LA-Z-BOY INC

Results of Operations

Fiscal 2026 First Quarter Compared with Fiscal 2025 First Quarter

La-Z-Boy Incorporated

Sales

Consolidated sales decreased $3.3 million, or 1%, in the first quarter of fiscal 2026, compared with the same period a year ago. Sales in the first quarter of fiscal 2026 benefited from incremental sales from our retail store acquisitions in the prior year, increased sales from our retail store expansion, and growth in our core North America La-Z-Boy branded wholesale business driven by strategic pricing and surcharge actions. These increases were more than offset by the combination of lower delivered volume in our international wholesale business due to a significant customer transition that began in the second quarter of fiscal 2025, along with lower delivered volume in our Joybird business.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 200 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

•Gross margin, which is calculated as gross profit as a percentage of sales, decreased 60 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

◦Increased supply chain costs, including higher distribution costs primarily related to our distribution and home delivery transformation, and increased overhead in our manufacturing operations, drove a decrease in gross margin in the first quarter of fiscal 2026 compared with the same period a year ago.

◦Gross margin also declined due to increased promotional activity on casegoods products and accessories in the first quarter of fiscal 2026 compared with the same period a year ago.

◦Partially offsetting the items above, gross margin in the first quarter of fiscal 2026 benefited from lower input costs compared with the same period a year ago, led by favorable inbound ocean freight and improved sourcing.

•SG&A expenses as a percentage of sales increased 140 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

◦SG&A expense as a percentage of sales increased due to fixed cost deleverage in our Retail segment from lower delivered same-store sales combined with higher selling expenses and fixed costs resulting from our retail store expansion in support of our long-term strategy of growing our Retail segment.

◦Partially offsetting the item above, SG&A expense as a percentage of sales benefited from lower warranty expense, driven by decreased claims activity and improved warranty trends, along with reduced marketing spend relative to the prior year.

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

Retail Segment

Sales

The Retail segment’s sales increased $4.8 million, or 2%, in the first quarter of fiscal 2026, compared with the same period a year ago primarily due to $8.4 million of incremental sales resulting from our retail store acquisitions that occurred in fiscal 2025 along with increased sales from our retail store expansion, net of closed stores. These increases were partially offset by a decline in delivered same-store sales.

Total written sales increased 5% in the first quarter of fiscal 2026, compared with the same period a year ago. Written same-store sales decreased 4% over the same periods, primarily due to lower consumer demand as a result of a challenging macroeconomic environment. 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 390 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

•Gross margin decreased 30 basis points in the first quarter of fiscal 2026, compared with the same period a year ago, primarily due to increased promotional activity on casegoods products and accessories.

•SG&A expenses as a percentage of sales increased 360 basis points in the first quarter of fiscal 2026, compared with the same period a year ago, primarily due to fixed cost deleverage from lower delivered same-store sales combined with increased selling expenses and fixed costs resulting from our retail store expansion of 11 net new stores over the last 12 months, supporting our long-term strategy of growing our Retail segment.

Wholesale Segment

Sales

The Wholesale segment’s sales increased $2.1 million, or 1%, in the first quarter of fiscal 2026, compared with the same period a year ago, primarily due to growth in our core North America La-Z-Boy branded wholesale business led by strategic pricing and surcharge actions, combined with a favorable shift in product mix towards higher priced products. Additionally, sales increased for our casegoods business as a result of strategic pricing and promotional activity. These increases in sales were partially offset by lower delivered volume in our international wholesale business due to a significant customer transition that began in the second quarter of fiscal 2025.

The Wholesale segment's operating margin increased 30 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

•Gross margin decreased 60 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

◦Increased distribution costs, primarily due to incremental expenses related to our distribution and home delivery transformation, as well as increased fixed costs, and higher outbound freight, drove a 110 basis point decrease in gross margin in the first quarter of fiscal 2026, compared with the same period a year ago.

◦Higher manufacturing overhead costs led to a 40 basis point decrease in gross margin in the first quarter of fiscal 2026 compared with the same period a year ago.

◦Partially offsetting the items above, lower input costs, led by favorable inbound ocean freight and improved sourcing, drove a 100 basis point increase in gross margin during the first quarter of fiscal 2026, compared with the same period a year ago.

•SG&A expense as a percentage of sales decreased 90 basis points in the first quarter of fiscal 2026, compared with the same period a year ago.

◦Lower warranty expense resulting from decreased claims activity and improved warranty trends drove a 60 basis point decrease in SG&A expense as a percentage of sales in the first quarter of fiscal 2026, compared with the same period a year ago.

◦Marketing expense in the first quarter of fiscal 2026 decreased relative to the prior year, resulting in a 40 basis point comparative decrease in SG&A expense as a percentage of sales.

Corporate and Other

Sales

Corporate and Other sales decreased $7.5 million in the first quarter of fiscal 2026, compared with the same period a year ago. The change in sales was led by Joybird sales which decreased $6.8 million to $27.7 million in the first quarter of fiscal 2026, primarily due to lower delivered volume partially offset by a favorable shift in product mix. Written sales for Joybird decreased 14% in the first quarter of fiscal 2026, compared with the same period a year ago, primarily from lower online sales.

Intercompany eliminations increased in the first quarter of fiscal 2026 compared with the same period a year ago due to higher sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss increased $4.0 million in the first quarter of fiscal 2026, compared with the same period a year ago, primarily due to Joybird's operating loss resulting from lower delivered volume, combined with lower La-Z-Boy branded royalty income.

Non-Operating Income (Expense)

Interest Income

Interest income was $1.3 million lower in the first quarter of fiscal 2026, compared with the same period a year ago, primarily driven by lower interest rates.

Income Taxes

Our effective tax rate was 25.0% for the first quarter of fiscal 2026, compared with 25.5% for the first quarter of fiscal 2025. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.