La-Z-Boy shareholders celebrate strong year

MONROE — When you’ve had a good year and fis­cal quar­ter, and the fu­ture looks promis­ing, you can pretty much ex­pect your stock­hold­ers to be be­hind you.

And so it was Wed­nes­day at La-Z-Boy Inc.’s an­nual share­hold­ers meet­ing when com­pany chair­man, pres­i­dent and chief ex­ec­u­tive Kurt Dar­row twice basked in ap­plause — af­ter a video trum­pet­ing the fur­ni­ture maker’s 85th an­niver­sary this year, and then af­ter his up­beat up­date on the Mon­roe-based firm’s sta­tus.

But a few of the 75 at­ten­dees at the 45-minute meet­ing also po­litely raised two sticky ques­tions:

Why, af­ter 85 years at 1284 N. Tele­graph Road, does La-Z-Boy want to move?

Why, with the com­pany now fi­nan­cially healthy, does it not re­store div­i­dends, the last of which came in Novem­ber, 2008?

La-Z-Boy last week said it wants a new world head­quar­ters, with Mon­roe as its first lo­ca­tion choice. But it also plans to look else­where in south­east Michi­gan or north­west Ohio if its pre­ferred site in Mon­roe — on the cam­pus of the Sis­ters of the Im­mac­u­late Heart of Mary — can’t be ac­quired. The land needs to be re­zoned and the com­pany says it needs lo­cal and state in­cen­tives.

Mr. Dar­row said ob­tain­ing La-Z-Boy’s pre­ferred site “is by far not a done deal.” But de­spite 85 years on Tele­graph Road, La-Z-Boy can­not re­main there, he added.

Fix­ing the cur­rent head­quar­ters would be dif­fi­cult and ex­pen­sive. Also, traf­fic on Tele­graph Road is fre­quently clogged and mo­torists use La-Z-Boy’s en­trance as a cut-through road.

More im­por­tantly, a new head­quar­ters would bet­ter por­tray La-Z-Boy as a grow­ing global firm.

“It’s not just about im­age, it’s about col­lab­o­ra­tion, a work­ing lab­o­ra­tory that would in­spire more cre­ativ­ity, it’s a lot of things,” Mr. Dar­row said.

As for div­i­dends, the CEO said the tim­ing re­mains poor for both div­i­dends or share buy-backs with the Novem­ber pres­i­den­tial elec­tion adding un­cer­tainty to the econ­omy. “We are not anti-div­i­dend, we just don’t think we’ve had the right tim­ing to be able to do some­thing in that re­gard given the other pri­or­i­ties we’ve had for our cash,” Mr. Dar­row said.

For the ma­jor­ity of his pre­sen­ta­tion, how­ever, Mr. Dar­row kept rolling out good news on the firm known for its fa­mous re­cliner chairs.

La-Z-Boy, which in June re­ported a 2012 fis­cal year profit that more than tripled to $88 mil­lion, on Tues­day posted a first-quar­ter profit of $4.4 mil­lion. While it had a first-quar­ter profit of $45.5 mil­lion last year, $43.4 mil­lion of that was from a one-time tax gain. And two years ago it had a first-quar­ter loss, il­lus­trat­ing how the com­pany typ­i­cally strug­gles dur­ing sum­mer months.

But the com­pany’s three key op­er­at­ing seg­ments all per­formed strongly, Mr. Dar­row said. Uphol­stery sales in­creased 9.5 per­cent for the quar­ter, sales of wooden fur­ni­ture known as “case­goods,” rose 1.4 per­cent, and re­tail sales rose 17 per­cent.

“This is all done in a quar­ter that’s typ­i­cally not our strong­est and it’s not just La-Z-Boy, it’s the in­dus­try,” he said. “Most of the in­dus­try, as does La-Z-Boy, we still take a week’s va­ca­tion in July for the plant shut­downs, and for va­ca­tion time, and for main­te­nance on the plants.

Mr. Dar­row said part of La-Z-Boy’s re­cent suc­cess is be­cause of its $23 mil­lion ad cam­paign with ac­tress Brooke Shields that is chang­ing per­cep­tions “that we can’t do these beau­ti­ful rooms” of fur­ni­ture, only re­clin­ers. La-Z-Boy ear­lier said it had ex­panded the cam­paign to 30 weeks from 15, start­ing this month, and Mr. Dar­row pre­viewed two of four new com­mer­cials at the meet­ing.

The com­pany can now af­ford to fund an ag­gres­sive ad cam­paign or spend $18 mil­lion, as it did this month to buy nine Fur­ni­ture Gal­leries stores in south­ern Ohio, be­cause its debt load is low, Mr. Dar­row said. He used a graphic show­ing La-Z-Boy debt is $9.8 mil­lion af­ter reach­ing $224 mil­lion in 2003 af­ter buy­ing Ladd Fur­ni­ture Inc. for $300 mil­lion in 2000.

“Even in the years when we weren’t mak­ing a lot of profit we were al­ways cash-flow pos­i­tive and we took the ex­tra cash and paid down our debt. And now it puts us in a po­si­tion to play a lit­tle of­fense,” Mr. Dar­row said.

La-Z-Boy’s stock fell 14 cents to close at $13.36 Wed­nes­day on the New York Stock Ex­change.

Con­tact Jon Chavez at:jchavez@the­blade.com or 419-724-6128.