Q3 2025 La-Z-Boy Inc Earnings Call
Mark Becks: Good morning and welcome to the Lazy Boy Fiscal 2025 third quarter conference call.
Mark Becks: At this time, all participants are in a listen-only mode. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Mark Becks, Director of Investor Relations and Corporate Development. Mark, the floor is yours.
Mark Becks: Thank you, Jenny. Good morning, everyone, and thanks for joining us to discuss our fiscal 2025 third quarter.
Speaker Change: With us today are Melinda Whittington, Lazy Boy Incorporated's Board Chair, President and Chief Executive Officer, Taylor Luebke, Lazy Boy's SVP and CFO, and Bob Lucian, Lazy Boy's retiring CFO.
Speaker Change: Melinda will open and close the call, and Taylor will speak to segment performance and the financials midway through. We will then open the call to questions.
Speaker Change: 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 Change: Before we begin the presentation, I would 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.
Speaker Change: Although we believe these statements to be reasonable, our actual results could differ materially.
Speaker Change: The most significant risk factors that could affect our future results are described in our annual report on Form 10-K.
Speaker Change: We encourage you to review those risk factors, as well as other key information detailed in our SEC filings. 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.
Speaker Change: which are also included as an appendix at the end of our conference call slide deck.
Speaker Change: With that, I will now turn the call over to Melinda Whittington, Ladies Boy Incorporated's Board Chair, President, and Chief Executive Officer.
Thank you, Mark, and good morning, everyone.
Speaker Change: Yesterday, following the close of market, we reported results for our January-ended third quarter. Our results reflect the steady progress we've made to build a more agile business and create our own momentum to drive growth in what is still a very challenged furniture industry.
Speaker Change: We delivered sales growth across each of our segments, led by retail and punctuated by strong same-store sales growth.
Speaker Change: And, within our Wholesale segment, our core North American Lazy Boy brand continues to post sales growth and margin expansion.
Speaker Change: Highlights for the quarter included consolidated delivered sales of $522 million, up 4% versus the prior year. Non-GAAP operating margin expansion up 20 basis points versus last year.
Speaker Change: And within these total company results, our retail segment sales increased an impressive 11%, led by same-store sales growth.
Speaker Change: Results were also buoyed by acquisitions and new stores as we continue progress against our Century Vision growth strategy.
Speaker Change: During the quarter, we opened three new company-owned Lazy Boy Furniture Galleries, completed the acquisition of a two-store independent network in Ohio, and signed an agreement to acquire another two-store independent dealer in Michigan, which is expected to close in the fourth quarter.
Speaker Change: These strong results reflect delivered sales and non-GAAP operating margin above a year ago and at the high end of our guidance range. Additionally, we posted top-line sales growth for the third consecutive quarter despite the general malaise of the broader furniture industry.
Speaker Change: Our relentless focus on solving the needs of the consumer with comfort and quality, and controlling what we can control with strong execution, has kept Lazy Boy top of mind.
Speaker Change: The environment in which we operate continues to be volatile and the fundamentals within the furniture and home furnishings industry continue to be challenged with existing home sales near 30-year lows and steep mortgage rates. However, these trends will eventually turn in the favor of our industry.
Speaker Change: And in the meanwhile, in spite of these industry headwinds, Lazy Boy Incorporated is growing. Our vertically integrated model and custom handcrafted furniture with strong speed of delivery is what consumers are valuing in a highly dynamic environment.
Speaker Change: This foundation has led Lazy Boy Incorporated to be successful for the past century and will continue to be the cornerstone of our philosophy for our century vision strategy over the next hundred years.
Speaker Change: Shifting to written sales trends, during the quarter total written sales for our company-owned retail segment increased an impressive 15% versus last year's third quarter.
Speaker Change: And importantly, written same-store sales for this segment, which exclude the benefit of newly opened stores and acquired stores, increased 7% versus the prior year third quarter.
Speaker Change: Same store sales were positive across each month of the third quarter and strongest in November around the key holiday sales period.
Speaker Change: Traffic, while still negative, improved from the double-digit declines experienced at the beginning of our fiscal year.
Speaker Change: We believe our marketing campaigns are resonating to expand reach of the La-Z-Boy brand, and superior in-store execution again led to higher conversion rates, average ticket, and design sales year over year.
Speaker Change: Written same-store sales for the entire Lazy Boy Furniture Galleries network of 362 stores increased 5% versus the prior year.
and on our Joybird business.
