LA-Z-BOY INC

Results of Operations

Fiscal 2027 First Quarter Compared with Fiscal 2026 First Quarter

Supply Chain Optimization

During the first quarter of fiscal 2027, we announced the planned closure of our leased upholstery assembly plant in San Luis Rio Colorado ("SLRC"), Mexico with operations ceased at the end of the first quarter of fiscal 2027. As a result of this action, during the first quarter of fiscal 2027, we recorded charges within the Wholesale segment of $9.3 million in SG&A expense for the impairment of various long-lived assets and $3.0 million in cost of sales primarily related to severance expense.

Additionally, during the first quarter of fiscal 2027, we announced the planned closure of our leased Joybird manufacturing plant in Tijuana, Mexico, with all manufacturing operations expected to transfer to our U.S. plants by the end of fiscal 2027. As a result of this action, we recorded charges of $5.0 million in cost of sales within Corporate and Other for severance expense, accelerated depreciation, and accelerated lease expense.

La-Z-Boy Incorporated

Sales

Consolidated sales decreased $16.5 million, or 3%, in the first quarter of fiscal 2027, compared with the same period a year ago. Sales in the first quarter of fiscal 2027 benefited from incremental sales from our retail store acquisitions that occurred over the last 12 months and increased sales from our retail store expansion. These increases were more than offset by a lower delivered volume in our wholesale businesses, which includes the absence of sales from our Casegoods businesses that were divested during the fourth quarter of fiscal 2026 and first quarter of fiscal 2027. Excluding the sales from the Casegoods divestiture, consolidated sales decreased 1%.

Operating margin, which is calculated as operating income as a percentage of sales, decreased 490 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

•Gross margin, which is calculated as gross profit as a percentage of sales, increased 140 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

◦Changes in our consolidated mix led to a 210 basis point increase in gross margin in the first quarter of fiscal 2027 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.

◦Favorable tariff impact, including refunds and pricing actions net of tariff costs, drove an additional increase in gross margin in the first quarter of fiscal 2027 compared with the same period a year ago.

◦Partially offsetting the items above, gross margin decreased in the first quarter of fiscal 2027, compared with the same period a year ago, as a result of the Supply Chain Optimization actions in our Mexico manufacturing operations described above.

•SG&A expenses as a percentage of sales increased 630 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

◦Changes in our consolidated mix led to a 220 basis point increase in SG&A expense as a percentage of sales in the first quarter of fiscal 2027 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.

◦Supply Chain Optimization actions in our Mexico manufacturing operations described above also contributed to the increase in the first quarter of fiscal 2027 compared with the same period a year ago.

◦Fixed cost deleverage from lower delivered sales further contributed to higher SG&A expense as a percentage of sales in the first quarter of fiscal 2027 compared with the same period a year ago.

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

Retail Segment

Sales

The Retail segment’s sales increased $21.4 million, or 10%, in the first quarter of fiscal 2027, compared with the same period a year ago primarily due to $16.4 million of incremental sales resulting from our retail store acquisitions that occurred over the last 12 months along with $6.3 million of sales from the addition of new retail stores, net of closed stores. These increases were partially offset by a slight decline in delivered same-store sales.

Total written sales increased 16% in the first quarter of fiscal 2027, compared with the same period a year ago. Written same-store sales increased 3% over the same period, driven by strong in-store execution. 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 increased 10 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

•Gross margin increased 70 basis points in the first quarter of fiscal 2027, compared with the same period a year ago, primarily due to reduced promotional activity on casegoods products and accessories relative to the prior year along with a favorable shift in product mix towards higher margin product.

•SG&A expenses as a percentage of sales increased 60 basis points in the first quarter of fiscal 2027, compared with the same period a year ago, primarily due to fixed cost deleverage from lower delivered same-store sales.

Wholesale Segment

Sales

The Wholesale segment’s sales decreased $30.0 million, or 9%, in the first quarter of fiscal 2027, compared with the same period a year ago, primarily due to lower delivered volume including the absence of sales from our Casegoods wholesale businesses that were divested during the fourth quarter of fiscal 2026 and first quarter of fiscal 2027. Excluding the sales from the Casegoods divestiture, the Wholesale segment's sales decreased 5%. These decreases were partially offset by a favorable shift in product mix towards higher priced products.

The Wholesale segment's operating margin decreased 500 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

•Gross margin increased 40 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

◦Favorable tariff impact, including refunds and pricing actions net of tariff costs, drove a 240 basis point increase in gross margin in the first quarter of fiscal 2027 compared with the same period a year ago.

◦Partially offsetting the item above, gross margin decreased 100 basis points in the first quarter of fiscal 2027 compared with the same period a year ago, as a result of the Supply Chain Optimization actions related to our SLRC, Mexico facility described above.

◦Targeted promotional activity also contributed to a 90 basis point decrease in gross margin in the first quarter of fiscal 2027 compared with the same period a year ago.

•SG&A expense as a percentage of sales increased 540 basis points in the first quarter of fiscal 2027, compared with the same period a year ago.

◦SG&A expense as a percentage of sales increased 290 basis points in the first quarter of fiscal 2027 compared with the same period a year ago, as a result of the Supply Chain Optimization actions related to our SLRC, Mexico facility described previously.

◦SG&A expense as a percentage of sales increased an additional 80 basis points in the first quarter of fiscal 2027 compared with the same period a year ago, due to the one-time loss recognized from the divestiture of our Casegoods wholesale business.

◦The remaining increase in SG&A expense as a percentage of sales in the first quarter of fiscal 2027 compared with the same period a year ago was primarily due to fixed cost deleverage on lower delivered sales volume.

Corporate and Other

Sales

Corporate and Other sales decreased $1.2 million in the first quarter of fiscal 2027, compared with the same period a year ago, resulting from a decrease in Joybird sales to $26.5 million driven by lower delivered volume partially offset by a favorable shift in product mix. Written sales for Joybird decreased 17% in the first quarter of fiscal 2027, compared with the same period a year ago, as this consumer segment continues to be particularly volatile in the current macroeconomic environment.

Intercompany eliminations increased in the first quarter of fiscal 2027 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 $7.1 million in the first quarter of fiscal 2027, compared with the same period a year ago, primarily due to the Supply Chain Optimization actions related to our Tijuana, Mexico facility described above along with Joybird's operating loss resulting from lower delivered volume and unfavorable gross margin.

Non-Operating Income (Expense)

Other income (expense), net was $4.3 million of expense in the first quarter of fiscal 2027, compared with $0.6 million of expense in the same period a year ago. The expense in fiscal 2027 was primarily due to a $4.1 million loss related to the termination and lump-sum settlement of our non-qualified legacy acquired retirement plan along with losses on investments held to fund the plan.

Interest Income

Interest income was $0.2 million lower in the first quarter of fiscal 2027, compared with the same period a year ago, primarily driven by lower interest rates along with lower interest-bearing cash balances.

Income Taxes

Our effective tax rate was 45.8% benefit for the first quarter of fiscal 2027, compared with 25.0% expense for the first quarter of fiscal 2026. Due to the immaterial net loss position in the first quarter of fiscal 2027, the change in the effective tax rate was disproportionately impacted by one-time impacts of certain non-deductible supply chain optimization charges along with the tax benefits from the vesting of stock awards and state refunds. We expect a more normalized effective tax rate for the full year fiscal 2027.