La-Z-Boy Incorporated (NYSE:LZB) shares crashed 23.55% in after-hours trading on Tuesday, falling to $29.90 from $39.11 after the furniture retailer reported disappointing first-quarter results that missed analyst expectations amid mounting operational pressures.
Check out how LZB stock is trading here.
Earnings Miss Drives Sharp Selloff
The Monroe, Michigan-based company reported Generally Accepted Accounting Principles diluted earnings per share of $0.44 for the quarter ending on July 26, falling short of market expectations. Adjusted earnings per share (EPS) came in at $0.47, down 24% from $0.62 in the prior year period.
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Total sales also declined 1% to $492 million versus $495.5 million last year, reflecting growth in retail and wholesale segments offset by a 20% decline in Joybird delivered sales to $28 million.
Operating Margins Compress Under Pressure
GAAP operating margin of the manufacturer and retailer of residential furniture contracted 200 basis points to 4.5% from 6.5% year-over-year, while adjusted operating margin fell 180 basis points to 4.8%. The margin compression stemmed from retail same-store sales deleverage and investments in new stores, partially offset by lower marketing and warranty expenses.
“Investments in our Century Vision strategy to grow our Retail store footprint and expand brand reach, combined with soft industry demand, had a downward impact on our margin performance this quarter,” said CEO Melinda Whittington.
Acquisition Costs Add to Investor Concerns
La-Z-Boy announced a 15-store acquisition in the Southeast region from Atlanta Furniture Galleries, LLC, owned by Tom and Amy DeGoey.
The purchase agreement is expected to close in late October and represents approximately $80 million in annual sales. The acquisition will bring company-owned stores to 220, representing 60% of the total network.
While management expects the deal to be immediately accretive, the acquisition costs and integration expenses come at a challenging time when same-store sales dropped 4% despite a 5% increase in total written sales.
Outlook Remains Cautious
CFO Taylor Luebke projected second-quarter sales of $510-530 million with an adjusted operating margin of 4.5-6.0%, reflecting continued investment in strategic growth while navigating challenging consumer conditions.
The company generated $36 million in operating cash flow and returned $22 million to shareholders through dividends and share repurchases during the quarter.
With a market capitalization of $1.61 billion, a price to earnings ratio of 16.63, and an average daily volume of 441,340 shares, the shares of the leading furniture manufacturer of US have traded between $34.89 and $48.31 over the past year.
Price Action: LZB closed at $39.11, up 2.01% or $0.77 on Tuesday, according to Benzinga Pro data.
Benzinga's Edge Stock Rankings indicate LZB holds a Value score of 83.41. Here is how the stock fares on other parameters.
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