What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-18 compared with 2024-11-19 · 89 added, 85 removed, 153 unchanged (53% of the section changed)

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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.

Forward-looking statements may include words such as "aim," "anticipates," "believes," "continues," "estimates," "expects," "feels," "forecasts," "hopes," "intends," "plans," "projects," "likely," "non-recurring," "one-time," "outlook," "seeks," "short-term," "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.

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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.

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

We are the leading global producer of reclining chairs and one of the largest manufacturers/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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In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Kincaid ® , American Drew ® , Hammary ® , and Joybird ® tradenames.

As of October 26, 2024, our supply chain operations included the following:

As of January 25, 2025, our supply chain operations included the following:

• Five major manufacturing locations and 15 distribution centers in the United States and three facilities in Mexico to support our speed-to-market and customization strategy

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• An upholstery manufacturing business in the United Kingdom and a wholesale sales office that is responsible for distribution of our product in the United Kingdom and Ireland

• 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

• A global trading company in Hong Kong that 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 second quarter of fiscal 2024, we announced actions intended to drive efficiencies and optimize our manufacturing capacity in our global supply chain operations.

As part of this initiative, we made the decision to shift upholstery production from our Ramos, Mexico operations to our other upholstery plants and relocate our cut and sew operations back to Ramos, Mexico, resulting in the permanent closure of our leased cut and sew facility in Parras, Mexico.

As a result of these actions, charges were recorded within the Wholesale segment in the second quarter of fiscal 2024, totaling $3.6 million in cost of sales for severance-related expenses, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.

As a result of these actions, charges were recorded within the Wholesale segment in the first nine months of fiscal 2024, totaling $4.0 million in cost of sales for severance-related expenses, and $3.0 million in SG&A expense for the accelerated depreciation of fixed assets.

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

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◦ We also have approximately 2.8 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.

• Our other brands, England, American Drew, Hammary, and Kincaid enjoy distribution through many of the same outlets, with 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 654 outlets and approximately 1.9 million square feet of proprietary floor space.

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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, 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.

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, 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 .

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• 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 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.

Corporate and Other includes the shared costs for corporate functions, including human resources, information technology, finance and accounting, 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 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, and through small-format stores in key urban markets.

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Results of Operations

Fiscal 2025 Second Quarter Compared with Fiscal 2024 Second Quarter

Fiscal 2025 Third Quarter Compared with Fiscal 2024 Third Quarter

La-Z-Boy Incorporated

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/25/2025 1/27/2024 % Change 1/25/2025 1/27/2024 % Change

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Operating margin 6.7% 6.5% 6.9% 6.7%

Consolidated sales increased $9.6 million, or 2%, and $23.5 million, or 2%, in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

The increase during the second quarter was primarily driven by incremental sales resulting from our Retail acquisitions and higher delivered volume in our Joybird business.

The first six months of fiscal 2025 further benefited from higher delivered volume to external customers, including the addition of new major wholesale dealers, within our Wholesale segment.

Consolidated sales increased $21.4 million, or 4%, and $44.8 million, or 3%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

The increase during the third quarter of fiscal 2025 was primarily driven by delivered same-store sales growth in our Retail business, incremental sales resulting from our Retail acquisitions, and higher delivered volume in our Joybird business.

The increase during the first nine months of fiscal 2025 was primarily driven by incremental sales resulting from our Retail acquisitions, higher delivered volume in our Joybird business, and higher delivered wholesale volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, increased 80 basis points and 10 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 70 basis points and 60 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix led to a 60 basis point increase in gross margin in the second quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ During the second quarter of fiscal 2024, we recognized $3.6 million of severance-related charges as part of our global supply chain optimization initiative, resulting in a comparative gross margin increase of 70 basis points and 40 basis points in second quarter and first six months of fiscal 2025, respectively.

◦ Demand and macroeconomic challenges in our casegoods import business negatively impacted gross margin during the second quarter and first six months of fiscal 2025, compared with the same periods a year ago.

◦ Lower input costs, led by reduced commodity prices and improved sourcing, drove an increase in gross margin during the first six months of fiscal 2025, compared with the same period a year ago.

The second quarter of fiscal 2024 experienced favorable duty expense, more than offsetting the benefit of lower commodity costs in the second quarter of fiscal 2025, resulting in a comparative decrease in gross margin.

• SG&A expenses as a percentage of sales decreased 10 basis points and increased 50 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix led to a 60 basis point increase in SG&A expense as a percentage of sales in the second quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦ As part of our global supply chain optimization initiative, during the first quarter of fiscal 2024 we recognized a $1.2 million gain related to the settlement of our Torreón, Mexico lease obligation on previously impaired long-lived assets and during the second quarter of fiscal 2024, we recognized $3.0 million in accelerated

deprecation related to long-lived assets at our Ramos, Mexico facility.

