Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

La-Z-Boy Incorporated (NYSE:LZB)

F1Q09 Earnings Call

August 20, 2008 8:30 am ET

Executives

Kurt L. Darrow - President, Chief Executive Officer, Director

Louis M. Riccio - Chief Financial Officer, Senior Vice President

Kathy Liebmann - Director, Investor Relations and Corporate Communications

Analysts

Todd Schwartzman - Sidoti & Co.

Sean Connor - BB&T Capital Markets

Budd Bugatch - Raymond James

John Baugh - Stifel Nicolaus

Laura Champine - Morgan Keegan & Co.

Operator

Welcome to the La-Z-Boy Incorporated first quarter fiscal 2009 conference call. (Operator Instructions) It is now my pleasure to introduce your host, Kathy Liebmann, Director, Investor Relations and Corporate Communications for La-Z-Boy Incorporated

Kathy Liebmann

Thank you for joining us on this morning’s call to discuss our fiscal 2009 first quarter results. Present this morning are Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer and Mike Riccio our Chief Financial Officer. Kurt will open today’s call with some prepared remarks and then Mike will speak about some of the financial highlights of the quarter. Following Kurt’s concluding remarks we will open the call to questions.

As is our custom, the time allotted for this call is one hour. In order to allow everyone an opportunity to ask questions, please limit your questions to two. If you have followups, you may re-enter the queue. A telephone replay of the call will be available for one week beginning this afternoon.

These regular quarterly investor conference calls are one of La-Z-Boy’s primary vehicles to provide guidance and to communicate with investors about the company’s current operations and future prospects. We will make forward-looking statements during this call, so I will repeat our usual Safe Harbor remarks. While these statements reflect the best judgment of management at the present time, they are subject to numerous future risks and uncertainties as detailed in our regular SEC filings and they may differ materially from actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call.

And with that, let me turn over the call to Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer.

Kurt L. Darrow

The challenges facing our industry persist. This is evident not only in our results but in the results of all the companies operating in the home furnishing space. The difficulties are pervasive on both sides of the business, both manufacturing and retail. On the wholesale side of the business, the distribution channels are changing with the credit worthiness of our traditional retail partners continuing to be a challenge demonstrated by the string of bankruptcies being announced throughout the industry. On the retail side, the consumer is reluctant to make discretionary furniture purchases. Add to it increasing raw material and transportation cost, and for our company, the first quarter of that includes July with a scheduled one-week vacation shut-down across all of our facilities.

With sales down 6.6% compared with last year’s first quarter we were able to improve the operating performance of the company on the wholesale side demonstrating we are making strides in strengthening our business model. We did make a slight improvement in our retail business during the quarter and continue to strengthen our balance sheet. With those remarks servicing as a brief backdrop, let me take you through a discussion of each of our operating segments.

On the wholesale side of our business, upholstery sales declined 6.9% and Casegoods sales fell 10.2%. In upholstery we improved our operating margin to 4.2% from 3.5% in last year’s first quarter, and we significantly improved our gross margin, primarily the result of the conversion to the cellular production process at our La-Z-Boy branded facilities, additional cost cutting measures, and improved merchandizing.

We closed our Tremonton, Utah La-Z-Boy facilities in June, one month ahead of schedule and transitioned its production to our remaining five La-Z-Boy facilities, improving their capacity utilization. We also transferred the majority of the cutting and sewing equipment from Tremonton to Mexico. Our new cut and sew facility in Mexico is under construction and on schedule to be completed in time to start operations in February. This month we will begin hiring and training people in a temporary facility in Mexico. As we stated, when we made the announcement last quarter, we anticipate to combine the savings of the Tremonton closure and the Mexico cut and sewing operation to be in excess of $25 million, but we will not see the full impact of the cost savings until fiscal 2011.

We also made the decision during the quarter to liquidate our La-Z-Boy United Kingdom import and distribution business and took a related write-down for inventory and goodwill. As we previously reported, we sold the UK manufacturing facility in the fourth quarter of fiscal 2007 and booked a gain of $10 million. At that time, we transitioned the business to an import and distribution model. After a year of disappointing results, we made the decision to transfer the operation to an established manufacturer, importer, and distributor in the UK who we believe is better suited to service our existing customers and grow our customer base with larger accounts.

