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La-Z-Boy Incorporated Message Board

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  • bluecheese4u bluecheese4u Nov 18, 2009 12:21 AM Flag

    LA-Z-BOY REPORTS SECOND-QUARTER PROFIT

    part three

    Darrow said, “In the casegoods segment, we completed the consolidation of the production transfer to our Hudson, NC facility after closing our North Wilkesboro, NC plant last quarter. The transition to Hudson went smoothly and without service delays to our customers. The North Wilkesboro facility will be converted to a finished-goods warehouse when we vacate a leased warehouse operation in Statesville, NC in the first half of calendar 2010. These changes, once fully completed, are expected to result in annual cost savings of approximately $5 to $6 million, based on current volume. We expect to realize over one third of the annual savings in the second half of this fiscal year. The operating margin in the casegoods segment was negatively impacted

    during the quarter by the significant reduction of volume in the segment. As we have said in the past, higher ticket categories, including bedroom and dining room, tend to be more challenged at retail in an environment where consumers are delaying significant discretionary purchases.
    “In our youth business, we had a very successful introduction at the October High Point Furniture Market of a new line of furniture licensed with Nickelodeon. It was very well received by dealers and, based on feedback and written orders, we believe the line has great potential.”
    Retail
    For the quarter, retail sales were $38.0 million, down 3.7% compared with the prior-year period. The retail group posted an operating loss of $5.3 million for the quarter, and its operating margin was (13.9%). Darrow stated, “Our retail group continues to make changes throughout its business which enabled it to decrease its operating loss by $5.1 million in the face of a sales decline. While we are pleased with the progress made over the course of the past year, our team is focused on driving traffic into the stores, building stronger relationships with the customer through various follow-up programs, improving its close ratio and increasing the average ticket to increase volume levels, which has been our biggest challenge over the past year.”
    Balance Sheet
    La-Z-Boy’s debt-to-capitalization ratio was 13.2% compared with 23.4% a year ago and 13.5% at the end of the fiscal 2010 first quarter. During the quarter, the company generated $22.2 million of cash from operations, including a $13 million tax refund, increased its cash position and maintained a very low debt level. The availability under La-Z-Boy’s revolving line of credit increased by $16.5 million to $87.0 million.”
    Business Outlook
    Darrow stated, “Although the magnitude of volume declines is not as great as we experienced over the last several quarters, we remain concerned about the overall macroeconomic environment and it is too early to predict a recovery for our industry. We will continue to look for ways to drive sales and operate our business in the most efficient manner possible while continuing to make whatever changes are necessary to our business model. We will also maintain a clear focus on our balance sheet to ensure our company has the greatest operating flexibility in the challenging environment.”

 
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