La-Z-Boy Incorporated

Greetings and welcome to the Lazy Boy Incorporated Fiscal 2026 First Quarter Conference Call. At this time, all participants are on a listen-only mode and 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. And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Mark Becks, Director of Investor Relations and Corporate Development at Lazy Boy Incorporated. Sir, you may begin.

Thank you, Ali. Good morning, everyone. And thanks for joining us to discuss our fiscal 2026 first quarter. Joining me on today's call are Melinda Whittington, Lazy Boy Incorporated's board chair, president, and chief executive officer, and Taylor Lubke, Lazy Boy's SVP and CFO. Melinda will open and close the call, and Taylor will speak to segment performance and the financials midway through. After our prepared remarks, we will open the line for questions. Flies 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. 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 filing. 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 adjusted 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.

Thanks, Mark. Good morning, everyone. Yesterday, following the close of market, we reported our July-ended first quarter results. During the quarter, we delivered sales growth in both our retail and wholesale segments, as well as margin expansion in wholesale. And we accomplished significant Century Vision strategic milestones even despite continued industry headwinds. Highlights for our first quarter included, in our retail segment, delivered sales increased 2% and written sales increased 5%. We opened two new company-owned Lazy Boy furniture galleries, bringing our total to 13 new company-owned stores over the last 12 months. And we announced a 15-store acquisition in the growing southeast region of the United States, which is expected to close late in October and will be the largest independent Lazy Boy Furniture Gallery's acquisition in our company's history. In our wholesale segment, delivered sales grew 1%, led by growth in our core North American Lazy Boy wholesale business. On top of this, we successfully transitioned to our new Arizona Distribution Center, the first of three centralized hubs that will provide the foundation to our multi-year distribution transformation. We also delivered strong operating cash flow of $36 million for the quarter. And finally, we continued to maintain a strong balance sheet with $319 million in cash and no external debt. And we updated our revolver to more favorable terms. Consolidated sales for the quarter were $492 million, down slightly from the prior year. While we delivered growth in our retail and wholesale segments against an increasingly challenged consumer and macroeconomic environment, those challenges did affect store traffic and related same-store sales in our retail segment. And our Joybird business delivered sales for the first quarter were down 20%, consistent with the drop in written sales Joybird experienced in our fourth quarter. The combination of slower same-store sales plus investment in new store expansions, which take a couple of years to get to going profitability, pressured our total company adjusted operating margin for the quarter, which came in at 4.8%. As we look forward, We continue to be optimistic about our ability to grow sales and outperform the industry while driving strong margins, and we are actively adjusting our near-term operations to prudently navigate the current environment. Total written sales for our company-owned retail segment increased 5% versus last year's first quarter, driven by new and acquired store growth, which more than offset a 4% written same-store sales decrease. Both total and same-store written sales trends sequentially improved versus our fourth quarter. Joybird written sales decreased 14% in the quarter versus a year ago, with trends improving throughout the quarter and with continued stronger performance in physical stores than online. Industry traffic remains depressed, with housing transactions continuing to be near 30-year lows and exacerbated by increasingly challenged consumer. Industry data for the quarter continues to be volatile and mixed, with retail public company peers reporting same-store sales ranging from down low to mid-single digits, while broader industry data, as defined by the U.S. Census Bureau, shows recently downwardly revised figures, but still in the positive mid-single digit range. Even as we navigate the current consumer choppiness, We continue to advance our century vision strategy to deliver long-term shareholder value. In our ongoing drive to increase our direct-to-consumer business, where we control the entire consumer experience, we were thrilled to announce the upcoming acquisition of a 15-store Lazy Boy Furniture Galleries network in the southeast region of the United States. This network currently drives roughly $80 million in annual sales, which will add an incremental $40 million in sales to the company on a consolidated basis. And we see continued growth opportunity for that region. Further, during the quarter, we opened two net new stores with 15 total planned for the year, mostly company-owned, and making this one of the most significant retail expansion years in our company's history. At the end of the quarter, Our retail footprint included 205 company-owned furniture galleries, 56% of our entire 368 store network, which includes independently-owned stores. And there is continued opportunity to expand our retail store footprint as part of our century vision. We're also pleased during this past quarter to open our 14th Joybird store just last week in Mission Viejo, California. as we prudently expand the Joybird physical store footprint with up to four stores planned in this fiscal. Demonstrating our consumer-recognized strength in retail, we were recently named by Newsweek as one of America's best retailers in 2025 and ranking number one in the furniture category for the first time in our history. This recognition based on quantitative data gathered from independent surveys is a testament to our talented and dedicated team and our continued focus on further strengthening our product offerings, our customer service, and our in-store experience. Our refined channel strategy and wholesale is also seeing continued momentum as we expand our brand reach with compatible strategic partners to delight and inspire more consumers. We recently added another strategic regional partner in Farmer's Furniture, an approximately 250-store retailer in the Southeast, giving consumers greater access to the Lazy Boy brand in some more rural markets we haven't served in the past. With our refined channel strategy, we continue to add new distribution as well as grow our brand with existing partners to ensure Lazy Boy is accessible to more consumers. And another core pillar of our Century Vision growth strategy is to expand brand reach. Here, we also made progress during the quarter with our brand campaign update, which we again officially launched on National Lazy Day, August 10th. And we also recently introduced our reinvigorated Lazy Boy brand identity, rooted in our heritage of comfort and craftsmanship, The new identity reflects a more modern brand and represents an important step in our journey to evolve with our consumer, further increase brand relevance, and reach a broader audience. Within our Century Vision pillar to drive supply chain agility, as we noted last quarter, we are in the first quarter of a multi-year project to transform our distribution network and home delivery program. We're designing and building an even more effective network for our business today and in the future, delivering an even better consumer experience while strengthening our operations, improving margins, and further enhancing the agility of our vertically integrated supply chain. This transformation will reduce our distribution footprint from a total of 15 large distribution centers to three centralized hubs, supported by small format cross-docs across the country, located close to our customers and our consumers. And it will drive an estimated 30% reduction in total square footage across our network. It will also reduce mileage of inventory traveled across our network by approximately 20%. Further, the program will enable improved inventory productivity and working capital levels, will enable us to reach a broader consumer base, doubling our delivery radius from 75 to 150 miles and decreasing our reliance on third-party providers, and increase the agility of our supply chain to more optimally serve our current store footprint with flexibility for added growth in the future, all while improving an already strong consumer experience. During the quarter, we successfully completed the opening of our new Arizona distribution hub, the first of these three centralized hubs. And we are excited about the early progress of this transformation, which is an important driver toward our broader objective of double-digit margins in our wholesale segment over the long term. We continue to drive long-term value creation through our Century Vision Strategy across the enterprise. And we are strengthening our core business of branded, customized upholstery in North American markets to ensure that our company is structured to deliver on long-term value creation, while also prudently responding in the near term to an increasingly challenged consumer environment. In addition, we are actively evaluating all alternatives to address financial pressure from non-core parts of our enterprise. Our guiding principles will remain the same. We will do the right thing for our consumers by delivering comfort and customization with quality. We will be nimble to responding to the dynamic environment and leverage our iconic brand, vertically integrated business model, and robust balance sheet to further strengthen our foundation and disproportionately benefit when an industry rebound occurs. And now, let me turn the call over to Taylor to review the financial results in more detail.