This article first appeared on GuruFocus .
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Consolidated Sales:Down 3% as reported and down 1% adjusting for the wholesale Casegoods divestiture.
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Consolidated GAAP Operating Income:Loss of $2 million, including onetime plant exit charges.
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Adjusted Operating Income:Positive $19 million.
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Consolidated GAAP Operating Margin:Minus 0.4%.
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Adjusted Operating Margin:3.9% versus 4.8% last year.
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Diluted EPS (GAAP):Minus $0.06.
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Adjusted Diluted EPS:$0.43.
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Retail Segment Delivered Sales:Increased 10% to $229 million.
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Retail Segment Written Sales:Increased 16%.
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Retail Written Same-Store Sales:Grew 3%.
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Retail Delivered Same-Store Sales:Down slightly versus a year ago.
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Retail Adjusted Operating Margin:Increased to 6.5% versus 6.3% last year.
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Wholesale Segment Delivered Sales:Decreased 9% to $323 million on a reported basis, down 5% adjusting for the Casegoods divestiture.
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Wholesale Adjusted Operating Margin:Decreased to 6.8% versus 7.5% last year.
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Joybird Delivered Sales:$27 million, down 4%.
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Joybird Written Sales:Decreased 17%.
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Consolidated Adjusted Gross Margin:Increased 290 basis points versus the prior year first quarter.
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Adjusted SG&A as a Percent of Sales:Increased by 380 basis points compared with last year.
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Cash from Operating Activities:$16 million in the quarter, or $27 million excluding an $11 million payment to terminate a legacy retirement plan.
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Capital Expenditures:$23 million.
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Shareholder Returns:Approximately $35 million, a 62% increase versus the prior year, including $25 million in share repurchases and $10 million in dividends.
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Cash Position:$267 million in cash with no external debt.
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Company-Owned Stores:Added 4 during the quarter, bringing total to 234 company-owned stores or 62% of the total network.
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Total Store Network:Approximately 380 stores across North America.
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Second Quarter Sales Guidance:Expected in the range of $500 million to $520 million, reflecting sales growth of down 1% to positive 2%, excluding the impact of the wholesale Casegoods divestitures.
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Second Quarter Adjusted Operating Margin Guidance:Expected in the range of 4% to 5.5%.
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Fiscal 2027 Capital Expenditures Guidance:Expected in the range of $90 million to $110 million.
Release Date: August 19, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Retail segment written sales increased 16% with positive written same-store sales growth of 3%, driven by excellent in-store execution.
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Added 4 company-owned stores during the quarter, expanding the retail footprint to 234 company-owned stores (62% of the network), with a signed agreement for 2 more acquisitions.
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Strong balance sheet with $267 million in cash and no external debt, while returning $35 million to shareholders, a 62% increase year-over-year.
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Gross margin increased 290 basis points, driven by favorable mix shift toward retail and tariff benefits including IEEPA refunds.
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Over 90% of upholstered production is U.S.-based, providing a competitive advantage in managing tariff volatility and offering 4-6 week delivery times.
Negative Points
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Consolidated delivered sales declined 1% (excluding Casegoods divestitures) due to lower wholesale and Joybird sales.
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Wholesale segment delivered sales decreased 9% (down 5% adjusting for divestitures), impacted by uneven order patterns and fixed cost deleverage.
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Joybird written sales decreased 17%, with continued consumer volatility and a drag on enterprise results.
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Adjusted operating margin declined to 3.9% from 4.8%, due to expense deleverage on lower wholesale and Joybird volumes.
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Second quarter guidance reflects a cautious outlook with adjusted operating margin of 4% to 5.5%, impacted by incremental investments, friction costs, and a non-repeating warranty benefit.
Q & A Highlights
Q: Can you rank order the factors contributing to the improvement in retail written sales in the quarter, and how should we think about these factors contributing into the current quarter (fiscal 2Q) and August trends so far? A: Melinda Whittington (CEO) stated that no single factor stands out, but rather all retail KPIs were incrementally better, reflecting sound execution across the board. The focus is on driving same-store sales while expanding the footprint, with tentpole events like Memorial Day and 4th of July being big drivers in Q1. It is too early to comment on Labor Day trends.
