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

Investors are getting tired of the bad weather excuse, punishing La-Z-Boy for underwhelming earnings and slow revenue growth.

Jun 20, 2014 at 5:30PM

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
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 



Daniel James has no position in any stocks mentioned. The Motley Fool recommends Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers