Q3 2022 La-Z-Boy Inc Earnings Call

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Speaker 1: Good morning, ladies and gentlemen, and welcome to the lazy boy fiscal 2022 3rd quarter conference call. At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the present.

Good morning, ladies and gentlemen, and welcome to the La Z Boy fiscal 2022 third quarter Conference call.

At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host Kathy Liebmann.

Speaker 1: It is now my pleasure to turn the floor over to your host, Kathy Leibman. Ma'am, the floor is yours.

Ma'am the floor is yours.

Thank you Holly.

Speaker 2: Good morning and thank you for joining us to discuss our fiscal 2022 third quarter results.

Good morning, and thank you for joining us to discuss our fiscal 2022 third quarter results.

Speaker 2: With us this morning are Melinda Whittington, Lazy Boys President and Chief Executive Officer, and Bob Lucian, CFO .

This morning, our Melinda Whittington.

<unk>, President and Chief Executive Officer, and Bob pollution CFO .

Speaker 2: Melinda will open and close the call and Bob will speak to segment performance and the financials midway through. We'll then open the call to questions. Slides will accompany this presentation and you may view them through our webcast link, which will be available for 1 year. And to tell us on replay of the call will be available for 1 week beginning this afternoon.

Melinda will open and close the call and Bob will speak to segment performance and the financials midway through we'll.

And then open the call to questions slides will accompany this presentation and you may view them through our webcast link which will be available for one year and a telephone replay of the call will be available for one week beginning this afternoon.

Speaker 2: Before we begin the presentation, I'd like to remind you that some statements made in today's call include forward-looking statements about Lazy Boy's future performance and other matters.

Before we begin the presentation I'd like to remind you that some statements made on today's call include forward looking statements about <unk> future performance and other matters. Although we believe these statements to be reasonable our actual results could differ materially the most significant risk factors that could affect our future results.

Speaker 2: Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10-K . We encourage you to review those risk factors as well as other key information details in our SEC filing.

Are described in our our annual report on Form 10-K , we encourage you to review those risk factors as well as other key information detailed in our SEC filings.

Speaker 2: Also, our earnings release is available under the news and events tab on the investor relations page of our website, and it includes the reconciliation. A certain non-GAAP measures , which are also included as an appendix at the end of our conference call slide.

Also our earnings release is available under the news and events tab on the Investor Relations page of our website and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck.

Speaker 2: With that, I'll now turn over the call to Melinda Whittington, Lizzie Boyce President and Chief Executive Officer. Melinda. Thank you, Kathy. Good morning.

With that I'll now turn over the call to Melinda Whittington.

President and Chief Executive Officer Linda.

Thank you Kathy and good morning, everyone Yeah.

Speaker 2: Yesterday afternoon, following the close of market, we reported our fiscal 22 third quarter results, which included delivered consolidated sales of a strong 22% versus last Q3, including record delivered sales and operating profit for our company owned retail segment.

Yesterday afternoon, following the close of market, we reported our fiscal 'twenty two third quarter results, which included delivered consolidated sales up a strong 22% versus last Q3, including record delivered sales and operating profit for our company owned retail segment.

Ongoing strong demand versus pre pandemic levels.

Speaker 2: ongoing strong demand versus pre-pandemic levels.

Speaker 2: $32 million returned to shareholders through dividends and share repurchases in the quarter, bringing our year-to-date total up to $96 million, an all-time high, and closing on two important acquisitions, the five La-Z-Boy furniture gallery stores in the Alabama market and the Furnico manufacturing company in the UK.

$32 million returned to shareholders through dividends and share repurchases in the quarter, bringing our year to date total up to $96 million, an all time high.

In closing on two important acquisitions, the five lazy boy furniture galleries stores in the Alabama market and the furniture manufacturing company in the UK.

While delivering strong top line growth this quarter also had significant challenges.

Speaker 2: While delivering strong top line growth, the quarter also had significant challenges. After a very strong November across the majority of our business, supply chain volatility amplified in the balance of the quarter, even beyond our previous expectations.

After a very strong November across the majority of our business supply chain volatility amplified in the balance of the quarter, even beyond our previous expectations.

This had a significant near term impact on the efficiency of our manufacturing capacity ramp plans affecting both sales and profit performance.

Speaker 2: This had a significant near term impact on the efficiency of our manufacturing capacity ramp plans, affecting both sales and profit performance.

Within our own manufacturing operations, which comprise the majority of our wholesale business lack of availability of component parts, including electronic chips and actuators continued to disrupt production plans, but at a higher level than we expected.

Speaker 2: Within our own manufacturing operations, which comprise the majority of our wholesale business, lack of availability of component parts, including electronic chips and actuators, continued to disrupt production plans, but at a higher level than we expected.

Speaker 2: Beyond the obvious direct production delays, these outages drove inefficiencies as manufacturing cells are trained on specific unit styles and need to retrain on other styles until parts are available.

Beyond the obvious direct production delays. These outages drove inefficiencies as manufacturing cells are trained on specific unit styles and need to retrain and other styles until parts are available.

Speaker 2: This was exacerbated by such a large portion of our manufacturing staff being relatively new, given our significant capacity expansion, including 3 new facilities in Mexico over the past year.

This was exacerbated by such a large portion of our manufacturing staff being relatively new given our significant capacity expansion, including three new facilities in Mexico over the past year.

Further these parts outages are disproportionately affecting our higher end products, which sell at a greater level and are lazy boy furniture galleries stores, including our own retail, thereby magnifying the near term financial impact.

Speaker 2: Further, these parts outages are disproportionately affecting our higher end products, which sell at a greater level in our Lazy Boy furniture gallery stores, including our own retail, thereby magnifying the near-term financial impact.

With the goal of meeting consumer demand and to best serve our customers in this environment. Our procurement team continues to invest in inventory for key component parts and diversify our supplier base, including creative solutions.

Speaker 2: With the goal of meeting consumer demand and to best serve our customers in this environment, our procurement team continues to invest in inventory for key component parts and diversify our supplier base, including creative solutions.

In one particular instance, we have sent a lazy boy team to work in the plants of one of our domestic suppliers to help increase their production of component parts for lazy boy as they too are experiencing labor challenges.

Speaker 2: In one particular instance, we have sent a La-Z-Boy team to work in the plant of one of our domestic suppliers to help increase their production of component parts for La-Z-Boy as they too are experiencing labor challenges.

Speaker 2: We will continue to make progress here. The global supply chain disruptions remain prevalent, and we will likely be managing them for a while.

We will continue to make progress here the global supply chain disruptions remain prevalent and we will likely be managing them for awhile.

Additionally.

Speaker 2: The 14 week COVID related shutdowns in Vietnam, where the majority of our case goods products is sourced significantly impacted our wholesale segment, resulting from minimal inventory available to ship to consumers. And high freight costs during the quarter product is flowing again. And we expect case good sales and profits to normalize during the 1st, half of fiscal 23 when we will more consistently receive product to ship to customers.

The 14th week Covid related shutdowns in Vietnam, where the majority of our case goods product is sourced significantly impacted our wholesale segment, resulting from minimal inventory available to ship to consumers and high freight costs during the quarter.

Product is flowing again, and we expect case, good sales and profits to normalize during the first half of fiscal 2003, when we were more consistently receive product to ship to customers.

