Welcome, investor. Have a seat and relax. La-Z-Boy's (NYSE:LZB) fiscal Q4 and full-year 2005 earnings report is due out tomorrow afternoon. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Eight analysts track La-Z-Boy's fortunes. Four of them rate the stock a buy, three a hold, and one a sell.
  • Revenues. On average, they're looking for a 4% decline in quarterly sales, to $545.8 million.
  • Earnings. And a 14% decline in profits, to $0.30 per share.

What management says:
The big news at La-Z-Boy in recent weeks has been a shuffling of chairs in the upper echelons of management. In March, it was announced that CFO David Risley would be departing. Then, a few days ago, Chairman of the Board Patrick Norton announced his retirement from the company to become "Chairman Emeritus."

Business-wise, CEO Kurt Darrow sounded an upbeat note in the last quarterly earnings report, admitting that volume of products shipped was "essentially flat," but pointing to stronger margins in casegoods and upholstery as signs of "execution of our strategy."

What management does:
What strategy is that? Among other things, the firm is restructuring its operations, closing one plant in Canada last quarter, and shifting some of its focus to use of "imported cut and sewn kits in both fabric and leather." La-Z-Boy is also raising prices to offset the higher raw-material cost of foam padding used in its products. Thus far, however, these moves are not yielding any appreciable improvement in either operating or net margins. When Darrow cited his stronger margins, therefore, I'm guessing he was comparing fiscal Q3 2005 results to fiscal Q2 2005 -- rather than fiscal Q3 2005 to fiscal Q3 2004. Run that comparison, and you'd see that operating margins are still sliding -- as reflected below.

Margins %

10/04

1/05

4/05

7/05

10/05

1/06

Gross

22.9

23.3

23.2

23.4

23.2

23.4

Op.

4.4

4.1

3.6

3.7

3

2.9

Net

(1.1)

(1.3)

1.8

2.1

1.4

1.4
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.

The Fool says:
In his March review of the Motley Fool Income Investor portfolio's recommendations, lead Income Investor analyst Mathew Emmert commented, "Restructuring improvements are beginning to shine through, and operational performance finally appears back on track. The firm's margins are holding up, and cash flow remains solid." However, citing the company's "history of missteps," Mathew advised Foolish investors to demand another quarter or two of improvement before believing in this turnaround.

Competitors:

  • Stanley Furniture (NASDAQ:STLY)
  • Hooker Furniture (NASDAQ:HOFT)
  • Furniture Brands (NYSE:FBN)
  • Flexsteel (NASDAQ:FLXS)
  • Ethan Allen (NYSE:ETH)
  • Bassett Furniture (NASDAQ:BSET)

La-Z-Boy is a Motley Fool Income Investor recommendation. To discover more promising stocks with dynamic dividends, sign up today for a free 30-day guest pass .

Fool contributor Rich Smith does not own shares of any company named above. Hooker Furniture is a Motley Fool Hidden Gems pick. The Fool has a disclosure policy.