Speaker Change: written sales increased 10% in the quarter versus a year ago. We're pleased to see this business gaining momentum even in the challenged environment with improved retail traffic and strengthening execution across the business, particularly in-store.
Speaker Change: According to recently released U.S. Census Bureau data, the furniture and home furnishing industry grew 5% during our fiscal third quarter, November through January.
Speaker Change: The furniture-specific subcategory, reflecting only November and December, as it's reported on a one-month lag, increased 6%.
Speaker Change: Across our businesses, our written sales compare favorably to these industry results and reflect continued market share gains in the quarter.
Speaker Change: Looking to the longer term, I want to recap our sensory vision initiatives to strengthen our enterprise for the future.
Speaker Change: Recall, this is our strategic framework setting up Lazy Boy, Inc. for the next 100 years as we celebrate our first century in 2027, driving top-line growth at a pace double the market and delivering consistent double-digit operating margins over the long term.
Speaker Change: The continued growth in our business in the quarter is a testament that our Century Vision strategy is working.
Speaker Change: The furniture and home furnishings category is highly fragmented and is one of the largest brands in North America We are well positioned to continue to strategically grow our business and gain share
Speaker Change: We have consistently expanded Lazy Boy's brand reach over the past several years and will continue to execute the strategy to disproportionately benefit when we do experience sustained industry tailwinds.
Speaker Change: A key pillar of our expanded brand reach is our total furniture galleries network, which ended the quarter at 362 stores. We remain on track to grow the total Lazy Boy Furniture Galleries network to over 400 stores within the next several years, with nearly 20 net additions in the last two years alone.
Speaker Change: Additionally, we are expanding the company-owned portion of the network. Our retail segment has increased to 197 stores, up 13 in the last year, and now represents 54% of the total Lazy Boy Friends and Galleries network.
Speaker Change: We opened three new company-owned stores in the quarter, in Queen Creek, Arizona, Newington, New Hampshire, and Bellingham, Washington, and closed one.
Speaker Change: Furthermore, we acquired two independently owned stores in Ohio during the third quarter and signed an agreement to acquire two more in Michigan in the fourth quarter.
Speaker Change: Growing our company-owned furniture gallery stores is a key driver to our success as we control the entire end-to-end consumer experience and develop more value-added consumer insights.
Speaker Change: And these store acquisitions are immediately accretive to our profitability, allowing the company to benefit from the integrated wholesale and retail margins.
Speaker Change: We're also growing the business through our refined channel strategy. The La-Z-Boy brand is showing up in more showrooms as we are expanding strategic distribution while increasing our share of voice in the marketplace to provide a broader range of consumers access to the La-Z-Boy brand.
Speaker Change: As our business scales, we continue to incorporate a more data-driven approach to product development. These deeper consumer insights enable us to design more on-trend merchandise.
Speaker Change: A great illustration of this is our expanded motion furniture offerings where we launched a new consumer relevant assortment at High Point Furniture Market last fall.
Speaker Change: Our North American supply chain gives us the ability to produce a wide variety of customized fabric and leather options with speed to market in as little as four to six weeks.
Speaker Change: This will continue to provide a key point of differentiation and allows us to solve for the growing desire for personalization in consumers' homes.
Speaker Change: Another core pillar of Century Vision growth strategy to expand Lazy Boy reach is through our Long Live the Lazy Brand campaign. In just a short time since launching the campaign, we are expanding both consideration and purchase intent across a broader range of consumers, including Millennials and Gen X.
Speaker Change: This is achieved by targeting the confidently comfortable consumer and winning more business while also staying true to our heritage of comfort and quality.
Speaker Change: Lazy Boy is becoming more socially relevant and leaning in to cultural trends when appropriate. And we continue to look for new and innovative ways to connect with brighter audiences.
Speaker Change: In November, we introduced a test and learn concept store in Lincoln Park in Chicago.
Speaker Change: This smaller format store was designed with an intent to capture a new generation of consumers. A recliner runway, highlighting our most foundational products in a new and innovative way, is surrounded by lifestyle rooms, from gamer to heritage.
Speaker Change: Included in our learning agenda, we'll gain deep consumer insights that will inform next steps to use in updating our approach in our existing footprint, as well as inform experiments with entirely new concepts.
Speaker Change: Joybird is another core pillar of our Century Vision where we're optimizing the brand to deliver a balance of sales growth and profitability. Joybird had a strong quarter with positive delivered and written sales trends and operating performance improving against the prior year and resulting in breakeven profit.
