Foolish Forecast: La-Z-Boy Unstuffed

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La-Z-Boy (NYSE: LZB) took a little nap last quarter and, for the first time in nearly two years, slept through its chance to report a profit. But can it rouse from its slumber in time for Tuesday morning's fiscal Q2 2008 earnings report, or will this chair-maker keep on sawing logs?

What analysts say:

• Buy, sell, or waffle? The five analysts still following this stock are doubtful, giving La-Z-Boy two buy ratings and three holds.
• Revenues. On average, they expect to see quarterly sales slide 14% to $377.7 million.
• Earnings. But profits are predicted to rise a penny to $0.07 per share.

What management says:
La-Z-Boy's management continued to yank out stuffing this quarter, slimming down in order to cut costs and focus on its core brand. In late September, the firm completed its sales of Clayton Marcus to Rowe Fine Furniture -- and promised to take a $5.5 million pre-tax charge to earnings this quarter in consequence. Then in October, La-Z-Boy sold off its Pennsylvania House "trade name and certain related assets" to Universal Furniture. This one necessitated somewhere between a $3.6 million and $4.6 million pre-tax charge. We'll find out how much, exactly, in tomorrow's news.

What management does:
Things aren't going too bad for La-Z-Boy near the top of its income statement. Up there, gross margins have been climbing over the past 18 months or so, retaining a comfortable lead over rivals Stanley (Nasdaq: STLY) and Furniture Brands (NYSE: FBN). La-Z-Boy's gross margin doesn't compare at all well with rivals like Ethan Allen (NYSE: ETH) or Bassett (Nasdaq: BSET), however.

By the time we reach the bottom line, La-Z-Boy joins Furniture Brands and Bassett in the money-losers club. Within this group, only Stanley and Ethan Allen are still finding a way to make money in a very tough furniture market.

Margins	4/06	7/06	10/06	1/07	4/07	7/07
Gross	24.9%	25.1%	25.8%	26.3%	26.6%	26.6%
Operating	2.7%	2.5%	2.9%	2.6%	2.7%	1.9%
Net	(0.2%)	(0.2%)	0.3%	(0.8%)	0.3%	(0.4%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
La-Z-Boy's decision to stop providing quarterly guidance turned heads at Motley Fool Income Investor this past summer. While this is an admirable declamation against the short-term fixation of Wall Street when taken by a profitable firm like Coca-Cola or The Washington Post, I just can't bring myself to applaud it in a firm that waited till business turned bad to discover its principles.

And what is the opinion of our ace stock-pickers? "Bottom line, La-Z-Boy is dead money until the housing market stabilizes." That said, the team at Income Investor opined that "the company's balance sheet is sound enough to weather the industry downturn. The stock is trading near 10-year lows and pays a nice 4.2%. Given its top-notch brand name, it seems like an excellent long-term value play."

At last report, La-Z-Boy's sinking stock price had buoyed that dividend yield all the way up to 6.5%. Yes, you read that right. One of the biggest names in lounging is willing to pay you a big six-five to sit on its stock and wait for a recovery. And seeing as over the last 12 months, management has managed to reduce accounts receivable and draw down inventory faster than sales are falling (sales are down 5.6% in the trailing-12-month period, while A/R dropped 10% and inventories, 15%), my read is that they'll ultimately weather this storm. It won't be fun, but La-Z-Boy will float on home in the end.

Did you miss our interview with La-Z-Boy CEO Kurt Darrow earlier this year? Kick back and enjoy: Sitting Down With La-Z-Boy.