LA-Z-BOY INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have prepared this Management’s Discussion and Analysis as an aid to understanding our financial results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related Notes to Consolidated Financial Statements. After a cautionary note regarding forward-looking statements, we begin with an introduction to our key businesses and then provide discussions of our results of operations, liquidity and capital resources, and critical accounting policies. Cautionary Note Regarding Forward-Looking Statements La-Z-Boy Incorporated and its subsidiaries (individually and collectively, "we," "our," "us," "La-Z-Boy" or the "Company") make "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include words such as "aim," "anticipates," "believes," "continues," "estimates," "expects," "feels," "forecasts," "hopes," "intends," "plans," "projects," "likely," "seeks," "short-term," "non-recurring," "one-time," "outlook," "target," "unusual," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," or "may." A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this report. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial performance. Our actual future results and trends may differ materially from those we anticipate depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Annual Report for the fiscal year ended April 29, 2023, under Item 1A, "Risk Factors" and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in our Annual Report for the fiscal year ended April 29, 2023 or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason. Introduction Our Business We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States . The La-Z-Boy Furniture Galleries ® stores retail network is the third largest retailer of single-branded furniture in the United States . We manufacture, market, import, export, distribute and retail upholstery furniture products under the La-Z-Boy ® , England, Kincaid ® , and Joybird ® tradenames. In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames. As of July 29, 2023, our supply chain operations included the following: • Five major manufacturing locations and 13 distribution centers in the United States and four facilities in Mexico to support our speed-to-market and customization strategy • A logistics company that distributes a portion of our products in the United States • A wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland • An upholstery manufacturing business in the United Kingdom • A global trading company in Hong Kong which helps us manage our Asian supply chain by establishing and maintaining relationships with our Asian suppliers, as well as identifying efficiencies and savings opportunities 19 Table of Contents During the third quarter of fiscal 2023, we made the decision to close our manufacturing facility in Torreón, Mexico as part of our initiative to drive improved efficiencies through optimized staffing levels within our plants. As a result of this action, charges were recorded within the Wholesale segment in the third and fourth quarters of fiscal 2023, totaling $9.2 million in SG&A expense for the impairment of various assets, primarily long-lived assets, and $1.6 million in cost of sales, primarily related to severance. During the first quarter of fiscal 2024, we terminated our lease on the Torreón facility and recognized a $1.2 million gain in SG&A expense within the Wholesale segment related to the settlement of our lease obligation on the previously impaired long-lived assets. We also participate in two consolidated joint ventures in Thailand that support our international businesses: one that operates a manufacturing facility and another that operates a wholesale sales office. Additionally, we have contracts with several suppliers in Asia to produce products that support our pure import model for casegoods. We sell our products through multiple channels: to furniture retailers or distributors in the United States, Canada, and approximately 50 other countries, including the United Kingdom, China, Australia, South Korea and New Zealand, directly to consumers through retail stores that we own and operate, and through our websites, www.la-z-boy.com and www.joybird.com. • The centerpiece of our retail distribution strategy is our network of 351 La-Z-Boy Furniture Galleries ® stores and 521 La-Z-Boy Comfort Studio ® locations, each dedicated to marketing our La-Z-Boy branded products. We consider this dedicated space to be “proprietary.” ◦ La-Z-Boy Furniture Galleries ® stores help consumers furnish their homes by combining the style, comfort, and quality of La-Z-Boy furniture with our available design services. We own 175 of the La-Z-Boy Furniture Galleries ® stores, while the remainder are independently owned and operated. ◦ La-Z-Boy Comfort Studio ® locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. All 521 La-Z-Boy Comfort Studio ® locations are independently owned and operated. ◦ In total, we have approximately 7.6 million square feet of proprietary floor space dedicated to selling La-Z-Boy branded products in North America. ◦ We also have approximately 2.6 million square feet of floor space outside of the United States and Canada dedicated to selling La-Z-Boy branded products. • Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with slightly over half of Hammary’s sales originating through the La-Z-Boy Furniture Galleries ® store network. ◦ Kincaid and England have their own dedicated proprietary in-store programs with 615 outlets and approximately 1.8 million