Speaker Change: The digitally native brand is benefiting from strong execution in its retail footprint as it delivers a seamless omni-channel experience and enables consumers to bring their own personalized styles to life.
Speaker Change: I'm excited to highlight Joybird's most recent collaboration, the Joybird Pantone Collection, a first-of-its-kind furniture collaboration.
Speaker Change: Joybird had the honor of being the first and exclusive furniture partner for Pantone's Caller of the Year 2025 release.
Speaker Change: The collection features Joybird's top-selling performance fabric, Royale, and stars the Pantone Color of the Year 2025 Mocha Mousse in more than 300 silhouettes.
Speaker Change: The collaboration leverages Pantone's color authority and decades-long expertise while showcasing Joybird's color-centric brand focus.
Speaker Change: Strengthening our foundational capabilities, including building a more agile supply chain, is our final pillar of Century Vision.
Speaker Change: In this challenging global landscape, we view our North America manufacturing footprint, with the majority of final assembly in the United States, as a key differentiator in our ability to manufacture high-quality, comfortable custom furniture with quick speed to market.
Speaker Change: Limitative data gathered from independent surveys highlights our commitment to doing what is right for our business and all stakeholders.
Speaker Change: As we enter the final quarter of our fiscal year.
Speaker Change: We continue to expect a choppy macro environment overall housing fundamentals and housing affordability remains challenging and we also continue to monitor and plan against the evolving global tariff and trade environment.
Speaker Change: However, the structural housing shortage and pent up demand of the category remained key opportunities as we look to the future.
Speaker Change: And in the meantime, we remain optimistic about our ability to continue to outperform the market while investing in our business through our central vision strategy.
Taylor Luebke: Now, let me turn the call over to Taylor to review the financial results in more detail Taylor.
Taylor Luebke: Thank you Melinda and good morning, everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis, we believe the non-GAAP presentation better reflects underlying operating trends and performance of the business.
Taylor Luebke: 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.
Taylor Luebke: On a consolidated basis fiscal 2025 third quarter sales grew 4% to $522 million versus the prior year driven by strong same store sales acquisitions and new stores in our retail business momentum in our core North America Lazy boy wholesale brands and strong sales in our jewelry business.
Taylor Luebke: GAAP operating income was $35 million and non-GAAP operating income was $35 million, an increase of 7% versus last year's third quarter.
Taylor Luebke: Consolidated GAAP operating margin was six 7% and non-GAAP operating margin was six 8%, reflecting a 20 basis point increase versus last year, driven by lower input costs, including reduced commodity prices and improved sourcing partially offset by the impact of the significant customer transition and our international wholesale.
Taylor Luebke: <unk>.
Taylor Luebke: GAAP diluted EPS was <unk> 68 for the third quarter versus 66 in the prior year quarter.
Taylor Luebke: non-GAAP diluted EPS was <unk> 68.
Taylor Luebke: Versus 67 last year.
Taylor Luebke: As I move to the segment discussion and my comments from here will focus on our non-GAAP reporting among specifically stated otherwise.
Taylor Luebke: Starting with the retail segment for the quarter delivered sales were $228 million of 11% over the prior year's third quarter due to foundational same store sales growth independent La Z boy furniture dollars acquisitions and new stores.
Taylor Luebke: 7% written same store sales growth was driven by solid conversion rates average ticket and design sales all of which once again improved year over year.
Taylor Luebke: Retail non-GAAP operating margin was 10, 7% versus 10, 9% holding relatively stable as we absorbed the increased selling expenses and fixed costs supporting our long term strategy of growing our retail business.
Taylor Luebke: For our wholesale segment delivered sales for the quarter increased 2% to $363 million driven by our core North America Lazy boy brand through favorable shift in product and channel mix as a result of higher sales to our laser word furniture dollars, partially offset by the customer transition in our international business.
Taylor Luebke: non-GAAP operating margin for the wholesale segment was six 5% versus six 4% in last year's third quarter, increasing 10 basis points year over year, driven by gross margin expansion, including lower input costs and favorable foreign exchange and margin expansion in our core North American Lazy boy brand in our wholesale business. This.
Taylor Luebke: This progress was again, partially offset by significant deleverage in our international wholesale business.
