La-Z-Boy Incorporated

in written same-store sales trends over the last two quarters. While consumer trends remain challenging for our industry, we continue to be agile and hone our execution. We saw our strongest results of the second quarter in October, where we achieved positive written same-store sales. However, results in early November remain mixed. And for Joybird, total written sales for the quarter were a positive 1% increase versus a year ago, demonstrating significant improvement versus the prior two quarters and driven by strength in retail store performance. We also have made substantial progress against our strategic initiatives, focusing on our core vertically integrated North American upholstery business. We completed our 15-store acquisition in the Southeast US region, expanding our ownership of important growing markets. We announced the planned exit of non-core businesses, including Kincaid Case Goods, American Drew Case Goods, and Kincaid Upholstery. And we announced the proposed closure of our UK manufacturing facility. Notably, we expect all of these exits to be substantially completed by the end of our fiscal year. And we have strategically realigned our senior commercial leadership as well as realigned our corporate staffing to more efficiently support our streamlined business. These strategic initiatives are a clear demonstration of our proactive approach to driving our own momentum in what remains a challenged marketplace. We remain agile and committed to strengthening our business to prudently navigate the current environment, while at the same time, best positioning ourselves for the next 100 years. To expand a bit more on these important century vision strategic initiatives, we were thrilled to complete our acquisition of the 15 store network in the Southeast US region at the end of October. These acquired stores are located in attractive markets, Atlanta, Georgia, Orlando and Jacksonville, Florida, and Knoxville, Tennessee. And our ownership of these markets will enable new store growth on top of the already high-performing existing store base. This is the largest independent store acquisition in our company's history and will add an estimated $80 million in annual retail sales. and roughly $40 million net to the total company on a consolidated basis. Recall, our wholesale segment already manufactured and sold products to this business, and therefore already recognized the wholesale portion of these annual sales. Given the strong profitability of this network, immediate sales and profit accretion, and opportunity for further market expansion, This is a very attractive investment for our company. As an important pillar of our Century Vision strategy, over the last several years, we have maintained a consistent cadence of independent dealer acquisitions, and we see opportunity for a continued pipeline over time, with roughly 40 independent dealers and nearly 150 independent stores still in our network. New store growth is another key lever to growing our retail business, and our strong balance sheet gives us the flexibility to make disciplined investments, even in more challenging macroeconomic conditions. We opened five new company-owned stores in the quarter and closed three, and opened 15 new stores in the last 12 months and closed five. as we deliver the most significant period of new retail store growth in our company's history. Looking back even a bit further, over the last 24 months, we have added 20 new company-owned stores as we continue to expand our Lazy Boy store network towards our target of over 400 stores. And with this recently completed acquisition, company-owned stores now represent 60% of the current 370 Lazy Boy store network, a significant increase from 45% of the approximately 350 store network just five years ago. We were also pleased to open our 15th Joybird store just last week in Easton Town Center in Columbus, Ohio, one of the Midwest's premier open-air shopping and dining destinations. We remain on track to open three to four new Joybird stores this fiscal year and are pleased at the ramp-up and performance of our Joybird retail stores. In wholesale, our refined channel strategy is also contributing to our sales momentum as we expand our brand reach with compatible strategic partners. We recently added living spaces, a top 100 furniture retailer with over 40 stores across western states. We also launched Lazy Boy product at Costco on floors in over 350 locations as well as on Costco.com. This follows the addition of Farmer's Home furniture and there are over 260 stores in the southeast in our first quarter. Each of these strategic additions are complementary to our existing distribution and expand our brand reach to even more consumers. And lastly, highlighting our industry-leading service levels, we're proud to once again be named the Forbes 2026 Best Customer Service List, recognizing our team's passion and commitment to our mission of transforming homes, rooms, and communities for our customers and consumers. We're also capitalizing on the momentum from our ongoing initiatives to continue rolling out our new brand identity, which has been well received. The response from media, customers, and consumers has been overwhelmingly positive, generating headlines such as Lazy Boy just rebranded to prove it's more than your grandmother's recliner and how Lazy Boy made comfort cool again. We plan to build on this success and continue executing our strategy to drive brand consideration and purchase intent across a broad range of consumers, including millennials and Gen X. On our final strategic pillar, strengthening our foundational capabilities, including building a more agile supply chain, we are making strong progress on our multi-year project to transform our distribution network and home delivery program. This transformation will reduce our distribution footprint from a total of 15 large distribution centers to three centralized hubs. In the second quarter, we consolidated an additional two distribution centers. As a reminder, the cumulative benefits of this transformation will include an estimated 30% reduction in square footage across our warehouse network, an approximate 20% reduction in mileage of inventory traveled across our network, doubling of our delivery radius from 75 to 150 miles, enabling us to reach even more consumers, and improved inventory productivity and working capital levels, all while improving an already strong consumer experience and, once completed, delivering 50 to 75 basis points of wholesale segment margin improvement, the equivalent of up to 50 basis points on the total enterprise margin. Finally, as I noted earlier, we are taking steps to optimize our portfolio by focusing on our core vertically integrated North American upholstery business. We have announced plans to exit our non-core wholesale case goods businesses, which include Kincaid Case Goods, American Drew Case Goods, and Kincaid Upholstery. We are currently evaluating alternatives for these exits and will provide more details as negotiations progress. Importantly, we will continue to offer optimized case goods offerings in our Lazy Boy stores, comfort studios, and branded spaces as they enable consumers to furnish their homes and elevate our design business. And we are confident our new structure will further enhance our offerings in the future. In addition, while we remain committed to growing our Lazy Boy business in the UK, we have announced the proposed closure of our UK manufacturing facility in favor of more financially sustainable sourcing alternatives. We are currently in the required 45-day collective consultation period as required by the UK statutory process. We expect all of these strategic actions to be substantially completed by the end of our fiscal year. And we are committed to supporting our customers, our consumers, and our employees through these transitions. And as we announced last month, we also strategically realigned our executive commercial leadership and corporate staffing to focus on our core and enhance operating efficiency. As our industry continues to evolve, it's important we remain agile and evolve our business to position us for continued profitable growth into the future. Collectively, these initiatives sharpen our focus on growing our core business where we have a leadership position and a right to win with the consumer. They also align with our century vision goals of growing double the market and delivering double digit operating margins over the long term. The furniture industry has experienced tremendous change and challenge in recent years. Despite this, our mission remains the same, to empower our people to transform rooms, homes, and communities. Our iconic brand, well-positioned manufacturing base, strong balance sheet, and talented team provide the foundation for sustained sales growth and margin expansion. And now, let me turn the call over to Taylor to review the financial results in more detail.

Thank you, Melinda, and good morning, everyone. As a reminder, we present our results on both a GAAP and adjusted basis. We believe the adjusted presentation better reflects underlying operating trends and performance of the business. Adjusted results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides. On a consolidated basis, fiscal 2026 second quarter sales increased slightly from prior year to $522 million as growth in our retail and wholesale business were partially offset by lower delivered volume in our Joybird business. Consolidated gap operating income was $36 million and adjusted operating income was $37 million. Consolidated gap operating margin was 6.9% and adjusted operating margin was 7.1%. Retail margin to leverage due to lower delivered same-store sales and the impact of investment in new stores was partially offset by stronger wholesale segment margin, which included solid operating trends as well as the 110 basis point benefit of a change in our dealer warranty arrangements during the quarter. Diluted earnings per share totaled 70 cents on a gap basis, and adjusted diluted EPS was 71 cents, flat versus last year's comparable period. As I move to the segment discussion, my comments from here will focus on our adjusted reporting unless specifically stated otherwise. Starting with the retail segment for the second quarter, delivered sales increased slightly to $222 million. Retail adjusted operating margin was 10.7% versus 12.6% due to fixed cost to leverage on lower delivered same-store sales and investments in new stores. For our wholesale segment, delivered sales for the first quarter increased 2%, to $369 million versus last year, driven by growth in our core North America Lazy Boy branded wholesale business. Adjusted operating margin for the wholesale segment was 8.1% versus 6.8%, with 160 basis points improvement, driven by lower warranty expense due to the change in our dealer warranty arrangements, as well as solid operating trends, partially offset by incremental expenses related to our distribution transformation project, and increased advertising expenses. On our wholesale business, we view our North America supply chain as a competitive advantage, with approximately 90% of finished goods produced in the U.S. As such, we are well-positioned to navigate the current trade and tariff environment. For Joybird, reported in Corporate & Other, delivered sales were $35 million, down 