La-Z-Boy Incorporated

Good day and welcome to the Lazy Boy Fiscal 2025 First Quarter Conference Hall. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to the Director of Investor Relations and Corporate Development, Mark Becks. The floor is yours.

Thank you, Kelly. Good morning, everyone, and thanks for joining us to discuss our fiscal 2025 first quarter. 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 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 these 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 it includes reconciliations of certain non-GATT 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 Boys Incorporated's President and Chief Executive Officer. Melinda?

Thanks, Mark, and good morning, everyone. Yesterday, following the close of market, we reported results for our July-ended first quarter. We posted a solid quarter despite continued furniture and home furnishings industry headwinds and a general malaise in broader consumer discretionary purchases. We were pleased with our total delivered sales results in the quarter, which increased on a year-over-year basis despite continued industry challenges. Highlights for the quarter included consolidated delivered sales of $496 million, up 3% versus the prior year. Wholesale segment sales increasing 5% on growth to external customers. non-GAAP operating margin of 6.6%, non-GAAP EPS of 62 cents, strong operating cash flow of $52 million for the quarter, twice as high as the prior year, $42 million return to shareholders through share repurchases and dividends, a strong balance sheet with $342 million in cash and no external debt, and continued progress against our Century Vision growth strategy, including completing the acquisition of one independent Lazy Boy Furniture Gallery store in the Midwest and signing an agreement to acquire another two-store independent dealer in Florida in our second quarter. Our results for the first quarter were in line with our guidance. We were pleased as this came against a consumer backdrop that has become increasingly challenging. We are more focused than ever on adapting and improving our business, and I couldn't be more proud of our resilient sales teams and our increasingly agile supply chain demonstrating our ability to deliver a truly enriching experience for consumers in transforming their homes. The furniture industry remains challenged. Structural headwinds of elevated mortgage rates and high housing costs and global geopolitical and economic uncertainty continue to dampen big ticket purchases. Nevertheless, our recent quarter again illustrates that an iconic brand amplified by strong execution and operational agility can still drive business growth even with this backdrop. Further, we are optimistic that expected Fed rate cuts later this calendar year will begin to spur an acceleration in housing turnover and subsequently in furniture demand. Meanwhile, we're not waiting for the macro environment to turn around. We continue to play offense with our century vision strategy, offering tangible solutions to drive disproportionate growth over the long term and to consistently gain share in the fragmented furniture and home furnishings market. Recapping our first quarter written sales trends, total written sales for our company-owned retail segment increased 4% versus last year's first quarter. Written same-store sales for our company-owned retail segment in the first quarter declined 3% versus the prior year. Same-store sales were strongest early in the quarter around key Memorial Day events and softened towards the end of the quarter as consumers continued the pattern of pulling back spending outside of key holidays. Our stores continue to execute very well, with conversion rates and design average ticket both improving year over year. However, this has only been able to offset a portion of the continuing double-digit year-over-year traffic declines experienced across our industry. Written same-store sales for the entire Lazy Boy Furniture Gallery's network of 356 stores also declined 3% versus the prior year. According to the US Census Bureau data, the furniture and home furnishings industry also declined 3% for our fiscal first quarter. With our company-owned Lazy Boy Furniture Gallery's same-store sales outperforming the industry, in the first two months of our quarter. Turning to Joybird, written sales increased 9% versus a year ago, driven by execution across the 12-store network compared to 10 stores for most of the prior year quarter. Joybird operating performance again made meaningful progress against the prior comparable period as the brand focuses on balancing sales growth and profitability. Looking to the longer term, I want to spend a few minutes on our progress during the quarter to strengthen our enterprise. Recall, 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. The furniture and home furnishings category is highly fragmented. As one of the largest brands in the United States, but with only roughly a 5% market share, we are well positioned to continue to strategically grow our business. We have consistently expanded Lazy Boy's brand reach over the last several quarters. Our total furniture galleries network ended the quarter with 356 stores, And our retail segment, comprised of the company-owned portion of those stores, increased to 188 stores, up 13 from the prior year. Company-owned stores now represent 53% of all Lazy Boy furniture galleries. Growing our company-owned stores is important, as it gives us the greatest opportunity to delight the consumer by controlling the end-to-end experience. which features comfortable and customized upholstery with quick delivery. Our North American manufacturing footprint enables us to deliver custom furniture in less than eight weeks to the consumer and benefits us financially with the strength of our vertically integrated model. We see opportunity 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. To this point, we acquired one store during the first quarter, and we recently signed an agreement to acquire an additional two-store network from an independent dealer in Florida scheduled to close in the second quarter. These store acquisitions are immediately accretive to our profitability, allowing the company to benefit from the integrated wholesale and retail margins. We are also growing the business through our refined channel strategy. This has enabled us to grow share of voice of the Lazy Boy brand with general dealers and provide a broader range of consumers access to the Lazy Boy brand. We have had strong results with strategic partners like Rooms to Go, which have allowed us to gain mind share in an under-penetrated market. We continue to look for new and creative ways to reach a broader audience and bring products like the iconic Lazy Boy recliner into more households. Another core pillar of our Century Vision strategy to expand Lazy Boy brand reach is our Long Live the Lazy brand campaign, which is celebrating its one-year anniversary after debuting last August on National Lazy Day. One of our initial goals was to enhance unaided brand awareness and keep the brand top of mind. A year into the campaign, we have been successful in increasing unaided awareness, consideration, and purchase attempts among those who have seen the Long Live the Lazy campaign and connected to Lazy Boy. Since its introduction, Long Live the Lazy has won numerous awards, including the Drum Awards for Marketing Americas and the Best Short-Form Video at the Think LA Idea Awards. We have also activated the brand in new ways, including a New Heights podcast sponsorship with Jason and Travis Kelsey, and branded media integrations across Amazon, New York Times, and ESPN.com. Speaking to how Lazy Boy is beloved in consumers' minds, the brand was even recently mentioned in a hit song by Luke Combs. As we move the campaign into its second year, we are focused on broadening the campaign impact to achieve our goal of connecting with an even broader audience. Another focus area for expanding Lazy Boy brand reach is within product development. Our development process is becoming even more consumer-centric, leveraging a data-driven approach. The insights we are gaining are enabling us to develop more consumer-relevant, on-trend products in our core upholstered furniture category, particularly in motion and reclining, 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. We were pleased that written sales trends were positive in the quarter and operating performance improved from prior year. With 12 stores currently open in major metro markets, the digitally native e-commerce brand is benefiting from the halo effect of stores in key markets. We have identified the potential to grow to 25 locations over the intermediate term, with our expansion pace depending on opportunities in real estate and overall market conditions. We continue to believe in the long-term growth prospects of the brand, as Joybird has a considerable opportunity to expand market share, and we will continue to make prudent investments to position it for long-term success. Strengthening our foundational capabilities including building a more dynamic supply chain, is our final pillar of Century Vision. We are making steady progress improving the agility of our business model by better optimizing our global supply chain operations. As we mentioned in last quarter's call, we are prudently managing the consolidation of our cut and sew operations in Mexico to optimize costs while ensuring no service disruptions. In this challenging global landscape, we view our North American manufacturing footprint as a key differentiator in our ability to manufacture high quality, comfortable, custom furniture with quick speed to market. As we enter our second quarter, we expect a continued challenging macro environment for the remainder of the fiscal year. However, we remain optimistic about our ability to continue to outperform the market while investing in our business through our Century Vision so that when trends rebound, we can disproportionately benefit. We once again made strong progress in the quarter, and we look forward to continuing to make Century Vision a reality. Now let me turn the call over to Bob to review the results in more detail. Bob?