Recall, we're working through a significant customer transition in our UK business as we move to a new strategic partnership with DFS, the leading UK furniture retailer, our strategic partnership with DFS will benefit our U K business and grow the lazy boy brand, but it will take time to fully complete the transition as we optimize our merchandising and go to.
Taylor Luebke: Our market approach in the midst of a highly challenged U K consumer demand environment.
Taylor Luebke: <unk> reported in corporate and other delivered sales grew to $37 million up 9% versus the prior year quarter, driven by improved retail traffic in execution across the business.
Taylor Luebke: <unk> operating margin performance also saw year over year improvement from higher gross margins driven by favorable product mix and SG&A leverage on higher sales. This resulted in breakeven operating profit for the quarter as this business achieves foundational stability from which to grow.
Taylor Luebke: Moving onto our consolidated non-GAAP gross margin and SG&A performance for fiscal 2025 third quarter.
Taylor Luebke: Consolidated non-GAAP gross margin increased 160 basis points versus the prior year third quarter gross.
Taylor Luebke: Gross margin expansion was driven by the positive shift in consolidated mix towards our retail segment, which has a higher gross margin rates in our wholesale segment, along with lower input costs and favorable foreign exchange.
Taylor Luebke: non-GAAP SG&A as a percent of sales for the quarter increased by 140 basis points compared with the same period last year, primarily due to changes in consolidated mix to our retail segment, which carries a higher fixed cost structure relative to wholesale and reduced leverage in our wholesale segment due to lower sales in our international business.
Taylor Luebke: Yes.
Taylor Luebke: Our effective tax rate on a GAAP basis for the third quarter was 25, 1% compared to 22% for the prior year the.
Taylor Luebke: The increase in our effective tax rate was primarily the result of favorable return to provision adjustments impacting the prior year absent. These discrete items the effective tax rate would have been 25, 6% for the prior year third quarter.
Taylor Luebke: Turning to cash we ended the quarter once again with a strong balance sheet $315 million in cash and no externally funded debt.
Taylor Luebke: We generated $57 million in cash from operating activities in the quarter, an 18% increase versus last year.
Taylor Luebke: Year to date cash flow from operations was 125 up 19% from last year's comparable period.
Taylor Luebke: We invested $19 million in capital expenditures during the quarter, primarily primarily related to lazy boy furniture galleries, driven by new stores and Remodels. We also spent $7 million on aggregate acquisitions during the period.
Taylor Luebke: For the quarter, we returned approximately 20 million to shareholders via dividends and share repurchases, including 9 million paid in dividends.
Taylor Luebke: Additionally, we repurchased 271000 shares in the quarter, which leaves 4 million shares available under our existing share repurchase authorization.
Taylor Luebke: Year to date <unk>.
Taylor Luebke: $90 million has been returned to shareholders of approximately 40% versus the prior year comparable period.
Taylor Luebke: We continue to view share repurchases and our dividend is an attractive use of our cash and positive return to shareholders. Our capital allocation targets is to reinvest 50% of operating cash flow back into the business and returned 50% to shareholders and share repurchases and dividends over the long term.
Speaker Change: Before turning the call back to Melinda, Let me highlight several important items through the remainder of our fiscal 2025 fourth quarter.
Speaker Change: Consistent with our century vision strategy, we continue to target sales growth double the industry growth rate and double digit operating margins over the long term with the benefit of more normalized industry performance.
Speaker Change: Assuming no significant changes in tariffs, we expect fourth quarter delivered sales in the range of $545 million to $565 million.
Speaker Change: Further we expect fourth quarter non-GAAP operating margin to be in the range of eight 5% to 95%.
Speaker Change: Recall significant winter weather events in January last year resulted in some shifting of delivered sales from Q3 to Q4 in last year's results accounting for this shift in base period results and at the midpoint of our fourth quarter range, we expect to grow 2% in the second half of our fiscal year.
Speaker Change: On the external front the current situation on tariffs and global trade policies is dynamic and we have plans ready for a range of scenarios that leverage the strength and agility of our supply chain as well as potential pricing actions.
Speaker Change: Across the network, we will open five to seven new Lazy Boy furniture gallery stores in the fourth quarter, depending on final permit timing. This will bring new store openings for the year to 14% to 16 of which the majority are company owned.
Speaker Change: We expect our tax rate for the full fiscal year to be in the range of 25, 5% to 26, 5%.
Speaker Change: We anticipate non-GAAP adjustments for purchase accounting charges for the year to be in the range of one to.
Speaker Change: To <unk> <unk> per share.
