LA-Z-BOY INC

Results of Operations

Fiscal 2026 Second Quarter Compared with Fiscal 2025 Second Quarter

La-Z-Boy Incorporated

Sales

Consolidated sales increased $1.5 million, or 0.3%, and decreased $1.9 million, or 0.2% in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago. Sales benefited from growth in our core North America La-Z-Boy branded wholesale business driven by strategic pricing and surcharge actions, increased sales from our retail store expansion, and incremental sales from our retail store acquisitions completed in the prior year. These increases were largely offset by the combination of lower delivered same-store sales in our Retail segment, along with lower delivered volume in our Joybird business. Additionally, lower delivered volume in our international wholesale businesses, due in part to a significant customer transition that began in the second quarter of fiscal 2025, negatively impacted sales in the first six months of fiscal 2026, and to a lesser extent, in the second quarter of fiscal 2026.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 50 basis points and 130 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

•Gross margin, which is calculated as gross profit as a percentage of sales, decreased 10 basis points and 30 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

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

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

•SG&A expenses as a percentage of sales increased 40 basis points and 100 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods 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 due to a reduction in our warranty liability driven by a change in which we provide our external dealers an upfront service allowance for certain labor and delivery costs that they provide under our Wholesale warranty program for La-Z-Boy products that they sell and have previously sold.

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

Retail Segment

Sales

The Retail segment’s sales increased $0.5 million, or 0.2%, and $5.3 million, or, 1% in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago. The increase was primarily due to increased sales from our retail store expansion, net of closed stores, along with $6.0 million and $14.1 million of incremental sales in the second quarter and first six months of fiscal 2026, respectively, resulting from our retail store acquisitions that occurred in fiscal 2025. These increases were largely and partially offset by a decline in delivered same-store sales during the second quarter and first six months of fiscal 2026, respectively.

Total written sales increased 4% in both the second quarter and first six months of fiscal 2026, compared with the same periods a year ago. Written same-store sales decreased 2% and 3% 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 190 basis points and 290 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

•Gross margin increased 100 basis points and 40 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago, primarily due to a favorable shift in product mix towards higher margin products.

•SG&A expenses as a percentage of sales increased 290 basis points and 330 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods 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 10 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 $5.5 million, or 2%, and $7.6 million, or 1% in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods 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. The sales increase in the first six months of fiscal 2026 was partially offset by lower delivered volume in our international wholesale businesses, due in part to a significant customer transition that began in the second quarter fiscal 2025.

The Wholesale segment's operating margin increased 120 basis points and 70 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

•Gross margin decreased 10 basis points and 40 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago

◦Increased distribution costs, primarily due to incremental expenses related to our distribution and home delivery transformation, drove a 70 basis point and 90 basis point decrease in gross margin in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

◦The first six months of fiscal 2026 also experienced higher manufacturing overhead costs, driving a 50 basis point decrease in gross margin 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 60 basis point and 90 basis point increase in gross margin in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

•SG&A expense as a percentage of sales decreased 130 basis points and 110 basis points in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago

◦The reduction in our warranty liability as a result of the change described above drove a 160 basis point and 80 basis point decrease in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago. Lower warranty expense as a result of improved warranty trends drove an additional 30 basis point decrease in SG&A expense as a percentage of sales in the first six months of fiscal 2026 compared with the same period a year ago.

◦Partially offsetting the item above, marketing expense in the second quarter of fiscal 2026 increased relative to the prior year, resulting in a 40 basis point increase in SG&A expense as a percentage of sales.

Corporate and Other

Sales

Corporate and Other sales decreased $3.4 million and $10.9 million in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago. The change in sales was primarily attributable to Joybird sales which decreased $3.8 million to $34.9 million and $10.7 million to $62.6 million in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago, primarily due to lower delivered volume partially offset by a favorable shift in product mix. Written sales for Joybird increased 1% and decreased 7.0% in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago.

Intercompany eliminations increased slightly in the second quarter and first six months of fiscal 2026 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 $3.0 million and $7.1 million in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago, primarily due to Joybird's operating loss resulting from lower delivered sales volume.

Non-Operating Income (Expense)

Interest Income

Interest income was $0.2 million and $1.5 million lower in the second quarter and first six months of fiscal 2026, respectively, compared with the same periods a year ago. The decrease in the first six months of fiscal 2026 was primarily driven by lower interest rates.

Other Income, (Expense), Net

Other income (expense), net was $0.1 million and $0.6 million of expense in the second quarter and first six months of fiscal 2026, respectively, compared with $1.9 million and $2.5 million of expense in the same periods a year ago. The expense in fiscal 2025 was primarily due to exchange rate losses related to our manufacturing and wholesale businesses in Thailand.

Income Taxes

Our effective tax rate was 26.7% and 26.1% for the second quarter and first six months of fiscal 2026, respectively, compared with 26.3% and 25.9% for the second quarter and first six months of fiscal 2025, respectively. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.