La-Z-Boy's Latest, Greatest Excuse

I could hardly wait to write today's Motley Fool Take on Motley Fool Income Investor pick and plush furniture king La-Z-Boy (NYSE: LZB). Matter of fact, I grabbed this one off the Fool's "dibs" list as soon as I saw it.

But not because of the earnings numbers. I want to talk about how the company has come up with the best preemptive excuse for lousy numbers since retailers first hit on "bad weather." But before we get to the forecast, let's give the numbers their due.

Fiscal first-quarter 2006 saw La-Z-Boy experience a minor sales decline of just 0.8%. More importantly, though, it earned a profit this quarter -- something that eluded the company one year ago. In fact, through improved gross margins -- resulting from 1) benefiting from a lower cost of goods sold and 2) not having to take a restructuring charge -- La-Z-Boy not only earned itself a $0.06-per-share profit, but beat estimates by the proverbial penny, to boot.

That accomplished, La-Z-Boy proceeded to give cash-loving Fools further cause for rejoicing. The company reversed its net free cash outflow of one year ago, lifted its cash from operations significantly out of the hole, reduced capital expenditures, and -- voila! -- generated a healthy $13.1 million in free cash flow. Huzzah!

Okay. That tribute to Q1 2006 accomplished, let's move smartly on to next quarter. Whatever goodwill La-Z-Boy earned itself on the Street yesterday, I expect it was squandered when, in its next breath, the company forecast sales numbers that fell 3% short of analyst expectations for Q2 2006. Worse, La-Z-Boy predicted earnings numbers that, at $0.17-$0.21 per diluted share, would represent healthy year-over-year growth but fall at least $0.02 short of analysts' hopes. Get ready for the backlash today.

And now we get to the good part. Where does La-Z-Boy lay the blame for next quarter's feared but as-yet-uncertain profits shortfall? Not hurricanes (too late for those). Not snow (too early). Not even high gasoline prices (mentioned in passing, but not emphasized, lest Wal-Mart (NYSE: WMT) sue for copyright infringement).

No, of all conceivable bogeymen, La-Z-Boy blames GM (NYSE: GM). And DaimlerChrysler (NYSE: DCX) and Ford (NYSE: F) as well, I would imagine. Hear it straight from the CEO's mouth: "Additionally, there has been fierce competition for consumers' discretionary income, with employee pricing offers from the automotive industry, which is contributing to weak retail furniture demand."

That's right, Fools. If in three months, La-Z-Boy disappoints (as it seems destined to do), you'll know what's to blame -- too many consumers watching TV while ensconced upon cheap cars parked in the living room.

For more plush Foolishness on La-Z-Boy, check out:

• See La-Z-Boy's latest quarter by the numbers.
• Nathan Parmalee foreshadowed this quarter's robust free cash flow two months ago.
• Read why it's particularly reassuring to see a furniture maker make inroads in selling off its inventory.

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.