Speaker Change: We expect capital expenditures to be in the range of $70 million to $80 million fiscal 'twenty five as we invest to strengthen the company for the future consistent with our century vision strategy and finally presuming no significant worsening in macroeconomic trends, we expect to continue share repurchases at dollar levels consistent with pre COVID-19.
Melinda Whittington: Levels I will now turn the call back to Melinda.
Melinda Whittington: Thanks Taylor.
Melinda Whittington: Im excited about the momentum that is building across our enterprise our strong execution, even despite a still challenging industry backdrop is leading to both sales growth and margin expansion, we are thoughtfully and efficiently controlling what we can control.
Melinda Whittington: And we will continue to drive our century vision strategy with focus on expanding our lazy boy brand reach disproportionately growing our company owned retail segment improving.
Melinda Whittington: Improving agility across our supply chain and driving efficiency and margin expansion.
Melinda Whittington: Before we close our prepared remarks I'd like to note that lazy boy incorporated has been named to Forbes list of America's Best large employers for 2025. This is a remarkable achievement and our first time ranking among this distinguished list, which is determined using a <unk>.
Melinda Whittington: <unk> of independent survey data.
Melinda Whittington: And finally, I'd like to congratulate and thank our entire team for yet another quarter of outstanding results.
Melinda Whittington: With that I'll turn it back to Marc. Thank you Melinda we will now begin the question and answer portion.
Melinda Whittington: Jenny Please review the instructions for getting into the queue to ask questions.
Speaker Change: Thank you very much if you would like to ask a question you can press star one on your phone keypad now a confirmation tone will indicate that your line is in the queue. You May press star two if you would like to remove your question from the keys for anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys.
Speaker Change: Please wait a moment, whilst we poll for questions.
Speaker Change: Thank you. Your first question is coming from Brad Thomas of Keybanc Capital Brad Your line is live.
Speaker Change: Hey, good morning, everyone. This is Taylor on for Brad This morning, Congrats on a good quarter.
Speaker Change: Just curious malinda, if you can speak a little bit more to cadence in the trends and.
Speaker Change: It is a trend throughout the quarter I know you spoke to positive months throughout the quarter with Nomura.
Speaker Change: November being strong, but I think Taylor had mentioned January had a little bit of a shift. So is there any additional color you can provide and then related to that.
Speaker Change: Any thoughts on what Youre seeing so far in the fourth quarter.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Good morning, So a couple of thoughts we.
Speaker Change: Certainly we've been talking for a while about the consumer is coming out more around around those peak holidays. Those key holidays that we've always seen but even more so here in this kind of malaise industry. So our strength during the quarter was strongest during the holiday period.
Speaker Change: But overall year on year strength across all three months of our quarter as far as February is concerned I mean, we're still super early in our quarter.
Speaker Change: Early in the month and really still just seeing.
Speaker Change: Presidents' day results starting to come in from across all of our businesses.
Speaker Change: Overall again pleased with execution still comfortable with what we're doing there, but we didn't see traffic as robust this president's day.
Across the industry as what we've seen on some of the other recent holidays, but still way too early to tell kind of is that just weather related last year. The end of January was bad. This year. It's early February seems to be bad across more of the states. So time will tell it continues to be a choppy environment.
Speaker Change: And on the phasing question I would just point references more toward the written trends, but more impacted our ability to deliver product.
Speaker Change: As.
Speaker Change: Winter weather wise to shut down some of our plants complicated being able to deliver.
Speaker Change: Precise calculation on exactly what shifted which is why we looked at our total back half of the year, which we're really proud.
Speaker Change: The outlook about a 2% growth year over year across the period.
Speaker Change: Gotcha. Thank you.
Speaker Change: And then maybe if I could just touch on margins Taylor is there any more color you can provide on some of the puts and takes for the eight and a half.
Speaker Change: The non <unk> operating margin you're guiding to for this fourth quarter I guess, what would get you to the low end and high end and anything to keep in mind.
Taylor Luebke: Yes, I'd start with a couple a couple of points one is we're <unk>.
Speaker Change: Incredibly pleased at.
Speaker Change: The sustainability of margin progression on our core North America Lazy boy wholesale business, which is the one part of the business that was most thrown into I'll call. It.
Speaker Change: Volatility through the pandemic and out of it and we're seeing really good margin expansion now three consecutive quarters also very pleased with where <unk>. This time last year, losing money to now breakeven, which is a good foundation for future growth.
