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Published: Thursday, 2/10/2005

La-Z-Boy speeds store conversions to gallery format

BY MARY-BETH McLAUGHLIN
BLADE BUSINESS WRITER

MONROE - La-Z-Boy Inc. is accelerating the conversion of its stores to a gallery-style format, driven by the strong sales from already-updated sites.

Company executives told Wall Street analysts yesterday that its new-format stores generate 36 percent more customer traffic and 28 percent more sales than the old-format stores.

As a result, the Michigan furniture maker said that in its fiscal year that ends April 30, it expects to have completed 44 new-store formats, twice the number of the prior year, and to complete 50 more such projects next fiscal year.

The firm has 336 stores now but expects to increase that number to 360 in a year and to 400 by the end of 2007.

The new format, which the company uses in new stores and hopes to establish in more than half its existing stores in three more years, features room-like showcases, considered more attractive to customers than the previous format's rows of chairs and tables.

The new design brings in on average $4.2 million a year in sales for a store, compared with $3.3 million in the older-format stores, executives said. At the end of current fiscal year, the firm plans to have 112 stores with the new format.

La-Z-Boy reported Tuesday after the stock market closed that its profit for its quarter ending Jan. 22 fell to $11.1 million from $15.3 million a year earlier on sales that jumped to $518 million from $492 million. Shares of its stock closed yesterday on the New York Stock Exchange down 72 cents at $14.52.

Kurt Darrow, president and chief executive officer, also said during yesterday's conference call with analysts that about 75 percent of the company's bedroom suites and dining room sets, sold under brand names other than La-Z-Boy, will be imported by the end of the year.

And, with nearly 50 percent of the company's retail sales being custom orders, La-Z-Boy is exploring ways to quickly make furniture after a fabric choice has been made. To do that, it is increasingly buying prepared leather pieces from abroad to be assembled in eight U.S. plants for some of its upholstered furniture.

Mark Stegeman, La-Z-Boy's treasurer, told The Blade that workers in China, South America, and other places cut out the pieces needed for a chair, for example, and those are shipped to be stapled to a frame built in the United States.

"You get a high dollar value in a container that way," Mr. Stegeman said. The company is expanding the program to its fabric products.

Overall, he said, company executives are pleased with the direction in which the company is heading, after some tough times.

"The end is in sight for us. We're making the right steps and going in the right direction," Mr. Stegeman said. "We're excited."

Contact Mary-Beth McLaughlin at

mmclaughlin@theblade.com

or 419-724-6199.



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