KeyBanc: La-Z-Boy Posts Healthy Q1 Margins, But Market Trends Remain Uncertain

La-Z-Boy Incorporated LZB reported first-quarter earnings Tuesday that came in higher than expectations alongside a revenue miss. 

Although the company’s broader top-line opportunity remains encouraging, there are growing concerns around end-market trends owning to competition and the housing market slowdown, according to KeyBanc Capital Markets.

The Analyst

Bradley Thomas said KeyBanc's estimates for La-Z-Boy are under review. 

The Thesis

La-Z-Boy reported an earnings beat for the first quarter that was driven by better margins. Although the company’s sales came in slightly below Street expectations, there were signs of a sequential improvement, Thomas said in a Tuesday note. (See his track record here.) 

La-Z-Boy posted adjusted EPS at 42 cents, representing 8.2% year-on-year growth and convincingly beating the consensus estimate of 34 cents.

Revenue came in at $414 million, increasing 7.5% year-on-year vs. consensus expectations of 8.1%.

The sales growth was helped by the acquisition of Arizona Furniture Galleries and the online brand Joybird, the analyst said. 

La-Z-Boy indicated continued challenges in the furniture industry, citing tariff uncertainty and other geopolitical concerns.

The furniture retailer achieved operating margin expansion of 32 basis points to 6.3%, backed by an improvement in gross margin, which the company noted was due to sales mix changes.

“The sales mix benefit was driven by retail segment growth and the acquisition of Joybird, which has higher gross margins than the company’s upholstery and casegoods segments,” Thomas said. 

Price Action

Shares of La-Z-Boy were higher by 0.39% at $30.67 at the time of publication Wednesday. 

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Photo by Anthony92931 via Wikimedia.