Speaker Change: And on retail.
Speaker Change: Where we want it to be as we know.
Speaker Change: Deal with the general malaise in the broader industry, but we're controlling what we can control.
Speaker Change: Turning up new furniture galleries, as well as completing independent acquisitions. So.
Speaker Change: Those are all positives looking into quarter four.
Speaker Change: And then on the opposite we have challenges on our international business has talked in your prepared remarks, which.
Speaker Change: From a wholesale segment, a 50 basis point impact.
Speaker Change: On that business and it.
Speaker Change: Will improve over time, but it's going to take some time to grow our partnership.
Speaker Change: With DFS so.
Speaker Change: Kind of what we saw in quarter three we expect.
Speaker Change: To transition in quarter four.
Speaker Change: And positively looking forward you know we're standing up.
Speaker Change: A lot of new stores, we still have three this quarter three last quarter, our five to seven in quarter four of those have a little bit of short term impacts.
Speaker Change: But exactly what that is exactly what we said we would do and then overtime into next year, we'll start to see those margins all benefit the total segment.
Speaker Change: Got you. Thank you and then maybe if I could just.
Speaker Change: Can I sneak one more in here maybe for Melinda.
Speaker Change: Talks about their strategic partnerships you've had.
Speaker Change: Success with Schlumberger lens room to go.
Speaker Change: And others, but can you kind of update us on the progress of those partnerships and maybe speak to the pipeline of potentially rolling out some more strategic partnerships.
Speaker Change: Absolutely.
Speaker Change: A couple of lines yeah, those those b to B partners are foundational to us and remain important to our focus across some of the smaller.
Speaker Change: Some of our smaller partners, we continue to invest in what we call our comfort studios, which is branded space within the space and we have call. It 500 plus of those type of spaces, and really making sure that branding comes through with those so.
Speaker Change: So thats something thats been again foundational that we're not walking away from and in fact, we're refreshing and we've got quite a few of those in the pipeline to refresh and with updated brand materials and everything but to your point those bigger regional strategic partnerships, what we're seeing in the industry is.
Speaker Change: Those that are doing better in this ongoing challenging environment tend to be of the of the multi branded retailers are those let's call them, a little bit larger regional entities and we like them for a couple of reasons. One we've talked a lot about about partnerships like rooms to go.
Speaker Change: Up here in the North it's Gardner white in the Detroit area.
Speaker Change: Longtime partners slumberland that.
Speaker Change: Advertise heavily and that's great because that remains the brand that remains the consumer about our brand regardless of where they choose to shop, and so that really increases our share of voice as well as helps us get our products select product out to consumers that we might not otherwise capture with our furniture galleries.
Speaker Change: And our recently, we've expanded our furniture row partnership it's been about two years into into the rooms to go and there does continue to be a pipeline out there, but I think equally as important will be just growing with those existing partnerships and really doing more with with the.
Speaker Change: The strategic ones as you mentioned.
Speaker Change: Great. Thank you I'll pass it along.
Brian: Thank you Brian thank.
Speaker Change: Thank you.
Speaker Change: And your next question is coming from Bobby Griffin of Raymond James Your line is live.
Speaker Change: Thank you and good morning, everybody I appreciate you taking my questions.
Speaker Change: Congrats on the good momentum during the quarter as well I guess, the first aspect I want to hit on we're making some progress in inside the core wholesale segment. So maybe can we talk a little bit about that on the margin front. Some more from an efficiency standpoint, where are we in getting back that business back to the efficient.
Speaker Change: Patiency levels that you kind of are used to in wholesale and I guess, if you exclude the international disruption, where we can kind of think about it on a core on core basis.
Speaker Change: Bobby Thanks for your questions. We're pleased with the progress and as mentioned, particularly on our core North America wholesale business, which has now grown margin.
Speaker Change: For the first three quarters of the year versus the comparable periods.
Speaker Change: So our supply chain from procurement through manufacturing through distribution is making headway across all fronts. So we're really pleased with the progress end of the day, what really needs to get us back to our longer term goal, because we need volume, which right now are still depressed from where we used to be primarily driven by the fundamentals, which drive the furniture industry is really.
Speaker Change: A healthy housing market and whether new home starts existing home sales, which, albeit we've seen a little bit of a tick up in the last couple of months is still decades decades low so.
Speaker Change: We continue to focus on what we can control which is improved.
