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Item 7. Management’s Discussion and Analysis

2026-06-16 compared with 2025-06-17 · 113 added, 109 removed, 163 unchanged (58% of the section changed)

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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 .

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.

The La-Z-Boy Stores retail network is the second 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, and Joybird ® tradenames.

In addition, we import, distribute and retail accessories and casegoods (wood) furniture products under the Hammary ® and Joybird ® tradenames.

During fiscal 2026, we also imported, distributed, and retailed accessories and casegoods (wood) furniture products under the Kincaid ® and American Drew ® tradenames, and following the completion of the sale of certain assets of the Kincaid ® and American Drew ® wholesale businesses on May 29, 2026, we continue to retail such products.

Refer to Note 4, Assets Held for Sale and Note 21, Subsequent Events, to our consolidated financial statements for further information.

For additional information about our business, refer to Part I, Item 1, Business of this report.

Century Vision Strategy

Our goal is to deliver value to our shareholders over the long term by executing Century Vision, our strategic plan for growth to our centennial year in 2027 and beyond, 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:

As La-Z-Boy approaches its centennial anniversary in 2027, we remain focused on executing our Century Vision strategy to grow sales and market share through growth of our consumer brands, La-Z-Boy and Joybird, and sustainably grow our operating margin well beyond this milestone year.

Building on a century of innovation, comfort, craftsmanship, and consumer

trust, we are working to leverage our iconic brand to expand market reach and strengthen our engagement with consumers, dealers and partners.

Through continued investment in brand evolution, retail expansion, digital transformation, innovation, and consumer insights, we aim to deliver the transformational power of comfort to future generations with a consumer-first approach while honoring our almost 100 year heritage that has made La-Z-Boy one of America's most recognized and enduring brands.

Our Century Vision strategy continues to have significant runway and we are executing through the following initiatives:

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 leverage our consumer insights to develop and deliver on-trend upholstered furniture, particularly in the motion and reclining categories.

We launched our brand campaign and marketing platform in fiscal 2024, Long Live the Lazy , with compelling, consumer inspired, messaging designed to increase recognition and consideration of the brand.

We expect that this messaging will enhance the appeal of our brand with a broader consumer base.

• Leveraging our connection to comfort and reinvigorating our brand with a consumer focus, expanded omni-channel presence, and digital transformation.

We leverage our consumer insights to develop and deliver meaningful product innovation, particularly in the motion and reclining categories.

We also utilize consumer insights to optimize our messaging and marketing campaigns to increase recognition and consideration of La-Z-Boy among both existing and prospective customers.

Our Long Live the Lazy campaign, launched in 2024, continues to resonate through its compelling, consumer-inspired message.

In 2025, we successfully launched a refreshed brand identity - the first significant evolution of the La-Z-Boy brand in more than two decades - designed to modernize the brand, enhance differentiation, and strengthen relevance with a broader consumer audience across retail and digital footprints.

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 .

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 where we see opportunity for growth, or where we believe we have opportunities for further market penetration.

Over the last five years, as a result of opening new company-owned stores and acquiring independent La-Z-Boy Furniture Galleries ® stores, we increased our ownership percentage in this store network from 44% to 55%.

We believe that our digital transformation will improve traffic both online and in our retail locations.

• Growing our La-Z-Boy retail business .

We expect to grow our Retail segment through organic same-store sales growth and by increasing company-owned stores through the opening of new stores and acquisitions.

Opportunistically acquiring existing La-Z-Boy Stores and opening new La-Z-Boy Stores where we see opportunity for growth or further market penetration continues to be a priority.

Over the last five years, as a result of opening new company-owned stores and acquiring independent La-Z-Boy Stores, we have increased our ownership percentage in this store network from 45% to 61%.

With 378 stores currently in the La-Z-Boy Store network, we believe there is opportunity to open approximately ten stores annually, with the majority being company-owned, targeting a network of 450 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, the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format, and La-Z-Boy branded space locations.

