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:email@example.com or 419-724-6128.