Further exacerbating the disruption this quarter, the omnicom variant impacted plant operations and production across all geographies in.

Speaker 2: Further exacerbating the disruption this quarter, the Omicron variant impacted plant operations and production across all geographies.

In January at times, we had as much as 20% of our manufacturing workforce out due to contraction of the virus or exposure as the health and safety of our team remains our highest priority.

Speaker 2: In January , at times, we had as much as 20% of our manufacturing workforce out due to contraction of the virus or exposure as the health and safety of our team remains our highest priority.

Speaker 2: These peaks are orders of magnitude higher than our previous worst peaks last winter.

These peaks are orders of magnitude higher than our previous worst peaks last winter.

Speaker 2: As with much of North America, we're now seeing the number of coded cases trend downward quickly. But it will take time to recover from the disruption.

As with much of North America, we're now seeing the number of Covid cases trend downward quickly, but it will take time to recover from the disruption.

Managing across these challenges as well as the ongoing tight labor market and increasing input costs has resulted in production gains being slower than expected impacting the pace of delivered sales and profitability growth in the near term.

Speaker 2: Managing across these challenges, as well as the ongoing tight labor market and increasing input costs, has resulted in production gains being slower than expected, impacting the pace of delivered sales and profitability growth in the near term.

Speaker 2: Our number one focus across the company is to improve the agility of our supply chain to increase production more quickly and efficiently.

Our number one focus across the company is to improve the agility of our supply chain to increase production more quickly and efficiently.

Speaker 2: We have deployed SWAT teams comprised of some of our most experienced leaders to our newer, most challenged locations to assist in training and increasing output.

We have deployed Swat teams comprised of some of our most experienced leaders to our newer most challenged locations to assist in training and increasing output.

Speaker 2: We have hired additional key leadership with expertise from other industries to bring fresh perspectives to our challenges, working alongside our industry veterans.

We have hired additional key leadership with expertise from other industries to bring fresh perspectives to our challenges working alongside our industry veterans.

And as noted we continue to identify and act on creative solutions to upstream supply challenges, including expanded sourcing diversity protective inventory builds and even helping supplier staff extra shifts to supply key component parts.

Speaker 2: And as noted, we continue to identify and act on creative solutions to upstream supply challenges, including expanded sourcing diversity, protective inventory builds. And even helping supplier staff extra shifts to supply key component parts.

Speaker 2: These challenges, while significant, are temporary in nature, and each day we get better at managing through them.

These challenges while significant are temporary in nature and each day, we get better at managing through them.

Ultimately <unk>.

Speaker 2: Ultimately, demand for our product is strong and we are already delivering sales at all-time record levels.

<unk> for our products is strong and we are already delivering sales at all time record levels.

Speaker 2: But we must do better to weather each disruption. Continue to increase our capacity, improve cost efficiencies. Work down our backlog and service our customers and consumers. While working toward the double digit profitability levels, we know we can achieve in the longer term with our expanded North American footprint.

But we must do better.

So whether each disruption continued to increase our capacity improved cost efficiencies work down our backlog and service our customers and consumers while working towards the double digit profitability levels. We know we can achieve in the longer term with our expanded North America.

Can footprint.

Turning back to the topline and demand for our products written same store sales for the lazy boy furniture galleries network increased 3% in the fiscal 'twenty, two third quarter and were up 9% compared with the pre pandemic fiscal 'twenty quarter for our compound.

Speaker 2: Turning back to the top line and demand for our products. Written same store sales for the lazy boy furniture galleries network increased 3% in the fiscal 22 3rd quarter. And we are at 9% compared with the Pre pandemic fiscal 20 quarter for a compound annual growth rate of 4% across the 2 years.

Annual growth rate of 4% across the two years.

Sales to the lazy boy furniture galleries network represent about half of our total manufactured lazy boy product and are Directionally indicative of the continued strength of demand for our product over time.

Speaker 2: Sales to the La-Z-Boy furniture galleries network represent about half of our total manufactured La-Z-Boy products and are directionally indicative of the continued strength of demand for our product over time.

Speaker 2: For our company owned stores, our retail segment written same store sales were down 1% versus the prior year 3rd quarter. And up across the 2 years at a compound annual growth rate of 4%.

For our company owned stores, our retail segment written same store sales were down 1% versus the prior year third quarter and up across the two years at a compounded annual growth rate of 4%.

Given the unusual nature of the past two years written same store sales comparisons in any given period may shift positive or negative slightly compared with prior year period, even as the underlying business remains very strong.

Speaker 2: Given the unusual nature of the past two years, written same store sales comparisons in any given period may shift positive or negative slightly compared with prior year period, even as the underlying business remains very strong. In fact, our annual sales per store across the network now average about 5 million dollars versus 4 million pre-pandemic.

In fact, our annual sales per store across the network now average about $5 million versus $4 million pre pandemic.

Speaker 2: And as part of our century vision, in addition to sustained strong same store sales, we intend to also grow lazy boy with additional new stores and specific to our company owned retail business, opportunistic company acquisitions of existing independently owned stores, such as the recent Alabama network acquisition.

And as part of our century vision. In addition to sustained strong same store sales, we intend to also grow lazy boy with additional new stores.

And specific to our company owned retail business opportunistic company acquisitions of existing independently owned stores such as the recent Alabama network acquisition.

And our Joy bird business continued on its strong growth trajectory this quarter rising 27% more business. This Q3 than last year's third quarter with an extremely impressive compound annual growth rate of 51% across the last two years.

Speaker 2: And our joybird business continued on its strong growth trajectory this quarter. Writing 27% more business this Q3 than last year's 3rd quarter. With an extremely impressive compound annual growth rate of 51%. Across the last 2 years now, let me turn the call over to Bob to review the results in more detail. Bob. Thank you, Melinda.

Now, let me turn the call over to Bob to review the results in more detail Bob.

Thank you Melinda and good morning, everyone.

As a reminder, we present our results on both the GAAP and non-GAAP basis.

Speaker 3: As a reminder, we present our results on both a GAAP and non-GAAP basis.

Speaker 3: We believe a non-GAAP presentation better reflects underlying operating trends and performance of the business.

The non-GAAP presentation, better reflects underlying operating trends and performance of the business.

Speaker 3: non-GAAP results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides.

non-GAAP results exclude items, which are detailed in our press release and in the tables in the appendix section of our conference call slides.

On a consolidated basis fiscal 'twenty twos.

Third quarter sales increased 22%.

Speaker 3: Third quarter sales increased 22% to $572 million versus the prior year quarter, reflecting continued strong demand and ongoing manufacturing capacity increases, as well as the effects of pricing and surcharge action.

$572 million versus the prior year quarter, reflecting continued strong demand in.

Ongoing manufacturing capacity increases as well as the effective pricing and surcharge actions.

Speaker 3: Compared with the pre-pandemic fiscal 20 third quarter, sales were 20% higher for compound annual growth rate of about 10% over the last two years.

Compared with their pre pandemic fiscal 'twenty third quarter sales were 20% higher for a compound annual growth rate of about 10% over the last two years.

Consolidated GAAP operating income increased to $39 million versus the prior year period, our non-GAAP operating income was $40 million.

Speaker 3: Consolidated GAAP operating income increased to $39 million versus the prior year period, and non-GAAP operating income was $40 million.