Q: What is driving the choppiness in the wholesale segment, and how should we think about that segment in the quarters ahead given the difficult industry backdrop? A: Melinda Whittington (CEO) explained that while retail is the primary strategic focus, Wholesale remains important for reaching consumers who won't visit La-Z-Boy stores. The fragmented marketplace shows dramatically different performance levels among privately held players weathering the choppy consumer environment. Q1 was particularly seasonally low, compounded by the plant shutdown week and uneven order timing. The company has a cautious outlook but feels good about strategic partners and the solid backlog entering Q2.
Q: Can you unpack the 2Q guidance for adjusted operating margins of 4% to 5.5%, distinguishing between near-term investments and temporary friction costs? A: Taylor Luebke (CFO) noted that last year's 2Q included a favorable onetime 110 basis point warranty benefit that doesn't repeat. The company is incrementally investing in advertising to win Labor Day, digital transformation, and strategic pricing. Additionally, this is a significant investment year for supply chain with three large projects running in parallel: the distribution transformation (year 2, the heaviest investment year) and two plant consolidations, which are creating incremental friction costs expected to remain for the balance of the year.
Q: What portion of wholesale goes to non-La-Z-Boy galleries, and what can be done to help that channel which faces more pressure? A: Melinda Whittington (CEO) clarified that roughly 2/3 of manufactured product goes through the La-Z-Boy network (over half company-owned), with about 1/3 going through multi-branded retailers. The company is working more closely with independently held La-Z-Boy stores to ensure consistent consumer experience, and is doubling down on assets like Comfort Studios and branded space executions to help multi-branded retailers bring the brand alive and create value for both parties.
Q: Is the pricing environment more challenged given La-Z-Boy's domestic-based model with fewer tariff refunds to throw back into promotions? A: Melinda Whittington (CEO) acknowledged that while the North America footprint positions the company well (tariffs are a small factor), tariff refunds are also small. The company commands a premium due to customization, quality, and comfort, but recognizes the bifurcating consumer. They continue to see strong design sales and large tickets, while also sharpening opening price points with pared-down offerings. Promotions have been consistent with recent holidays with sharpening of individual price points but no dramatic increase in spending, though there's been a bit more deeper discounting at the wholesale level recently.
Q: Is there too much going on with all these initiatives hitting at once, and is the underlying margin performance actually getting better but masked by transitory costs? A: Taylor Luebke (CFO) stated that this is the right time for La-Z-Boy to have a lot going on when the industry is softer, to set up as an optimized enterprise for when recovery emerges. Retail continues to perform really positively on both sales and margin. Wholesale is uneven and choppy with deleverage impacts from lower sales, but remains important. Joybird continues to be a drag, with the goal to improve cost structure and stabilize the plant. Overall, as the company exits the year with fewer plants and works through distribution transformation, there's confidence in future sales growth and sustainable earnings growth.
Q: Can you share examples of what you've done to work more closely with dealer stores and what you expect to accomplish? A: Melinda Whittington (CEO) explained that these are 30-40 year relationships, and the company has learned from them over time (e.g., the Arizona franchise acquisition 8 years ago brought strong performance metrics and hiring assessments now used across the network). Now the company is giving back by sharing learnings across localized marketing, staffing takeaways, commission structures, and selling/training modelsa very open sharing partnership where "a rising tide lifts all boats."
Q: Can you provide more details on the solid backlog entering the quarter? A: Melinda Whittington (CEO) reinforced that the solid backlog indicates the wholesale business remains very important. The choppiness comes from Memorial Day sales throughput, the plant shutdown through Memorial Day week, and summer disruptions taking time for orders to come through. Consumer choppiness will make orders more lumpy, and timing can drive differences in any individual quarter, but the company feels good about performance across wholesale channels.
Q: Can Joybird be profitable or at least breakeven if current sales levels remain stable after moving manufacturing to the U.S.? A: Melinda Whittington (CEO) stated that Joybird's profitability journey is multipronged, involving getting the marketing mix and investment levels right, managing costs, and addressing the choppy consumer. The biggest single driver within the company's control is making more of the cost variable rather than fixed by leveraging established U.S. plants that can manage throughput volatility more effectively than a stand-alone single plant.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