For the second calendar quarter, same-store sales were down 1.9%, the lowest decline we have reported in more than a year. We are encouraged by this performance, and although we are still reporting a negative number, we believe we are gaining share in a difficult marketplace, which is a credit to the hard work, commitment, and dedication by our team of dealers.

We are almost a year into the “Comfort. It’s what we do” television marketing campaign launched last September and designed to drive awareness of the La-Z-Boy Furniture Gallery stores, positioning them as whole solution resource to the consumer. A series of commercials is building momentum and we are pleased with the results of the campaign so far. In my mind, the best litmus test is that our furniture gallery dealers signed on for another year of pooled advertising dollars indicating they too are seeing the success of this campaign.

Although our marketing expense for this year’s first quarter was up $2 million over last year, it is paying dividends as evidenced by our same-store sales numbers. Over the course of the full year, however, our marketing spend will be the same as fiscal 2008, indicating the spend in the back half of this year will be lower compared with last year’s second half.

We launched our e-commerce platform in June and are pleased with progress to-date. Our integrated system is working and we are learning many things which will allow us to continually improve the online experience for our consumers. Over the coming months, we will expand the range of available products including tables, lamps, and accessories. This initiative is represented by our continuing commitment to provide a seamless multi-channel shopping experience for the consumer. And over the next 6 months, we plan to completely re-design our website to make it even more user friendly, informative, and compelling with a goal of a re-launch in early 2009.

Our Casegoods segment continues to face more significant challenges in this environment primarily due to the higher pricing associated with bedroom and dining room groups relative to upholstery pricing. Our team is working to expand in new distribution channels while ensuring this segment’s cost structure is more closely aligned with the lower volume environment. During the quarter, we reduced headcount and managed our inventories accordingly.

We believe there are still levers to pull on the wholesale side of the business to drive out cost and garner greater efficiencies, and we will work throughout the year to improve our operations further. Importantly, until the overall environment for home furnishing strengthens, with our expected single-digit sales decline, we believe we can improve our performance year over year.

In our company-owned retail segment, on a 6% decline in sales, our loss of $10 million was flat against that of last year’s first quarter loss primarily as a result of an improved gross margin during the period. In this year’s first quarter, we are operating not only with a reduced overall cost structure, but it worked past the one-time expenses associated with the consolidations of our warehouses and IT systems. Given the environment, we have slowed down our new store opening plans and are working to improve the performance of the existing store base. Although the operating landscape remains challenging, our senior management team is focused on driving the top-line. We recognize that we need more that cost reductions alone to make our business profitable.

We continue to work on training our sales personnel to ensure they increase their close ratios and their average ticket sale. Additionally, we are working to obtain more in-home design appointments where we consistently increase the average transaction per customer. We are also continuing with the four test stores in the Chicago market, but it’s still too early to measure their success and effectiveness. We are pleased with the positive results of several key selling metrics including increased average ticket margins, accessory sales, and in-home appointments. We will continue the test concept through the holiday season and make some judgment in terms of what to change heading into next year.

I had talked over the last couple quarters about rolling out our warehouse system to our independent dealers as we believe the more robust distribution system will make our network as a whole more competitive. We now have a test dealer in our northeast distribution center and expect to convert our other dealers to assist them that would number 10 to 15 warehouses over the next 3-year period. Once complete, the distribution network will also help to make a significant positive change to our accounts receivable. Additionally, we will offer our IT retail management system to our independent dealers to begin the process of creating a common platform throughout our retail network. By providing these services to the dealer network, they will be able to focus on the front end of the business while we can help manage the backside.

And finally, as a result of greater operational efficiencies and improved merchandizing, the performance of our VIEs, which represents 34 stores in four different markets, improved this quarter as they lost a penny per share versus the loss of $0.03 a year ago.

I will now turn the call over to Mike Riccio, our Chief Financial Officer.

Louis M. Riccio

I will take a few moments to review some of the financial highlights for the quarter. We reported net sales of $322 million and a loss from continuing operations of $8.5 million or a loss of $0.17 per share. These results included $0.09 per share restructuring charge which relates primarily to the closure of our Tremonton, Utah upholstery facility and the La-Z-Boy UK operations.

Our results also include a $0.03 per share intangible write-down related to the goodwill associated with the UK operation. The charge from the UK operations is a result of the changes Kurt referred to in his comments. Also, we were able to increase our gross margin during the quarter by 1.1 percentage point even with our restructuring charges which is more than double quarter over quarter.