Together, these items resulted in a comparative 60 basis point and 20 basis point decrease in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2025, respectively.

◦ Reduced marketing expense relative to the prior year, in which we launched our Long Live the Lazy campaign, drove a decrease in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2025.

◦ SG&A expense as a percentage of sales increased in the second quarter of fiscal 2025 compared with the same period a year ago, due to fixed cost deleverage on lower sales in our international wholesale business due to a significant temporary customer disruption.

◦ The remaining increase in SG&A expense as a percentage of sales in the first six months of fiscal 2025 was primarily due to increased selling expenses and fixed costs resulting from acquisitions of independently owned La-Z-Boy Furniture Galleries ® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

Operating margin, which is calculated as operating income as a percentage of sales, increased 20 basis points in both the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.

• Gross margin, which is calculated as gross profit as a percentage of sales, increased 170 basis points and 90 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix led to a 110 basis point increase in gross margin in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher gross margin than our Wholesale segment.

◦ Lower input costs, led by reduced commodity prices and improved sourcing, drove an increase in gross margin during the third quarter and first nine months of fiscal 2025, compared with the same periods a year ago.

◦ The third quarter and first nine months of fiscal 2024 experienced favorable duty expense causing a comparative decrease in gross margin in the third quarter and first nine months of fiscal 2025.

◦ Favorable fluctuations in the Mexican peso relative to the U.S.

dollar drove lower production-related costs, resulting in increased gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.

◦ During the first nine months of fiscal 2024 we recognized $4.0 million of severance-related charges as part of our global supply chain optimization initiative, resulting in a comparative gross margin increase in the first nine months of fiscal 2025.

• SG&A expenses as a percentage of sales increased 150 basis points and 70 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Changes in our consolidated mix led to a 110 basis point increase in SG&A expense as a percentage of sales in the third quarter of fiscal 2025 compared with the same period a year ago, driven by growth of our Retail segment, which has a higher SG&A expense as a percentage of sales than our Wholesale segment.

◦ SG&A expense as a percentage of sales increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago, due to fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.

◦ SG&A expense as a percentage of sales in the first nine months of fiscal 2025 also increased due to higher selling expenses and fixed costs resulting from acquisitions of independently owned La-Z-Boy Furniture Galleries ® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

We discuss each segment’s results in the following section.

Retail Segment

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

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Operating margin 10.7% 10.9% 11.2% 12.7%

The Retail segment’s sales increased $7.3 million, or 3%, and $1.4 million, or 0.3%, in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

The increase in sales was primarily due to $12.0 million and $22.5 million of incremental sales during the second quarter and first six months of fiscal 2025, respectively, from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025, partially offset by a decline in delivered same-store sales.

Written same-store sales were down 1% and 2% in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago, primarily due to softer industry-wide demand as a result of a challenging macroeconomic environment.

The Retail segment’s sales increased $23.0 million, or 11%, and $24.4 million, or 4%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

The increase during the third quarter was primarily due to higher delivered same-store sales along with $9.2 million of incremental sales resulting from our retail store acquisitions that occurred in fiscal 2024 and fiscal 2025.

During the first nine months of fiscal 2025, our retail store acquisitions contributed $32.1 million of incremental sales but were partially offset by a decline in delivered same-store sales.

Written same-store sales increased 7% and 1% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, driven by strong store-level execution and improved traffic trends in the third quarter of fiscal 2025.

Same-store sales include the sales of all currently active stores that have been open and company-owned for each comparable period.

Operating Margin

The Retail segment's operating margin decreased 40 basis points and 200 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

• Gross margin increased 60 basis points and 40 basis points in the second quarter and first six months of 2025, respectively, compared with the same periods a year ago, primarily due to a favorable shift in product mix towards higher priced products.

• SG&A expenses as a percentage of sales increased 100 basis points and 240 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago, primarily due to increased selling expenses and fixed costs resulting from our acquisitions of independently owned La-Z-Boy Furniture Galleries ® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

The Retail segment's operating margin decreased 20 basis points and 150 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

• Gross margin decreased 10 basis points and increased 10 basis points in the third quarter and first nine months of 2025, respectively, compared with the same periods a year ago, as a result of slight shifts in our product mix.

• SG&A expenses as a percentage of sales increased 10 basis points and 160 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

The increase in the first nine months of fiscal 2025 was primarily due to increased selling expenses and fixed costs resulting from our acquisitions of independently owned La-Z-Boy Furniture Galleries ® and retail store expansion, both to support our long-term strategy of growing our Retail segment.

