La-Z-Boy (NYSE:LZB) is not living up to its name -- and that's a good thing.
Shares of the iconic recliner-maker have gained 43% over the past 12 months, easily topping the performance of the S&P 500. But La-Z-Boy isn't resting on its laurels. With sales up an anemic 3% in the most recently reported quarter, management announced a plan Wednesday to jump-start sales growth, and get earnings going again as well.
The headline news at La-Z-Boy is a plan to shift production of casegoods (hint: to remember what these are, think of hardwood "bookcases," and, by extension, chests of drawers, dressers, cabinets, and similar items made of wood) overseas. Up till now, casegoods accounting for about 10% of the company's revenue -- largely bedroom furniture -- have been produced at the company's Hudson, N.C., facility. Henceforth, La-Z-Boy will source wood furniture from Asia, while Hudson takes over warehouse and furniture repair functions from La-Z-Boy's two facilities in Wilkesboro, N.C., both of which will be shuttered and sold.
La-Z-Boy expects to halt furniture production in Hudson by the end of Q2 2015, i.e., this October, and anticipates laying off about 100 employees.
From a financial perspective, La-Z-Boy says all of this restructuring will cost it $0.15 to $0.17 per share. La-Z-Boy expects to report these as charges to earnings, most of which will show up in fiscal Q4 2014 (i.e., this current quarter), with the balance coming in the first and second quarters of fiscal 2015.
Additionally, La-Z-Boy says it will put its Lea Industries youth furniture business up for sale. As with casegoods, La-Z-Boy noted concerns about Lea's business size as driving its decision -- raising the question: If La-Z-Boy, the biggest publicly traded furniture company in the country, is having trouble with profitability, what does this mean for smaller players?
Hooker turns the tables on bigger La-Z-Boy
Actually, the news for the other guys might not be as bad as you'd think. Smaller rival Hooker Furniture (NASDAQ:HOFT), for example, was faster than La-Z-Boy in moving to an offshoring model for its products. And as we learned in Tuesday's earnings report, Hooker's business is actually growing faster than La-Z-Boy's.
Fiscal 2013 saw Hooker's sales rise 4.5%. And Hooker is expanding its business as La-Z-Boy slims down. Hooker has set up two new divisions -- H Contract, which makes furniture for "upscale senior living facilities," and Homeware, a direct-to-consumer e-commerce operation marketing "fresh, fashionable furnishings that are parcel delivery shippable and easily assembled" for millennials. Both target what Hooker believes will be growth markets in the future.
Of the two furniture makers, Hooker seems to be the one with more business momentum on its side.