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, La-Z-Boy Comfort Studio ® , or La-Z-Boy branded space experience and provide design services.

In addition to our branded distribution channels, approximately 1,900 other dealers sell La-Z-Boy products, which include some of the best-known names in the industry, providing us the benefit of multi-channel distribution.

Consumers experience the La-Z-Boy brand in many channels including the La-Z-Boy Store network, the La-Z-Boy Comfort Studio ® locations, our store-within-a-store format, and La-Z-Boy branded space locations.

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 Store, La-Z-Boy Comfort Studio ® , or La-Z-Boy branded space experience and provide design services.

In addition to our branded distribution channels, over 1,000 other dealers sell La-Z-Boy products, which include some of the best-known names in the industry, providing us the benefit of multi-channel distribution.

We believe there is significant growth potential for our consumer brands through these retail channels.

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Joybird is a leading omni-channel, direct to consumer retailer and manufacturer of upholstered furniture.

We believe that Joybird is a brand with significant potential and our strategic initiatives in this area focus on fueling profitable growth through the opening of additional small-format stores in key urban markets, an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology, and an expansion of product assortment.

We believe that Joybird is a brand with significant long-term potential and our strategic initiatives in this area focus on driving profitable growth through the opening of additional small-format stores in key markets, expanding distribution channels, driving customer acquisition and awareness through digital marketing, and continued optimization of cost structure.

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.

Key to successful growth is ensuring we have the capabilities to support that growth, including an agile supply chain, modern technology for consumers, employees, and analytic capabilities, and by delivering a human-centered employee experience.

We continue to have initiatives focused on enhancing these capabilities with a consumer-first focus.

Reportable Segments

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• Retail Segment .

Our Retail segment consists of one operating segment comprised of our 203 company-owned La-Z-Boy Furniture Galleries ® stores.

Our Retail segment consists of one operating segment comprised of our 230 company-owned La-Z-Boy Stores.

The Retail segment sells primarily upholstered furniture, in addition to some casegoods and other home furnishing accessories, to end consumers through these stores.

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Our Wholesale segment consists primarily of four operating segments:

La-Z-Boy, our largest operating segment, our England subsidiary, our casegoods operating segment that sells furniture under three brands (American Drew ® , Hammary ® , and Kincaid ® ), and our international operating segment which 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 ® and branded space locations, England Custom Comfort Center locations, major dealers, and a wide cross-section of other independent retailers.

The Wholesale segment sells directly to La-Z-Boy Stores, operators of La-Z-Boy Comfort Studio ® and branded space 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 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.

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 omni-channel 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 online through its website, www.joybird.com, through small-format stores in key markets, and through other distribution channels.

None of the operating segments included in Corporate and Other meet the requirements of reportable segments.

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Supply Chain Optimization

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, third, and fourth quarters of fiscal 2024, totaling $4.3 million in cost of sales, primarily related to severance, and $4.2 million in SG&A expense for the accelerated depreciation and impairment of fixed assets.

Additionally, as result of a significant customer transition and a challenging consumer demand environment in the United Kingdom, during the fourth quarter of fiscal 2025, we recorded charges within the Wholesale segment of $20.6 million for the full impairment of the United Kingdom reporting unit's goodwill and $2.1 million in SG&A expense for the impairment of various long-lived assets in the United Kingdom.

Refer to Note 6, Goodwill and Other Intangible Assets, for further information regarding our fiscal 2025 impairment testing.

Further, as we continue to drive efficiencies and optimize our manufacturing capacity in the United Kingdom to meet current demand, during the fourth quarter of fiscal 2025 we recorded severance-related charges of $1.1 million in cost of sales within the Wholesale segment.

As a result of a significant customer transition in the current consumer demand environment in the United Kingdom, during fiscal 2025, we recorded charges of $20.6 million for the full impairment of the United Kingdom's reporting unit's goodwill and $2.1 million in SG&A expense for the impairment of various long-lived assets.