During the quarter, we reduced our inventories and receivables, but the cash generated was offset by a decline in our current liabilities. These changes are consistent with prior years and are a result of our summer seasonality. We also increased our provision for bad debts given the difficult credit environment we are facing. As you are aware, there has been a continuous stream of announced bankruptcies in our industry, and we remain concerned about the credit landscape for both our general dealers and our furniture galleries.

We also sold properties during the quarter and recorded a gain of $2.1 million. Our tax rate on continuing operations for the quarter was 37%. It was impacted by the UK restructuring charges and the intangible write-off as well as other discrete items. We expect our tax rate for the remainder of the year to be in the 38% to 39% range excluding any additional discrete items.

Due to our expansion in Mexico and our IT related upgrade, we believe that capital expenditures will be slightly higher than our depreciation and amortization in fiscal year 2009. Depreciation and amortization will be in the $24 million to $25 million range.

I thank you for the time this morning, and I’ll now turn back the call to Kurt.

Kurt L. Darrow

Difficult macroeconomic conditions persist and we believe it will be some time before our industry recovers. However, with the changes we have made to our business model where we have been relentless in cost cutting and improving our efficiencies, we are confident the opportunity for growth in earnings will be readily more apparent when things improve. We are managing our company for cash generation and making decisions for the long-term and will continue working to navigate our way through a difficult credit environment, depressed consumer spending, and increasing raw materials. We are addressing each of these issues in a multitude of ways and are confident in our ability to emerge from this period as a meaner and stronger company poised to grow market share through innovation, excellent customer service, mean manufacturing, and structuring our company to operate as an integrated retail.

We thank you for being on our call today and I’ll turn things over to Kathy to begin the question and answer period.

Kathy Liebmann

We will begin the question and answer period now.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will be coming from Todd Schwartzman with Sidoti & Co.

Todd Schwartzman - Sidoti & Co.

The magnitude of your cost cutting efforts I think is becoming apparent. I wanted to just focus on the demand side and demand metrics for a minute. Can you talk at least directionally about store traffic and average ticket within the system during the quarter and especially if you track a closing ratio of a percentage of consumers entering a store actually buy something and how that ratio has been growing, shrinking, or is it simply staying the same year over year?

Kurt L. Darrow

I’ll a stab at a couple of those questions. Our store traffic is down, it’s down consistent with our volume. Our team has done a reasonable job with adding on to the ticket. They have obviously more time to spend with customers and so they’re working them harder, we’re capturing names of people who have been in the stores who don’t buy, we are doing everything we can to garner a greater share of wallet out of every customer that we interact with, but they are reluctant right now to make discretionary purchases and getting them to commit is harder; I would say our close rates are down a little bit, typically the industry close rate is probably in the low 20s, that is lot of times measured on a manual basis and have sales people do the counting; in most of our stores we have door counters, and while there are some people who come into the door that aren’t customers, it would indicate that the closing rate is probably actually a little less than that. One of the big drivers there is that people do shop multiple stores before making a purchase. One of the things that we believe why the internet is becoming more important, particularly in light of the fuel issues as people are using the internet for more information than they are going from store to store. So, we believe you have to have an informative engaging website for people to use that may cut down on their visit to other stores, but very few customers buy on their first visit. And so I think that tends to add to the closing rate in the furniture industry compared to other retail businesses.

Todd Schwartzman - Sidoti & Co.

My other question is what are you seeing with respect to foam prices?

Kurt L. Darrow

Foam prices have gone up. They’ve gone up parallel with what’s happened to oil prices because some of the ingredients in there are comparable but poly and steel are the two raw material components that have had the biggest increases in our business in the last 6 months.

Operator

Our next question is coming from Sean Connor from BB&T Capital Markets.

Sean Connor - BB&T Capital Markets

I didn’t see any comment on the guidance that you offered at the end of Q4 and I know that you guys would have addressed this if something had changed; is it safe to assume that what you offered in Q4 is still on the table for the full year?

Louis M. Riccio

When we went through the annual guidance, we will update the guidance if it changes. Other than that, we just didn’t think that putting it back in there or discussing it if it hadn’t, in our mind, changed though; this is where we’re going to leave it at. That we’ll give it out annually and if something changes we will reflect that in future filings to update the group.

Sean Connor - BB&T Capital Markets

Secondly, unless I missed it in your prepared remarks, I didn’t hear anything, any details, on the change in the revenue recognition in upholstery. Can you quantify the benefit that that segment saw in this quarter, and may be an impact from economic COGS line, and maybe just some details on why the change was made?

