La-Z-Boy Incorporated

Good morning and welcome to the Lazy Boy Fiscal 2025 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. 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 Investor Relations and Corporate Development. Mark, the floor is yours.

Thank you, Jenny. Good morning, everyone, and thanks for joining us to discuss our fiscal 2025 third quarter. With us today are Melinda Whittington, Lazy Boy Incorporated's board chair, president, and chief executive officer, Taylor Luebke, Lazy Boy's SVP and CFO, and Bob Lucien, Lazy Boy's retiring CFO. Melinda will open and close the call, and Taylor 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 slide deck. With that, I will now turn the call over to Melinda Whittington, Baby Boy Incorporated's Board Chair, 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. Our results reflect the steady progress we've made to build a more agile business and create our own momentum to drive growth in what is still a very challenged furniture industry. We delivered sales growth across each of our segments, led by retail and punctuated by strong same-store sales growth. And within our wholesale segment, our core North American Lazy Boy brand continues to post sales growth and margin expansion. Highlights for the quarter included Consolidated delivered sales of $522 million, up 4% versus the prior year. Non-GAAP operating margin expansion up 20 basis points versus last year. GAAP and non-GAAP diluted EPS of 68 cents. And within these total company results, our retail segment sales increased an impressive 11%, led by same-store sales growth. Results were also buoyed by acquisitions and new stores as we continue progress against our Century Vision growth strategy. During the quarter, we opened three new company-owned Lazy Boy furniture galleries, completed the acquisition of a two-store independent network in Ohio, and signed an agreement to acquire another two-store independent dealer in Michigan, which is expected to close in the fourth quarter. These strong results reflect delivered sales and non-GAAP operating margin above a year ago and at the high end of our guidance range. Additionally, we posted top line sales growth for the third consecutive quarter despite the general malaise of the broader furniture industry. Our relentless focus on solving the needs of the consumer with comfort and quality and controlling what we can control with strong execution has kept Lazy Boy top of mind. The environment in which we operate continues to be volatile, and the fundamentals within the furniture and home furnishings industry continue to be challenged with existing home sales near 30-year lows and steep mortgage rates. However, these trends will eventually turn in the favor of our industry. And in the meanwhile, in spite of these industry headwinds, Lazy Boy Incorporated is growing. Our vertically integrated model and custom handcrafted furniture with strong speed of delivery is what consumers are valuing in a highly dynamic environment. This foundation has led Lazy Boy Incorporated to be successful for the past century and will continue to be the cornerstone of our philosophy for our century vision strategy over the next 100 years. Shifting to written sales trends, during the quarter, total written sales for our company-owned retail segment increased an impressive 15% versus last year's third quarter. And importantly, written same-store sales for the segment, which exclude the benefit of newly opened stores and acquired stores, increased 7% versus the prior year third quarter. Same-store sales were positive across each month of the third quarter, and strongest in November around the key holiday sales period. Traffic, while still negative, improved from the double-digit declines experienced at the beginning of our fiscal year. We believe our marketing campaigns are resonating to expand reach of the Lazy Boy brand, and superior in-store execution again led to higher conversion rates, average ticket, and design sales year over year. written same-store sales for the entire Lazy Boy Furniture Gallery's network of 362 stores increased 5% versus the prior year. And on our Joybird business, written sales increased 10% in the quarter versus a year ago. We're pleased to see this business gaining momentum even in the challenged environment with improved retail traffic and strengthening execution across the business, particularly in-store. According to recently released US Census Bureau data, the furniture and home furnishing industry grew 5% during our fiscal third quarter, November through January. The furniture-specific subcategory, reflecting only November and December, as it's reported on a one-month lag, increased 6%. Across our businesses, our written sales compare favorably to these industry results and reflect continued market share gains in the quarter. Looking to the longer term, I want to recap our Century Vision initiatives to strengthen our enterprise for the future. Recall, this is our strategic framework setting up Lazy Boy Incorporated for the next 100 years as we celebrate our first century in 2027, driving top-line growth at a pace double the market and delivering consistent double-digit operating margins over the long term. The continued growth in our business in the quarter is a testament that our century vision strategy is working. The furniture and home furnishings category is highly fragmented and is one of the largest brands in North America. We are well positioned to continue to strategically grow our business and gain share. We have consistently expanded Lazy Boy's brand reach over the past several years and will continue to execute the strategy to disproportionately benefit when we do experience sustained industry tailwinds. A key pillar of our expanded brand reach is our total furniture galleries network, which ended the quarter at 362 stores. We remain on track to grow