During fiscal 2025, we also recorded severance charges of $1.1 million in cost of sales to optimize our manufacturing capacity within the United Kingdom.

During fiscal 2026, due to continued challenges in the macroeconomic environment in the United Kingdom, we announced the closure of the United Kingdom manufacturing business and operations ceased at the end of fiscal 2026.

We recorded charges of $5.8 million in cost of sales related to this action, primarily for severance and the write-down of remaining inventory balances.

All charges in fiscal 2026 and 2025 were recorded within the Wholesale segment.

The comparative impact of these actions in fiscal 2026 relative to fiscal 2025 did not have a meaningful impact on our gross margin or SG&A expense as percentage of sales for La-Z-Boy Incorporated or the Wholesale segment.

Refer to the segment discussion below for the comparative impact of the goodwill impairment recorded in fiscal 2025.

Business Realignment

As part of our plan to dispose a portion of our Casegoods wholesale business, during fiscal 2026 we completed the sale of the Casegoods headquarters building and related fixed assets, resulting in a $3.9 million gain recorded in SG&A expense.

Additionally, we recorded an impairment charge of $3.1 million in cost of sales to reduce inventory classified as held for sale to

its fair value on the upholstery portion of our Casegoods business which was sold during the fourth quarter of fiscal 2026.

Both the gain on sale and impairment charge were recorded in the Wholesale segment and did not have a meaningful impact on our gross margin or SG&A expense as percentage of sales in fiscal 2026 compared with fiscal 2025 for La-Z-Boy Incorporated.

Refer to the segment discussion below for the impact on the Wholesale segment.

During the first quarter of fiscal 2027, we closed on the sale of the remaining assets in the Casegoods disposal group.

Refer to Note 21, Subsequent Events, for further information.

La-Z-Boy Incorporated

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Operating margin 6.1% 6.4%

Consolidated sales in fiscal 2025 increased $62.2 million, or 3%, compared with the prior year, primarily driven by incremental sales resulting from our Retail acquisitions and new store expansion, higher delivered wholesale volume in our core North America La-Z-Boy branded upholstery business, including growth from our major wholesale dealers, and higher delivered volume in our Joybird business.

Consolidated sales in fiscal 2026 increased $17.4 million, or 1%, compared with the prior year, primarily driven by incremental sales resulting from our Retail acquisitions and new store expansion along with higher delivered wholesale sales in our core North America La-Z-Boy branded upholstery business driven by strategic pricing and surcharges.

These increases were partially offset by lower delivered same-store sales in our Retail segment, along with lower delivered volume in our Casegoods and Joybird businesses.

Operating Margin

Operating margin, which is calculated as operating income as a percentage of sales, decreased 30 basis points in fiscal 2026 compared with the prior year.

• Gross margin increased 80 basis points during fiscal 2025 compared with fiscal 2024.

◦ Changes in our consolidated mix led to a 40 basis point increase in gross margin in fiscal 2025 compared with fiscal 2024 driven by growth of our Retail segment, which has 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 fiscal 2025 compared with the prior year.

◦ Partially offsetting the items above, higher tariff expense in fiscal 2025, which accelerated in the fourth quarter due to changes in tariff policies, combined with favorable tariff expense in fiscal 2024 resulted in a comparative decrease in gross margin in fiscal 2025.

• Gross margin increased 10 basis points during fiscal 2026 compared with fiscal 2025, as a 50 basis point benefit from a change in our consolidated mix due to growth in our Retail segment, which has a higher gross margin than our Wholesale segment, was largely offset by higher distribution costs, primarily related to our distribution and home delivery transformation.

• Selling, general, and administrative ("SG&A") expenses increased 40 basis points during fiscal 2026 compared with fiscal 2025.

◦ Changes in our consolidated mix led to a 40 basis point increase in SG&A expense as a percentage of sales in fiscal 2026 compared with fiscal 2025 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 fiscal 2025 compared with fiscal 2024 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 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.

• Operating margin decreased 100 basis points due to a $20.6 million non-cash impairment charge to reduce the carrying value of goodwill associated with our wholesale and manufacturing businesses in the United Kingdom.