square feet of proprietary floor space. • In total, our proprietary floor space includes approximately 12.0 million square feet worldwide. • Joybird sells product primarily online and also has limited retail showroom floor space through eleven small-format stores in key urban markets. Our goal is to deliver value to our shareholders over the long term by executing our Century Vision, our strategic plan for growth to our centennial year in 2027, in which we aim to grow sales and market share and strengthen our operating margins. The foundation of our strategic plan is to drive disproportionate growth of our two consumer brands, La-Z-Boy and Joybird, by delivering the transformational power of comfort with a consumer-first approach. We plan to drive growth in the following ways: Expanding the La-Z-Boy brand reach • Leveraging our connection to comfort and reinvigorating our brand with a consumer focus and expanded omni-channel presence. Our strategic initiatives to leverage and reinvigorate our iconic La-Z-Boy brand center on a renewed focus on leveraging the compelling La-Z-Boy comfort message, accelerating our omni-channel offering, and identifying additional consumer-base growth opportunities. We launched our new brand campaign and marketing platform in fiscal 2024, Long Live the Lazy , with compelling messaging designed to increase recognition and consideration of the brand. We expect this new messaging will enhance the appeal of our brand with a broader consumer base. Further, our goal is to connect with consumers along their purchase journey through multiple means, whether online or in person. We are driving change throughout our digital platforms to improve the user experience, 20 Table of Contents with a specific focus on the ease with which customers browse through our broad product assortment, customize products to their liking, find stores to make a purchase, or purchase at www.la-z-boy.com. • Growing our La-Z-Boy Furniture Galleries ® store network . We expect our strategic initiatives in this area to generate growth in our Retail segment through an increased company-owned store count and in our Wholesale segment as our proprietary distribution network expands. We are not only focused on growing the number of locations, but also on upgrading existing store locations to our new concept designs. We are prioritizing growth of our company-owned Retail business by opportunistically acquiring existing La-Z-Boy Furniture Galleries ® stores and opening new La-Z-Boy Furniture Galleries ® stores, primarily in markets that can be serviced through our distribution centers, where we see opportunity for growth, or where we believe we have opportunities for further market penetration. Additionally, we are testing potential store formats to expand our reach to value-seeking consumers and currently operate two Outlet by La-Z-Boy stores. • Expanding the reach of our wholesale distribution channels. Consumers experience the La-Z-Boy brand in many channels including the La-Z-Boy Furniture Galleries ® store network and the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format. While consumers increasingly interact with the brand digitally, our consumers also demonstrate an affinity for visiting our stores to shop, allowing us to frequently deliver the flagship La-Z-Boy Furniture Galleries ® store, or La-Z-Boy Comfort Studio ® , experience and provide design services. In addition to our branded distribution channels, approximately 2,200 other dealers sell La-Z-Boy products, providing us the benefit of multi-channel distribution. These outlets include some of the best-known names in the industry, including Slumberland, Nebraska Furniture Mart, Mathis Brothers and Raymour & Flanagan. We believe there is significant growth potential for our consumer brands through these retail channels. Profitably growing the Joybird brand • Profitably growing the Joybird brand with a digital-first consumer experience. During fiscal 2019, we purchased Joybird, a leading e-commerce retailer and manufacturer of upholstered furniture with a direct-to-consumer model. We believe that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology, an expansion of product assortment, and providing additional small-format stores in key urban markets to enhance our consumers' omni-channel experience. Enhancing our enterprise capabilities • Enhancing our enterprise capabilities to support the growth of our consumer brands and enable potential acquisitions for growth. Key to successful growth is ensuring we have the capabilities to support that growth, including an agile supply chain, modern technology for consumers and employees, and by delivering a human-centered employee experience. Through our Century Vision strategic plan, we have several initiatives focused on enhancing these capabilities with a consumer-first focus. Our reportable operating segments include the Wholesale segment and the Retail segment. • Retail Segment . Our Retail segment consists of one operating segment comprised of our 175 company-owned La-Z-Boy Furniture Galleries ® stores. The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other accessories, to end consumers through these stores. • Wholesale Segment . Our Wholesale segment consists primarily of three operating segments: La-Z-Boy, our largest operating segment, our England subsidiary, and our casegoods operating segment that sells furniture under three brands: American Drew ® , Hammary ® and Kincaid ® . The Wholesale segment also includes our international wholesale and