LA-Z-BOY INC

Results of Operations

Fiscal 2025 Third Quarter Compared with Fiscal 2024 Third Quarter

La-Z-Boy Incorporated

Sales

Consolidated sales increased $21.4 million, or 4%, and $44.8 million, or 3%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase during the third quarter of fiscal 2025 was primarily driven by delivered same-store sales growth in our Retail business, incremental sales resulting from our Retail acquisitions, and higher delivered volume in our Joybird business. The increase during the first nine months of fiscal 2025 was primarily driven by incremental sales resulting from our Retail acquisitions, higher delivered volume in our Joybird business, and higher delivered wholesale volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.

Operating margin, which is calculated as operating income as a percentage of sales, increased 20 basis points in both the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.

•Gross margin, which is calculated as gross profit as a percentage of sales, increased 170 basis points and 90 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦Changes in our consolidated mix led to a 110 basis point increase in gross margin in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦Lower input costs, led by reduced commodity prices and improved sourcing, drove an increase in gross margin during the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.

◦The third quarter and first nine months of fiscal 2024 experienced favorable duty expense causing a comparative decrease in gross margin in the third quarter and first nine months of fiscal 2025.

◦Favorable fluctuations in the Mexican peso relative to the U.S. dollar drove lower production-related costs, resulting in increased gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.

◦During the first nine months of fiscal 2024 we recognized $4.0 million of severance-related charges as part of our global supply chain optimization initiative, resulting in a comparative gross margin increase in the first nine months of fiscal 2025.

•SG&A expenses as a percentage of sales increased 150 basis points and 70 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦Changes in our consolidated mix led to a 110 basis point increase in SG&A expense as a percentage of sales in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦SG&A expense as a percentage of sales increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago, due to fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.

◦SG&A expense as a percentage of sales in the first nine months of fiscal 2025 also increased due to higher selling expenses and fixed costs resulting from acquisitions of independently owned La-Z-Boy Furniture Galleries® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

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

Retail Segment

Sales

The Retail segment’s sales increased $23.0 million, or 11%, and $24.4 million, or 4%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase during the third quarter was primarily due to higher delivered same-store sales along with $9.2 million of incremental sales resulting from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025. During the first nine months of fiscal 2025, our retail store acquisitions contributed $32.1 million of incremental sales but were partially offset by a decline in delivered same-store sales.

Written same-store sales increased 7% and 1% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, driven by strong store-level execution and improved traffic trends in the third quarter of fiscal 2025. Same-store sales include the sales of all currently active stores that have been open and company-owned for each comparable period.

The Retail segment's operating margin decreased 20 basis points and 150 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

•Gross margin decreased 10 basis points and increased 10 basis points in the third quarter and first nine months of 2025, respectively, compared with the same periods a year ago, as a result of slight shifts in our product mix.

•SG&A expenses as a percentage of sales increased 10 basis points and 160 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The increase in the first nine months of fiscal 2025 was primarily due to increased selling expenses and fixed costs resulting from our acquisitions of independently owned La-Z-Boy Furniture Galleries® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

Wholesale Segment

Sales

The Wholesale segment’s sales increased $6.6 million, or 2%, and $23.0 million, or 2%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. Over the same periods, intercompany sales from our Wholesale segment to our Retail segment increased 13% and 5%, respectively. Sales in both the third quarter and first nine months of fiscal 2025 benefited from a favorable shift in product mix toward higher price products which was partially offset by the impact of a significant customer transition in our international wholesale business. Additionally, sales during the first nine months of fiscal 2025 were higher due to increased sales volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.

The Wholesale segment's operating margin increased 10 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago

•Gross margin increased 130 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦Lower input costs, led by reduced commodity prices and improved sourcing drove an 80 basis point and 70 basis point increase in gross margin during the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦The third quarter and first nine months of the prior year experienced favorable duty expense, causing a comparative 70 basis point and 30 basis point decrease in gross margin in the third quarter and first nine months of fiscal 2025, respectively.

◦Favorable fluctuations in the Mexican peso relative to the U.S. dollar drove lower production-related costs, resulting in an 80 basis point increase in gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.

◦Gross margin in the third quarter of fiscal 2025 benefited 20 basis points from a favorable shift in channel mix toward sales to our La-Z-Boy Furniture Galleries®, which generally carry products with a higher gross margin than products sold to external customers. A shift in channel mix towards external customers was experienced during the first nine months of fiscal 2025, resulting in a 50 basis point decrease in gross margin.

◦During the first nine months of fiscal 2024, we recognized $4.0 million in severance-related charges as part of our global supply chain optimization initiative, resulting in comparative gross margin increase of 10 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively.

•SG&A expense as a percentage of sales increased 120 basis points and 10 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦Marketing expense in the third quarter of fiscal 2025 increased relative to the prior year, resulting in a 50 basis point increase in SG&A expense as a percentage of sales. For the first nine months of fiscal 2025, marketing expense decreased relative to the prior year, as during fiscal 2024 we launched our Long Live the Lazy campaign, resulting in a 30 basis point comparative decrease in SG&A expense as a percentage of sales.

◦SG&A expense as a percentage of sales increased 50 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, from fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.

Corporate and Other

Sales

Corporate and Other sales increased $2.5 million and $7.0 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The change in sales was primarily led by Joybird sales which increased $3.0 million to $37.1 million and $8.4 million to $110.3 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, as higher delivered volume and a favorable shift in product mix more than offset promotional activity. Written sales for Joybird increased 10% and 7% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

Intercompany eliminations increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss increased $0.4 million and decreased $7.7 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago. The third quarter of fiscal 2025 benefited from improved Joybird operating margin, resulting in breakeven profit, but was more than offset by lower intercompany operating profit from our global trading company in Hong Kong. In the first nine months of fiscal 2025, Joybird operating profit improvements along with favorable intercompany inventory profit elimination adjustments, relative to the same period a year ago, were partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

Non-Operating Income (Expense)

Interest Income

Interest income was $0.7 million lower and $0.4 million higher in the third quarter and first nine months of 2025, respectively, compared with the same period a year ago, primarily driven by changes in interest rates which decreased throughout the first nine months of fiscal 2025.

Other Income, (Expense), Net

Other income (expense), net was $0.1 million of income and $2.4 million of expense in the third quarter and first nine months of fiscal 2025, respectively. The expense in the first nine months of fiscal 2025 was primarily due to exchange rate losses related to our operations in Mexico and Thailand.

Income Taxes

Our effective tax rate was 25.1% and 25.6% for the third quarter and first nine months of fiscal 2025, respectively, compared with 20.2% and 24.5% for the third quarter and first nine months of fiscal 2024. The increase in our effective tax rate in the third quarter of fiscal 2025 compared with the same period a year ago was primarily the result of favorable return to provision adjustments impacting the prior year and absent these discrete items, the effective tax rate would have been 25.6% for the third quarter of fiscal 2024. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.