the total Lazy Boy Furniture Galleries network to over 400 stores within the next several years, with nearly 20 net additions in the last two years alone. Additionally, we are expanding the company-owned portion of the network. Our retail segment has increased to 197 stores, up 13 in the last year, and now represents 54% of the total Lazy Boy Friends and Galleries network. We opened three new company-owned stores in the quarter in Queen Creek, Arizona, Newington, New Hampshire, and Bellingham, Washington, and closed one. Furthermore, We acquired two independently-owned stores in Ohio during the third quarter and signed an agreement to acquire two more in Michigan in the fourth quarter. Growing our company-owned furniture gallery stores is a key driver to our success as we control the entire end-to-end consumer experience and develop more value-added consumer insights. And these store acquisitions are immediately accretive to our profitability, allowing the company to benefit from the integrated wholesale and retail margins. We're also growing the business through our refined channel strategy. The Lazy Boy brand is showing up in more showrooms as we are expanding strategic distribution while increasing our share of voice in the marketplace to provide a broader range of consumers access to the Lazy Boy brand. As our business scales, we continue to incorporate a more data-driven approach to product development. These deeper consumer insights enable us to design more on-trend merchandise. A great illustration of this is our expanded motion furniture offerings where we launched a new consumer-relevant assortment at High Point Furniture Market last fall. Our North American supply chain gives us the ability to produce a wide variety of customized fabric and leather options with speed to market in as little as four to six weeks. This will continue to provide a key point of differentiation and allows us to solve for the growing desire for personalization in consumers' homes. Another core pillar of Century Vision growth strategy to expand Lazy Boy Reach is through our Long Live the Lazy Brand campaign. In just a short time since launching the campaign, we are expanding both consideration and purchase intent across a broader range of consumers, including millennials and Gen X. This is achieved by targeting the confidently comfortable consumer and winning more business while also staying true to our heritage of comfort and quality. Lazy Boy is becoming more socially relevant and leaning in to cultural trends when appropriate, and we continue to look for new and innovative ways to connect with broader audiences. In November, we introduced a test and learn concept store in Lincoln Park in Chicago. This smaller format store was designed with an intent to capture a new generation of consumers. A recliner runway, highlighting our most foundational products in a new and innovative way, is surrounded by lifestyle rooms from gamer to heritage. Included in our learning agenda, we'll gain deep consumer insights that will inform next steps to use in updating our approach in our existing footprint, as well as inform experiments with entirely new concepts. Joybird is another core pillar of our century vision where we're optimizing the brand to deliver a balance of sales growth and profitability. Joybird had a strong quarter with positive delivered and written sales trends and operating performance improving against the prior year and resulting in break-even profit. The digitally native brand is benefiting from strong execution in its retail footprint as it delivers a seamless omni-channel experience and enables consumers to bring their own personalized styles to life. I'm excited to highlight Joybird's most recent collaboration, the Joybird Pantone Collection, a first of its kind furniture collaboration. Joybird had the honor of being the first and exclusive furniture partner for Pantone's Caller of the Year 2025 release. The collection features Joybird's top-selling performance fabric, Royale, and stars the Pantone Caller of the Year 2025 mocha mousse in more than 300 silhouettes. The collaboration leverages Pantone's color authority and decades-long expertise while showcasing Joybird's color-centric brand focus. Strengthening our foundational capabilities, including building a more agile supply chain, is our final pillar of Century Vision. In its challenging global landscape, We view our North America manufacturing footprint with the majority of final assembly in the United States as a key differentiator in our ability to manufacture high-quality, comfortable custom furniture with quick speed to market. We're driving gross margin expansion in our core business as we improve efficiencies in our supply chain. We're also expanding our assortment of on-trend merchandise in our main upholstery categories, particularly reclining in motion. And notably, we were pleased during the quarter to be named on Newsweek's 2025 list of America's Responsible Companies, recognizing our commitment to responsible manufacturing operations and business practices. This award, based on quantitative data gathered from independent surveys, highlights our commitment to doing what is right for our business and all stakeholders. As we enter the final quarter of our fiscal year, we continue to expect a choppy macro environment. Overall housing fundamentals and housing affordability remain challenging, and we also continue to monitor and plan against the evolving global tariff and trade environment. However, the structural housing shortage and pent-up demand of the category remain key opportunities as we look to the future. And in the meantime, we remain optimistic about our ability to continue to outperform the market while investing in our business through our century vision strategy. Now, let me turn the call over to Taylor to review the financial results in more detail. Taylor?