Wholesale Segment

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

(Unaudited, amounts in thousands, except percentages) 1/25/2025 1/27/2024 % Change 1/25/2025 1/27/2024 % Change

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Operating margin 6.5% 6.4% 6.7% 6.4%

The Wholesale segment’s sales decreased $1.1 million, or 0.3%, and increased $16.4 million, or 2%, in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

The Wholesale segment’s sales increased $6.6 million, or 2%, and $23.0 million, or 2%, in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

Over the same periods, intercompany sales from our Wholesale segment to our Retail segment increased 13% and 5%, respectively.

Compared with the same periods a year ago, sales volume increased during the first six months of fiscal 2025, reflecting higher delivered volume to external customers, but declined during the second quarter of fiscal 2025, mainly due to a significant temporary customer disruption in our international wholesale business.

Additionally, both the second quarter and first six months of fiscal 2025 benefited from a favorable shift in product mix toward higher price products.

Sales in both the third quarter and first nine months of fiscal 2025 benefited from a favorable shift in product mix toward higher price products which was partially offset by the impact of a significant customer transition in our international wholesale business.

Additionally, sales during the first nine months of fiscal 2025 were higher due to increased sales volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers.

Operating Margin

The Wholesale segment's operating margin increased 80 basis points and 40 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago

• Gross margin decreased 20 basis points and was flat in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Demand and macroeconomic challenges in our casegoods import business, drove a 70 basis point and 50 basis point decrease in gross margin during the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Lower input costs, led by reduced commodity prices and improved sourcing drove a 60 basis point increase in gross margin during the first six months of fiscal 2025, compared with the same period a year ago.

◦ An unfavorable shift in channel mix towards external customers, which generally carry products with a lower gross margin than products sold to La-Z-Boy Furniture Galleries ® , led to a 60 basis point decrease in gross margin during the first six months of fiscal 2025 compared with the same period a year ago.

◦ During the second quarter of fiscal 2024, we recognized $3.6 million in severance-related charges as part of our global supply chain optimization initiative, resulting in comparative gross margin increase of 100 basis points and 50 basis points in second quarter and first six months of fiscal 2025, respectively.

• SG&A expense as a percentage of sales decreased 100 basis points and 40 basis points in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

Together, these items resulted in a comparative 80 basis point and 30 basis point decrease in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2025, respectively.

◦ Reduced marketing expense relative to the prior year, in which we launched our Long Live the Lazy campaign, drove a 70 basis point and 60 basis point decrease in SG&A expense as a percentage of sales in the second quarter and first six months of fiscal 2025, respectively.

◦ Partially offsetting the items above, SG&A expense as a percentage of sales increased 40 basis points and 30 basis points in the second quarter and first six months of fiscal 2025, respectively, from fixed cost deleverage on lower sales in our international wholesale business due to a significant temporary customer disruption.

The Wholesale segment's operating margin increased 10 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago

• Gross margin increased 130 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Lower input costs, led by reduced commodity prices and improved sourcing drove an 80 basis point and 70 basis point increase in gross margin during the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ The third quarter and first nine months of the prior year experienced favorable duty expense, causing a comparative 70 basis point and 30 basis point decrease in gross margin in the third quarter and first nine months of fiscal 2025, respectively.

◦ Favorable fluctuations in the Mexican peso relative to the U.S.

dollar drove lower production-related costs, resulting in an 80 basis point increase in gross margin during the third quarter of fiscal 2025 compared with the same period a year ago.

◦ Gross margin in the third quarter of fiscal 2025 benefited 20 basis points from a favorable shift in channel mix toward sales to our La-Z-Boy Furniture Galleries ® , which generally carry products with a higher gross margin than products sold to external customers.

A shift in channel mix towards external customers was experienced during the first nine months of fiscal 2025, resulting in a 50 basis point decrease in gross margin.

◦ During the first nine months of fiscal 2024, we recognized $4.0 million in severance-related charges as part of our global supply chain optimization initiative, resulting in comparative gross margin increase of 10 basis points and 40 basis points in the third quarter and first nine months of fiscal 2025, respectively.

• SG&A expense as a percentage of sales increased 120 basis points and 10 basis points in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

◦ Marketing expense in the third quarter of fiscal 2025 increased relative to the prior year, resulting in a 50 basis point increase in SG&A expense as a percentage of sales.

For the first nine months of fiscal 2025, marketing expense decreased relative to the prior year, as during fiscal 2024 we launched our Long Live the Lazy campaign, resulting in a 30 basis point comparative decrease in SG&A expense as a percentage of sales.

