Strategic pivot to retail expansion helped drive earnings, says La-Z-Boy CEO Melinda Whittington

The exchange shares of LA Z Boy up about 17% on pace for their best day since 2017 on stronger than expected earnings and first quarter outlook. And while management did warn of continued macro headwinds, they remain optimistic that impending rate cuts could help turn things around. Joining us now to discuss is Melinda Whittington, CEO at La Z Boy. Melinda, great to have you with us. Thanks for having me. I thought it was interesting that you outperformed the broader furniture industry by 900 basis points and part of that you know, according to you and the management team is having the physical bricks and mortar stores. How has that helped in terms of you know, a customer walks in not necessarily intending to purchase, but then sealing that sale? Sure. You know, we've, we've been around for 97 years and our foundation is on manufacturing and to this day we offer a high quality furniture manufactured primarily in North America and that enables us to do that on a timely basis and offer customization which is we, we know the consumer likes to likes to have their choice. As we think about leveraging that historical foundation of manufacturing, we really have expanded particularly in recent years on owning our own, our own stores as well. There are about 355 stores in our overall Lazy Boy Furniture galleries network and we own over half of them company owned, the rest are independently owned. And we're really looking for that, that terrific brand experience all the way end to end. It gives U.S. data about the consumer so that we can can continue to get better, but it also ensures that our comfortable brand experience really goes from from product to their shopping experience to everything that they're doing with us. What's been really successful for us in in the last couple of years when furniture has been in a bed of a of a furniture recession is to be able to continue to speak to our consumer about the strength of our brand. Remind them of the quality that they can trust, but really bring absolute strong in store execution to them. Give them a comfortable experience when they are in store with the right product and the right messaging to to get them in in the 1st place. How have prices been, Melinda, what is the trend been and have you seen consumer push back on that front? You know, our consumer is a generally a, an upper middle income consumer. And so it's important that we continue to divert, deliver high quality at a reasonable price. We've had to sharpen some price points for opening price points for consumers that it's aspirational to give them the chance to get into that lazy boy, you know, furniture that they want to be a part of. But overall pricing has held really well. Our our in the industry in history had been a bit reticent to price over pandemic. Prices went up as much as 3040% for us that was about 30% and and a good 2/3 of that has really held really still on input costs that are are are lightning, but still still a challenge. Do you think you've seen the highest, the worst in terms of input costs? Have we laughed that after the last couple of years? I'd never say never. But yes, I would say after some of the some of the absolute industry highs that we've had on so many inputs, it feels like things have moderated about right. I'm just curious, you know, from a CEO perspective, it must be sort of a rare occasion. I mean this hasn't happened since 2017 to see your stock go up by this much. What sort of your reaction to that, that stock reaction to the results that you delivered? Sure. You know, first of all, I'd say our industry overall it it's known that it's been challenged for a while. And a lot of what we've been trying to do is make sure that people understand that we are out executing both in our longer term strategy to drive our own retail and to drive a truly consumer centered experience and you know and help people understand our business and the expansion on both manufacturing and the and the retail side of things. So overall, the industry's been challenged and sometimes we we will tend to sort of get caught up in some of that, but it's good to see some of the hard work and you know, and, and just outstanding results of the team get recognized a bit in the marketplace. You know, again, we we do stand out for both our long history, but also the fact that we play in the retail side, which is a real strategic pivot for us enabled by our strong balance sheet. As you mentioned in a, in a, in a teaser a few moments ago, we've been able to do some, some retail expansion enabled by our balance sheet. Our goal is not to be in real estate long term, but our goal is to ensure that we can get stores open. We're at 3:55 today, we want to be at 400 and we know we have the places for those and we want to continue to increase the ones that we are company owned as well so that we can ensure our consumer is getting an outstanding experience wherever they want to shop. Quite frankly, that may be in store, but it all starts online. Consumers start online with research and so we're investing in that messaging and that experience as well, so they get the data they need. Looking ahead, I mean, in addition to to buying back some of those retail store locations that you don't currently own and expanding into more galleries, what do you see as the biggest catalyst? Would it be, you know, if the Fed cuts rates 2 * 3 times and you're saying, you know what, we're going to sell a lot more sofas. I mean, what is it? Yes, that's exactly right. The the industry overall is at its best when people are moving homes. And so you know historical lows in both new housing starts and then and then overall turn in the market is definitely holding back our industry and has been for the last couple of years. What we're doing is really doing, you know, the best in the down market to strengthen our company to disproportionately benefit when we do begin to get those tailwinds. And you know, in the shorter term you're taking share. But all, all the fundamentals are there for there is a pent up desire for folks to to move to get into new homes. A little bit of easing of interest rates, a little bit of a tailwind from from housing will make a big difference for the overall industry. And we're positioning ourselves to to disproportionately benefit from that. Melinda, thank you. Melinda Whittington, thank you, CEO of Lazy Boy.