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La-Z-Boy posts increases in FY 2016 sales, earnings
MONROE, Mich. – Upholstery and case goods resource La-Z-Boy closed its fiscal 2016 with a healthy slate of numbers, including a 7% increase in sales and a 12.5% increase in net income for fiscal year 2016.
The company's sales for the year totaled $1.53 billion, up from $1.43 billion in fiscal year 2015. Operating income rose 18.6% to $122.4 million from $103.2 million in 2015, and net income rose to $81 million from $72 billion for 2015.
For the full fiscal year 2016, which included an extra week, consolidated gross margin rose to 38.2% from 35.4% in fiscal 2015.
Earnings per share for continuing operations for the period rose 21.1% to $1.55 compared to $1.28 per share for 2015. This includes a previously announced 7 cents per share charge in fiscal 2016 related to a pending legal matter.
Sales in the fourth quarter rose 11.2% to $417.1 million compared to $374.9 million in 2015, which again included the extra week, which the company said had an 8 percentage point impact. Operating income rose 15.9% to $34.2 million from $29.6 million in 2015, while net income rose 12% to $22.9 million from $20.5 million in 2015.
Earnings per share from continuing operations rose 18.4% to 45 cents during the fourth quarter from 38 cents for the comparable period in 2015.
For the full year, consolidated gross margin rose to 38.2% from 35.4% in fiscal 2015. For the fourth quarter, consolidated gross margin rose to 39.3% versus 35.6% in the fiscal 2015 fourth quarter.
In a statement, Chairman, President and CEO Kurt Darrow said, "We delivered exceptional performance in fiscal 2016 and continued on a five-year path of sales and earnings increases. Our results demonstrate the effectiveness of our strategic growth initiatives in today's retail environment and the efficiencies throughout our manufacturing platform.
"We had an excellent quarter and year, which would have been even stronger without the previously announced $0.07 per share charge for the pending legal matter. We recorded increases in sales, earnings per share, and consolidated operating margin, reflecting improved operating performance across all three business segments. We also returned $62.2 million to shareholders through dividends and share purchases, all while reinvesting in our business – including the acquisition of 11 La-Z-Boy Furniture Galleries stores – to drive long-term profitable growth. Our balance sheet remains strong and we are well positioned for ongoing success as we enter fiscal 2017."
The upholstery segment achieved a 9.7% increase in sales for the fourth quarter, to $334.9 million, from $305.3 million in 2015. The company said the category also increased its operating margin to 11.8% for the period compared to 11.6% in 2015.
The case goods segment also reported an increase in sales and profitability. Sales in the fourth quarter rose 1.6% during the fourth quarter to $26.3 million, while operating margins rose to 6.2% from 4% in the fourth quarter of 2015.
"We increased our operating margin to 11.8% in the upholstery segment for the quarter, despite the accrual for the previously announced legal matter which exerted a 1.6 percentage point drag on the segment's operating margin in the fiscal 2016 fourth quarter," Darrow said. "This performance was driven by increased volume and our ability to leverage the fixed-cost structure of our manufacturing facilities as well as supply chain savings, which included procurement and plant efficiencies. Additionally, we are realizing the benefits of our new ERP system throughout the La-Z-Boy branded facilities. With a truly integrated system, we have better information flow and data visibility, which we are leveraging to provide improved service to our customers."
He added that an all import model on the case goods side of the business has improved profitability of the segment. He noted that a "product refresh" at both American Drew and Kincaid is nearly complete and that the new AD Modern collection by American Drew has been well received by dealers and is expected to hit retail in September.
"Moving forward, we believe the changes we have made across our case goods model will ensure more consistent performance," Darrow said.
In its retail segment, the company achieved more than $400 million in sales in fiscal 2016. Sales for the quarter rose 25.9% to $109.2 million. Factoring in a core base of 107 stores included in last year's fourth quarter, sales for the segment rose 13%, which included the extra week. The segment's operating margin was 5.8% during the quarter compared to 3.8% in the prior year period. For the full fiscal year, the retail side of the business posted a 6.4% operating margin, compared to 3.4% in fiscal 2015.
At the end of fiscal 2016, the company owned 124 La-Z-Boy Furniture Galleries stores, which included the acquisition of one independent La-Z-Boy Furniture Galleries store in Fort Collins, Colo. and a total of 11 in 2016.
"Subsequent to year end, we acquired a store in Reno, Nevada, and believe there are additional acquisition opportunities ahead," Darrow noted. "We have succeeded in integrating these stores into our portfolio quickly, and they have been accretive from the start. As our retail segment continues to increase in size, we will have further opportunity to benefit from the combined margin associated with our integrated retail strategy, where we earn a profit on both the wholesale and retail sales."
Sourse: Thomas Russell -- Furniture Today
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