LA-Z-BOY INC

Results of Operations

Fiscal 2026 Third Quarter Compared with Fiscal 2025 Third Quarter

La-Z-Boy Incorporated

Sales

Consolidated sales increased $19.8 million, or 3.8%, and $18.0 million, or 1.2% in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago, led by incremental sales from our retail store acquisitions that occurred in fiscal 2025 and 2026 along with sales from our retail store expansion. Sales during the first nine months of fiscal 2026 further benefitted from growth in our core North America La-Z-Boy branded wholesale business driven by strategic pricing and surcharge actions. These increases were partially offset by lower delivered same-store sales in our Retail segment, along with lower delivered volume in our Casegoods and Joybird businesses.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 120 basis points in both the third quarter and first nine 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 120 basis points and 60 basis points in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦During the third quarter of fiscal 2026, we recorded $3.4 million of severance expense in connection with the planned closure of the United Kingdom manufacturing business and a $3.0 million impairment charge to adjust inventory held for sale to its fair value on the upholstery portion of our Casegoods business, both of which reduced gross margin in the third quarter and first nine months of fiscal 2026, compared with the same periods a year ago.

◦Higher distribution costs, primarily related to our distribution and home delivery transformation, drove an additional decrease in gross margin in the third quarter and first nine months of fiscal 2026, compared with the same periods a year ago.

◦Partially offsetting the items above, changes in our consolidated mix drove an increase in gross margin in the third quarter and first nine months of fiscal 2026, respectively, due to growth in our Retail segment, which has a higher gross margin than our Wholesale segment.

•SG&A expenses as a percentage of sales was flat and increased 60 basis points in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦In the third quarter and first nine months of fiscal 2026, 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.

▪Decreased due to a $3.9 million gain recognized in the third quarter of fiscal 2026, as we completed the sale of our Casegoods headquarters building and related fixed assets.

◦In the third quarter of fiscal 2026, changes in our consolidated mix also drove an increase in SG&A expense as a percentage of sales compared with the same period a year ago, due to growth in our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦In the first nine months of fiscal 2026, SG&A expense as a percentage of sales also 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 $24.3 million, or 11%, and $29.5 million, or, 5% in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago. The increase was primarily due to $23.4 million and $37.7 million of incremental sales in the third quarter and first nine months of fiscal 2026, respectively, resulting from our retail store acquisitions that occurred in fiscal 2025 and 2026, 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 during the third quarter and first nine months of fiscal 2026.

Total written sales increased 11% and 7% in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago. Written same-store sales decreased 4% 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 and excludes the benefit of net new stores and acquired stores.

The Retail segment's operating margin decreased 20 basis points and 190 basis points in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

•Gross margin increased 20 basis points and 30 basis points in the third quarter and first nine 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 upholstery products.

•SG&A expenses as a percentage of sales increased 40 basis points and 220 basis points in the third quarter and first nine 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 12 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 $3.6 million, or 1%, and $11.2 million, or 1% in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago, driven by modest growth across the majority of our wholesale businesses, partially offset by lower delivered volume in our Casegoods business. Additionally, sales in the first nine months of fiscal 2026 were negatively impacted 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 decreased 130 basis points and was flat in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

•Gross margin decreased 280 basis points and 120 basis points in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦During the third quarter of fiscal 2026, we recorded $3.4 million of severance expense in connection with the planned closure of the United Kingdom manufacturing business resulting in a 90 basis point and 30 basis point reduction in gross margin in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦During the third quarter of fiscal 2026, we recorded a $3.0 million impairment charge to adjust inventory held for sale to its fair value on the upholstery portion of our Casegoods business, resulting in an 80 basis point and 30 basis point reduction in gross margin in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦Higher distribution costs, primarily related to our distribution and home delivery transformation drove an 80 basis point decrease in gross margin in both the third quarter and first nine months of fiscal 2026, compared with the same periods a year ago.

◦Gross margin in the third quarter of fiscal 2026 also decreased 50 basis points as the Mexican peso strengthened relative to the U.S. dollar, driving higher production-related costs compared with the same period a year ago.

•SG&A expense as a percentage of sales decreased 150 basis points and 120 basis points in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago

◦During the third quarter of fiscal 2026, we completed the sale of our Casegoods headquarters building and related fixed assets, resulting in a $3.9 million gain and a comparative 110 basis point and 40 basis point improvement in SG&A as a percentage of sales in third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago.

◦The remaining decrease in SG&A expense as a percentage of sales in the third quarter of fiscal 2026 was primarily due to fixed cost leverage on higher sales.

◦SG&A expense as a percentage of sales also decreased 80 basis points in the first nine months of fiscal 2026, compared with the same period a year ago, due to a reduction in our warranty liability as a result of the change described above, along with lower warranty expense led by improved warranty trends.

Corporate and Other

Sales

Corporate and Other sales decreased $1.6 million and $12.5 million in the third quarter and first nine 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 $1.1 million to $35.9 million and $11.8 million to $98.5 million in the third quarter and first nine 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 decreased 13% and 9% in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago, as this consumer segment continues to be particularly volatile in the current macroeconomic environment.

Intercompany eliminations increased in the third quarter and first nine 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 $10.0 million in the third quarter and first nine 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 $0.8 million and $2.3 million lower in the third quarter and first nine months of fiscal 2026, respectively, compared with the same periods a year ago. The decrease in the third quarter and first nine months of fiscal 2026 was primarily driven by lower interest rates along with lower interest-bearing cash balances.

Other Income, (Expense), Net

Other income, expense, net was $0.6 million and $1.2 million of expense in the third quarter and first nine months of fiscal 2026, respectively, compared with $0.1 million of income and $2.4 million of expense in the same periods a year ago. The expense in the first nine months of fiscal 2026 and fiscal 2025 were primarily due to changes in exchange rates related to our operations in Mexico and Thailand.

Income Taxes

Our effective tax rate was 31.3% and 27.8% for the third quarter and first nine months of fiscal 2026, respectively, compared with 25.1% and 25.6% for the third quarter and first nine months of fiscal 2025, respectively. The year-over-year increases were primarily due to operating losses and charges related to our supply chain optimization actions in our United Kingdom business. Our effective tax rate varies from the 21% federal statutory rate primarily due to state and foreign taxes.