What changed in this filing

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Item 1. Business

2024-06-17 compared with 2023-06-20 · 52 added, 62 removed, 181 unchanged (39% of the section changed)

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Today, our La-Z-Boy brand is one of the most recognized brands in the furniture industry.

We are the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States .

We are the leading global producer of reclining chairs and one of the largest manufacturer/distributors 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 .

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• 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

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.

Torreón was the last facility to begin operating as part of our broader Mexico manufacturing expansion in fiscal 2021 and 2022 to meet pandemic-related upholstery demand and accounted for approximately 3% of our La-Z-Boy branded production.

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 selling, general, and administrative expense for the impairment of various assets, primarily long-lived assets, and $1.6 million in cost of sales, primarily related to severance.

We also participate in two consolidated joint ventures in Thailand that support our international businesses:

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• In total, our proprietary floor space includes approximately 12.3 million square feet worldwide.

• Joybird sells product primarily online and has a limited amount of proprietary retail showroom floor space including ten small-format stores in key urban markets.

• Joybird sells product primarily online and has 12 small-format stores in key urban markets.

Principal Products and Industry Segments

Our reportable operating segments include the Wholesale segment and the Retail segment.

Our reportable operating segments include the Retail segment and the Wholesale segment.

Our Retail segment primarily sells upholstered furniture, in addition to some casegoods and other home furnishing accessories, to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores.

Our Wholesale segment manufactures and imports upholstered and casegoods (wood) furniture and sells directly to La-Z-Boy Furniture Galleries ® stores, operators of La-Z-Boy Comfort Studio ® locations, branded space locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

Our Retail segment primarily sells upholstered furniture, in addition to some casegoods and other accessories, to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores.

We have provided additional detailed information regarding our segments and their products in Note 17, Segment Information,

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The principal raw materials and parts used for manufacturing that are purchased are cover (primarily fabrics and leather), polyester batting and polyurethane foam for cushioning and padding, lumber and plywood for frames, steel for motion mechanisms, electrical components for power units and various other metal components for fabrication of product.

We purchase most of our polyurethane foam from two suppliers, which have several facilities across the United States that deliver to our plants.

We purchase most of our polyurethane foam from three suppliers, which have several facilities across the United States.

We purchase cover from a variety of sources, but we rely on a limited number of major suppliers.

We purchase more than half of our cover in a raw state (fabric rolls or leather hides) primarily from suppliers in China, then cut and sew it into cover in our cut and sew facilities in Mexico.

We purchase the remainder of our cut and sewn leather and fabric kits from five main suppliers primarily from China as well as Vietnam.

We purchase more than half of our cover in a raw state (fabric rolls or leather hides) from suppliers in multiple countries including China, the United States, and Brazil, then cut and sew it into cover in our cut and sew facilities in Mexico.

We purchase the remainder of our cut and sewn leather and fabric kits from three main suppliers primarily from China and Vietnam.

We use these suppliers primarily for their product design capabilities and to balance our mix of in-sourced and out-sourced production.

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We manage our Asian supply chain through our global trading company in Hong Kong, which works to identify efficiencies and savings opportunities, while verifying La-Z-Boy quality standards are being adhered to and managing the relationships with our Asian suppliers.

During fiscal 2022 and the first half of fiscal 2023, the prices of materials we use in our upholstery manufacturing process increased, driven by supply chain challenges due to COVID-19, higher demand for raw materials in manufacturing sectors and the home furnishings industry due to an economic sector rotation, and inflationary cost pressure.

During the second half of fiscal 2023, raw material prices began to decrease relative to the historic highs experienced in the prior year, but are still well above pre-pandemic levels.

As we begin fiscal 2024, we anticipate that prices will remain relatively consistent with those seen at the end of fiscal 2023, with potential increases due to economic volatility and price inflation in our core materials.

To the extent that we again experience incremental costs in any of these areas, as we did in fiscal 2023, we may increase our selling prices or assess material surcharges to offset the impact.

However, increases in selling prices, or surcharges, may not fully mitigate the impact of raw material cost increases, which could adversely impact operating profits.

During fiscal 2024, the cost of materials and parts used for manufacturing moderated and began to stabilize relative to the volatility experienced in prior years as a result of the supply chain disruptions created by the COVID-19 pandemic.

As we begin fiscal 2025, we anticipate that prices of such materials and parts will remain relatively consistent with those seen at the end of fiscal 2024, with potential increases due to economic volatility and price and wage inflation related to our core materials.

