La-Z-Boy's Sales Recline

La-Z-Boy (NYSE: LZB  ) , maker of the eponymous classic reclining chair, reported a 3.6% year-over-year decline in third-quarter revenue after the bell yesterday, along with a 29% drop in earnings per share.

The company has faced a harsh climate for furniture sales since 2001, as a weakened economy has consumers sitting tight and holding off on costly furniture purchases. Compounding the problem of weakened demand is increased supply from importers.

In fact, that problem has gotten so bad that La-Z-Boy and some competitors -- including Stanley Furniture (Nasdaq: STLY  ) , Bassett Furniture Industries (Nasdaq: BSET  ) , and Hooker Furniture (Nasdaq: HOFT  ) -- have filed a petition with the U.S. Department of Commerce accusing Chinese manufacturers of "dumping" bedroom furniture on the U.S. market at below fair-market value. Read more about that rather odd story here.

Perhaps the allegations should be taken seriously. La-Z-Boy's casegoods (wooden furniture) division suffered the most this quarter, dropping 14% when compared to the same period last year. In addition to the competition from abroad in casegoods, management says continued weakness in demand from customers in the lodging industry was another downward pull on sales.

In the face of such adversity, the company hasn't tired of returning money to its shareholders. In the past quarter, it bought back 840,000 shares of its own stock for just over $17 million, under a previous buyback plan with 1.4 million shares remaining. On top of that, it announced an additional 6 million shares have been authorized for repurchase.

In the past four years, La-Z-Boy has spent over $250 million on buybacks and an additional $82 million on dividends -- all while reporting only $202 million in earnings. During this time, management has cut the share count from over 60 million to 53.9 million today.

Moves like that have investors sitting comfortably while awaiting a pick-up in the furniture business.

**Disclosure - Hooker Furniture (Nasdaq: HOFT  ) is a recommended stock in Tom Gardner's Hidden Gems. Total performance for Tom'sHidden Gemsselections, as of 2/11/2004 is 56.34% vs. the S&P 500 up 10.46%.

Feeling relaxed in your La-Z-Boy recliner with your La-Z-Boy? Or is the threat from China keeping you from kicking back? Talk with other Fools on the La-Z-Boy discussion board. Only on Fool.com.

Matt Logan is a Motley Fool contributor. He doesn't own shares in any of the companies mentioned.


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