La-Z-Boy sees chance for growth in fiscal '13

Firm to extend ad drive and revise China efforts

6/21/2012

Monroe-based La-Z-Boy Inc. is poised for growth in fiscal 2013 and plans to capitalize on opportunities by expanding its store network into new markets, working with a new partner in China to sell its products there, extending its successful advertising campaign featuring actress Brooke Shields, and introducing some wood products to be made at its North Carolina plant.

"Overall, we are pleased with our performance for fiscal 2012," company chairman, president, and chief executive Kurt Darrow told Wall Street analysts Wednesday in a conference call held a day after the company released its annual earnings. "Our operating performance improved significantly, we generated strong cash flow, and had increased sales."

In fact, La-Z-Boy had a profit of $88 million, or $1.64 a share, compared to $24 million, or 45 cents a share, in fiscal 2011.

The famous maker of La-Z-Boy recliners saw its operating income increase 92 percent to $49.6 million from $25.9 million a year earlier.

Yet despite those numbers the Michigan furniture maker's shares dropped more than 12 percent Wednesday, losing $1.66 a share to close at $11.47 on the New York Stock Exchange.

Analysts said the souring by investors indicated a focusing on the company's fourth-quarter results as opposed to the full year.

La-Z-Boy's fourth-quarter profit of $19.6 million, or 37 cents a share, benefited from a 19 cents a share boost from anti-dumping revenues it received after the government collected fines from foreign competitors. Without the anti-dumping income, the company's fourth quarter earnings would have been 18 cents per share, which is below Wall Street's expectations of 26 cents a share.

Also, the company's total sales were $327 million for the fourth quarter, while analysts expected $334 million. La-Z-Boy countered that the drop was largely because fiscal 2012's fourth quarter had just 13 weeks, compared to 14 weeks for the same quarter in 2011 when its quarterly sales were $338 million.

Mr. Darrow also said the company faced changes in its tax rates, and it made a decision -- one that he defended during the half-hour teleconference -- in the fourth quarter to pay bonuses totaling $1.6 million to all of its employees under a new compensation plan and $2.6 million in stock under the executive-compensation plan.

Mr. Darrow said the $1.6 million in company bonuses were well-earned and necessary because over the last several years La-Z-Boy had stopped providing incentive compensation to its employees, had stopped making 401(k) fund contributions, and had ended its profit-sharing plan. In fiscal 2011 the company only hit 18 percent of its target goals, but in 2012 it hit "over 100 percent of targets" that led the company to its $88 million profit.

"The $1.6 million … is the right thing to do for our people. They earned it, and we appreciate what they did," Mr. Darrow said.

The chief executive said the company was quite pleased by its 2012 marketing campaign featuring Ms. Shields and in April extended her contract for another two years.

The furniture maker continues to expand its store network and will remodel or open 10 to 15 stores in 2013.

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