To the extent that we experience changes in our cost of materials and parts, we may adjust our selling prices or assess material surcharges, accordingly.

However, in the event of rising costs, increases in selling prices or implementation of surcharges may not fully mitigate the impact of raw material cost increases, which could adversely impact operating profits.

Finished Goods Imports

Imported finished goods represented 6% and 7% of our consolidated sales in fiscal 2024 and 2023, respectively.

In fiscal 2023, we purchased 74% of this imported product from five suppliers based in Asia.

In fiscal 2024, we purchased approximately 75% of this imported product from six suppliers based in Vietnam.

We use these suppliers primarily to leverage our buying power, to control quality and product flow, and because their capabilities align with our product design needs.

If any of these suppliers experience financial or other difficulties, we could experience disruptions in our product flow until we obtain

alternate suppliers, which could be lengthy due to the longer lead time required for sourced wood furniture from Asian manufacturers.

The prices we paid for these imported products, including associated transportation costs, decreased throughout 2023 compared with fiscal 2022 when costs increased drastically due to the constrained supply chain along with the lack of shipping container availability.

In fiscal 2024, we anticipate our product costs will stabilize.

If any of these suppliers experience financial or other difficulties, we could experience disruptions in our product flow until we obtain alternate suppliers, which could be lengthy due to the longer lead time required for sourced wood furniture from Asian manufacturers.

The prices we paid for imported products, including associated transportation costs, decreased throughout most of 2024 compared with fiscal 2023.

While ocean freight costs decreased during the first half of the year, rates rose near the end of our fiscal year as a result of supply challenges in global shipping routes.

In fiscal 2025, while we anticipate our product costs will be relatively flat overall, we expect slight increases in ocean freight costs due to continued container transit challenges in these global shipping routes.

Seasonal Business

Our business has historically displayed seasonal patterns driven by consumer behavior with demand highest in the winter months as discretionary spend tends to shift toward travel and leisure activities during the summer months.

For our wholesale businesses, our fiscal fourth quarter has historically had the highest volume of delivered sales relative to other quarters.

For our wholesale

business, our fiscal fourth quarter has historically had the highest volume of delivered sales relative to other quarters.

For our retail businesses, which includes our company-owned retail stores, our fiscal third quarter typically has the highest volume of delivered sales relative to other quarters.

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Also driven by the seasonal slowdown in the summer, each of our retail businesses typically experience their lowest sales in our fiscal first quarter.

During the last three fiscal years, our sales volume and production schedule did not follow typical trends due to the impact of COVID-19.

As a result of the significant backlog built in prior years driven by heightened demand during the COVID-19 pandemic, in fiscal 2023, our wholesale and retail businesses both experienced their largest sales volume in the second quarter of fiscal 2023.

We anticipate that typical seasonal trends in the furniture industry will return to normal in fiscal 2024.

During fiscal 2024, we experienced our largest sales in the fourth quarter for both our wholesale and retail businesses, which we believe was consistent with overall trends in the furniture industry.

We therefore do not believe that this is an indicator that our seasonal trends are changing for our retail businesses and anticipate typical seasonality for both our wholesale and retail businesses in fiscal 2025.

Economic Cycle and Purchasing Cycle

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In addition, consumer confidence, employment rates, inflation and interest rates, consumer savings levels, international trade policies, and other factors could affect demand.

During fiscal 2021 and the beginning of fiscal 2022, we experienced heightened demand as more discretionary spending was allocated to the home furnishings industry due to the impact of COVID-19.

However, during fiscal 2023, demand trends have returned to pre-pandemic patterns and therefore, in fiscal 2024, we anticipate furniture demand and purchasing cycles to respond to macroeconomic conditions as they historically have.

Upholstered furniture has a shorter life cycle than casegoods furniture because upholstered furniture is typically more fashion and design-oriented and is often purchased one or two pieces at a time.

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Joybird finished goods inventory is maintained at our distribution centers, at its manufacturing and warehouse locations, or in-transit to the end consumer.

Our inventory decreased $26.9 million as of year end fiscal 2023 compared with year end fiscal 2022 primarily due to higher inventory levels at the end of fiscal 2022 to support increased sales demand and manufacturing capacity and to reduce the impact associated with volatility in raw material availability.