Consolidated GAAP operating margin was six 9% and non-GAAP operating margin was 7.0%.

Speaker 3: Consolidated gap operating margin was 6.9%, and non-gap operating margin was 7.0%.

GAAP diluted EPS was <unk> 65 for the fiscal 'twenty third quarter versus 62 in the prior year quarter.

Speaker 3: Gap diluted EPS was 65 cents for the fiscal 22 third quarter versus 62 cents in the prior year quarter.

non-GAAP diluted EPS was <unk> 65 in the current year quarter versus <unk> 74 in last year's third quarter.

Speaker 3: non-GAAP diluted EPS was 65 cents in the current year quarter versus 74 cents in last year's third quarter.

As I move to the segment discussion my comments from here will focus on our non-GAAP reporting.

Speaker 3: As I move to the second discussion, my comments from here will focus on our non-GAAP reporting, unless specifically stated otherwise.

Specifically stated otherwise.

Demand for and delivery of product across the enterprise remains strong.

Speaker 3: Demand for and delivery of product across the enterprise remains strong.

Starting with our wholesale segment delivered sales for the quarter grew 21% to $423 million compared with the prior year period, driven by pricing and surcharge actions as well as higher volume.

Speaker 3: Starting with our wholesale segment, delivered sales for the quarter grew 21% to $423 million compared with the prior year period, driven by pricing and surcharge actions as well as higher volume.

non-GAAP operating margin for the wholesale segment was six 5% versus 10, 2% in last year's third quarter.

Speaker 3: non-GAAP operating margin for the wholesale segment was 6.5% versus 10.2% in last year's third quarter.

Speaker 3: This reflects higher raw material and freight costs, sourcing related tariff and duty increases, and disruption from component parts shortages.

This reflects higher raw material and freight costs.

<unk> related tariff and duty increases and disruption from component part shortages.

We also experienced continued labor challenges and plant inefficiencies related to manufacturing startup activities, which were exacerbated by the way this COVID-19 peaks.

Speaker 3: We also experienced continued labor challenges and planning inefficiencies related to manufacturing startup activities, which were exacerbated by the latest code.

Additionally, COVID-19 related shutdowns in Vietnam significantly impacted the product flow and margin performance of our case goods business.

Speaker 3: Additionally, COVID-related shutdowns in Vietnam significantly impacted the product flow and margin performance of our case goods business.

Speaker 3: driving an approximate 130 basis point decline and non-gap operating margin of the total 370 basis point decline for the period.

Driving at an approximate 130 basis point decline in non-GAAP operating margin of the total 370 basis point decline for the period.

These challenges were partially offset by pricing and surcharges fix.

Speaker 3: These challenges were partially offset by pricing and surcharges, fixed cost leverage on higher volume, and lower marketing spend as a percentage of sales.

Fixed cost leverage on higher volume and lower marketing spend as a percentage of sales.

For the quarter, our retail segment delivered sales increased 19% to an all time record $197 million.

Speaker 3: For the quarter, our retail segment delivered sales increased 19% to an all-time record $197 million.

Speaker 3: delivered same store sales increased 16% versus the year ago quarter.

<unk> delivered same store sales increased 16% versus the year ago quarter.

Retail posted record high non-GAAP operating profit dollars and non-GAAP operating margin increased to 12, 2% versus eight 9% in the prior year quarter.

Speaker 3: Retail posted record high non-GAAP operating profit dollars, and non-GAAP operating margin increased to 12.2% versus 8.9% in the prior year quarter, driven primarily by fixed cost leverage on the higher delivered sales volume and disciplined expense management.

Driven primarily by fixed cost leverage on the higher delivered sales volume and disciplined expense management.

Joy Bird, which is reported in corporate and other.

Speaker 3: Joybird, which is reported in Corporate and Other, posted record sales of $45 million, a 56% increase versus the prior year quarter.

Posted record sales of $45 million.

56% increase versus the prior year quarter.

On a two year basis, compared with a pre pandemic fiscal 2013.

Speaker 3: On a two year basis, compared with the pre pandemic fiscal 2030 fiscal 23rd quarter, delivered sales more than doubled, representing a compound annual growth rate of 43%.

Fiscal 'twenty third quarter.

<unk> sales more than doubled representing a compounded annual growth rate of 43%.

This reflects the momentum Joy Brunel building and the direct to consumer marketplace as we continue to acquire customers.

Speaker 3: This reflects the momentum Joybird is building in the direct-to-consumer marketplace as we continue to acquire customers and strengthen brand awareness through new digital marketing channels.

And strengthened brand awareness through new digital marketing channels.

Speaker 3: Joybird's profit for the quarter was roughly breakeven as we invested significantly in marketing to grow the business while experiencing increased raw material and freight costs which negatively impacted gross margins.

<unk> profit for the quarter was roughly breakeven as we invested significantly in marketing to grow the business, while experiencing increased raw material and freight costs, which negatively impacted gross margin.

Moving forward, we expect pricing actions to continue to work their way through our delivered sales, which will improve gross margins back to target levels.

Speaker 3: Moving forward, we expect pricing actions to continue to work their way through our delivered sales, which will improve gross margin back to target levels, and we will continue to invest in marketing to deliver disproportionate brand growth while sustaining profitability.

And we will continue to invest in marketing to deliver disproportionate brand growth while sustaining profitability.

Speaker 3: Putting all of this together, consolidated non-GAAP gross margin for the entire company for fiscal 22 third quarter decreased 440 basis points versus the prior year quarter. Due primarily to the challenges noted in wholesale, offset partially by pricing and surcharge acts.

Putting all of this together consolidated non-GAAP gross margin for the entire company for fiscal 'twenty third quarter decreased 440 basis points versus the prior year quarter due primarily to the challenges noted in wholesale offset partially by pricing and surcharge actions.

Consolidated non-GAAP SG&A as a percent of sales for the quarter decreased 190 basis points, primarily reflecting fixed cost leverage on higher sales volume across our wholesale and retail segments.

Speaker 3: Consolidated non-GAAP SG&A as a percent of sales for the quarter decreased 190 basis points, primarily reflecting fixed cost leverage on a higher sales volume across our wholesale and retail segment.

Our effective tax rate on a GAAP basis for the fiscal 'twenty third quarter was 24, 8% versus 27, 7% in last year's third quarter.

Speaker 3: Our effective tax rate on a GAAP basis for the fiscal 22 third quarter was 24.8% versus 27.7% in last year's third quarter.

The third quarter of last year was unfavorably impacted by a non deductible fair value adjustment of the contingent liability related to the acquisition of our jewelry business.

Speaker 3: The third quarter of last year was unfavorably impacted by a non-deductible fair value adjustment of the contingent liability related to the acquisition of our Joybird business.

Speaker 3: Our effective tax rate varies from the 21% federal statutory rate primarily due to state tax.

Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

We expect our effective tax rate for the full fiscal 'twenty two year two to be between $25 five and 26, 5%.

Speaker 3: We expect our effective tax rate for the full fiscal 22 year. To be to be between 25 and a half and 26 and a half percent.

Turning to cash.

Speaker 3: Turning to cash, year to date, we generated $45 million cash from operating activity.

Year to date, we generated $45 million in cash from operating activities.