◦ SG&A expense as a percentage of sales increased 50 basis points and 30 basis points in the third quarter and first nine months of fiscal 2025, respectively, from fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.

Corporate and Other

Quarter Ended Six Months Ended

Quarter Ended Nine Months Ended

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Operating loss (12,854) (12,463) (3.1)% (38,786) (46,477) 16.5 %

Corporate and Other sales increased $5.9 million and $4.5 million in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

The change in sales was primarily led by Joybird sales which increased $6.3 million to $38.7 million and $5.4 million to $73.2 million in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago, as higher delivered volume more than offset promotional activity.

Written sales for Joybird increased 1% and 5% in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago.

Intercompany eliminations increased in the second quarter of fiscal 2025 compared with the same period a year ago due to higher sales from our Wholesale segment to our Retail segment, while intercompany eliminations decreased during the first six months of fiscal 2025 compared with the same period a year ago due to lower sales from our Wholesale segment to our Retail segment.

Corporate and Other sales increased $2.5 million and $7.0 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

The change in sales was primarily led by Joybird sales which

increased $3.0 million to $37.1 million and $8.4 million to $110.3 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago, as higher delivered volume and a favorable shift in product mix more than offset promotional activity.

Written sales for Joybird increased 10% and 7% in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

Intercompany eliminations increased in the third quarter and first nine months of fiscal 2025 compared with the same periods a year ago due to higher sales from our Wholesale segment to our Retail segment.

Operating Loss

Our Corporate and Other operating loss decreased $2.1 million and $8.1 million in the second quarter and first six months of fiscal 2025, respectively, compared with the same periods a year ago, primarily due to improved Joybird operating margin resulting in breakeven profit, partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

The first six months of fiscal 2025 also benefited from favorable intercompany inventory profit elimination adjustments relative to the same period a year ago.

Our Corporate and Other operating loss increased $0.4 million and decreased $7.7 million in the third quarter and first nine months of fiscal 2025, respectively, compared with the same periods a year ago.

The third quarter of fiscal 2025 benefited from improved Joybird operating margin, resulting in breakeven profit, but was more than offset by lower intercompany operating profit from our global trading company in Hong Kong.

In the first nine months of fiscal 2025, Joybird operating profit improvements along with favorable intercompany inventory profit elimination adjustments, relative to the same period a year ago, were partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

Non-Operating Income (Expense)

Interest Income

Interest income was $1.1 million higher in the first six months of 2025, compared with the same period a year ago, primarily driven by higher interest rates.

Interest income was $0.7 million lower and $0.4 million higher in the third quarter and first nine months of 2025, respectively, compared with the same period a year ago, primarily driven by changes in interest rates which decreased throughout the first nine months of fiscal 2025.

Other Income, (Expense), Net

Other income (expense), net was $1.9 million and $2.5 million of expense in the second quarter and first six months of 2025, respectively, primarily due to exchange rate losses related to our Thailand manufacturing and wholesale businesses.

Our effective tax rate was 26.3% and 25.9% for the second quarter and first six months of 2025, respectively, compared with 26.5% for both the second quarter and first six months of fiscal 2024.

Other income (expense), net was $0.1 million of income and $2.4 million of expense in the third quarter and first nine months of fiscal 2025, respectively.

The expense in the first nine months of fiscal 2025 was primarily due to exchange rate losses related to our operations in Mexico and Thailand.

Our effective tax rate was 25.1% and 25.6% for the third quarter and first nine months of fiscal 2025, respectively, compared with 20.2% and 24.5% for the third quarter and first nine months of fiscal 2024.

The increase in our effective tax rate in the third quarter of fiscal 2025 compared with the same period a year ago was primarily the result of favorable return to provision adjustments impacting the prior year and absent these discrete items, the effective tax rate would have been 25.6% for the third quarter of fiscal 2024.

Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

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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 2025 contractual obligations.

We had cash, cash equivalents and restricted cash of $303.1 million at October 26, 2024, compared with $341.1 million at April 27, 2024.

In addition, we had investments to enhance our returns on cash of $2.4 million at October 26, 2024, compared with $6.8 million at April 27, 2024.

We had cash, cash equivalents and restricted cash of $314.6 million at January 25, 2025, compared with $341.1 million at April 27, 2024.

In addition, we had investments to enhance our returns on cash of $2.6 million at January 25, 2025, compared with $6.8 million at April 27, 2024.

The following table illustrates the main components of our cash flows:

Six Months Ended

Nine Months Ended

(Unaudited, amounts in thousands) 1/25/2025 1/27/2024

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Operating Activities

During the first six months of fiscal 2025, net cash provided by operating activities was $68.3 million, an increase of $11.4 million compared with the same period a year ago.