Refer to Note 6, Goodwill and Other Intangible Assets, for further information regarding our fiscal 2025 impairment testing.

◦ SG&A expense as a percentage of sales in fiscal 2026 also increased due to fixed cost deleverage in our Retail segment from lower delivered same-store sales combined with higher selling expenses and fixed costs resulting from our retail expansion in support of our long-term strategy of growing our Retail segment.

◦ Partially offsetting the items above, SG&A expense as percentage of sales in fiscal 2026 decreased due to a $7.6 million and $3.9 million gain on the sale of buildings and fixed assets related to sale-leaseback transactions of four retail stores and our Casegoods headquarters building, respectively.

We explain these items further when we discuss each segment's results later in this Management's Discussion and Analysis.

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Operating margin 11.4% 11.7%

The Retail segment's sales increased $43.2 million, or 5%, in fiscal 2025 compared with fiscal 2024, primarily due to $42.4 million of incremental sales resulting from our fiscal 2025 retail store acquisitions and the full-year impact of our fiscal 2024 retail store acquisitions, along with $15.3 million of sales from our retail store expansion, net of closed stores.

The Retail segment's sales increased $52.3 million, or 6%, in fiscal 2026 compared with fiscal 2025, primarily due to $60.1 million of incremental sales resulting from our fiscal 2026 retail store acquisitions and the full-year impact of our fiscal 2025 retail store acquisitions, along with $31.7 million of sales from the addition of new retail stores, net of closed stores.

These increases were partially offset by a decline in delivered same-store sales.

Written same-store sales decreased 1% in fiscal 2025 compared with fiscal 2024, primarily due to lower consumer demand as a result of a challenging macroeconomic environment.

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

Total written sales increased 8% in fiscal 2026 compared with fiscal 2025 while written same-store sales decreased 3% over the same period, primarily due to lower consumer demand as a result of the current macroeconomic environment.

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

Operating Margin

The Retail segment's operating margin decreased 30 basis points in fiscal 2026 compared with fiscal 2025.

• Gross margin increased 10 basis points during fiscal 2025 compared with the prior year, primarily due to a slight shift in product mix towards higher margin products.

• SG&A expenses as a percentage of sales increased 150 basis points during fiscal 2025 compared with the prior year, 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.

• Gross margin increased 40 basis points during fiscal 2026 compared with the prior year, primarily due to a favorable shift in product mix towards higher margin upholstery products.

• SG&A expenses as a percentage of sales increased 70 basis points during fiscal 2026 compared with fiscal 2025.

◦ SG&A expense as a percentage of sales increased compared with the prior year primarily due to fixed cost deleverage from lower delivered same-store sales combined with increased selling expenses and fixed costs resulting from our retail store expansion of 12 net new stores over the last 12 months, supporting our long-term strategy of growing our Retail segment.

◦ Partially offsetting the item above, during the fourth quarter of fiscal 2026, we recognized a $7.6 million gain on sale-leaseback transactions for the buildings and related fixed assets of four retail stores, resulting in an 80 basis point decrease in SG&A expense as a percentage of sales.

Wholesale Segment

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Operating margin 7.4% 5.6%

The Wholesale segment's sales increased 2%, or $32.5 million, in fiscal 2025 compared with fiscal 2024, primarily due to increased volume in our core North America La-Z-Boy branded upholstery business, mainly driven by sales to our Retail segment along with growth from our major wholesale dealers, combined with a favorable shift in product mix toward higher price products.

The increase in sales was partially offset by a significant customer transition in our international wholesale business.

The Wholesale segment's sales increased 0.2%, or $2.4 million, in fiscal 2026 compared with fiscal 2025, driven by modest growth across the majority of our wholesale businesses resulting from strategic pricing and surcharge actions, partially offset by lower delivered volume in our Casegoods business and international wholesale business.

