Source: La-Z-Boy

After a climb of 5% on Jun. 17, shares of La-Z-Boy (NYSE:LZB) fell 8% on Jun. 18. The news that sent the company spiraling was an earnings report that indicated lackluster sales and profits at a time when Mr. Market had expected to see some improvements at the retailer. Moving forward, does this present the Foolish investor with a good opportunity to jump into the business' stock at a nice discount, or would a position in Ethan Allen Interiors (NYSE:ETH) make more sense?

La-Z-Boy couldn't reach the earnings remote
For the quarter, La-Z-Boy reported revenue of $353 million. Although this managed to top the $345.8 million it reported for the year-ago quarter, it came in 4% below the $368.1 million forecast by analysts. In its press release, the retailer attributed this drop in revenue to a 0.9% falloff in comparable-store sales. Despite this decline, however, La-Z-Boy did see positive revenue growth in its upholstery segment and its retail segment, which rose 2% and 7%, respectively.

Source: La-Z-Boy

From an earnings standpoint, La-Z-Boy performed even worse. For the quarter, the business reported earnings per share of $0.23, 28% below the $0.32 Mr. Market anticipated and 30% lower than its $0.33 figure for the fourth quarter of 2013. In spite of its higher revenue, the company was negatively affected by a $5 million restructuring charge and a $2.4 million charge stemming from some discontinued operations (versus $583,000 in the year-ago period).

Is La-Z-Boy still better than Ethan Allen?
Over the past five years, La-Z-Boy has posted some pretty decent results. Between its 2010 and 2014 fiscal years, the retailer saw its revenue climb 23% from $1.11 billion to $1.36 billion. While the company did see some improvement in its upholstery segment during this period, the fastest growing of La-Z-Boy's segments was its retail segment, which grew by 94% from $153.6 million to $298.6 million.

(Revenue in billions) 2014 2013 2012 2011 2010
La-Z-Boy $1.36 $1.27 $1.23 $1.19 $1.18
Ethan Allen $0.73 $0.73 $0.68 $0.59 $0.67

Sources: La-Z-Boy and Ethan Allen

In contrast, Ethan Allen saw its revenue climb just 8% from $674.3 million to $729.1 million in its most recent five-year period. Most of this increase took place between the retailer's 2011 and 2012 fiscal years and the retailer chalked it up to the positive impact of higher promotional activity, new store openings, and a greater emphasis on e-commerce.

Looking at profit, La-Z-Boy's metrics came in even stronger than its revenue growth. Over the past five years, the company saw its net income skyrocket 68% from $32.7 million to $55.1 million. In addition to benefiting from higher revenue, the retailer enjoyed some meaningful cost reductions. During this time-frame, the company's cost of goods sold fell from 67% of sales to 65.4%, while its selling, general, and administrative expenses declined from 29.1% of sales to 27.6%.

(Net Income in millions) 2014 2013 2012 2011 2010
La-Z-Boy $55.1 $46.4 $88.0 $24.0 $32.7
Ethan Allen $32.5 $49.7 $29.3 -$44.3 -$52.7

Sources: La-Z-Boy and Ethan Allen

While La-Z-Boy handily outperformed Ethan Allen in terms of revenue growth, it's hard to equate its earnings growth with that of its rival. Over the past five years, Ethan Allen saw its net income convert from a loss of $52.7 million to a gain of $32.5 million.

Although slow revenue growth helped the business to some extent, the company also saw improvements in its cost of goods sold, which fell from 48.5% of revenue to 45.4%, and its selling, general, and administrative expenses, which declined from 52.4% of revenue to 46.3%. Another contributor to Ethan Allen's bottom-line improvement was that its net loss in 2009 resulted in part from a $67 million impairment charge. The company did not book any impairments in 2013.

Foolish takeaway
Based on the data provided, Mr. Market is anything but happy about La-Z-Boy's performance. In addition to the revenue shortfall, the significant profit decline suggests that trouble might lie ahead. However, given the company's long-term results and how it has fared against Ethan Allen during the past five years, the company should not be written off yet. If, in fact, this drop in profitability and slow sales growth turns out to be a bump in the road, the Foolish investor could see a great deal of upside later.