La-Z-Boy (NYSE:LZB) let investors down today when it reported a rather murky second quarter. Furniture can be tough business, judging by the recent fortunes of some furniture companies, and today La-Z-Boy definitely feels like your grandfather's recliner.
The company's press announcement, of course, focused on the bright side, that it met sales expectations by growing revenues 4.4% to $534 million. However, the company glossed over its 41% drop in net income, which came in at $8.2 million, or $0.17 per share. In another ominous sign, its operating margin dropped to 3% from 5.3%.
When commenting on its business outlook, the company's president and CEO, Kurt Darrow, blamed difficulties on "record high energy and raw material costs, rising interest rates, indifferent consumer confidence" and warned that it's "somewhat cautious about consumer discretionary spending in the coming months." On the bright side, he said La-Z-Boy has been increasing market share.
The company lowered third-quarter guidance down to $0.11 to $0.14 per share; the consensus estimate was previously $0.25 per share. Given the variables, it's no wonder investors soured on the stock today.
And of course, it's not like some of us didn't warn you -- longtime Fool Rick Munarriz penned this cautionary note about La-Z-Boy back in August. La-Z-Boy's not alone in its plight, either -- there's been a protracted struggle for some furniture makers, as investors in Ethan Allen (NYSE:ETH) and Bombay Co. (NYSE:BBA) might attest.
On the other hand, there are other furniture companies that have shown much more positive aspects, such as Motley Fool Hidden Gems stock pick Hooker Furniture (NASDAQ:HOFT) and Stanley Furniture (NASDAQ:STLY), the latter of which recently reported a comfy quarter despite the difficulties in the economic climate that form La-Z-Boy's complaints.
For now, La-Z-Boy seems to be struggling in more ways than one. Given its own admissions of a difficult climate as well as evidence that other companies have been able to combat it, it may be a while before La-Z-Boy makes a comfortable investment.
Hooker Furniture is a Motley Fool Hidden Gems pick. What else makes the grade? Try our free trial and find out.
Alyce Lomax does not own shares of any of the companies mentioned.
