La-Z-Boy hopeful about next 3 quarters

MONROE - Furniture sales are "choppy" as Americans postpone purchases and the national housing market struggles, but continued efficiency strides at La-Z-Boy Inc. - and having no more supply disruptions - will help the next three quarters, shareholders were told Wednesday.

Business, though, will remain challenging until furniture sales pick up, La-Z-Boy President and Chief Executive Kurt Darrow said at the annual shareholder meeting at company headquarters in Monroe.

"We are not the first thing people get up in the morning and think about, unless you work for La-Z-Boy," Mr. Darrow told about 80 shareholders, including some company retirees.

The Michigan firm reported a loss of $195,000 on sales of $263.3 million for its first quarter, which ended July 24. The Monroe furniture firm had a $2 million profit and $262.7 million in sales in the same three-month period a year ago.

La-Z-Boy's stock closed Wednesday at $7.65 a share on the New York Stock Exchange, up 13 cents a share.

In the first quarter, La-Z-Boy had supply problems in China, which were partially caused by production and quality issues, and shipment delays in Mexico caused by flooding from Hurricane Alex. As a result, La-Z-Boy - which has five U.S. plants making recliners and other upholstered furniture - had to move about $10 million worth of July orders to August, Mr. Darrow told analysts during a conference call before the shareholder meeting.

A decade ago, about 95 percent of the fabric and leather La-Z-Boy used came from U.S. suppliers, Mr. Darrow explained to shareholders. Now about 90 percent comes from elsewhere, primarily Asia, he said.

"Having a worldwide supply chain is not as easy to manage as when it was all in the United States," Mr. Darrow said.

Plus, workers at the company's 1 1/2-year-old Mexican cutting-and-sewing factory are not yet up to expected speed, and about 10 percent of such work for custom orders still is being done in U.S. factories, Mr. Darrow said. With 900 fabrics and 200 frame styles, there is a learning curve for the approximately 1,000-employee factory, but remaining U.S. production should be transferred this fiscal year, he said after the meeting.

La-Z-Boy is facing higher costs for upholstery, foam, and other raw materials, which are expected to total an additional $16 million to $18 million this year, Mr. Darrow told analysts. The company increased furniture prices on some items this month to counteract higher costs, which most competitors did in April, he said.

Shareholders Wednesday continued to wonder when La-Z-Boy would resume paying a dividend, which has been canceled since February, 2009. The board continues to assess the possibility, but there needs to be more improvements in the economy, Mr. Darrow said.

An economic turnaround also was on the minds of some shareholders Wednesday.

"I'm hoping things start to pick back up," said Susan Dandron of Monroe, a shareholder for several years.

Mr. Darrow, meanwhile, had a suggestion for shareholders.

"I think all of you should think about redecorating your house so you need some furniture," he said to a round of laughter.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.