Speaker Change: Improvements in efficiencies that we can drive by the end of the day to get over the hump per say, we need some sustained industry growth.
Speaker Change: And then so.
Speaker Change: And I think you mentioned youre talking to lazy boy brand and what about the non lazy boy brand and stuff that goes through wholesale I mean, how is that running today. There are opportunities there from efficiency standpoint, and I guess I'm just getting that ex the international transition or are we just basically left with volume and you guys got the factories back where you want them is what I'm trying to kind of get out.
Speaker Change: I would tell you that general theme on volume is consistent across our entire wholesale segment and whether I guess La Z boy wholesale whether it's our England division, whether it's our case goods, it's all impacted by the general industry.
Speaker Change: Certainly we continue to drive ongoing efficiency and improvement on our wholesale business.
Speaker Change: You saw this quarter, even at that even in a challenged volume levels are.
Speaker Change: Our team in the supply chain is doing two things there they are creating an agility and building and agility for this macro environment that is unlike anything we've had in the past.
Speaker Change: While still making progress towards getting back to the kind of margins that we that we touched on just before the pandemic. So.
Speaker Change: To your point, Bobby Yes, there is still headroom.
Speaker Change: Volume helps a lot, but meanwhile, every quarter, particularly in that core business, we are seeing progress.
Speaker Change: Okay, and then when you think about the international transition has taken place during some of that disruption.
Speaker Change: Are we past the peak and that disruption and I guess, where im getting at is that become an incremental tailwind a little bit less of a headwind in FY 'twenty six or is there should we assume that that headwind continues for FY 'twenty six against the wholesale margin.
Speaker Change: I would expect you'll see incremental improvement, but it will be slow it will be slow and steady.
Speaker Change: And then you really you've taken you've taken our largest customer globally and completely change them out. So I actually just just meant with that team and Vegas market a few weeks ago, they're super happy with where the where the partnership is but.
Speaker Change: It's a brand new ground up partnership so it's going to take some time.
Speaker Change: And in the meantime, we're we're not just waiting for it.
Speaker Change: And I agree improve we're driving both top to top off call. It commercial levers growth partnership, but we also continue to work in action.
Speaker Change: Efficiencies across our international organization, including right sizing our manufacturing capacity.
Speaker Change: To help improve those results sequentially looking forward.
Speaker Change: Perfect.
Speaker Change: And then maybe just on the guidance unpacking it a little further.
Speaker Change: When you look at the midpoint is roughly flat year over year you guys throughout the prior three quarters are grown on a year over year basis is that only just a function of the shifts daily that you talked about or did you see kind of something in the quarter that gives you a little bit more caution than maybe what we were seeing earlier in the quarter. The March checks I guess have indicated some.
Speaker Change: Strength in November, but then a slowdown in China.
Speaker Change: Or kind of as we move into 'twenty five.
Bobby Griffin: Yes, Bobby.
Bobby Griffin: Answered in a couple of ways. One is the international we just talked through we will have again, a shorter term impact in quarter four.
Bobby Griffin: So that doesn't just alleviate within the next quarter.
Bobby Griffin: As mentioned, we have plans to stand up 5% to seven again, new ways of our furniture galleries stores that has a moment in time call. It profit impact as we start to ramp those up and Thats on top of six we've stood up in quarter, three a quarter or two so we have that shorter term impact on our retail business, which is which is fine which is exactly what we said we.
Bobby Griffin: We're going to do and what we what we wanted to do.
Bobby Griffin: So those I think are the primarily two impacts to the ranges as outlook and the weather shifting again it not us.
Bobby Griffin: Precise does have some level of impact.
Bobby Griffin: As regards to exiting the quarter.
Speaker Change: We saw a strong November has talked in the written remarks.
Bobby Griffin: Again more positive.
Bobby Griffin: The balance of the quarter, but as we look forward, we expect the consumer to still be choppy.
Bobby Griffin: The fundamentals underneath.
Bobby Griffin: Again, the furniture industry, primarily housing or still just kind of status quo to where we've been so all of that together.
Speaker Change: Thanks for driving surgery put out.
Speaker Change: And I guess last one for me Joy bird nice bright spot in the quarter as well returning to breakeven and some nice growth I think I think in a very marked it mentioned foundation for future growth. So maybe you can unpack that a little bit and what you see from the Georgia Boot brand and is there any update or different view on what the potential is on a multiyear basis.
Speaker Change: For that brand.
Speaker Change: Sure.
Speaker Change: As you recall joy.