10%, primarily due to lower delivered sales volumes. Joybird operating loss increased versus the prior year, primarily due to the leverage on lower Joybird delivered sales. Moving on to our consolidated adjusted gross margin and SG&A performance for fiscal 2026 second quarter. Consolidated adjusted gross margin for the entire company increased 10 basis points versus the prior year second quarter. The increase in gross margin was primarily driven by lower input costs led by favorable ocean freight and improved sourcing, partially offset by higher supply chain costs, including friction costs related to our distribution and home delivery transformation. Adjusted SG&A as a percent of sales for the quarter increased by 50 basis points compared with last year due to fixed cost deleverage in our retail stores as well as investment in new stores. This was partly offset by the benefit of a change in our dealer warranty arrangements in the quarter that resulted in a one-time benefit due to a reduction in our ongoing warranty liabilities. This change has no impact on the end consumer and provides significant improvements in program management and administration. Our effective tax rate on a gap basis for the second quarter was largely unchanged at 26.7% versus 26.3% in the second quarter of fiscal 2025. Turning to liquidity, we ended the quarter with $339 million in cash and no externally funded debt. We generated a strong $50 million cash from operating activities in the second quarter, triple the year-ago period, with improved working capital and higher customer deposits. We invested $20 million in capital expenditures during the quarter, primarily related to new stores and remodels and supply chain-related investments. We continue to believe that the best use of our cash and highest return on investment is prudently reinvesting back into the business. As such, we remain committed to disciplined investment in new stores acquisitions in our distribution and home delivery transformation project to profitably grow our core business. Regarding cash return to shareholders, year-to-date, we returned $31 million to shareholders through dividends and share repurchases, including $18 million paid in dividends. We repurchased 23,000 shares in the quarter, which leaves 3.4 million shares available under our existing share repurchase authorization. Subsequent to quarter end, Reflecting the confidence in the company's financial strength and long-term growth prospects, the Board of Directors increased the regular quarterly dividend by 10%. This is the fifth consecutive year of double-digit increases to the dividend. We continue to also view share purchases in our dividend as an attractive use of our cash and positive return to shareholders. Capital allocation in fiscal 2026 is tilted more into the business through investments in the recent 15-store acquisition in our distribution and home delivery transformation project. Longer term, our capital allocation target remains consistent to reinvest 50% of operating cash flow back into the business and return 50% to shareholders in share purchases and dividends. Before turning the call back to Melinda, let me highlight several important items for fiscal 2026 in our third quarter. We expect fiscal third quarter sales to be in the range of $525 to $545 million, a growth of 1% to 4% year over year, an adjusted operating margin to be in the range of 5% to 6.5%, reflecting advancement of our century vision initiatives, friction costs related to portfolio optimizations and supply chain transformation, and a measured view on the uncertain macroeconomic backdrop. We expect to open approximately 15 new company-owned and independent Lazy Boy stores during the full fiscal year, of which the majority are company-owned, as well as three to four new Joybird stores. We continue to expect our tax rate for the full year to be in the range of 26 to 27 percent. We expect capital expenditures to be in the range of 90 to 100 million for fiscal 2026, consistent with prior guidance. This includes investments for new stores and remodels, our multi-year project to transform our distribution network and home delivery program, and continued manufacturing-related investments. Of note, I want to spend a few moments on expected financial benefits of our strategic initiatives to hone our portfolio, which Melinda covered earlier. With the combined impacts of our 15-store acquisition, our case goods exit, our proposed closure of the UK facility, and our management reorganizations, We expect the going annual impact on our enterprise to be an approximate 30 million net sales decrease in a significant adjusted operating margin improvement of 75 to 100 basis points to the entire enterprise. We expect all of these initiatives to be substantially completed by the end of this fiscal year. And at this time, we do not expect these exits to have a material one-time gain or loss to the enterprise. Lastly, we anticipate adjustments for all other purchase accounting charges for the year to be in the range of one cent to two cents per share. And with that, I will turn the call back to Melinda.

Thanks, Taylor. We are sharpening our focus on our core businesses and enhancing our agility to navigate the challenging home furnishings environment. At the same time, we're executing on our long-term strategic objectives and I am more excited than ever about the opportunities that lie ahead. Before I close, I want to welcome the employees of our latest acquisition, and I want to thank all of our employees around the world for their continued dedication to our mission of bringing the transformational power of comfort to more homes. And now, I'll turn the call back to Mark.