Shares of La-Z-Boy (NYSE:LZB) fell 12% during Wednesday's trading session after disappointing fourth quarter results turned in Tuesday. Shares now trade at $11.46, in the middle of the company's fifty two week trading range ($6.76-$16.43).
The company's fourth quarter results are a bit misleading as the company reported a thirteen week period versus last year's fourteen week fourth quarter. This year's fourth quarter also included higher compensation costs that impacted earnings.
Sales for the company's Upholstery unit were up 0.8% versus last year and increased 8.5% when the extra week from last year was factored in. Same store sales at the company's La-Z-Boy Furniture Gallery stores were up 10% for the quarter. The company's Casegoods segment was weak with sales declining 13.3% from last year and 6.6% on a comparable fourteen week basis.
Net sales increased 4% on a thirteen week basis from last year's fourth quarter. Earnings per share came in at $0.37. The earnings per share beat last year's $0.19, but include $0.19 in one time earnings from anti-dumping rules. Earnings per share would have been $0.18 without the one time distribution.
The company's highlights for fiscal 2011 include:
· Comparable sales increased 6%
· Same store sales increased 9.4%
· Opened a new concept store with 4 locations
· Partnership with Kuka Home to expand La-Z-Boy brand in China
Now that La-Z-Boy has focused on its internal operating costs and marketing efforts, the company has began opening new stores once again. During the fourth quarter, the company opened stores in St. Louis and Chicago. Expansion plans for the company call for opening 75-100 more stores in North America. Three stores will open soon in the Pittsburgh, Pennsylvania market.
A big announcement by the company came in May, with the announcement of a partnership in China. La-Z-Boy partnered with Kuka Home, a large Chinese upholstery retailer. The partnership will greatly increase La-Z-Boy's international presence by selling products in Kuka Home stores and also launching hundreds of La-Z-Boy branded stores. The stores will be owned by Kuka Home, but La-Z-Boy will receive a portion of the profits. I wrote a recent article on RadioShack (NYSE:RSH) seeking Chinese expansion to save its brand as well.
La-Z-Boy ended fiscal 2012 with $152 million in cash. The company aggressively paid back debt and now has a long term debt balance of $10 million. The company bought back 0.5 million shares during the fiscal year. Investors may be happy to hear that La-Z-Boy aggressively buys back shares to offset stock option dilution from employee awards.
La-Z-Boy has high institutional ownership with Blackrock, Franklin, and Dimensional Funds each owning around 7% of outstanding shares. The SPDR S&P 500 Homebuilders ETF (NYSEARCA:XHB) owns 3% of La-Z-Boy shares. The company's shares only make up 1.4% of the exchange traded fund.
La-Z-Boy rings in the year celebrating its 85th anniversary. The company has three main goals to reward shareholders: increase cash flow, buy back shares, and return dividends. La-Z-Boy paid a quarterly dividend from 1988 to 2008. The company's dividend payout increased almost every year before the company lowered its rate in 2008. The company then suspended dividend payouts in 2009 as its shares approached penny stock status.
Analysts are calling for $0.94 in earnings per share for fiscal 2013. The following year, analysts see the company earning $1.16, giving shares a price to earnings of under 10 on a forward basis. I think the company's expansion into China bodes well for the company. A growing housing market in the United States is also in the company's favor. I think an announcement for a quarterly dividend will come in fiscal 2013, sending shares higher as new investors take a look at the company. My price target on the stock is $17 by the end of 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.