Investors Are Not Buying La-Z-Boy’s Bad Weather Excuse

Blaming underwhelming results on the harsh winter weather has become an almost comical cop-out, with companies in various segments of the retail sector using the excuse as a means to justify their numbers. In some cases, blaming the weather has proven perfectly valid. In other cases, not so much.

La-Z-Boy (NYSE: LZB  ) recently came out with some fairly disappointing numbers and predictably blamed the weather. However, many of its competitors in the furniture space, including Restoration Hardware (NYSE: RH  ) and Williams-Sonoma (NYSE: WSM  ) , do not seem to have suffered from the blizzards. As such, investors aren't buying the excuse.

Source: La-Z-Boy

The weather, of course
La-Z-Boy's fourth-quarter results were less than stellar. Earnings per share of $0.33 beat the consensus estimate by $0.01 but were nevertheless down from $0.34 last year. Revenue did grow by 2.1% year over year to $353 million but missed the $368.5 million consensus estimate. Investors were none too pleased, sending the stock down some 11% in after-hours trading.

The wholesale segment did fairly well for the period, upholstery sales up 2.3%, although casegoods sales were down 5%. According to management, weather was a drag on overall sales growth, especially in February, when La-Z-Boy Furniture Galleries same-store sales dropped nearly 5%. For the quarter, the store network posted its first decline in same-store sales in 14 quarters, down 0.9%.

With regard to the retail segment, management again commented on the adverse impact of the severe winter weather, although overall retail sales were up 7% for the period. Still, the majority of this growth was attributed to acquired stores. Furthermore, the operating margin dropped to 3.6% from 5.4%, due in part to costs associated with acquired stores as well as increased advertising and, of course, snow-removal costs.

Going forward, the business outlook given by La-Z-Boy was fairly vague, with a weak fourth quarter doing little to bolster investor confidence. Management doesn't seem particularly optimistic about the first quarter, citing weaker demand in the furniture industry over the summer months and an expected one-week plant shutdown over the period.

Competition shrugs it off
Part of the reason why investors are skeptical about blaming the weather for La-Z-Boy's lazy results is the fact that some of its competitors managed to pull off impressive growth for the same period. Restoration Hardware, for instance, saw net revenue rise a huge 22%, with adjusted net income skyrocketing 217%. Moreover, Restoration Hardware raised its guidance for the full year. Encouragingly, the company's earnings report didn't even mention the weather, and overall the company is easily outperforming the furniture industry.

Williams-Sonoma, another competitor, also does not seem to have suffered from rough weather in the fourth quarter. For the period, the company delivered net revenue growth of 9.7%, with comparable-brand revenue up 10%. Earnings per share of $0.48 easily topped the $0.44 consensus estimate, rising 20% year over year.

By brand, West Elm did particularly well, comparable-brand revenue up a whopping 18.8% followed by PBteen with a 12% increase. With overall strength in the luxury-furniture industry expected to persist, things look fairly bright for the company going forward as well.

The Foolish takeaway
La-Z-Boy's most recent earnings results failed to impress investors, sending the stock down by a double-digit percentage. Management blamed the less-than- stellar results partly on the weather, which has by now come to be regarded as a rather worn-out excuse. This is especially true considering the fact that competitors such as Restoration Hardware and Williams-Sonoma managed to deliver excellent earnings and sales growth for the period.

Beyond furniture
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Daniel James

I'm primarily a value and fixed-income investor with a background in cultural anthropology. As a writer for the Fool, I focus mainly on the consumer goods sector, also dabbling in technology occaisionally. When not pouring over the world's stock markets, I like to read, travel and make music.

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