manufacturing businesses. We aggregate these operating segments into one reportable segment because they are economically similar and meet the other aggregation criteria for determining reportable segments. Our Wholesale segment manufactures and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas and imports casegoods (wood) furniture, such as bedroom sets, dining room sets, entertainment centers and occasional pieces. The Wholesale segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers. • Corporate and Other. Corporate and Other includes the shared costs for corporate functions, including human resources, information technology, finance and legal, in addition to revenue generated through royalty agreements with companies licensed to use the La-Z-Boy ® brand name on various products. We consider our corporate functions to be 21 Table of Contents other business activities and have aggregated them with our other insignificant operating segments, including our global trading company in Hong Kong and Joybird, an e-commerce retailer that manufactures upholstered furniture, such as sofas, loveseats, chairs, ottomans, sleeper sofas and beds, and also imports casegoods (wood) furniture, such as occasional tables and other accessories. Joybird sells to the end consumer primarily online through its website, www.joybird.com. None of the operating segments included in Corporate and Other meet the requirements of reportable segments. Results of Operations Fiscal 2024 First Quarter Compared with Fiscal 2023 First Quarter La-Z-Boy Incorporated Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/29/2023 7/30/2022 % Change Sales $ 481,651 $ 604,091 (20.3)% Operating income 34,526 52,643 (34.4)% Operating margin 7.2% 8.7% Sales Consolidated sales decreased $122.4 million, or 20%, in the first quarter of fiscal 2024 compared with the same period a year ago. Sales in the first quarter of fiscal 2023 were fueled by delivery of a significant backlog resulting from heightened demand from prior periods. The decrease in sales in the first quarter of fiscal 2024, primarily due to lower unit volume, reflects a return to industry-wide seasonal trends relative to a historically high comparative period. Partially offsetting the decline in volume, sales benefited from favorable product mix. Operating Margin Operating margin, which is calculated as operating income as a percentage of sales, decreased 150 basis points in the first quarter of fiscal 2024, compared with the same period a year ago. • Gross margin, which is calculated as gross profit as a percentage of sales, increased 450 basis points in the first quarter of fiscal 2024, compared with the same period a year ago. ◦ Changes in our consolidated mix improved gross margin by 140 basis points in the first quarter of fiscal 2024 compared with the same period a year ago, driven by relative growth of our Retail segment, which has a higher gross margin than our Wholesale segment. ◦ Compared with the same period a year ago, gross margin in the first quarter fiscal 2024 further benefited from lower raw material costs and favorable product mix. • SG&A expenses as a percentage of sales increased 600 basis points in the first quarter of fiscal 2024 compared with the same periods a year ago. ◦ Changes in our consolidated mix increased SG&A expense as a percentage of sales by 120 basis points in the first quarter of fiscal 2024 compared with the same period a year ago, driven by relative growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment. ◦ The remaining increase in SG&A expense as a percentage of sales was primarily driven by lower delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses. We discuss each segment’s results in the following section. 22 Table of Contents Retail Segment Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/29/2023 7/30/2022 % Change Sales $ 208,243 $ 236,021 (11.8)% Operating income 29,264 38,152 (23.3)% Operating margin 14.1% 16.2% Sales The Retail segment’s sales decreased $27.8 million, or 12%, in the first quarter of fiscal 2024 compared with the same period a year ago, primarily due to a 16% decline in delivered same-store sales, as sales in the first quarter of fiscal 2023 reached historic levels benefitting from delivery of the backlog built in prior periods. The decrease in delivered same-store sales was partially offset by a $9.1 million increase in sales from our retail store acquisitions that occurred in fiscal 2023 and fiscal 2024. While delivered sales were down relative to the prior year, written same-store sales increased 2% in the first quarter of fiscal 2024 compared with the same period a year ago, reflecting continued strong store-level execution with improved conversion and higher design sales despite challenging industry trends. Same-store sales include the sales of all currently active stores which have been open and company-owned for each comparable period. Operating Margin The Retail segment's operating margin decreased 210 basis points in the first quarter of fiscal 2024 compared with the same period a year ago. • Gross margin increased 130 basis points in the first quarter of fiscal 2024 compared with the same period a year ago, primarily due to prior period pricing actions taken by the Retail business which were realized in the first quarter of this fiscal year as products were delivered to consumers. • SG&A expense as a percentage of sales increased 340 basis points in the first quarter of fiscal 2024 compared with the same period a year ago, primarily due to lower delivered sales