Speaker 3: We ended the period with $240 million in cash and no debt, and held $30 million in investments to enhance returns on cash.

We ended the period with $240 million in cash and no debt and held $30 million in investments to enhance returns on cash.

Speaker 3: Year to date, we've invested $83 million in higher inventory levels to help protect against supply chain disruptions and support increased production and delivery sales.

Year to date, we've invested $83 million and higher inventory levels to help protect against supply chain disruptions and support increased production and delivered sales.

We have also spent $59 million in capital year to date, primarily related to improvements to our retail stores, new upholstery manufacturing capacity in Mexico plant upgrades at our manufacturing and distribution facilities and technology upgrades.

Speaker 3: We have also spent 59 million dollars in capital year to date primarily related to improvement store retail stores. New upholstery manufacturing capacity in Mexico. Plant upgrades at our manufacturing and distribution facilities. And technology upgrades.

Regarding cash returned to shareholders during the quarter, we continued to buy back shares spending $25 million repurchasing more than 700000 shares of stock in the open market.

Speaker 3: Regarding cash returned to shareholders during the quarter we continue to buy back shares spending 25 million dollars repurchasing more than 700,000 shares of stock in the open market.

Leaving $7 9 million shares and our existing authorized share repurchase program.

Speaker 3: leaving 7.9 million shares in our existing Authorized Shared Repurchase Program.

Year to date, we have returned $76 million to shareholders via share repurchase and $21 million through dividends, including $7 million paid in dividends in the third quarter.

Speaker 3: Year to date, we have returned $76 million to shareholders via share repurchase and $21 million through dividends, including $7 million paid in dividends in the third quarter.

Before turning the call back from a window, let me highlight several important item for the remainder of fiscal 'twenty two.

Speaker 3: Before turning the call back to Melinda, let me highlight several important items for the remainder of fiscal 22.

As noted demand trends are strong across the business and remain much higher than pre COVID-19 levels and our backlog remains high.

Speaker 3: As noted, demand trends are strong across the business and remain much higher than pre-COVID levels, and our backlog remains high.

Speaker 3: To address this strong demand, we will continue to improve our agility and ability to increase production capacity, although our near-term gains will be slower than previously anticipated.

To address the strong demand, we will continue to improve our agility and ability to increase production capacity, although our near term gains will be slower than previously anticipated.

Efficient plant expansion will also benefit when global supply chain disruptions begin to stabilize although the timing is unknown.

Speaker 3: Efficient plant expansion will also benefit when global supply chain disruptions begin to stabilize, although this timing is unknown.

Speaker 3: and these challenges will likely continue to disproportionately impact our higher end products.

And these challenges will likely continue to disproportionately impact our higher end products.

Speaker 3: which sell at a greater level in our Lazy Boy furniture gallery stores.

Which sell a greater level in our La Z boy furniture galleries stores.

Specific to the case goods import business, we expect operations to normalize during the first half of fiscal 'twenty three as we more consistent we receive product and ship it to our customers.

Speaker 3: Specific to the case goods import business, we expect operations to normalize during the first half of fiscal 23 as we more consistently receive product and ship it to our customers.

The fourth quarter will benefit by containing 14 production weeks compared to 12 production weeks in our third quarter.

Speaker 3: The fourth quarter will benefit by containing 14 production weeks compared to 12 production weeks in our third quarter. Recall, fiscal 22 will include 53 weeks of results versus 52 weeks last year.

Recall fiscal 'twenty. Two will include 53 weeks of results versus 52 weeks last year.

Taking all of these factors into consideration, we now expect delivered sales per week in Q4 to be flat to slightly up versus the third quarter and consolidated non-GAAP operating margin to strengthen to a range of seven 5% to eight 5%.

Speaker 3: Taking all of these factors into consideration, we now expect deliberate sales per week in Q4 to be flat to slightly up versus the third quarter in consolidated non-GAAP operating margin to strengthen to a range of 7.5 to 8.5 percent.

We maintain our long term commitment to steady margin progress as we deliver incremental capacity increases with our rebalanced North American manufacturing footprint.

Speaker 3: We maintain our long-term commitment to steady margin progress as we deliver incremental capacity increases with our rebalanced North America manufacturing footprint and improve our ability to adjust to supply chain disruption.

And improve our ability to adjust the supply chain disruptions.

This will enable us to better service the demand for our highest value products, which disproportionately sell through our furniture galleries stores. However.

Speaker 3: This will enable us to better service the demand for our highest value products, which disproportionately sell through our furniture gallery stores.

However, as noted many variables will affect the next several quarters progress against these goals.

Speaker 3: However, as noted, many variables will affect the next several quarters' progress against these goals.

Finally, as we make investments in the business to strengthen the company for the future, including work related to our Central vision strategy, we expect capital expenditures to be in the range of $80 million to $85 million for fiscal 'twenty two.

Speaker 3: Finally, as we make investments in the business to strengthen the company for the future, including work related to our Sentry Vision strategy, we expect capital expenditures to be in the range of $80 to $85 million for Fiscal 22. And now I will turn the call to the next speaker.

And now I will turn the call back from a windows.

Thanks, Bob.

Speaker 2: While near-term supply chain headwinds are impacting our ability to efficiently ramp production to the extent we would like near-term, demand for our products is strong.

While near term supply chain headwinds are impacting our ability to efficiently ramp production to the extent, we would like near term.

Demand for our products is strong delivered.

<unk> delivered sales are at all time highs.

Speaker 2: Delivered sales are at all-time highs. We believe the momentum

We believe the momentum is sustainable.

And we are poised to grow from this new base of nearly $2 $2 billion of trailing 12 month sales.

Speaker 2: And we are poised to grow from this new base of nearly $2.2 billion of trailing 12-month sales.

In the immediate term we are laser focused on driving efficient supply chain expansion to benefit our end consumers are customer business partners and our top and bottom line financial performance.

Speaker 2: In the immediate term, we are laser focused on driving efficient supply chain expansion to benefit our end consumers, our customer business partners, and our top and bottom line financial performance.

And looking further out our focus remains on long term profitable growth as we execute our century vision our strategy to leverage our strong consumer brands to drive sales growth ahead of the industry and delivered double digit non-GAAP operating margins and value.

Speaker 2: And looking further out, our focus remains on long-term profitable growth as we execute our Sentry vision, our strategy to leverage our strong consumer brands to drive sales growth ahead of the industry and deliver double-digit non-GAAP operating margins and value to all stakeholders.

To all stakeholders.

We thank you for your time this morning, and I'll turn the call back to Kathy.

Speaker 2: We thank you for your time this morning, and I'll turn the call back to Kathy.

Thank you Melinda will begin the Q&A period now Holly. Please review the instructions for getting into the queue to ask a question.

Speaker 4: Thank you Melinda will begin that Q and a period now Holly please review the instructions for getting in the queue to ask questions.

Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality.

Speaker 1: Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question. You please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while everybody presses start button.

Please hold while we poll for questions.

Your first question for today is coming from Bobby Griffin. Please announce your affiliation then pose your question.

Speaker 1: Your first question for today is coming from Bobby Griffin. Please announce your affiliation then pose your question.

Good morning body. This is Bobby Griffin from Raymond James Thanks for taking my questions and hope everybody is doing well.