Speaker Change: <unk> was on a really nice growth trajectory in the middle of the pandemic.
Speaker Change: Along with many many primarily E com digital kind of businesses, we have pulled back when a lot of them went out of business.
Speaker Change: We've pulled back to really get the fundamentals right on that business and I feel like we're there and that is that's not just on the sort of the math.
Speaker Change: <unk> financial fundamentals, but it is on the execution of who we are as a brand and how are we going to bring that to life and we need to keep in mind <unk> fits to sort of our capabilities as a as an enterprise is that because of this same north America base footprint Joy bird can offer customization.
Speaker Change: And enable the consumer to really express themselves and then joined Bristol Bran.
Speaker Change: Brand stands for that expressive color color forward, if you will kind of customized furniture. So I feel good about knowing what the brand stands for as well as the financial discipline.
Speaker Change: As we move forward, so with that and we talked several years ago about seeing a near term footprint or at least the medium term footprint to 25 stores. We got to 12, when we pause that we've turned that final back on now that takes a little bit of time to start up but and I would see us at a pace of call. It three to four stores next year.
Speaker Change: For Joy Bird and then we'll continue we're going to be we're going to be cautious because the environment is still challenged but we feel like the fundamentals are there and we're ready to start investing back into the same joy bread grow while still keeping a close eye on making progress on that bottom line.
Speaker Change: Thank you I appreciate the details and best of luck you are wrapping up the fiscal year.
Thank you. Thank you.
Speaker Change: Thank you very much just a reminder, if there are any remaining questions. You can press star one on your phone keypad now.
Your next question is coming from Anthony <unk> of Sidoti <unk> Company Anthony Your line is nice.
Anthony: Thank you Ron and good morning, everyone and thanks for taking the questions certainly nice to see the trends in the written sales being up just curious did you guys see any notable differences in terms of your different markets or regions.
Speaker Change: To call out there as far as the third quarter trends.
Anthony: Nothing that.
Anthony: Nothing that really stands out dramatically of course again at any given time, there's what other weather event or whatever but nothing dramatic across markets.
Speaker Change: Got you Okay. Thanks, Melinda and then on the <unk>.
Speaker Change: Retail segment your operating margin was down slightly given increased selling expenses and fixed costs.
Speaker Change: Is that primarily advertising or can you share more details on that.
Speaker Change: Should we think about these expenses going forward.
Speaker Change: Yes, Anthony it's really a couple of things, it's the pace of new stores that we've stood out both in the quarter as well as quarter two six stores over very short period of time again, those Dol started going level. It takes time to ramp up.
Speaker Change: As well as you know over quarter three was one of our bigger written periods around the holidays. So we have more commissions that hit us in the quarter.
Speaker Change: So I think those are the two primary drivers for retail.
Speaker Change: Alright, Thanks, Taylor and then.
Speaker Change: As far as thinking about the potential impact of tariffs. So obviously your guidance as you said excludes any tariff impact.
Speaker Change: It needs to be a dynamic situation, but.
Speaker Change: Can you provide any sort of more detailed as far as how you're thinking about that if there are tariffs on Canada, and Mexico and elsewhere.
Speaker Change: Any additional.
Speaker Change: Thank you. So you can highlight as to how you were thinking about that.
Speaker Change: Yes Anthony.
Anthony: On the tariff front, our hope is it's just noise because we think at the end of the day, it's going to a more challenging consumer who has been challenged now for a while and where you went to a healthy consumer.
Anthony: But with that being said since November we've been planning on a wide range of scenarios, whether Mexico, Canada or other markets. So we have.
Anthony: Developed a playbook to respond to whatever our crude happen, which will again leverage our global supply chain from sourcing through where we manufacture as well as potential pricing actions to ensure we're mitigating whatever could be put into place.
Anthony: So we're planning for all eventualities and we're acting on only on one fact.
Anthony: Today. There is there is not much of that and what has gone into place. We've taken action to ensure we are mitigating the impact.
Anthony: Yes.
Speaker Change: Got it alright, well, thank you very much and best of luck.
Speaker Change: Thanks, Anthony Anthony.
Speaker Change: Thank you very much while we appear to have reached the end of our question and answer session. I will now hand back over to the management team for any closing remarks.
Speaker Change: Thanks to everyone for joining us Melinda Taylor and I will be in our offices to take any follow up calls thanks and have a great day.
Speaker Change: Thank you very much. This does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.