Additionally, inventory balances at the end of fiscal 2023 were lower as we have worked down our backlog toward pre-pandemic levels and aligned production with incoming order trends.

Our inventory decreased $13.0 million as of year end fiscal 2024 compared with year end fiscal 2023 as we continue to stabilize inventory levels and align production with incoming order trends.

We actively manage our inventory levels on an ongoing basis to ensure they are appropriate relative to our sales volume, while maintaining our focus on service to our customers.

Accounts Receivable:

Our accounts receivable decreased $58.2 million as of year end fiscal 2023 compared with year end fiscal 2022.

The decrease in accounts receivable was primarily due to lower fourth quarter sales in fiscal 2023 compared with the same period a year ago as the prior year benefited from sales generated from the backlog built up in prior periods combined with the realization of pricing and surcharge actions taken in response to rising manufacturing costs.

Additionally, our allowance for receivable credit losses was $1.4 million higher at the end of fiscal 2023 compared with the end of fiscal 2022 reflecting uncertainty in the economic outlook.

Our accounts receivable increased $13.7 million as of year end fiscal 2024 compared with year end fiscal 2023, primarily reflecting higher sales from our Wholesale business to external dealers during the fourth quarter of fiscal 2024 compared with same period a year ago.

Additionally, our allowance for receivable credit losses was $0.3 million higher at the end of fiscal 2024 compared with the end of fiscal 2023 reflecting a higher receivable balance.

We monitor our customers' accounts, limit our credit exposure to certain independent dealers and strive to decrease our days' sales outstanding where possible.

Accounts Payable:

Our accounts payable increased $3.4 million as of year end fiscal 2023 compared with year end fiscal 2022, primarily due to higher marketing costs during the fourth quarter of fiscal 2023 compared with the fourth quarter of fiscal 2022.

Our accounts payable decreased $11.0 million as of year end fiscal 2024 compared with year end fiscal 2023, primarily reflecting lower inventory purchases.

Customer Deposits:

We collect a deposit from our customers at the time a customer order is placed in one of our company-owned retail stores or through our websites, www.la-z-boy.com and www.joybird.com.

Customer deposits decreased $77.5 million as of fiscal year end 2023 compared with fiscal year end 2022, as we worked down our backlog toward pre-pandemic levels.

Our wholesale customers are furniture retailers.

While primarily located throughout the United States and Canada, we also have customers located in various other countries, including the United Kingdom, China, Australia, South Korea and New Zealand.

Sales in our Wholesale segment are primarily to third-party furniture retailers, but we also sell directly to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores that make up our Retail segment and through our websites, www.la-z-boy.com and www.joybird.com.

Customer deposits decreased $17.0 million as of fiscal year end 2024 compared with fiscal year end 2023, primarily due to a slight reduction in backlog.

We sell directly to end consumers through our company-owned La-Z-Boy Furniture Galleries ® stores that make up our Retail segment, our small-format Joybird stores, and our websites, www.la-z-boy.com and www.joybird.com.

Sales in our Wholesale segment are primarily to third-party furniture retailers.

While mainly located throughout the United States and Canada, we also have customers located in various other countries, including the United Kingdom, China, Australia, South Korea and New Zealand.

We have formal agreements with many furniture retailers for them to display and merchandise products from one or more of our operating units and sell them to consumers in dedicated retail space, either in stand-alone stores or dedicated proprietary galleries, studios or branded spaces within their stores.

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The success of our product distribution model relies heavily on having retail floor space that is dedicated to displaying and marketing our products.

The 349-store La-Z-Boy Furniture Galleries ® network is central to this approach.

In addition, we sell product through proprietary space within other retail furniture stores, primarily La-Z-Boy Comfort Studio ® locations, branded space locations, England Custom Comfort Center locations, Kincaid Shoppes, and other international locations.

Additionally, our Joybird business, which sells product primarily online to end consumers through its website, www.joybird.com, also has a limited amount of retail showroom floor space in small-format stores in key urban markets.

Maintaining, updating, and, when appropriate, expanding our proprietary distribution network is a key part of our overall sales and marketing strategy.

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We continue to maintain and update our current stores to improve the quality of the network.

The La-Z-Boy Furniture Galleries ® store network plans to open 7 to 9 stores and relocate or remodel 20 to 25 stores during fiscal 2024, all of which will feature our latest store designs.

During fiscal 2024 the La-Z-Boy Furniture Galleries ® store network opened 8 new stores and relocated or remodeled 19 stores.