Speaker 5: Good morning, buddy. This is Bobby Griffin from Raymond Jams. Thanks for taking my questions and hope everybody's doing well.

Good morning, Bobby Good morning.

So I guess first I wanted to just touch on the price increases and maybe help us connect.

Speaker 5: So I guess first I wanted to just touch on the price increases and maybe help us connect where we are on the pricing that you've passed through and you know how much has been realized and I get how much how much is still left to be realized as you move forward.

We are on the pricing that you've passed through and.

How much has been realized and I guess, how much how much is still left to be realized as you move forward.

Bobby the vast majority of the pricing.

Speaker 3: Bobby, the vast majority of the pricing is now coming through delivered sales for the La-Z-Boy brand. We've got a little bit more pricing on both the Case Good side and the Joybird side that will come through Q4 and a little bit into Q1, just given some of the increases that we've seen in freight and what we import out of Vietnam.

Now there is no coming through delivered sales for the lazy Boy brand, we've got a little bit more pricing on both the case goods side and the Joy bird side that will come through through Q4, and a little bit into Q1, just given some of the increases that we've seen in freight and what we import out of Vietnam.

Okay. So Bob.

Speaker 5: Okay, so Bob is the is the cost pressures that we're seeing supply chain wise is more inefficiencies and just you know, having to expedite things and you know, challenges that way verse, you know, just pure cost of items or you're going to have to take based on some of these more recent challenges you've caught out you're gonna have to take more pricing to get whole again as well.

Is the cost pressures that we're seeing supply chain why she is more inefficiencies and just having to expedite things and challenges that way versus.

Just pure cost of items or are you going to have to take based on some of these more recent challenges you'd called out you're going to have to take more pricing to get whole again as well.

Speaker 3: It's more the former what you talked about relative to some of the inefficiencies that we have in our operations and the hits that we're taking as it relates to the supply chain disruptions and the extra work and money and effort we have to spend to deal with that.

It's more of a it's more of the former what you talked about relative to some of the inefficiencies that we have in our operations and the hits that we're taking as it relates to the supply chain disruptions and the extra work and money and effort, we have to spend to deal with that.

Speaker 2: Now, that said, we're constantly watching input costs and we'll continue to price as needed as we go forward.

Now that said, we're constantly watching input costs.

We'll continue to price.

As needed as we go forward.

Okay that makes sense and then I guess secondly for me.

Speaker 5: Okay, that makes sense. And then I guess secondly for me.

Speaker 5: And that's helpful. I appreciate the detail on the last one. Secondly, for me, I know we typically only get the backlog, say, once a year in the 10K, but times are a little more unique now, given the size of the backlog. I was hoping maybe just to get a little color and directionally where it's at. You know, written trends have been positive year to date. Production has increased, but, you know, it's tough to kind of say, has the backlog actually materially come down, given that business has been pretty good so far, even with increased production?

That's helpful. I appreciate the detail on the last one secondly for me I know, we typically only get the backlog once a year in the 10-K, but times are a little more unique now and given the size of the backlog I was hoping maybe just to get a little color on Directionally, where it's at.

Written trends have been positive year to date production has increased but it's tough to kind of say is the backlog actually materially come down given that business has been.

<unk> been pretty good so far even with increased production.

Yes, the backlog is about the same honestly and we are.

Speaker 2: Yeah, the backlog is about the same, honestly.

Speaker 2: Exactly as you said, it's a, it's a equation of strength of demand. And, you know, our ramping capacity and truthfully, we want to see that backlog start to come down because that's how we better service our customers and our consumers. But right now we're at about the same place. And again, it's an equation of strong demand continued and capacity ramping, but not fast enough to shorten our lead time.

Exactly as you said, it's a it's the equation of strength of demand.

And our ramping capacity and.

Truthfully, we want to see that backlog start to come down because that's how we better service our customers and our consumers.

But right now we're at about the same place and again, it's an equation of strong demand continues and capacity ramping but not fast enough to shorten our lead times.

Speaker 5: Okay, that's helpful. And then I guess, lastly, for me, we have got a couple questions. You know, when you look at the written same store sales for the owned in licensed stores, you know, so for the whole La-Z-Boy network, on a two year basis, they did slow sequentially. Now, I guess my question is, I understand timing wise, the price increases and stuff last year can mess with the seasonality. So if you put written into, I guess, if you take a look at just dollars of written business.

Okay. That's helpful. And then I guess lastly from me, we haven't gotten a couple of questions.

When you look at the written same store sales for the owned and licensed stores separate the whole lazy Boy network on a two year basis. They did slow sequentially now I guess my question is I understand timing wise, the price increases and stuff last year can mess with the seasonality. So if you put written into I guess, if you've taken a look at the dollars of written.

Business.

Speaker 5: Has that materially changed from 1Q to 2Q to 3Q? Is there anything to read more into that slow down on a two-year percentage basis?

Has that materially changed from <unk> to two two to three Q is there anything to read more into that slowdown on a two year percentage basis.

I think the thing to keep in mind overall is that the business is about 30% bigger than it was pre pandemic and its sustaining.

Speaker 2: I think the thing to keep in mind overall is that the business is about 30% bigger than it was pre-pandemic and it's sustaining.

Speaker 2: And, you know, as we think about growth across that demand continues high to your point on any given quarter, the base period comparisons get so strange on. You know, this December , January was more affected by Omicron in Canada. They were shut down a year ago for the most part. You know, you get a lot of different wiggles at any given period.

And as we think about growth across that demand continues to your point on any given quarter the base period comparisons get so strange on.

This December January was more affected by omicron in Canada. They were shut down a year ago for the most part you get a lot of different wiggles at any given period.

Speaker 2: But overall, the written trends still stay stay strong and our businesses. Is 30% bigger than it was before the pandemic. So our focus is on. Continuing to grow that obviously we want to keep kind of that same store sales. Written business strong I mentioned in my prepared comments that. Right now, our average is about 5M dollars per store on existing stores and before the pandemic, it was 4M. But at the same time, you know.

But overall the written trends still stay stay strong and our businesses is 30% bigger than it was before the pandemic. So our focus is on continuing to grow that obviously, we want to keep kind of that same store sales written business strong.

Mentioned in my prepared comments that right now our average is about $5 million per store on existing stores and before the pandemic it was $4 million.

But at the same time you know.

Bill.

Speaker 2: Look to expand stores and expand the number of stores we own as well. And, of course, that that's just speaking to to. Our retail business, half of our business is selling through other outlets, other. Other customers and that business remains strong as well.

Look to expand stores and expand the number of stores, we own as well.

And of course, that's just speaking to to our retail business half of our business is selling through other outlets other our other customers in that business remains strong as well.

Speaker 5: Okay, that's very helpful. I'll jump back jump back in the queue and turn over somebody else. Thank you for taking my questions and best of luck here going forward. Thanks. Thank you.

Okay. That's very helpful. I'll jump back jump back in the queue and turn it over to somebody else. Thank you for taking my questions and best of luck going forward.

Thank you.

Your next question is coming from Anthony <unk>. Please announce your affiliation then pose your question.

Speaker 1: Your next question is coming from Anthony Libidinsky. Please announce your affiliation, then pose your question.

Speaker 6: Yes, good morning. This is Anthony Libejenski from Sidoti & Company. And good morning and thank you for taking the questions.