relative to selling expenses and fixed costs, mainly occupancy expenses. Wholesale Segment Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/29/2023 7/30/2022 % Change Sales to external customers $ 236,251 $ 323,728 Intersegment sales 97,224 118,090 Total Sales 333,475 441,818 (24.5)% Operating income 23,503 26,142 (10.1)% Operating margin 7.0% 5.9% Sales The Wholesale segment’s sales decreased $108.3 million, or 25%, in the first quarter of fiscal 2024 compared with the same period a year ago. Over the same period, intercompany sales from our Wholesale segment to our Retail segment decreased 18%. The decrease in sales reflects a decline in delivered unit volume as the significant backlog built up in prior periods returns to pre-pandemic levels and the industry returns to typical seasonality. Partially offsetting lower volume, sales benefited from a favorable shift in product mix toward higher priced products. Operating Margin The Wholesale segment's operating margin increased 110 basis points in the first quarter of fiscal 2024 compared with the same period a year ago. 23 Table of Contents • Gross margin increased 470 basis points in the first quarter of fiscal 2024 compared with the same period a year ago. ◦ Declining raw material costs drove a 400 basis point increase in gross margin during the first quarter of fiscal 2024 compared with the same period a year ago. ◦ Gross margin further improved 120 basis points from a favorable shift in product mix during the first quarter of fiscal 2024 compared with the same period a year ago. ◦ Unfavorable fluctuations in the Mexican peso relative to the U.S. dollar, drove higher production-related costs for our manufacturing operations in Mexico, resulting in a 50 basis point decrease in gross margin during the first quarter of fiscal 2024 compared with the same period a year ago. • SG&A expense as a percentage of sales increased 360 basis points in the first quarter of fiscal 2024 compared with the same period a year ago. ◦ Reduced fixed cost leverage and an increase in marketing expense, as a percentage of sales, contributed to higher SG&A expense as a percentage of sales in the first quarter of fiscal 2024 compared with the same period a year ago. ◦ During the first quarter of fiscal 2024 we terminated our lease on the Torreón facility that was closed during the fourth quarter of fiscal 2023 and recognized a $1.2 million gain related to the settlement of our lease obligation on the previously impaired long-lived assets, resulting in a 40 basis point decrease in SG&A expense as a percentage of sales. Corporate and Other Quarter Ended (Unaudited, amounts in thousands, except percentages) 7/29/2023 7/30/2022 % Change Sales $ 40,061 $ 48,730 (17.8)% Intercompany eliminations (100,128) (122,478) 18.2% Operating loss (18,241) (11,651) (56.6)% Sales Corporate and Other sales decreased $8.7 million in the first quarter of fiscal 2024 compared with the same period a year ago. The change in sales was primarily led by Joybird sales which decreased $7.1 million to $35.6 million in the first quarter of fiscal 2024, largely due to lower delivered volume resulting from continued demand challenges consistent with those recently experienced across the e-commerce home furnishings industry. Written sales for Joybird were also down 17% in the first quarter of fiscal 2024 compared with the same period a year ago. Intercompany eliminations decreased in the first quarter of fiscal 2024 compared with the same period a year ago due to lower sales from our Wholesale segment to our Retail segment. Operating Loss Our Corporate and Other operating loss increased $6.6 million in the first quarter of fiscal 2024 compared with the same period a year ago, primarily due to higher intercompany inventory profit elimination adjustments, lower operating profit from our global trading company in Hong Kong, and higher Joybird operating losses, primarily resulting from lower sales volume and higher fixed costs, partially offset by lower input costs. Non-Operating Income (Expense) Interest Income Interest income was $2.6 million higher in the first quarter of fiscal 2024 compared with the same period a year ago, primarily driven by higher interest rates. Other Income (Expense), Net Other income (expense), net was $0.6 million of income in the first quarter of fiscal 2024, primarily due to unrealized gains on investments and exchange rate gains. Other income (expense), net was de minimis in the first quarter of fiscal 2023. 24 Table of Contents Income Taxes Our effective tax rate was 26.5% for both the first quarter of fiscal 2024 and the first quarter of fiscal 2023. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes. Liquidity and Capital Resources Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash from operations, and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, and fulfill other cash requirements for day-to-day operations and capital expenditures, including fiscal 2024 contractual obligations. We had cash, cash equivalents and restricted cash of $340.3 million at July 29, 2023, compared with $346.7 million at April 29, 2023. In addition, we had investments to enhance our returns on cash of $10.6 million at July 29, 2023, compared with $11.6 million at April 29, 2023. The following table illustrates the main components of our cash flows: Quarter Ended (Unaudited, amounts in thousands) 7/29/2023 7/30/2022 Cash Flows Provided By (Used For) Net cash provided by operating activities $ 25,913 $ 33,104 Net cash used for investing activities (12,679) (25,938) Net cash used for financing activities (19,904) (13,835) Exchange rate changes 242 (750) Change in cash, cash equivalents and restricted cash $ (6,428) $ (7,419) Operating Activities During the first quarter of fiscal 2024, net cash provided by operating activities was $25.9 million, a decrease of $7.2 million compared with the prior year, mainly due to lower net income and less favorable changes to working capital, partially offset by a smaller reduction in customer deposits. Our cash provided by operating activities in fiscal 2024 was primarily attributable to net income, adjusted for non-cash items, a $14.8 million decrease in receivables and a $9.3 million decrease in inventory as we align production with incoming order trends. This was partially offset by a $26.2 million decrease in other liabilities, primarily due to the payout of our fiscal 2023 incentive compensation awards during the first quarter of fiscal 2024 along with a $9.4 million decrease in customer deposits reflecting the reduced backlog. Investing Activities During the first quarter of fiscal 2024, net cash used for investing activities was $12.7 million, a decrease of $13.3 million compared with the prior year primarily due to lower capital expenditures and higher proceeds from asset sales. Cash used for investing activities in fiscal 2024 included the following: • Cash used for capital expenditures in the period was $13.5 million compared with $21.0 million during the first quarter of fiscal 2023, which is primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels) and upgrades at our manufacturing and distribution facilities. We anticipate that spending on these items will continue in fiscal 2024 with full year fiscal 2024 capital expenditures expected to be in the range of $50 to $60 million. We have no material contractual commitments outstanding for future capital expenditures. • Cash used for acquisitions was $4.3 million, primarily related to the acquisition of the Colorado Springs, Colorado retail business. Financing Activities On October 15, 2021, we entered into a five-year $200 million unsecured revolving credit facility (as amended, the “Credit Facility”). Borrowings under the Credit Facility may be used by the Company for general corporate purposes. We may increase the size of the facility, either in the form of additional revolving commitments or new term loans, subject to the discretion of each lender to participate in such an increase, up to an additional amount of $100 million. The Credit Facility will mature on 25 Table of Contents October 15, 2026 and provides us the ability to extend the maturity date for two additional one-year periods, subject to the satisfaction of customary conditions. As of July 29, 2023, we have no borrowings outstanding under the Credit Facility. The Credit Facility contains certain restrictive loan covenants, including, among others, financial covenants requiring a maximum consolidated net lease adjusted leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as customary covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of certain assets. As of July 29, 2023, we were in compliance with our financial covenants under the Credit Facility. We believe our cash and cash equivalents, short-term investments, and cash from operations, in addition to our available Credit Facility, will provide adequate liquidity for our business operations over the next 12 months. During the first quarter of fiscal 2024, net cash used for financing activities was $19.9 million, an increase of $6.1 million compared with the prior year, primarily due to higher share repurchases. Cash used for financing activities in fiscal 2024 included the following: • Our board of directors has authorized the repurchase of company stock and we spent $10.0 million in the first quarter of fiscal 2024 to repurchase 0.4 million shares. As of July 29, 2023, 6.9 million shares remained available for repurchase pursuant to this authorization. With the operating cash flows we anticipate generating in fiscal 2024, we expect to continue repurchasing Company stock. • Cash paid to our shareholders in quarterly dividends was $7.9 million. Our board of directors has sole authority to determine if and when we will declare future dividends and on what terms. We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time. Exchange Rate Changes Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $0.2 million for the three months ended July 29, 2023. These changes slightly impacted our cash balances held in Canada, Thailand, and the United Kingdom. Other During the first quarter of fiscal 2024, there were no material changes to the information about our contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023. We do not expect our continuing compliance with existing federal, state and local statutes dealing with protection of the environment to have a material effect on our capital expenditures, earnings, competitive position or liquidity. Critical Accounting Policies We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023. There were no material changes to our critical accounting policies or estimates during the quarter ended July 29, 2023. Recent Accounting Pronouncements See Note 1, Basis of Presentation, to the consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards. 26 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the first quarter of fiscal 2024, there were no material changes from the information contained in Item 7A of our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.