LaZBoy Incorporated (LZB) Q4 2024 Earnings Report

Revenue overview and trend
- Q4 2024 revenue: $553.535 million, down 1.38% YoY but up 10.62% QoQ, reflecting normalization after pandemic backlog deliveries in the prior year.
- LZB delivered sales for the company-owned retail segment: $228 million, down 6% YoY, with 4Q2023 volumes boosted by backlog; total 4Q24 written sales for La-Z-Boy Furniture Galleries: +1% YoY, but same-store trend negative reflecting traffic headwinds (Q4: -5% in company-owned stores; -3% for the 355-store Furniture Galleries network).
- Wholesale delivered sales: $392 million, -1% YoY, supported by channel expansion but offset by freight revenue headwinds due to prior-year pandemic backlog deliveries to company-owned retail partners.
- Joybird (corporate and other): $37 million, roughly flat YoY, with improving profitability driven by lower freight/warranty costs and better ad spend efficiency.

Profitability and margins
- Gross profit: $240.083 million; gross margin 43.37% in Q4 2024 (2Q4 gross margin benefited from favorable mix while fixed-cost de-leverage moderated gains).
- Operating income: GAAP $51.297 million; GAAP operating margin 9.27%; Non-GAAP operating income: $52 million; Non-GAAP margin 9.4% (margin decline of ~40 bps versus prior year, driven by mix with offsetting SG&A reductions).
- Net income: $39.308 million; net income margin 7.10%; Diluted EPS: $0.91; Non-GAAP diluted EPS: $0.95 (YoY EPS up ~15%, QoQ up ~37% as per reported metrics).

Cash flow and liquidity
- Operating cash flow (quarter): $53 million; full-year 2024 operating cash flow: $158 million.
- Free cash flow: $37.256 million for the year; Capital expenditures: $54 million; Acquisitions: $39 million; Dividend and share repurchases: approximately $85 million returned to shareholders in 2024.
- Balance sheet: Cash and cash equivalents $341.1 million; Total debt $483.6 million; Net debt around $142.5 million; Total assets $1.913 billion; Total stockholders’ equity $1.003 billion; Current ratio 1.914, quick ratio 1.312, cash ratio 0.780.

Strategic and operational drivers
- Century Vision progress: Expansion of the Furniture Galleries network to 355 stores (up 6 YoY) and company-owned stores to 187 (including 6 openings and 11 acquisitions); 53% of the network are company-owned, a milestone for end-to-end brand control.
- Brand and channel strategy: Strengthening Rooms To Go alliance and expanding company-owned retail to capture end-to-end consumer experience and margin opportunity through vertical integration.
- Brand campaigns and product development: Long Live the Lazy brand awareness initiative progressing with positive but qualitative indicators; emphasis on consumer-centric product development for motion/recliner categories where La-Z-Boy leads.
- Supply chain optimization: Ongoing North American manufacturing footprint optimization to improve productivity and service levels; projected margin uplift from Mexico-based upholstery and cut-and-sew realignment on the backend of FY2025.

Outlook and guidance
- FY2025 industry backdrop: Management expects industry demand to be down as much as 5% with late-calendar 2025 improvement as rate cuts pass through housing activity. The company expects to outperform the market with modest YoY sales growth.
- Store growth and capex: Guidance to open 12–15 new La-Z-Boy Furniture Gallery stores in FY2025; capex guidance of $70–$80 million; ongoing investments to strengthen the retail network and manufacturing facilities.
- Margin and profitability: First-quarter 2025 non-GAAP operating margin guidance of 6%–7% with delivered sales in $475–$495 million; sequential margin improvement expected as the Mexico/upswing projects come online in Q2 FY2025.
- Capital allocation: Reinvest about 50% of OCF into the business and return about 50% to shareholders over the long term; ongoing share repurchases at pre-COVID levels depending on macro conditions.

Key takeaways from the Q4 2024 earnings call, organized by themes:
- Strategy and growth framework (Century Vision): Melinda Whittington emphasized Century Vision as the strategic framework to grow top line at double the market pace and sustain double-digit operating margins, with ongoing expansion of the Furniture Galleries network and enhancement of brand reach:

Bottom-up and top-down signals support a constructive but disciplined long-term stance on La-Z-Boy. The company sits at an inflection point where secular demand for comfortable, customizable furniture remains resilient among a subset of households with discretionary spend. The key catalysts include: (1) accelerating company-owned store growth to boost control over the consumer journey and margin; (2) margin leverage from supply-chain optimization and the Mexico cut-and-sew realignment (expected to contribute meaningfully by Q2 FY2025); (3) continued brand expansion via partnerships and the Long Live the Lazy campaign, which could expand addressable market without proportional cost increases; and (4) a return-to-growth environment as housing activity potentially improves in late 2025. Valuation appears reasonable relative to earnings power (P/E ~8.95x, P/B ~1.40x, P/S ~2.54x) and the company’s deleveraged balance sheet (net debt ~$142m) given its cash flow generation and growth investments. Investors should monitor: pace of new-store openings (12–15 in FY2025), progress on Mexico realignment, demand trajectory for mid-to-upper income furniture buyers, and macro timing of rate cuts that could lift housing activity and furniture demand.