Executive Summary
La-Z-Boy reported a modest quarterly decline in consolidated revenue with meaningful margin dynamics by segment. Consolidated sales dipped 1% year over year to $492.2 million, reflecting strength in Retail and Wholesale offset by weaker Joybird performance. Adjusted operating margin stood at 4.8% (GAAP 4.5%), with Wholesale margin at 7.5% (versus 6.9% prior year), driven by lower warranty and marketing costs and ongoing gross margin expansion in core North America Wholesale. Retail margin faced de-leverage pressures from new store openings and elevated fixed costs, contributing to Retail adjusted margin of 6.3% (vs. 10.3% prior year). The company advanced the Century Vision agenda, highlighted by the first centralized Arizona distribution hub and a planned 15-store Gulf Coast/Southeast acquisition expected to add roughly $40 million in consolidated sales and access to key growth markets (Florida, Georgia, Tennessee).
La-Z-Boy also reiterated a disciplined capital allocation framework: maintaining a fortress balance sheet with $319 million in cash and no external debt, extending the revolver to 2030, and signaling near-term capital will be deployed toward investments in new stores, acquisitions, and the distribution transformation. Management guided for Q2 revenue of $510β$530 million and adjusted operating margin of 4.5β6%, signaling an expected near-term margin drag from transition costs that should ease as the distribution transformation matures (progress anticipated in year 3β4). ν¬μμ should monitor consumer demand dynamics, store productivity ramp, ongoing Joybird performance, and the progress of the wholesale distribution transformation as primary determinants of profitability in the coming quarters.
Key Performance Indicators
QoQ: -5.66% | YoY:-11.08%
QoQ: -9.58% | YoY:-12.86%
QoQ: -37.48% | YoY:-57.14%
QoQ: -35.97% | YoY:-53.69%
QoQ: -36.23% | YoY:-52.17%
Key Insights
Revenue: $492.2 million in Q1 2026, down 1% year over year (GAAP). YoY and QoQ context: Revenue declined modestly versus prior year; Management notes a sequential improvement in traffic trends into August, though not yet a confirmed trend.
Gross Profit: $209.2 million; Gross margin ~42.5% (0.42).
Operating Income: $21.98 million GAAP; $23.0 million adjusted; Adjusted operating margin 4.8% vs GAAP 4.5%.
Net Income / EPS: Net income $18.20 million; EPS $0.44 GAAP and $0.47 adjusted.
Segmen...
Financial Highlights
Revenue: $492.2 million in Q1 2026, down 1% year over year (GAAP). YoY and QoQ context: Revenue declined modestly versus prior year; Management notes a sequential improvement in traffic trends into August, though not yet a confirmed trend.
Gross Profit: $209.2 million; Gross margin ~42.5% (0.42).
Operating Income: $21.98 million GAAP; $23.0 million adjusted; Adjusted operating margin 4.8% vs GAAP 4.5%.
Net Income / EPS: Net income $18.20 million; EPS $0.44 GAAP and $0.47 adjusted.
Segment highlights: Retail delivered $207 million in sales, +2% YoY; Wholesale delivered $353 million, +1% YoY; Joybird $28 million, -20% YoY.
Wholesale profitability: Adjusted Wholesale margin 7.5% (improved from 6.9%), aided by lower warranty/marketing costs and core North America margin expansion; offset by International Wholesale transitions.
Liquidity and cash flow: Operating cash flow $36.3 million; capex $18.5 million; free cash flow $17.8 million. End-of-quarter cash: $319 million; net debt approximately $183 million.
Capital allocation: Dividends paid ~$9 million; share repurchases ~$12.5 million (300k shares) in the quarter; remaining repurchase authorization ~3.4 million shares. Credit facility extended to 2030 with higher accordion (up to $125 million).