In fiscal 2025, the La-Z-Boy Furniture Galleries ® store network further plans to open 12 to 15 stores and relocate or remodel 25 to 35 stores, all of which will feature our latest store designs.

Additionally, during fiscal 2025 we plan to open or update approximately 100 La-Z-Boy Comfort Studio ® locations as well as 40 branded space locations.

Independent dealers for our proprietary La-Z-Boy Furniture Galleries ® store network were selected based on factors such as their management and financial qualifications and the potential for distribution in specific geographical areas.

This proprietary distribution enables us to concentrate our marketing to a dedicated product line across the entire network benefitting La-Z-Boy, these dealers, and our consumers.

Independent dealers for our proprietary La-Z-Boy Furniture Galleries ® store network provide distribution in specific geographical areas and enable us to concentrate our marketing to a dedicated product line across the entire network benefitting La-Z-Boy, these dealers, and our consumers.

It also allows dealers in this proprietary group to take advantage of best practices, with which other proprietary dealers have succeeded, and we facilitate forums for these dealers to share them.

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Historically, the size of our backlog at a given time varies and may not be indicative of our future sales and, therefore, we do not rely entirely on backlogs to predict future sales.

Our wholesale backlog was $223.1 million as of April 29, 2023, compared with $697.2 million as of April 30, 2022.

The decrease in fiscal 2023 was the result of delivering on the backlog built in prior periods, continued production and supply chain efficiencies, and a slow-down in demand relative to the peak experienced during the COVID-19 pandemic.

As of the end of fiscal 2023, we believe that our backlog volume and lead times are returning to pre-pandemic levels and we anticipate that they will stabilize in fiscal 2024.

Our wholesale backlog was $136.6 million as of April 27, 2024.

This represents a 10% decrease from a fiscal 2023 year end backlog of $151.3 million, which was revised to reflect an adjustment to the dollar impact of cancellations that occurred during fiscal 2023.

At the end of fiscal 2023, backlog and lead times had generally returned to pre-pandemic levels and the slight decrease in fiscal 2024 was mainly due to shipments outpacing incoming orders as a result of lower industry-wide demand.

We anticipate our backlog will remain relatively stable in fiscal 2025.

Competitive Conditions

We are the second largest manufacturer/distributor of residential (living and family room, bedroom, and dining room) furniture in the United States, as measured by annual sales volume.

We are one of the largest manufacturer/distributors of residential (living and family room, bedroom, and dining room) furniture in the United States, as measured by annual sales volume.

The home furnishings industry competes primarily on the basis of product styling and quality, comfort, customer service (product availability and delivery), price, and location.

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The increased ability of consumers to purchase furniture through various furniture manufacturers' and digital-only retailers' internet websites has also increased competition in the industry.

Although digital retailers operate with lower overhead costs than a brick-and-mortar retailer, customer acquisition costs and advertising spend is typically much higher.

Although digital retailers operate with lower overhead costs than a brick-and-mortar retailer, customer acquisition costs and advertising spend are typically much higher.

Department stores and big box retailers with an online presence also offer products that compete with some of our product lines.

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We also license the use of the La-Z-Boy trademark on contract office furniture, outdoor furniture, and non-furniture products, as these arrangements enhance our brand awareness, broaden the perceptions of La-Z-Boy, and create visibility of the La-Z-Boy brand in channels outside of the residential furniture industry.

In addition, we license to our branded dealers the right to use our La-Z-Boy trademark in connection with the sale of

our products and related services, on their signs, and in other ways, which we consider to be a key part of our marketing strategies.

In addition, we license to our branded dealers the right to use our La-Z-Boy trademark in connection with the sale of our products and related services, on their signs, and in other ways, which we consider to be a key part of our marketing strategies.

We provide more information about those dealers under "Customers."

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Human Capital

We employed approximately 10,500 full-time equivalent employees as of April 29, 2023, compared with approximately 12,800 employees at the end of fiscal 2022.

The decrease in headcount was primarily due to the initiative to drive improved efficiencies through optimized staffing levels within our US, Mexico and Thailand plants.

As of April 29, 2023, we employed approximately 8,200 employees in our Wholesale segment, 1,600 in our Retail segment, 480 in our Joybird business, with the remaining employees being corporate personnel.

We employed approximately 10,200 full-time equivalent employees at the end of fiscal 2024, compared with approximately 10,500 employees at the end of fiscal 2023.

