La-Z-Boy's Recent Acquisitions Continue To Push Growth, Raymond James Says

In the first earnings report since La-Z-Boy Inc. (NYSE: LZB)’s acquisitions of Joybird and the Arizona-based company licensee, sales increased 11 percent year-over-year to beat analysts’ estimates and the consensus.

La-Z-Boy reported Q2 adjusted earnings of 48 cents per share, beating estimates by five cents. Sales of $439.3 million beat $434.04 million estimates.

The Analyst

Raymond James analyst Budd Bugatch reiterated a Market Perform rating with no specified price target.

The Thesis

Following the acquisitions, management hadn't decided on a plan to adjust costs from purchase accounting charges, Bugatch said.

“In the past, management did not adjust for purchase accounting from acquisitions and typically only reported non-GAAP EPS for restructuring charges," the analyst wrote in a note. "Accordingly, our estimates as well as consensus estimates (to best of our knowledge on FactSet) included the estimated purchase accounting charges that management provided on its F1Q19 conference call."

La-Z-Boy same-store sales for the galleries network increased over 4 percent, marking the seventh consecutive improved quarter, while delivered same-store sales increased 4 percent, ahead of the 1 percent estimate, according to Bugatch.

The largest impact should be in the second quarter, in congruence with the company’s new discipline, Bugatch said.

“We are pleased to see the pickup in performance in La-Z-Boy’s company owned retail stores as this was an area of weakness over the last two years. Management’s pricing actions over CY18 in response to raw material increases likely aided y/y written & delivered growth," he said.

Price Action

Shares of La-Z-Boy were up 5.6 percent to $30.79 at time of publication Thursday.

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