Outlook: Q2 revenue guidance of $510β$530 million; adjusted margin guidance 4.5β6%; expectation of 50β75 bps Wholesale margin expansion over time from the distribution transformation; capital expenditures guided toward $90β$100 million for FY2026; ~15 new company-owned/independent stores and 3β4 Joybird stores planned for the year.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
492.23M |
-11.08% |
-5.66% |
| Gross Profit |
209.20M |
-12.86% |
-9.58% |
| Operating Income |
21.99M |
-57.14% |
-37.48% |
| Net Income |
18.20M |
-53.69% |
-35.97% |
| EPS |
0.44 |
-52.17% |
-36.23% |
Management Commentary
Management commentary highlights:
- Strategy and growth: La-Z-Boy reaffirmed commitment to Century Vision, including expansion of direct-to-consumer exposure and the ongoing brand evolution. The Southeast 15-store acquisition is expected to add roughly $40 million in additional consolidated sales, on top of the existing ~$80 million annual sales from the network. The company opened 2 net new stores in the quarter and targeted 15 store openings for the year, prioritizing company-owned stores.
- Operations and margin dynamics: Wholesale margin expansion to 7.5% reflects improvements in core North America businesses and lower warranty/marketing costs, partially offset by the International Wholesale margin impact from a significant customer transition. Retail margins faced fixed-cost deleverage due to new store openings, resulting in a 6.3% adjusted margin. Management indicated a typical new-store ramp of 2β3 years to reach profitability, implying near-term margin pressure as the store network expands.
- Distribution transformation: The Arizona distribution hub opened as the first centralized hub in a multiyear plan to reduce the footprint from 15 large centers to 3 central hubs plus cross-stocks. The project targets a ~30% reduction in total square footage and ~20% fewer miles traveled, with delivery radius expanding from 75 to 150 miles and lower third-party reliance. Margin uplift is projected to materialize mainly in year 3 onward, with Wholesale benefiting by 50β75 bps in the long run.
- Market environment: Management acknowledged a challenged consumer backdrop and elevated industry traffic volatility, with industry data mixed and housing transactions near 30-year lows. They noted North American production strength and limited tariff exposure due to domestic manufacturing footprint, which supports B2B supply reliability.
- Balance sheet and capital allocation: The company emphasized a fortress balance sheet and conservative capital deployment, with a shift toward investments in stores, acquisitions, and the distribution transformation in FY2026, and less emphasis on share repurchases for the balance of the year.
We opened 2 new company-owned La-Z-Boy Furniture Galleries in the quarter and announced a 15-store acquisition in the growing Southeast region of the United Statesβthe largest independent La-Z-Boy Furniture Galleries acquisition in our company's history.
β Melinda D. Whittington
The distribution transformation is multiyear; in year 1β2 there will be a drag on margins as we stand up new hubs, with savings starting to flow through in year 3 and at a going rate as we exit year 4.
β Taylor E. Luebke
Forward Guidance
Management guidance reflects a cautious but constructive near-term outlook with longer-term margin upside from structural initiatives. Key points:
- Q2 guidance: Revenue of $510β$530 million and adjusted operating margin of 4.5%β6%; implies a modest sequential improvement in fundamentals but acknowledges near-term drag from transition costs associated with the distribution transformation and new-store investments.
- Margin trajectory: anticipated 50β75 basis points of wholesale margin improvement over the multi-year transformation. An initial margin drag is expected for the first two years as new hubs come online, with savings accelerating in year 3 and a more meaningful impact in year 4 (exit year) targeting 50β75 bps expansion in Wholesale margins.
- Growth investments: Approximately 15 new La-Z-Boy Furniture Galleries stores (majority company-owned) and 3β4 new Joybird stores planned for the year, alongside continued investments in distribution transformation and manufacturing-related upgrades. Capex guidance remains $90β$100 million for FY2026.
- Tax and other items: Full-year tax rate guidance is 26β27%, and adjustments for purchase accounting are expected to be $0.01β$0.02 per share.
- Investment thesis: The near-term challenge remains a softened consumer environment and the transition costs of the distribution project; the longer-term thesis centers on higher Wholesale margins, enhanced distribution efficiency, stronger direct-to-consumer reach, and sustained brand and product mix improvements under Century Vision. Investors should monitor: (1) progress of the Arizona hub and other central hubs, (2) ramp of new stores and Joybird performance, (3) the pace of cost deleverage as stores mature, and (4) the actual margin uplift from the distribution transformation over the next 2β4 years.