The 15-store retail acquisition that occurred at the beginning of the third quarter of fiscal 2026 led to higher intersegment sales and a decrease in external sales in fiscal 2026 compared with the prior year.

Operating Margin

The Wholesale segment's operating margin decreased 130 basis points in fiscal 2025 compared with fiscal 2024.

• Gross margin increased 30 basis points during fiscal 2025 compared with fiscal 2024.

◦ Lower input costs, led by reduced commodity prices and improved sourcing, drove a 90 basis point increase in gross margin during fiscal 2025 compared with the prior year.

◦ The comparative impact of the Supply Chain Optimization charges noted above in Mexico and the United Kingdom resulted in a net 20 basis point increase in gross margin in fiscal 2025 compared with fiscal 2024.

◦ Gross margin decreased 50 basis points in fiscal 2025 due to an unfavorable shift in product mix towards products that have a lower gross margin.

◦ Higher tariff expense in fiscal 2025, which accelerated in the fourth quarter due to changes in tariff policies, combined with favorable tariff expense in fiscal 2024 resulted in a comparative 40 basis point decrease in gross in margin in fiscal 2025.

• SG&A expense as a percentage of sales increased 10 basis points during fiscal 2025 compared with fiscal 2024.

◦ SG&A expense as a percentage of sales increased 40 basis points in fiscal 2025 compared with fiscal 2024 from fixed cost deleverage on lower sales in our international wholesale business due to a significant customer transition.

◦ Marketing expense in fiscal 2025 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.

• Operating margin decreased 150 basis points due to a $20.6 million non-cash impairment charge to reduce the carrying value of goodwill associated with our wholesale and manufacturing businesses in the United Kingdom.

Refer to Note 6, Goodwill and Other Intangible Assets, for further information regarding our fiscal 2025 impairment testing.

The Wholesale segment's operating margin increased 180 basis points in fiscal 2026 compared with fiscal 2025.

• Gross margin decreased 50 basis points during fiscal 2026 compared with fiscal 2025.

◦ Higher distribution costs, primarily related to our distribution and home delivery transformation drove a 70 basis point decrease in gross margin in fiscal 2026 compared with the prior year.

◦ Fiscal 2026 also experienced higher manufacturing overhead costs relative to the prior year, driving a 50 basis point decrease in gross margin in fiscal 2026, compared with the prior year.

◦ Partially offsetting the items above, gross margin increased 80 basis points in fiscal 2026 compared with fiscal 2025 due to lower input costs, led by favorable inbound ocean freight, improved sourcing and effective inventory management.

• SG&A expense as a percentage of sales decreased 90 basis points during fiscal 2026 compared with fiscal 2025.

◦ SG&A expense as a percentage of sales decreased 50 basis points in fiscal 2026, compared with the prior year, from lower warranty expense due to a reduction in our warranty liability driven by a change in which we provide external dealers an upfront service allowance for certain labor and delivery costs for La-Z-Boy products that they sell and have previously sold.

◦ Additionally, as noted above, we completed the sale of our Casegoods headquarters building and related fixed assets, resulting in a $3.9 million gain and a comparative 30 basis point improvement in SG&A as a percentage of sales in fiscal 2026, compared with the prior year.

• A $20.6 million non-cash impairment charge in fiscal 2025 to reduce the carrying value of goodwill associated with our wholesale and manufacturing businesses in the United Kingdom, drove a comparative 140 basis points increase in operating margin in fiscal 2026 compared with the prior year.

Corporate and Other

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Operating loss (89,466) (51,793) 72.7 %

Corporate and Other sales increased $6.7 million in fiscal 2025 compared with fiscal 2024, primarily due to a $7.5 million, or 5%, increase from Joybird, which contributed $146.1 million in sales in fiscal 2025.

The increase in Joybird sales was driven by higher delivered volume partially offset by increased promotional activity relative to the prior year.

Written sales for Joybird were flat in fiscal 2025 compared with fiscal 2024.

