La-Z-Boy: Time to Sit Up Straight

La-Z-Boy (LZB) reported increased profits on decreased sales. Always a good trick if you can do it. So the company deserves closer scrutiny. Who knows, maybe an important business lesson may reveal itself.

After reading the press release and search for the financial statements here is what happened. They dropped their dividend to conserve cash. Why not just drop the entire dividend and do the job right?Also, last year's supposed loss was the result of non cash write downs of intangibles from business held for sale. So the bounce is not as dramatic as you would think.

But keep reading. La-Z-Boy made $9.5 million net income in the quarter. To get there they booked approximately $7.2 million for Income from Continued Dumping and Subsidy Act and approximately $4.9 million other income.

Kurt L. Darrow, La-Z-Boy’s President and Chief Executive Officer, said: “We continue to go through a difficult macroeconomic period which is impacting the housing and home furnishings markets.”

Okay, we all read the papers, but what are you doing to make this place a financially viable entity? You cannot make it on corporate welfare.

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[the man]

Known around the world for its recliners, La-Z-Boy markets furniture for every room of the house. The two-year housing slump naturally has hurt the home-furnishings industry. Still, La-Z-Boy posted a profit in its third fiscal quarter (ended Jan. 31) of $9.5 million, or 18 cents a share, on a 7.8% drop in sales to $373.1 million -- versus a year-earlier loss of $7.8 million, or 15 cents.

Nevertheless, it cut its dividend -- to four cents a share from the 12 cents it had been disbursing for the past seven quarters -- to conserve cash, grow and lighten its debt (long-term borrowings total $146.4 million). The reduction translates into an annual savings of roughly $16.5 million. La-Z-Boy, which has been curbing costs by selling noncore assets and closing underperforming stores, among other things, has $63 million in cash on its balance sheet. It's paid dividends steadily since 1963, and its stock, which was recently quoted at 9.11 (its 52-week high is 14.85), yields 1.76%.