Louis M. Riccio

I just want to correct one thing. It’s not a change in revenue recognition. We had some contracts with some of our carriers that put into question whether we transfer title as shipping point or destination. We got those contracts corrected so that there was no dispute and no question on that to be able to recognize the revenue upon shipping point. So, already the recognition policy is unchanged; we just modified the contracts to support how we wanted to report the earnings. If you go back to our 10-K, we reported that those were $11 million of sales that deferred in there, so it’s somewhere in the neighborhood of what would have been impacted for this quarter.

Sean Connor - BB&T Capital Markets

And likewise on the $8 million on the COGS line?

Louis M. Riccio

Yes.

Operator

Our next question will be coming from Budd Bugatch with Raymond James.

Budd Bugatch - Raymond James

Just talk a little bit about receivable that does have a reserve. I don’t think you disclosed the receivable reserves quarterly, you do it annually, and at the fourth quarter it was like $18 million, up from $14 million the year before as we see it. What can you comment about bad debts and where does the reserve sit right now?

Louis M. Riccio

Budd, I think you are looking at the $18 million as the portion in current. We have the notes receivable non-current, but in the cash flow we’ve reported that our bad debt provision went up $4 million during the quarter compared to $2 million last year. So if you take the numbers from the end of the year, which I believe is combined of somewhere around $20 million, then we’re up to about $24 million.

Kurt L. Darrow

So, that hit the expense line in this quarter, right Mike?

Louis M. Riccio

Yes sir. So, the issue as we tried to explain in our comments in the Q is Florida is probably the biggest driver right now for us because of some of the economic situations down there that just can’t sustain some of our furniture gallery dealers. So, we made some adjustments down there and made some adjustments at some of the stores after we made that call and we had to make some adjustments to that provision, but overall, we had some other people go out of business. It’s been a tough environment for the retailers as well and we’re just trying to be prudent on maintaining our reserve quarterly based on the current situation and making sure that we are being prudent as we expand our credit situation, that we’re taking appropriate provisions at the time we make the credit decisions.

Budd Bugatch - Raymond James

And of that $4.2 million of provision, is that net of the reserve in the quarter?

Louis M. Riccio

No, that would be the gross.

Budd Bugatch - Raymond James

So, is there any relief to the reserve?

Louis M. Riccio

We didn’t. There were no significant write-offs during the quarter if that’s what you are asking.

Kurt L. Darrow

I would also add Budd that we don’t know, nobody can predict this credit situation, but we would also believe that this would the low point of a normal year for us with the seasonality of the summer and some of our customers needing some extra help to get back on their feet. So we’re trying to do the appropriate thing.

Budd Bugatch - Raymond James

Because the net days outstanding actually went down year over year as I look at it at least on a calculated basis, but this helps. The Boscovs number, that was about a million dollars of IOU, is that in this number or is that something we got to look forward to in the next quarter?

Louis M. Riccio

I think Boscovs, they reported most of those things, that is in the mid 700 range, but we have accounted for a large majority of the Boscovs impact. We will see how it all pans out, but we should not have a significant change in that over the next quarters.

Budd Bugatch - Raymond James

And likewise, I want to look at the inventories a little bit, kind of drill down there, the LIFO reserve didn’t change in the quarter. Typically, it looks like you don’t change the LIFO reserve once or twice a year as you must measure the index, and with inflation do you think that’s going to be an issue going up or is it lower inventory levels allow you to keep the reserve where it is?

Louis M. Riccio

A few things there Budd; one is, LIFO is an annual calculation, in other words we can have decrements in our inventory during the year because of the seasonality of our business being right now lowest at we’re going to be. If we feel that the numbers will be, if we’ll increase our inventory at the end of the year, then there won’t be any issue there. There is inflation, but our FIFO inventories would go up as well as our LIFO inventories would go down. So, it would be offsetting. If we had to write our inventories up because of inflation, then we would have to write them back down because there would be an offsetting side to it. So, there shouldn’t be a significant impact. It depends on our quantities where they are at at the end of the year, and right now, we look at that every quarter to see that we don’t have a significant change in levels, but we expect at the end of the year when our business recovers like it only does in the third and fourth quarters, our inventories will have to come up with it.

Budd Bugatch - Raymond James

And how much of the inventory reduction happened because of the closure of Tremonton?

