La-Z-Boy management is in same denial as captain of the Titanic.

Implications: Kurt Darrow (La-Z-Boy, CEO) has proven himself to be the king of the understatement. In the latest report on Fiscal 1stQuarter results he stated: "Against the backdrop of ongoing challenging business conditions pervasive throughout the furniture industry, our results reflect a significant drop in volume, which made it difficult to absorb our current fixed costs. Additionally, our first quarter is typically our slowest reporting period, due to seasonality factors, including the scheduled vacation shutdown in July at our plants, and is not indicative of our expectations for the full fiscal year." The above statement is the stance that Mr. Darrow has to take to the street but I don’t think he believes a word of it. La-Z-Boy is in critical shape. They are primarily a soft goods manufacturer with humongous capacity utilization problems that prohibit the company to migrate a very difficult classification off shore.

Analysis:  

Mr. Darrow is speaking about dynamics such as:

"Our incoming order rate in July improved versus the first two months of the quarter and, importantly, we believe today's order rate is more reflective of actual demand as retailers have worked through their high inventory levels. In the meantime, however, we further aligned our capacity this quarter, by closing four facilities. While our capacity today more closely matches the industry's overall dampened demand, we did experience manufacturing inefficiencies in the quarter as we shifted production to other plants."

There are many other quotes addressing both quantitative and qualitative strategies the company is planning on implementing. There is NOTHING good to say about this business or the future. La-Z-Boy has no upside and it is just a matter of time until the company has to make a drastic change in its business model. The company may survive in “name only” but will have little resemblance to the current iteration of this company.

This of course is coming as no surprise to any one who has been following La-Z-Boy, FBN, Stanley, Hooker and other domestic furniture manufacturers who supply the traditional furniture stores.

The math does not work. The COGS and retail prices make for a losing formula for domestic furniture manufacturers. For Mr. Darrow to cite the following :

"The external environment for home furnishings remains challenging, although it is important to note that we do not believe today's revenue stream is indicative of the run rate for the next 12 to 18 months. We will continue to adjust our cost structure based on anticipated future demand while focusing on superior levels of service to our customers. As we announced last quarter, we expect sales for the fiscal 2008 year to be down 5% to 10% compared with fiscal 2007 and expect earnings per share to be in the range of $0.45 to $0.60 per share compared with $0.38 per share from continuing operations in fiscal 2007. This estimated range does not include restructuring charges, potential income from any anti-dumping monies or gains/losses on the sale of discontinued operations."

is denying the end of the war.

I do not enjoy writing such a dire overview but the truth needs to be accepted and the La-Z-Boy statements are somewhat inane and dubious at best!