Corporate and Other sales decreased $16.7 million in fiscal 2026 compared with fiscal 2025, primarily due to a $15.3 million, or 10%, decrease from Joybird, which contributed $130.8 million in sales in fiscal 2026.

The decrease in Joybird sales was primarily due to lower delivered volume partially offset by a favorable shift in product mix.

Written sales for Joybird decreased 7% in fiscal 2026 compared with fiscal 2025, as this consumer segment continues to be particularly volatile in the current macroeconomic environment.

Intercompany eliminations increased in fiscal 2026 compared with fiscal 2025 due to higher sales from our Wholesale segment to our Retail segment, driven by higher sales in the Retail segment.

Operating Loss

Our Corporate and Other operating loss decreased $8.5 million in fiscal 2025 compared with fiscal 2024, primarily from improved Joybird operating performance, resulting in breakeven profit, and favorable intercompany profit elimination adjustments relative to the same period a year ago.

This was partially offset by lower intercompany operating profit from our global trading company in Hong Kong.

Our Corporate and Other operating loss increased $37.7 million in fiscal 2026 compared with fiscal 2025, primarily due to a $20.0 million non-cash impairment charge to reduce the carrying value of Joybird's goodwill, an increase in Joybird's operating loss resulting from lower delivered sales volume, and a higher intercompany profit elimination adjustment relative to the prior year.

Refer to Note 7, Goodwill and Other Intangible Assets, for further information regarding our fiscal 2026 goodwill impairment testing.

Non-Operating Income (Expense)

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Interest income was $3.0 million lower in fiscal 2026 compared with fiscal 2025.

The decrease in interest income was primarily driven by lower interest rates.

The decrease in interest income was primarily driven by lower interest rates along with lower interest-bearing cash balances.

Other Income (Expense), Net

Other income (expense), net was $1.8 million of expense in fiscal 2026 compared with $3.0 million of expense in fiscal 2025.

The expense in fiscal 2025 was primarily due to exchange rate losses related to our operations in Mexico and Thailand.

The expense in fiscal 2026 was primarily due to currency translation adjustments reclassified from accumulated other comprehensive income to net income due to the closure of our manufacturing operations in the United Kingdom.

The expense in fiscal 2025 was primarily due to unfavorable changes in exchange rates related to our operations in Mexico and Thailand.

Our effective income tax rate was 25.9% for fiscal 2026 and 31.4% for fiscal 2025.

The increase in the effective tax rate in fiscal 2025 compared with the prior year was primarily the result of the one-time tax effect of a non-deductible goodwill impairment charge related to the United Kingdom reporting unit along with unfavorable changes in the valuation allowance.

The effective tax rate in fiscal 2026 included the favorable tax impact of closing the United Kingdom manufacturing business partially offset by the one-time tax effect of a non-deductible goodwill impairment charge related to the Joybird reporting unit.

The effective tax rate in fiscal 2025 included the one-time tax effect of a non-deductible goodwill impairment charge related to the United Kingdom reporting unit along with unfavorable changes in the valuation allowance.

Refer to Note 18, Income Taxes, for additional information.

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Operating Activities

During fiscal 2025, net cash provided by operating activities was $187.3 million, an increase of $29.1 million compared with the same period a year ago.

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

Our cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items.

During fiscal 2026, net cash provided by operating activities was $204.1 million, primarily attributable to net income, adjusted for non-cash items, and a reduction in inventory levels to align production with incoming order trends.

Net cash provided by operating activities in fiscal 2026 was $16.8 million higher than the same period a year ago primarily due to favorable changes to working capital and deferred taxes along with a smaller reduction of customer deposits, partially offset by an increase in prepaid income taxes and lower net income, adjusted for non-cash items.

Investing Activities

During fiscal 2025, net cash used for investing activities was $98.4 million, an increase of $16.8 million c ompared with the prior year primarily due to an increase in capital expenditures partially offset by lower cash payments for La-Z-Boy Furniture Galleries ® acquisitions.