Louis M. Riccio

We don’t think our production is going to change much, so our inventory will not substantially change because we closed a plant.

Budd Bugatch - Raymond James

So is the reduction in inventory at retail, where is the reduction happening? Or is it just at the general level of business for maintaining inventories in ice bags?

Kurt L. Darrow

Budd, I would say that our team has done an excellent job of flexing our inventories based on what’s happened with demand and also doing it in a manner that hasn’t disrupted service, but it’s in finished goods, it’s in work in process, it’s in raw materials, it’s across all business units and all categories, and we’ve just been very diligent and very proactive in planning our business to be down slightly and slowing our inventories appropriately.

Budd Bugatch - Raymond James

And it looks like even though there are three more VIE stores this quarter versus last year, it looks like the sales per average VIE or store actually went up. Are they being more productive, the store, or is it just something that is just in the calculation and it’s not really accurate?

Louis M. Riccio

There are a lot of things that go into that number because we have to eliminate what we sell to them and everything. So, it could just be timing in some cases, but I mean they are holding their own, but I wouldn’t say they are dramatically doing any better per store than they did last year in the first quarter.

Kurt L. Darrow

And the combination of the VIEs, Budd, they don’t have the drag of Florida and some of the other markets to aggregate the effect of the total.

Budd Bugatch - Raymond James

I have got you. So when you look at that down 1.9% on a written basis on the sales and since you’ve got some Florida stores in that calculation, can you give us geographically what’s the high and the low of the comps?

Kurt L. Darrow

I would say our patterns have not changed. I would say that Canada is still our best market today and it is still tracking positive, probably in the mid single digits, so certainly Canada is a very strong performing network of stores for us today, and then on the flip side the same four or five areas that we’ve talked about in the past, California, Nevada, Arizona, Florida, and Michigan for other reasons remain the real trouble spots for us.

Budd Bugatch - Raymond James

Down double digits, Kurt?

Kurt L. Darrow

In some cases, yes.

Budd Bugatch - Raymond James

Lastly, when you look at the retail operation, in terms of comp, what comp level is necessary to get to either breakeven or to at least challenge breakeven?

Kurt L. Darrow

Budd, we’re looking at all avenues of that business, we’re looking at obviously our marketing program for traffic, we’re looking at the training programs for dealing with customers, we’re looking at our margins, we’re in the process of renegotiating some leases, we’re analyzing our management teams at all levels to be sure, we’re considering exiting some underperforming stores; so there are all kinds of things we’re doing there. We’re not anymore pleased with the performance than anyone else, but it’s a combination of things, it’s not just volume, it’s not just cost, we’re going to start bringing in the independent dealers to the warehouses which will reduce the load that the retail division is carrying on behalf of the entire network; so there are a number of numbers, and I think I said on a previous call, our store sales are down some 20% or 25% from their peak of 2-1/2 or 3 years ago, and that has put a tremendous strain on the performance.

Budd Bugatch - Raymond James

Is the gross margin year-over-year of the retail stores about equivalent? Is there any significant change in the maintaining margins?

Kurt L. Darrow

There was a significant change in the first quarter and there was a significant change from the fourth quarter when we took some actions to get our inventories in line.

Budd Bugatch - Raymond James

And so directionally the first quarter versus the first quarter of last year is up?

Kurt L. Darrow

It’s up.

Budd Bugatch - Raymond James

And it’s up significant versus the fourth quarter when you took some inventory?

Kurt L. Darrow

That’s correct.

Operator

Our next question is coming from John Baugh - Stifel Nicolaus.

John Baugh - Stifel Nicolaus

Just quickly on the retail comp number 1.9%, was there a divergence between the corporate and the independent of any significance, and you had an awfully good number and I am curious if you ran any kind of promotion or financing, merchandizing, promotion, and then on the improved gross margin in retail, was that really a byproduct of what you did a year ago in terms of liquidating “your bad inventories” or is there something you are doing with merchandize mix or otherwise that’s really helping that gross margin?

Louis M. Riccio

John, I’ll start with the first part of your question. I want to make sure everybody is clear on the timing of the statistics we’re giving. We’re giving written sales of April, May, and June, down 1.9% for the entire network. We’re giving delivered sales for our fiscal first quarter of May, June, and July, down 6% in the company owned stores. So it’s two different measurements at two different timeframes. With that being said, there wasn’t a dramatic difference between the company’s written business and the independent’s written business in the quarter. If we thought we had a magic formula we could do this all the time, we would. We were very successful in our Memorial Day sales strategy. We heavied up our national TV buy. We were not on TV at all a year ago because we did not start the campaign until September of ’07. So we believe that made a significant difference. We are anticipating a similar strategy for Labor Day, but that was the big driver of the quarter in terms of the written sales.

