La-Z-Boy: A Cushioning Against the Void?

by

La-Z-Boy (LZB 6.51%) stock took a bit of a tumble Wednesday, falling a respectable 7.3% despite, as it were, managing to not completely fail in its latest accounting ritual. One might think a company beating expectations would be rewarded, but then one would be assuming logic applies to the markets. A common, and frequently disastrous, mistake.

The oracles – analysts, we call them now, though ‘oracles’ feels more accurate given their success rate – predicted a mere $0.59 per share and $535.4 million in revenue. La-Z-Boy, with a flourish of numbers and a dash of optimistic accounting, delivered $0.61 and $541.6 million. A victory, of sorts. Though, as with most victories, a closer inspection reveals a landscape littered with caveats and the lingering scent of slightly-used spreadsheets.

La-Z-Boy Q3: The Numbers Tell a Story (Sort Of)

Sales grew 4% year-over-year, a respectable climb. Retail sales, buoyed by the inherent human desire for comfort and the avoidance of floor-based existence, were up 11%. Wholesale, however, merely shuffled forward by 1%, suggesting a reluctance amongst those who furnish the world to embrace the reclining life. A worrying trend, frankly.1

The earnings, ah, the earnings. La-Z-Boy “beat” them, yes, but with a cunning sleight of hand. The headline number, $0.61, was a non-GAAP figure. GAAP – Generally Accepted Accounting Principles – are the rules the grown-ups are supposed to follow, but occasionally, a bit of creative accounting is deemed necessary. The GAAP number was a mere $0.52. A significant difference. One might even call it… illusory. Non-GAAP profits declined 10%, despite the increase in sales. GAAP profits? A rather more alarming 24% drop. The operating profit margin contracted by 120 basis points, shrinking to a slender 5.5%. A worrying sign, like a favourite armchair developing a distinct lean.

Loading widget...

Is La-Z-Boy Stock a Buy? Or a Comfortable Place to Lose Money?

The good news, and it exists, is that La-Z-Boy remains profitable. And, crucially, it continues to generate free cash flow. $119 million in the first nine months of its fiscal year, a 61% increase. Management hasn’t divulged its expectations for Q4, but hints at continued revenue growth (at least $560 million) and improving non-GAAP operating margins. Which, translated from corporate-speak, means they’re hoping things won’t get too much worse.

Assuming they maintain this momentum, La-Z-Boy could generate at least $158 million in free cash flow this year. On a $1.5 billion market capitalization, that’s a price-to-free cash flow ratio of less than 10. Not bad. Not spectacular, but not a complete disaster either. It’s the financial equivalent of a slightly worn, but still perfectly functional, cardigan.

Add in a 2.6% dividend yield, and the stock appears… comfortably cheap. Perhaps not a screaming bargain, but a reasonably priced haven in a world increasingly given over to chaos and questionable investment schemes. A place to rest one’s financial weary head, if you will.

1It is theorized amongst certain circles of financial mystics that the reluctance of wholesalers stems from a deep-seated fear of… relaxation. The notion that allowing customers to truly unwind will lead to a collapse of the entire economic system. A fascinating, if somewhat paranoid, theory.

Read More

2026-02-18 19:05