La-Z-Boy Reports 24% Profit Drop in Q1

La-Z-Boy (LZB 2.06%), the furniture manufacturer and retailer best known for its recliners and home furnishings, released results for its fiscal first quarter 2026 on August 19, 2025. GAAP revenue was $492 million in Q1 FY2026, slightly ahead of the $490.6 million analyst consensus, but missed earnings per share projections, with Non-GAAP EPS of $0.47 versus the $0.53 estimate. This marks a 24% decrease from the prior year's quarter. Q4 FY2025 saw both margin compression and declining profits, driven by weaker same-store sales in the retail segment and ongoing challenges in the Joybird business. Overall, while topline sales held mostly steady, profitability was under pressure and the quarter fell short of prior expectations, particularly on the bottom line.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.

About La-Z-Boy and Its Business Model

La-Z-Boy designs, manufactures, and sells furniture including recliners, sofas, sectionals, and related home décor throughout North America. Its products are sold through an extensive network that includes company-owned La-Z-Boy Furniture Galleries stores, independent retailers, and its Joybird digital-native brand. The company manages a vertically integrated operation, controlling many elements from manufacturing to retail sales, which enables tight control over quality and customer experience.

Recent strategy highlights for La-Z-Boy center around expanding its retail footprint and investing in its brand. This includes opening new stores, updating existing locations, and acquiring retail outlets to increase company-owned penetration. The business also prioritizes efficient supply chain management and product customization to meet changing consumer preferences. Key success factors are brand recognition, supply chain agility, strength of retail distribution, and effective cost management, all of which help La-Z-Boy adapt to market demand and protect margins.

Quarter in Review: Performance and Key Developments

During Q1 FY2026, La-Z-Boy's reported revenue (GAAP) slightly surpassed expectations. However, overall sales (GAAP) declined by 1% from the prior year, showing subdued demand across its main channels. The retail segment achieved growth in total written sales, up 5%, and delivered sales, up 2%, aided by new and acquired stores. Yet, written same-store sales fell 4%, meaning sales at stores open at least a year decreased 5% in Q4 FY2025, due to factors including softened customer traffic, high mortgage rates, and increased economic volatility. The company attributed the delivered sales growth to its ongoing store expansion, but highlighted that increasing fixed costs are outpacing organic sales improvement.

The wholesale segment posted a sales increase of 1%, with growth in the core North American furniture wholesale business and casegoods, or non-upholstered items like tables and cabinets. This gain was tempered by continued weakness in international wholesale, primarily due to a significant customer transition abroad. Wholesale operating margins expanded to 7.5% on a Non-GAAP basis, up from 6.9% the prior year, helped by reduced warranty and marketing expenses and better gross margin in North America.

Joybird, the company’s digital-native furniture brand, reported heavy declines in written sales in Q4 FY2025. Written sales dropped 14% in the first quarter and delivered sales slid 20%, with most of the weakness in the online channel rather than at its 14 brick-and-mortar locations. Joybird’s operating loss increased compared to last year as lower volume weighed on performance. This ongoing contraction raises questions about Joybird’s long-term place within La-Z-Boy, as management mentioned it is evaluating options to address “financial pressure from non-core parts.”

Company-wide profitability suffered. The consolidated operating margin (GAAP) fell to 4.5%, down from 6.5% in the first quarter of the prior year, and adjusted operating margin dropped to 4.8%. Major factors included negative leverage from same-store sales declines in retail and continued investment in new locations and brand identity. The company realized cost savings in some areas, such as marketing and ocean freight, which provided only partial relief. One-time costs also contributed: an Arizona distribution center was converted to a new West Coast hub, incurring $1.3 million in pre-tax charges. Total free cash flow dropped to $17.8 million, less than half the amount generated in the first quarter of the prior year.

Despite the challenging quarter, La-Z-Boy continued executing on several strategic initiatives. It added two new stores and announced the acquisition of 15 Southeast U.S. locations expected to close later in the year. It also launched a brand refresh designed to reinforce its reputation for comfort and craftsmanship and received recognition from Newsweek as America’s top furniture retailer for the first time. These moves are part of the "Century Vision" strategy, focused on growing the company’s retail presence and brand, but they bring near-term costs and margin impact.

Shareholder returns slowed during the period. The company returned $22 million to shareholders, split between share buybacks and a $9 million dividend, about half the level from the prior year’s quarter. Management continues to emphasize financial flexibility, maintaining $319 million in cash and no external debt, supporting its ability to invest in growth despite near-term margin pressures.

Looking Ahead: Guidance and Watch Factors

For Q2 FY2026, La-Z-Boy forecast revenue between $510 million and $530 million, targeting sequential growth from current levels. Adjusted operating margin is expected within a range of 4.5% to 6.0%. Management cautioned that it expects the consumer and broader economic environment to remain difficult, and that near-term operational adjustments will be necessary to respond to the current climate. No comprehensive full-year guidance was provided for sales or profits.

The performance of recently acquired and remodeled stores, progress on distribution network upgrades, and any shifts in consumer demand within the furniture industry will remain critical. Management has highlighted ongoing efforts to address under-performing non-core assets, which may include further changes to Joybird’s business as well as business development decisions around its international wholesale operations.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.