John Baugh - Stifel Nicolaus

And any feel or commentary on July? The reports I get are that July was pretty weak, not that June was terrific, but any color there?

Louis M. Riccio

The summer is obviously a challenge, there is book-in by two strong holidays and our look at it is that if we don’t do very well in those couple of holidays it’s hard to bring the summer up to a level that is acceptable. I would say that the gross margin improvement is just with better marketing, better pricing strategies on store. It’s not that we’re having an anniversary of our really poor first quarter a year ago, but we’ve been very diligent about the way we go to market and the expectations we have on our selling margins and so I think it’s just a natural improvement that we’re getting. Our team has been challenged with getting the warehouses resituated, putting in a whole new IT system, having a common IT system is helping us to watch our margins and watch our pricing exceptions; so I think we are just managing the day to day transactions better than we were a year ago.

John Baugh - Stifel Nicolaus

And Kurt, really quickly, on the upholstery margin front, you had improvement there; it was seen significant in place in the early pressures. Is it fair to say that you have taken some pricing, I am sure that there’s a squeeze still between raw materials and pricing, but you’re more than offsetting it with cellular improvements or is that wrong?

Kurt L. Darrow

Well, our intent has been to make improvements to our business to pay for things outside of raw materials, in other words, if we’re going to have wage increases, healthcare increases, we’ve got to find the efficiencies within our own business to help justify that. When the raw materials come at us like they have the last 6 months, I don’t believe there’s anybody in the industry that can absorb those or who can get efficiencies as fast as we’re getting raw material increases; so yes, we have taken pricing to try to keep us even with the ramp-up in the raw materials.

Operator

Our next question is coming from Laura Champine with Morgan Keegan & Co.

Laura Champine - Morgan Keegan & Co.

My question is on the retail segment; given the continued losses there, is there the potential that you would exit the retail business, at least as an owner of stores, and if so, what are the timelines for that and what kind of bogies are you looking at as far as measuring returns you can get on your investments in retail?

Louis M. Riccio

Laura, I don’t believe that we would consider exiting the retail business. We believe the network of La-Z-Boy stores, both what we own and our network is a strategic advantage to us, but if you look at the retail landscape today and see what’s going on with the various retailers going out of business and bankrupt, we believe it’s very important to have your own distribution channel. It seems as though the survivors in this business are those who are charting their own course, the places to sell our product is dwindling, so having a retail presence is paramount, I think, for our brand and our company long-term. That’s not to say that we couldn’t exit certain markets that we’re in, that’s not to say we wouldn’t exit certain stores, but to totally abandon our retail program which is the cornerstone of our strategy, I think, would not be something that we would consider at this time.

Laura Champine - Morgan Keegan & Co.

Can you comment on the profitability in the independent dealer base and on the potential of needing to perhaps take over some of those stores that aren’t performing as well?

Kurt L. Darrow

Well, the profitability of our independent dealers varies by dealer. We have some that are even in today’s conditions still very profitable. We’ve had dealers that have been with us for 20-25 years who are very solvent and are very committed to moving forward with the business. I think if you recall our comments a couple of years ago, when we decided to enter the retail business and when we ended up with that in the VIEs, we effectively addressed the majority of our troubled retailers at that time. The remaining base of our dealers was fairly profitable. That certainly has changed with the economy, but we are watching all of our individual customers that own the stores, we have about 100 independent dealers that own the other 270 stores who are in close contact with them, but it wouldn’t surprise us as we said in our release that we may close 9, 12, 15 stores this year. There are certain of our independents who are going to retire, there are certain of them who don’t have the wherewithal to get through this; it is a very difficult marketplace out there not only for our La-Z-Boy store owners but for a number of our independents as well, and it’s something we’re watching very closely.

Operator

There are no further questions at this time.

Kathy Liebmann

Thank you everybody. If you have followup questions, give me a call later this afternoon, I will be available. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: La-Z-Boy Incorporated F1Q09 (Qtr End 07/26/08) Earnings Call Transcript
This Transcript
All Transcripts