Yes. Good morning. This is Anthony <unk> from Sidoti <unk> company, Good morning, and thank you for taking the questions.

So looking at the guidance for operating margin for Q4.

Speaker 6: So looking at the guidance for operating margin for Q4, what are the biggest factors as far as driving that sequential increase that you expect?

What are the biggest factors.

What's driving that sequential increase you expect.

The biggest factors are continuing to make progress against increasing our capacity.

Speaker 3: The biggest factors are continuing to make progress against increasing our capacity, getting the higher, continuing to hire and train and retain the folks that we need for that capacity, as well as opportunities that we have to improve our mix.

Getting the hiring continuing to hire and train and.

<unk> retained the folks that we need for that capacity.

As well as opportunities that we have to improve our mix with better.

I should say and slightly improving parts outages on some of the higher.

The higher cost products that we make and sell through our retail outlets. So those are the key factors that we expect that will help us drive sequentially higher margin versus what we just delivered.

And those are really Anthony the same the same factors we've been looking at all along we are marching towards stronger capacity and more efficient capacity builds.

Speaker 2: And those are really Anthony, the same factors we've been looking at all along. We are marching towards stronger capacity and more efficient capacity builds. Unfortunately, this quarter we had more setbacks than we expected on that trajectory. And recognizing it's going to take time, but it's really...

Fortunately this quarter, we had had more setbacks and we expected on that trajectory.

And that's going to recognizing it's going to take time, but it's really.

It's really all about driving that capacity servicing the consumer.

Speaker 2: It's really all about driving that capacity, servicing the consumer, and getting more efficient as we go.

And getting more efficient as we go.

Got it Okay and then in terms of the component shortages that you spoke about so since the quarter ended last month that has there been any notable change or is it just kind of more of the same.

Speaker 6: Got it. Okay. And then in terms of the component shortages that you spoke about, so since the quarter ended last month, has there been any notable change or is it just kind of more of the same?

This is Ben.

Speaker 3: There's been incremental sequential improvement. It's not fixed. I mean, we're some of the work that we're doing with some of our suppliers and some of the extra suppliers that we're bringing online are starting to starting to have a more positive impact relative to those shortages. But it's not a, you know, just flip a switch, turn it on and all those problems go away. So that will just continue to improve as we move through the quarter and into the first half of next year.

Incremental sequential improvement it's not fixed.

Some of the work that we're doing with some of our suppliers and some of the.

Extra suppliers that were bringing online are starting to you're starting to have a more positive impact relative to those shortages, but it's not a flip.

Flip a switch turn it on and.

All of these problems go away. So that will just continue to improve as we move through the quarter and into the first half of next year.

Got you, Okay. So thats intelligence here and the last question from me So joined that again did very well.

Speaker 6: That's okay, so that's encouraging to hear. And the last question from me, so Joybird again did very well, now accounting for 8% of total sales for the quarter. Longer term, how should we think about the growth of that business? How big it could ultimately become? And as that happens, how should we think about profitability of that segment?

Now accounting for 8% of total sales for the quarter.

Longer term, how should we think about the growth of that business.

How big it could ultimately become and as that happens.

How should we think about profitability of that segment longer term, yes, we are.

Speaker 2: Longer term, yeah, we have, you know, as we've laid out our century vision, we obviously a huge building block of that century vision for growth over time. We've said as a total company, we believe we can grow ahead of the industry. One pillar of that is the La-Z-Boy brand and really reinvigorating that brand.

Laid out our century vision, we obviously a huge building block of that century vision for growth over time, we've said as a total company. We believe we can grow ahead of the industry. One pillar of that is the lazy boy brand and really reinvigorating that brand.

Speaker 2: A 2nd pillar is is really leveraging the opportunity that the, you know, the room that we believe we have for joybird to grow as a consumer brand. So we will continue to invest in that brand. And we do believe it will disproportionately grow within our business. And our focus is on maintaining. Maintaining a reasonable profitability with that business, but not necessarily expecting it to.

Second pillar is is really leveraging the opportunity there.

The room that we believe we have for delivery to grow as a consumer brand. So we will continue to invest in that brand.

And we do believe it will disproportionally grow within our business.

And our focus is on maintaining.

Maintaining a reasonable profitability with that business, but not necessarily expecting it to.

Speaker 2: to look like an integrated profit on our La-Z-Boy brand because it is in growth mode. It's in a different mode of its maturity.

So look like an integrated profit on our lazy boy brand because it is in growth mode.

A different mode of it.

Of its maturity.

Understood. Okay. Thank you very much and best of luck going forward.

Thanks Anthony.

Once again, if there are any questions or comments. Please press star one on your phone at this time.

Speaker 1: Once again, if there are any questions or comments, please press star 1 on your phone at this time.

Your next question is coming from Brad Thomas Please announce your affiliation then pose your question.

Speaker 1: Your next question is coming from Brad Thomas. Please announce your affiliation then pose your question.

Okay.

Hi, Good morning, Yes, Brad Thomas with Keybanc capital markets, Good morning, Melinda, Bob and Kathy.

Speaker 7: Hi, good morning Brad Thomas with key bank capital market. Good morning. Melinda Bob and Kathy.

Hi, good morning.

Speaker 7: Just a few more from me here along a similar vein as some of the earlier questions.

Alright.

A few more from me here, along probably similar vein as some of the earlier questions.

Speaker 7: Um, but maybe just wanted to follow up on on the cadence of the written orders and wondering if you could provide any color on how things trended through the quarter. What you're seeing thus far.

But maybe just wanted to follow up on the cadence of the written orders I'm wondering if you could provide any color on how things trended through the quarter and what youre seeing thus far.

Speaker 7: in February . You know, we've obviously heard broader concerns about Omicron weather and lapping stimulus payments as having been headwinds for the consumer of late. Just curious if you're seeing any of that in your business.

In February we've obviously heard broader concerns about weather and lapping stimulus payments as having been headwinds for the consumer of late just curious if youre seeing any of that business.

Speaker 2: Yeah, I can't say there's any dramatic trend change through the quarter other than, you know, as I noted. You know, we saw January hit by Omicron temporarily, right? That was fairly fast. If you think about, again, from a comparison standpoint.

Yes, I can't say, there's any dramatic trend change through the quarter other than as I noted.

We saw January hit by Omicron temporarily right that was fairly fast.

If you think about again from a comparison standpoint.

Speaker 2: Canada was essentially shut down last year. Now they're open. So on a comparison basis, Canada looks great. But from a more, you know, long-term trend, I don't think we're seeing any dramatic change per se.

Canada was essentially shut down last year and now they're open so on a comparison basis, Canada looks great.

But from a more long term trend.

I don't think we're seeing any dramatic change per se.

Okay.

Speaker 7: That's helpful. And so with what you're seeing today, you feel like your fiscal fourth quarter is tracking up so far on a written basis. Is that right?

Thats helpful and so what Youre seeing today, you feel like your fiscal fourth quarter is tracking so far on a written basis is that right.

Yes, I guess.

Speaker 2: Yeah, I guess I would I'm not going to comment on on written for 4th quarter right now. There are so many so many different moving pieces, including in the base. But. You know, I would just point out a couple of things as we think, I think written written same store sales.

I'm not going to comment on on written for fourth quarter right. Now is there are so many so many different moving pieces, including in the base, but.

I would just point out a couple of things as we think I think written written same store sales.

Speaker 2: Is an important metric to kind of look at what are you doing with an existing asset base over time? But.

Is an important metric to kind of look at what are you doing with an existing asset base over time, but I would also challenge that its maybe it certainly isn't the only metric to look.

Speaker 2: I would also challenge that it's maybe, it certainly isn't the only metric to look.

At at any of these businesses right now when the base period is so different than what it has been in the past. So today, our stores are averaging $5 million in delivered sales per year compared to two years ago pre <unk>.

Speaker 2: at any of these businesses right now when the base period is so different than what it has been in the past.

Speaker 2: So, you know, today our stores are averaging 5M dollars in delivered sales per year, compared to 2 years ago, pre-

Covid they were $4 million a year right. So what the what we're growing off of that base that we are achieving off of that base of.

Speaker 2: They were 4M dollars a year, right? So what the, what we are growing off of that base, what we are achieving off of that base of, you know, of any given store. Is 30% more than it had been as we go forward, we'll continue to look at how do you drive more off of that same base of stores for sure that same written same store sale number.

Any given store is 30% more than it had been as we go forward. We'll continue to look at how do you drive more off of that same base of stores for sure that same written same store sales number.

Speaker 2: But we're also looking at as part of century vision, expanding the number of stores and we've talked in the past around. Um, you know, we believe there's opportunity for call it about 50 additional stores just within existing space where the marketplace would. With support additional stores.

But we're also looking at as part of the century vision expanding the number of stores and we've talked in the past around.

We believe there is opportunity for call. It about 50 additional stores just within existing space, where the the marketplace would would support additional stores.

Speaker 2: will continue to also grow through.

We will continue to also grow through acquisition like we did at the Alabama stores here in the last couple of months as we have in the past on some of the independently owned.

Speaker 2: You know, acquisition like we did at the Alabama stores here in the last couple of months through as we have in the past on some of the independently owned.

Speaker 2: And then, of course, through our other businesses as well.

And then of course through through our other businesses as well so.

Written same store sales is an important metric and we believe it will continue to be directionally positive over time, but it's not the only metric by which to evaluate the growth of our business as we go forward or anyone's business I would say coming off of this.

Speaker 2: Written same source sales is an important metric and we believe it will continue to be directionally positive over time, but it's not the only metric by which to.

Speaker 2: Evaluate the growth of our business as we go forward or anyone's business. I would say coming off of this, uh, this unusual pandemic

This unusual pandemic time.

Got you that's helpful context.

Speaker 7: Gotcha, that's helpful context. Thank you. And then I guess just as we think. Some of the product.

<unk>.

And then I guess, just as we think.

Sending the product inability or longer than usual times that you are quoting and some of the mix dynamics.

Speaker 7: inability or longer than usual times that you're quoting and

Speaker 7: some of the mixed dynamics. I guess just as we're thinking about, on whatever basis you want to talk about, delivered sales and report sales or written sales. Is there any way that you think that sales of any sort are being impacted right now?

I guess, just as we're thinking about.

Never basis, you want to talk about it delivered sales and reported sales of written sales is there any way that you think that sales of any sort or being impacted right now.

What you are offering is like.

Speaker 7: what you're offering is like and if so any ability to quantify it. Again, I'm just trying to put context around it. Sure, absolutely. So, you know, from a

And if so any ability to quantify it again I'm just trying to put context around sure absolutely so from a.

Speaker 2: A couple of things right now, you know, we're quoting 4 to 6 months lead time and that is not where we want to be. That's on our lazy boy business. We're shorter on our joy bird business right now.

A couple of things right now we're quoting four to six months lead time and that is not where we want to be thats on our lazy boy business with shorter I would enjoy bird business right now.

Speaker 2: That's not good service to our customers or our consumers. Right? And so it all comes down to our whole focus is on getting that supply chain expansion. You know, up running and running as efficiently as our plans have run over time. That's got to happen.

That's not good service to our customers or our consumers right and so it all comes down to our whole focus is on getting that supply chain expansion.

<unk> running and running as efficiently as our plants have run over time, that's got to happen.

Speaker 2: You know, as we do that, just simply with what's in our backlog, our backlog backlog still at all time highs on on our La-Z-Boy business. So just what's in our backlog alone, we will continue to drive, increase delivered sales and improve profitability quarter on quarter. And we've got a runway again, just with the orders that are already on the books to drive delivered sales incrementally improving week after week.

<unk>.

As we do that just simply with what's in our backlog our backlog backlog is still at all time highs on our La Z Boy business. So just with what's in our backlog alone. We will continue to drive increased delivered sales and.

And improve profitability quarter on quarter, and we've got a runway again, just with the orders that are already on the books to drive delivered sales incrementally improving week after week this quarter.

Speaker 2: Square, you know, a little bit slower than what we had hoped, but we will continue to work through that. And through, you know, as Bob noted, you know, for quarters to come, we expect to see. Incremental improvement in capacity and given even just the orders on the books. That turns into delivered sales right away. At the same time as we're looking at

A little bit slower than what we had hoped but we will continue to work through that.

Through <unk>.

Bob noted for quarters to come we expect to see incremental improvement in capacity and given even just the orders on the books that turns into delivered sales right away at the same time as we're looking at.

Speaker 2: How do you keep filling the copper again? Right? We want to drive that backlog down because we want to be delivering better service to our customers and our consumers. But as we drive that backlog down, we want to be filling filling that that copper with more sales to deliver. And so with that, we will continue to drive. Strengthening written.

Do you keep filling the coffer again, right, we want to drive that backlog down because we want to be delivering better service to our customers and our consumers, but as we drive that backlog down we want to be filling filling that that coffer with more sales to deliver.

And so with that we will continue to drive strengthening written sales and.

Speaker 2: And we believe we can do that through the strength of our brands and with our century vision on really reinvigorating the brand equities as well to ensure we're growing for the long term. Now the exact pace of that on any given quarter may shift around a little bit, but we feel confident that our last trailing 12 months is going to be a great year.

And we believe we can do that through the strength of our brands and with our century vision on really reinvigorating the brand equities as well to ensure we're growing for the long term now the exact pace of that on any given quarter may shift around a little bit, but we feel confident that our last our trailing 12 months is about.

$2 $2 billion in sales for total company.

Speaker 2: 2.2 billion dollars in sales for total company. Pre-pandemic, we are at 1.7, right? So business is up 30% pre-pandemic. And we do believe we will grow.

Pre pandemic, we are at one seven write some business is up 30% pre pandemic and we do believe we will grow we have the building blocks to grow off of that base ongoing and improve margins over time.

Speaker 2: We have the building blocks to grow off of that base ongoing and improve margins over time.

Yes.

Speaker 3: The one thing to add to that, just from a, how do you feel about the business when a consumer...

Bill wanted to add to that just from a.

How do you feel about the business when a consumer walks in and they are paying more money for product and we're telling them, it's still going to take them four to six months to get that product.

Speaker 3: and they're paying more money for product, and we're telling them it's still going to take them.

Speaker 3: four to six months to get that product and our sales are driven, our written sales are still strong.

Our sales are driven our written sales are still strong.