The decrease in headcount was primarily due to the initiative to drive improved efficiencies through optimized staffing levels at our Mexico operations.

As of the end of fiscal 2024 we employed approximately 7,800 employees in our Wholesale segment, 1,600 in our Retail segment, 500 in our Joybird business, with the remaining employees being corporate personnel.

We employ the majority of our employees on a full-time basis.

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We believe in creating and fostering a workplace in which all our employees feel valued, included, and empowered to do their best work and contribute their ideas and perspectives.

Our Company is committed to recruiting and retaining diverse talent so that our workforce better reflects the communities in which we operate our business globally.

We are committed to recruiting and retaining diverse talent so that our workforce better reflects the communities in which we operate our business globally.

We recognize that our employees’ unique backgrounds, experiences and perspectives enable us to create the optimal work environment and deliver on our mission.

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• Leveraging our Diversity, Inclusion and Belonging Council to provide enterprise-wide leadership focused on supporting all our employees, developing training and learning opportunities for our employees on diversity, unconscious bias and other topics, and creating sustainable plans to increase diversity in talent acquisition;

• Expanding our support of employee resource groups ("ERGs"), which include groups focused on Multicultural, Pride, Working Parents & Caregivers and Women.

Our ERG’s provide learning and mentorship experiences for our diverse employees, supporting our objective of creating diversity awareness across our organization, and helping our employees use their collective voices to positively impact our Company and the communities in which we operate our business and live;

• Expanding our support of employee resource groups ("ERGs"), which include groups focused on Multicultural, Pride (LGBTQ+), Working Parents & Caregivers, Women, and Salute (Armed Forces).

Our ERGs provide learning and mentorship experiences for our diverse employees, supporting our objective of creating diversity awareness across our organization, and helping our employees use their collective voices to positively impact our Company and the communities in which we operate our business and live;

• Revisiting, assessing and implementing changes to our processes, in an effort to continue mitigating unconscious bias and enhancing our inclusion recruiting strategy;

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Additionally, the National Safety Council (NSC) has recognized La-Z-Boy with multiple awards for safety performance and leadership throughout the Company’s history.

This includes our recognition as a six-time recipient of the Corporate Culture of Safety Award and our recognition as a recipient of the Green Cross for Safety Excellence Award, which recognizes only one corporation each year for outstanding achievement in safety.

This includes our recognition as a seven-time recipient of the Corporate Culture of Safety Award.

Training and Development

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effective in both current and future roles.

This includes training in the operations and retail environment

to maintain high-quality standards as we make and sell our products.

We strive to promote employees internally and to provide

new managers with the skills necessary to succeed.

This includes training in the operations and retail environment to maintain high-quality standards as we make and sell our products.

We strive to promote employees internally and to provide new managers with the skills necessary to succeed.

Further, we have a leadership development program to train employees who are new to managing teams.

Employee Town Halls and Employee Engagement

"LZB Live", our quarterly global town hall, and other employee town halls are held in person and streamed to give our employees an opportunity to ask questions of our Chief Executive Officer, Chief Financial Officer, and other senior executive leaders and to continue to build and support our mission, purpose, and values.

Additionally, the Company provides opportunities for employee recognition from peers and leaders through our BRAVO program, and also periodically administers employee engagement surveys.

Community Giving

Throughout our 97-year history, giving back to our communities has been woven through La-Z-Boy’s culture following the example set by our founders.

When it comes to giving, our vision is to improve the lives of others by developing exceptional programs based on partnerships where employees feel a sense of connection and pride in their communities and our mission is to enhance the quality of life in the communities in which we live and serve through leadership, financial contributions and volunteer efforts.

When it comes to giving, our vision is to improve the lives of others by developing exceptional

programs based on partnerships where employees feel a sense of connection and pride in their communities and our mission is to enhance the quality of life in the communities in which we live and serve through leadership, financial contributions, and volunteer efforts.

Our philanthropic initiatives include the La-Z-Boy Foundation, local community involvement, disaster relief, and our signature charity, Ronald McDonald House Charities.

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The Company participates in the "The La-Z-Boy Summer of Caring" during the summer and "The La-Z-Boy Season of Caring" during the winter, seasonal initiatives that encourage and support employee volunteerism.

Since launching in 2018, our employees have accumulated over 35,000 hours of caring as part of these programs.

Internet Availability

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business