high mortgage rates, and low housing turnover. With mortgage rates hovering around 7% and existing home sales down 40% from peak levels, furniture and home furnishings demand remains under pressure. However, we are not waiting for the macroeconomic environment to improve. Our team remains focused on servicing customers and consumers and delivering the Lazy Boy brand promise of comfortable, custom furniture with quick delivery. The category is highly fragmented and is one of the largest players, but still with only roughly 5% market share. We are well positioned to continue to strategically grow our business. Lazy Boy's brand reach expanded significantly over the past year. Our total furniture galleries network ended the fiscal at 355 stores, up six from the prior year. And our company-owned store account increased to 187, including six new store openings and 11 acquisitions. Further, in May, we signed an agreement to acquire an additional one-store market from an independent dealer in the Midwest, scheduled to close in the first quarter of fiscal 25. Retail company-owned stores now represent 53%, over half of the total Lazy Boy Furniture Gallery's network for the first time in history. Growing our company-owned network is important as it enables the brand to control the end-to-end consumer experience and leverage the strength of our vertically integrated model. We remain confident in our ability to grow the total Lazy Boy Furniture Gallery's network to approximately 400 stores over the next several years and see meaningful opportunity to expand the company-owned portion of the network through new store growth and acquisitions. These store acquisitions are immediately accretive to our profitability, allowing the company to benefit from the integrated wholesale and retail margins. Bob will provide more specific details on our new store targets for the year ahead in a moment. We're also growing our business through our broader channel strategy, which enables us to grow share of voice for the Lazy Boy brand and provide access to the brand to a broader range of consumers. Our strategic partnership with Rooms to Go is a great example of this strategy. We continue to look for new and innovative ways to reach a broader audience and bring products like the beloved Lazy Boy Recliner into more homes. Another core pillar of our century vision is to expand Lazy Boy's brand reach via our Long Live the Lazy campaign. We launched the campaign last August with the initial goal of enhancing brand awareness and keeping it top of mind. I'm happy to share, while less than a year in, that we have been successful in increasing awareness, consideration, and purchase intent among those who have seen Long Live the Lazy and Connected to Lazy Boy. While difficult to quantify, given the extended purchase cycles in furniture and furnishings, we have seen promising performance in the early impacts of the campaign. We will continue to adapt and expand the campaign as underlying industry fundamentals improve to achieve our goal of connecting with an even broader audience. Another focus area for expanding Lazy Boy brand reach is within our product development. We continue to shift organizational decision-making to be more consumer-centric while also leveraging a data-driven approach. This is enabling us to develop more consumer-relevant, on-trend upholstered furniture, particularly in the motion and reclining categories where we are a market leader. Joybird is another core pillar of our century vision, and we are optimizing the brand to deliver a balance of sales growth and profitability. Sales trends for the brand improve throughout the year, and with 12 stores open across major metro markets, the digitally native e-commerce brand is benefiting from the synergistic effect of a growing retail footprint. Joybird has considerable opportunity to expand market share, and we will continue to make prudent investments in the brand to position it for long-term success. Strengthening our foundational capabilities, including building a more dynamic supply chain, is our final pillar in Century Vision. We again made steady progress building a more agile business model with the moves to better optimize our global supply chain operations throughout the year. Our North America footprint is a key differentiator in our ability to manufacture comfortable custom furniture with quick speed to market. It is also crucial in helping us manage volatility in consumer demand and ordering patterns. As we begin fiscal 25, we expect to continue a continued challenge macro environment for most of our new fiscal year. However, I'm optimistic about our ability to continue to outperform the market consistent with our performance in fiscal 24. And I expect to deliver modest growth even against these industry challenges. Further, we are optimistic on the eventual rebound in category demand. And during fiscal 25, we will continue progress on our century vision pillars so that we are able to disproportionately benefit when the industry tailwinds do return. We've delivered meaningful results to date, and the best is still to come. Now, let me turn the call over to Bob to review the results in more detail. Bob?