Speaker 3: That's a good indication that the brand is strong and that some of the concerns that are out there that you've written about around stimulus checks going away and other, you know, doom and gloom on the industry. We're a little bit more bullish from that standpoint from an industry perspective. That because we're able to whether the higher price is no longer lead times. We're not happy about either one of those things, but we're here to make sure that the consumers who come in want furniture get that furniture.

A good indication of the brand is strong and that some of the concerns that are out there.

Sure.

You have written about around stimulus checks going away in Dubai.

And gloom on the industry.

We're a little bit more bullish from that standpoint from an industry perspective.

Because we are able to weather the higher prices in the longer lead times not happy about either one of those things, but we're here to make sure that the consumers who come in and what furniture get that furniture.

Absolutely and no question the industry.

Speaker 7: It's facing just unprecedented level of complexities and challenges right now. And you're navigating many of those very, very well. Just just on on some of the guidance for the 4th quarter. I just, I just want to make sure people are doing the math right here. I think if we looked at 12 weeks versus 14 weeks, and on a per week basis, being flat to up that implies that sales may be up in your fiscal 4th quarter. Perhaps high twenties to low thirties percent.

It is facing.

And trusted local.

Complexities and challenges right now and you're navigating many of them as well.

Just just on.

Some of the guidance for the fourth quarter I, just I just want to make sure people are doing the math right here I think if we looked at 12 weeks versus 14 weeks and on a per week basis being flat to up.

That implies that sales maybe up in your fiscal fourth quarter, perhaps high <unk> to low 30% just with the consensus sitting here now at I think only 23% growth.

Speaker 7: You know, just with the consensus sitting here now, I think only 23% growth. I just want to make sure we're doing the math right there. Bye.

Want to make sure we're doing the math right there Bob.

Speaker 3: The math is correct to take the Q3 divided by 12, multiply it by 14, and it will be that we're slightly better than that.

<unk> corrected take your.

Q3 divided by 12 multiply it by 2014 and it will be that were slightly better than that.

Speaker 7: Perfect and then just the last 1 for me about coming back to margins that are clearly a focal point here. I guess, as you reflect on the 3rd quarter and some of the guidance here for 4 Q. How much do you think is kind of clear cut? Oh, this should go away if we just give it time. This is part of the transitory issues we're dealing with in the pandemic.

Perfect and then just the last one for me about.

Coming back to margins that are clearly a focal point here.

I guess as you reflect on the third quarter and some of the guidance here for <unk>.

How much do you think is kind of clear cut this should go away. If we just give it time. This is part of the transitory issues, we're dealing with the pandemic versus issues that may be a little bit more structural and I guess, how if at all as your kind of long term outlook for operating margins for lazy boy changing.

Speaker 7: versus issues that may be a little bit more structural and I guess how if at all is your kind of long term outlook for operating margins for lazy boy changing.

I'll talk about that in a bit and then Bob can can add in.

Speaker 2: Brad, I'll talk about that in a bit and then Bob can can add in. It's a little bit of each of those. So the 1st thing is, you know, we've got we've got 3 brand new plants that we've opened in Mexico as well as, you know, the labor challenges in the US. We've got a lot of new people making furniture and, you know, we've talked in the past about it takes 6 to 9 months to sort of get them up to average.

It's a little bit of each of those so the first thing is we've got we've got three brand new plants that we've opened in Mexico.

As well as.

The labor challenges in the U S. So we've got a lot of new people, making furniture and we've talked in the past about it takes six to nine months to sort of get them up to average.

Speaker 2: kind of average throughput and when that many people are new, that probably slows that down a little bit. So a healthy chunk of what we saw this quarter is we were really, now with the, we just in January opened that third brand new plant. We are every day adding more to the sales and the production capacity.

Kind of average throughput and when that many people are new that probably slows that down a little bit so.

Healthy chunk of what we saw this quarter is we were really now with it we just in January .

<unk> opened that third brand new plant, where every day, adding more to the sales and the production capacity.

Speaker 2: What we saw this quarter is. Those continued and exacerbated disruptions on parts, you know, the different the on the crime outages and so you're always putting different, you know, in the end it's an artesian process. So you're always putting different people together trying to make furniture. So, what we saw is we didn't get the efficiency gains that we expected to in this quarter. That doesn't mean they're not there.

What we saw this quarter is the continued an exacerbated disruptions on parts the different the omicron outages and so you're always putting different in the end, it's an artesian process. They always putting different people together trying to make furniture. So what we saw as we didn't get the efficiency gains that we expected to in this quarter.

That doesn't mean, they're not there and so a big piece of our progress on margin.

Speaker 2: And so, you know, a big piece of our progress on margin and we're just trying to be realistic about, you know, you're dealing with training thousands of people. We're trying to be realistic about how quickly we come up on that. But a big chunk of that...

And we're just trying to be realistic about youre dealing with training thousands of people are trying to be realistic about how quickly we come up on that.

But a big chunk of that.

Speaker 2: Progress forward is controlling our own destiny, right? Is getting better every day at training folks to be able to be very efficient on furniture production and getting better at weathering the uncontrollable. So there's no doubt again.

Progress forward is controlling our own destiny is getting better every day at training folks to be able to be very efficient on furniture production and getting better at weathering. The uncontrollable. So there is no doubt again.

Speaker 2: You know, the chip shortages continue, the actuators, you pick your thing. And we're investing in

Chip shortages continue the actuators you pick your thing and we're investing in inventory to manage as much of that disruption as possible, but there are some things like.

Speaker 2: Inventory to manage as much of that disruption as possible, but there are some things like you can't go buy more chips, right? They just don't exist. So, some of those things are real, but we have to work on our own agility to manage that. So —

You can't go buy more chips right. They just don't exist so.

Some of those things are real but we have to work on our own agility to manage that.

No.

Speaker 2: Yes, there will continue to be disruptions. Yes, they will cause inefficiencies, but a lot of going forward is within our own control of getting better getting our folks trained and being able to weather those things. So that we continue to make progress. And at the end of this, we'll have a better.

Yes, there will continue to be disruptions, yes, they will cause inefficiencies, but a lot of going forward is within our own control of getting better getting our folks trained and being able to weather those things. So that we continue to make progress and at the end of this.

We will have a better.

A better distributed footprint.

Speaker 2: A better distributed footprint of where our manufacturing facilities lie across all of North America that sets us up with a. A better overall structure cost structure and service structure. Than we had Pre pandemic, even though I think some of the external headwinds will probably inflation and so forth will exist for the longer term.

Of where our manufacturing facility is live across all of North America that sets us up with that.

A better overall structure cost structure and service structure than we had pre pandemic.

Even though I think some of the external headwinds will probably inflation and so forth will exist for the longer term.

Very helpful. Thank you so much melinda.

Thanks, Brad.

There appear to be no further questions in queue do you have any closing comments you'd like to finish with.

Speaker 1: There appear to be no further questions in queue. Do you have any closing comments you'd like to finish with?

Thanks Holly.

Speaker 4: Thank you everyone for your time this morning. If you have follow-up questions, please be in touch and have a great day. Bye. Bye

Thank you everyone for your time. This morning, if you have follow up questions. Please be in touch and have a great day bye bye.

Yes.

Speaker 1: Thank you ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.

Okay.