La-Z-Boy Incorporated

Good morning everyone and welcome to the Lazy Boy Fiscal 2027 First Quarter Conference Call. At this time, all participants are in a listen-only mode. 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 phone keypad. Please note this conference is being recorded. I will now turn the call over to your host Mark Becks, Director of Investor Relations and Corporate Development at Lazy Boy Incorporated. Mark, the floor is yours.

Thank you, Jenny. Good morning, everyone, and thanks for joining us to discuss our fiscal 2027 first quarter. Joining me on today's call are Melinda Whittington, Lazy Boy Incorporated's Board Chair, President and Chief Executive Officer, and Taylor Luebke, SVP and CFO. Melinda will open and close the call, and Taylor will speak to segment performance in the financials midway through. After our prepared remarks, we will open the line for 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. 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 vary 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. 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.

Thank you, Mark. Good morning, everyone. Yesterday, following the close of market, we reported our July-ended first quarter results, which reflect driving our own retail momentum progressing our strategic initiatives and investing in our business while also returning capital to shareholders. Highlights for our first quarter included written sales for the retail segment increasing 16% with written same-store sales growing 3% driven by excellent in-store execution. Delivered sales for the retail segment increased 10% led by acquisitions in new stores with same store sales down just slightly. We added four company-owned stores during the quarter, including one new and three acquired, bringing our total to 234 company-owned stores, or 62% of the total network. And we announced another two-store acquisition now underway. We have concluded production at one of our two announced plant consolidations during the quarter, We returned $35 million to shareholders through share repurchase and dividends, a 62% increase versus prior year. And finally, we ended the quarter with $267 million in cash and no external debt, maintaining our strong balance sheet. Our first quarter results reinforce our strategic focus on driving our retail business, where we control the full end-to-end consumer experience and where we have significant growth potential as we continue to expand our base and drive positive same store sales. We are pleased with our first quarter execution in retail including positive written same store sales growth and our performance continues to demonstrate the strength of our iconic brand and our ability to drive our own momentum even as the broader furniture market experiences challenges. At the same time, on a consolidated basis, the quarter was mixed. as we navigate near-term headwinds while still investing to advance our strategic initiatives. Total delivered sales for the entire enterprise were down 1% versus prior year when excluding the impact of the case goods divestitures. Our strong 10% delivered sales growth on retail was more than offset by lower wholesale delivered sales which were impacted by flow-through of choppier-than-expected order patterns and continued pressure on our Joybird business. The deleverage on wholesale and Joybird sales in what is already the slowest season for our industry, topped with friction costs for investing for the long term, negatively impacted our margins for the quarter. Moving on to forward-looking trends, first quarter total written sales for our company-owned retail segment increased 16% versus last year's first quarter. driven by acquired and new stores, and importantly, positive written same-store sales. Written same-store sales, which exclude the benefit of new and acquired stores, grew 3% for the quarter, which is also a significant sequential improvement versus fourth quarter. This performance was driven by continued excellence in execution across marketing, product innovation, and in-store inspiration with increases in design sales, Conversion rates and average ticket. Trends were strongest in May and July around key holiday selling periods. On wholesale, demand patterns improved throughout the first quarter and our backlog is solid entering the second quarter against what we expect to be a continued uneven demand environment. Our Joybird business continues to experience the most significant consumer volatility. with written sales decreasing 17% in the quarter. We continue to work on improving the resiliency of this business, including transitioning manufacturing into our established U.S. plant network by the end of the fiscal year. Across our enterprise, despite sector-wide softness as reported in the Census Bureau data, we continue to capture market share through the strength of our iconic Lazy Boy brand, agile U.S.