LA-Z-BOY INC

Results of Operations

Fiscal 2025 First Quarter Compared with Fiscal 2024 First Quarter

La-Z-Boy Incorporated

Sales

Consolidated sales increased $13.9 million, or 3%, in the first quarter of 2025, compared with the same period a year ago. The increase in sales was primarily driven by higher delivered volume to external customers within our Wholesale segment along with incremental sales resulting from our Retail acquisitions. These increases were partially offset as the first quarter of fiscal 2024 included residual backlog deliveries within our Retail segment from prior periods.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 70 basis points in the first quarter fiscal 2025, compared with the same period a year ago.

•Gross margin, which is calculated as gross profit as a percentage of sales, increased 40 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦The improvement in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago was primarily due to lower input costs, led by reduced commodity prices, improved sourcing, and favorable duty expense.

◦Partially offsetting the item above, changes in our consolidated mix led to a 100 basis point decrease in gross margin in the first quarter of fiscal 2025 compared with the same period a year ago, driven by a higher percentage of sales in our Wholesale segment, which has a lower gross margin than our Retail segment.

•SG&A expenses as a percentage of sales increased 110 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦The increase in SG&A expense as a percentage of sales during the first quarter of fiscal 2025 compared with the same period a year ago was primarily due to reduced fixed cost leverage within our Retail segment, resulting from lower delivered sales relative to selling expenses and fixed cost increases supporting our long-term strategy of investing in store expansion and growth of our Retail segment.

◦Partially offsetting the item above, changes in our consolidated mix led to a 110 basis point decrease in SG&A expenses as a percentage of sales in the first quarter of fiscal 2025 compared with the same period a year ago, driven by a higher percentage of sales in our Wholesale segment, which has a lower SG&A expense as a percentage of sales than our Retail segment.

We discuss each segment’s results in the following section.

Retail Segment

Sales

The Retail segment’s sales decreased $5.9 million, or 3%, in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to a decline in delivered same-store sales, as the prior year benefited from the delivery of residual backlog from prior periods. The decrease in delivered same-store sales was partially offset by a $10.5 million increase in sales during the first quarter of fiscal 2025 from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025.

Written same-store sales were down 3% in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to softer industry-wide demand as a result of a challenging macroeconomic environment. Same-store sales include the sales of all currently active stores which have been open and company-owned for each comparable period.

The Retail segment's operating margin decreased 390 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

•Gross margin increased 10 basis points in the first quarter of fiscal 2025 compared with the same period a year ago, as promotional activity was more than offset by a favorable shift in product mix towards higher priced products.

•SG&A expenses as a percentage of sales increased 400 basis points in the first quarter of fiscal 2025 compared with the same period a year ago, primarily due to lower delivered sales relative to selling expenses and fixed cost increases supporting our long-term strategy of investing in store expansion and growth of our Retail segment.

Wholesale Segment

Sales

The Wholesale segment’s sales increased $17.4 million, or 5%, in the first quarter of fiscal 2025 compared with the same period a year ago. Over the same period, intercompany sales from our Wholesale segment to our Retail segment decreased 2%. The increase in sales primarily reflects higher delivered volume to external customers including the addition of new major wholesale dealers, partially offset by lower delivered volume in our casegoods businesses.

The Wholesale segment's operating margin decreased 20 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

•Gross margin increased 30 basis points in the first quarter of fiscal 2025 compared with the same period a year ago.

◦Lower input costs, led by reduced commodity prices, improved sourcing, and favorable duty expense drove a 160 basis point increase in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago.

◦Partially offsetting the item above, an unfavorable shift in channel mix towards external customers, which generally carry products with a lower gross margin than products sold to Furniture Galleries, led to a 120 basis point decrease in gross margin during the first quarter of fiscal 2025 compared with the same period a year ago.

•SG&A expense as a percentage of sales increased 50 basis points in the first quarter of fiscal 2025 compared with the same period a year ago. During the first quarter of fiscal 2024 we terminated our lease on the Torreón, Mexico facility and recognized a $1.2 million gain related to the settlement of our lease obligation on previously impaired long-lived assets, resulting in a comparative 40 basis point increase in SG&A expense as a percentage of sales.

Corporate and Other

Sales

Corporate and Other sales decreased $1.4 million in the first quarter of fiscal 2025 compared with the same period a year ago, primarily led by Joybird sales. Joybird sales decreased $1.0 million to $34.6 million in the first quarter of fiscal 2025, as higher delivered volume was more than offset by promotional activity. Written sales for Joybird increased 9% in the first quarter of fiscal 2025, compared with the same period a year ago.

Intercompany eliminations decreased in the first quarter of fiscal 2025 compared with the same period a year ago due to lower sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss decreased $6.0 million in the first quarter of fiscal 2025 primarily from favorable intercompany inventory profit elimination adjustments and improved Joybird operating performance, partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

Non-Operating Income (Expense)

Interest Income

Interest income was $1.4 million higher in the first quarter of fiscal 2025, compared with the same period a year ago, primarily driven by higher interest rates.

Income Taxes

Our effective tax rate was 25.5% for the first quarter of fiscal 2025 compared with 26.5% for the first quarter of fiscal 2024. The reduced effective tax rate in the first quarter of fiscal 2025 was partially the result of tax benefits from the vesting of stock-based compensation. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.