The year over year increase was primarily due to a smaller reduction in customer deposits along with a lower incentive compensation payout in fiscal 2025 relative to the prior year.

Our cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items, partially offset by an increase in inventory balances.

During the first nine months of fiscal 2025, net cash provided by operating activities was $125.3 million, an increase of $19.9 million compared with the same period a year ago.

The year over year increase was primarily due to an increase in customer deposits and favorable net changes in working capital, including lower receivables and lower inventory, partially offset by reduced payables.

Our cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items and favorable net changes in working capital, including higher payables and lower receivables, partially offset by an increase in inventory.

Investing Activities

During the first six months of fiscal 2025, net cash used for investing activities was $45.5 million, an increase of $20.2 million compared with the same period a year ago, primarily due to cash used for acquisitions and increased capital expenditures.

During the first nine months of fiscal 2025, net cash used for investing activities was $71.2 million, an increase of $17.2 million compared with the same period a year ago, primarily due to an increase in capital expenditures.

Cash used for investing activities in fiscal 2025 included the following:

• Cash used for capital expenditures in the period was $32.8 million compared with $26.5 million during the first six months of fiscal 2024, which was primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels), manufacturing-related investments, and market showroom upgrades.

• Cash used for capital expenditures in the period was $51.5 million compared with $38.0 million during the first nine months of fiscal 2024, which was primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels), manufacturing-related investments, and market showroom upgrades.

We anticipate that spending on these items will continue in fiscal 2025 with full year fiscal 2025 capital expenditures expected to be in the range of $70 to $80 million.

We have no material contractual commitments outstanding for future capital expenditures.

• Cash used for acquisitions was $17.8 million, primarily related to the acquisition of the Melbourne and Cocoa, Florida and Davenport, Iowa retail businesses.

• Cash used for acquisitions was $24.8 million, primarily related to the acquisition of the Davenport, Iowa, Melbourne and Cocoa, Florida, and Toledo, Ohio retail businesses.

• Proceeds from the sale of investments, net of investment purchases, were $4.9 million.

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The Credit Facility will mature on 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 October 26, 2024, we have no borrowings outstanding under the Credit Facility.

As of January 25, 2025, 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 October 26, 2024, we were in compliance with our financial covenants under the Credit Facility.

As of January 25, 2025, 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 six months of fiscal 2025, net cash used for financing activities was $61.7 million, an increase of $17.8 million compared with the same period a year ago, primarily due to higher share repurchases, partially offset by proceeds from exercised stock options.

During the first nine months of fiscal 2025, net cash used for financing activities was $81.2 million, an increase of $16.7 million compared with the same period a year ago, primarily due to higher share repurchases, partially offset by higher proceeds from exercised stock options.

In addition, our cash used for financing activities in fiscal 2024 included holdback payments of $5.0 million for a prior period acquisition.

Cash used for financing activities in fiscal 2025 included the following:

• Our board of directors has authorized the repurchase of company stock and we spent $53.1 million in the first six months of fiscal 2025 to repurchase 1.4 million shares.

As of October 26, 2024, 4.3 million shares remained available for repurchase pursuant to this authorization.

With the operating cash flows we anticipate generating in fiscal 2025, we

expect to continue repurchasing Company stock subject to market conditions and other factors as deemed relevant by our board of directors.

• Our board of directors has authorized the repurchase of company stock and we spent $64.4 million in the first nine months of fiscal 2025 to repurchase 1.7 million shares.

As of January 25, 2025, 4.0 million shares remained available

for repurchase pursuant to this authorization.

With the operating cash flows we anticipate generating in fiscal 2025, we expect to continue repurchasing Company stock subject to market conditions and other factors as deemed relevant by our board of directors.

• Cash paid to our shareholders in quarterly dividends was $25.9 million.

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Exchange Rate Changes

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $0.9 million for the six months ended October 26, 2024.

Due to changes in exchange rates, our cash, cash equivalents, and restricted cash increased by $0.6 million for the nine months ended January 25, 2025.

These changes impacted our cash balances held in Canada, Thailand, and the United Kingdom.

During the second quarter of fiscal 2025, 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 27, 2024.

During the third quarter of fiscal 2025, 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 27, 2024.

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.

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We disclosed our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024.

There were no material changes to our critical accounting policies or estimates during the six months ended October 26, 2024.

There were no material changes to our critical accounting policies or estimates during the nine months ended January 25, 2025.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first six months of fiscal 2025, 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 27, 2024.

During the first nine months of fiscal 2025, 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 27, 2024.

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-Q

Item 2. Management’s Discussion and Analysis