-centered supply chain, consumer-led insights, and most significantly, excellent execution in our Lazy Boy retail stores. Now in our 100th year, I want to take a few minutes to highlight progress against our Century Vision strategic framework. Our goal remains to grow sales at twice the industry rate, gaining share while strengthening margins. Last year, we proactively made structural changes in our business to focus on our core Lazy Boy brand and build an even more agile supply chain. Achievements included the wholesale case goods exit, which was completed in May, the first year of our distribution and home delivery transformation project, our UK supply chain restructuring, and significantly expanding our retail footprint. During fiscal 27, our strategic work continues. In retail, during the first quarter, we added four company-owned stores, including one new and three acquired, bringing our total to 234 company-owned stores, or 62% of the total network. This compares to only 127 company-owned stores 10 years ago and reflects our aggressive yet disciplined store expansion strategy with new stores across our network as well as acquisitions. Our total Lazy Boys store network including company owned stores and independently owned stores now stands at approximately 380 stores across North America and progress continues. The strength of our brand and productivity of our store network supports further expansion of the Lazy Boy footprint to 450 locations with expectations for approximately 10 new stores annually, primarily company owned. And independent dealer acquisitions also remain a key opportunity. as these transactions are immediately sales and profit accretive and often offer additional growth opportunities to underpenetrated markets. I am pleased to note that during the quarter we signed an agreement to acquire another two independent Lazy Boy stores in Louisiana expected to close in October. And there remains a solid pipeline potential over time with almost 40 independent dealers and nearly 150 independent stores still in the network. Another important focus is our digital transformation, which is a critical enabler to our direct-to-consumer growth strategy, consumer engagement objectives, and ability to appeal to a younger and broader consumer audience. Most of our consumers choose to complete their purchase journey in-store, where they can experience the personalized service and comfort of our Lazy Boy brand. But we know that today's purchase journey begins online for most consumers. and we are driving meaningful improvements to our consumer experience on our e-commerce platform. We have added several expanded features including a new content management system which showcases product imagery and visuals with enhanced viewing and high definition 3D illustrations. We've also incorporated AI enriched product descriptions to drive a more seamless discovery process. Additionally, We are now offering shared cart functionality where a shopper can share product ideas and inspirations with a loved one or an in-store retail consultant to augment the connected omni-channel experience. And we have added advanced technologies including AI-powered search capabilities to accelerate engagement and conversion. Our website attracts almost 50 million annual visitors seeking inspiration and product guidance as they begin their shopping journey. And these are just a few of the examples of our ongoing enhancements to support our vision of delivering a unified omni-channel experience and meeting our consumers wherever they want to shop. In the wholesale segment, We continue to grow our business with compatible strategic partners who appreciate our Lazy Boy brand equity and the comfort and quality our products offer. During the quarter, we continued to expand our dealer base and our relationship with existing strategic partners. We ended the quarter with over 1,400 Lazy Boy comfort studio and branded space locations, each with dedicated space for Lazy Boy branded products. We remain focused on organic expansion with existing partners while also evaluating new compatible distribution opportunities. Our final Century Vision strategic pillar involves driving enterprise agility and optimizing our foundational infrastructure in supply chain, technology, and talent. Our vertically integrated model with more than 90% of upholstered furniture produced domestically represents a powerful competitive advantage. This footprint enables us to deliver customized products with four to six weeks delivery time and positions us amongst the very best in our industry to manage the volatile tariff environment. We continue to optimize our manufacturing footprint by consolidating two of our smallest upholstery plants into our established US network with production concluded in one plant during the first quarter and the second to be closed by the end of the fiscal year. And still leaving us with ample capacity in our U.S. footprint to support future growth as we fully integrate and optimize these consolidations. Fiscal 27 is also a foundational year for our distribution and home delivery transformation project as the remaining two of our three centralized hubs will be completed and opened by fiscal year end. This four year project will optimize our footprint from 15 distribution centers to three centralized hubs, enabling 20% less mileage traveled, 30% less square footage, and doubling our delivery radius to consumers. As we look ahead, we're focused on making our own momentum, managing the variables within our control, and driving value for all stakeholders. While the timing for an industry recovery remains uncertain, We possess distinct levers to drive growth and reinforce our competitive position across our century vision pillars. We are well positioned to continue to gain share now and ongoing. And now, I'll turn the call over to Taylor to review the financial results in more detail.