During fiscal 2026, net cash used for investing activities was $138.6 million, an increase of $40.2 million compared with the prior year primarily due to increased cash paid for acquisitions and lower proceeds from the sale of investments, partially offset by higher proceeds from the sale of assets.

Cash used for investing activities in fiscal 2026 included the following:

• Cash used for capital expenditures in the period was $74.3 million compared with $53.6 million during fiscal 2024, which was primarily related to La-Z-Boy Furniture Galleries ® (new stores and remodels), manufacturing-related investments, and market showroom upgrades.

We expect capital expenditures to be in the range of $90 to $100 million for fiscal 2026, primarily related to investments in our La-Z-Boy Furniture Galleries ® (new stores and remodels), distribution network redesign, and manufacturing operations.

• Cash used for acquisitions was $86.4 million, primarily related to the 15-store acquisition of the retail business in the Southeast region of the United States.

• Cash used for capital expenditures in the period was $76.3 million, which were primarily related to La-Z-Boy Stores (new stores and remodels), manufacturing-related investments, and spending related to our distribution and home delivery transformation.

We expect capital expenditures to be in the range of $90 to $110 million for fiscal 2027, with continued spending on our distribution and home delivery transformation, manufacturing-related investments, and investments in our La-Z-Boy store (new stores and remodels).

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

• Cash used for acquisitions was $29.5 million, related to the acquisition of the Davenport, Iowa, Melbourne and Cocoa, Florida, Toledo, Ohio, and Lansing and Portage, Michigan retail businesses.

• Proceeds from the sale of investments, net of investment purchases, was $5.0 million.

• Proceeds from the sale of assets were $26.1 million, primarily from the sale and leasebacks of four retail stores and their related fixed assets, the Casegoods headquarters building and related fixed assets, and the upholstery portion of our Casegoods business.

Refer to Note 4, Assets Held for Sale for additional information.

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 increase, up to an additional amount of $100 million.

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 April 26, 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 April 26, 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 fiscal 2025, net cash used for financing activities was $102.6 million, an increase of $21.4 million compared with the prior year, primarily due to higher share repurchases and dividends, partially offset by cash paid in fiscal 2024 for holdback payments made on prior-period acquisitions.

During fiscal 2026, net cash used for financing activities was $91.1 million, a decrease of $11.5 million compared with the prior year, primarily due to lower share repurchases, partially offset by reduced proceeds from exercised stock options and higher dividend payments.

Cash used for financing activities in fiscal 2026 included the following:

• Our board of directors has authorized the repurchase of Company stock and we spent $77.9 million during fiscal 2025 to repurchase 2.0 million shares.

As of April 26, 2025, 3.7 million shares remained available for repurchase pursuant to this auth

With the operating cash flows we anticipate generating in fiscal 2026, we expect to continue repurchasing Company stock.

• Cash paid to repurchase 1.3 million shares of company stock was $47.3 million.

Our board of directors has authorized the repurchase of Company stock and as of April 25, 2026, 2.4 million shares remained available for repurchase pursuant to this authorization.

• Cash paid to our shareholders in quarterly dividends was $37.9 million.

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We expect the board to continue declaring regular quarterly cash dividends for the foreseeable future, but it may discontinue doing so at any time at the board's discretion.

• Proceeds from exercised stock options, net of stock issued and taxes withheld as part of our employee benefit plans, was $12.4 million.

• Cash paid for tax withholding on stock issued as part of our employee benefit plans, net of proceeds from exercised stock options, was $4.2 million.

In April 2026, our board of directors rescinded the remaining repurchase authorization as of May 14, 2026, and established a new stock repurchase program, effective as of May 14, 2026, authorizing the repurchase of up to $300 million of Company stock.

The new authorization does not have an expiration date.

With the operating cash flows we anticipate generating in fiscal 2027, we expect to continue repurchasing Company stock, subject to market conditions and other factors as deemed relevant by our board of directors.

On October 15, 2021, we entered into a credit agreement with Wells Fargo Bank, National Association, as administrative agent, the other agents and lenders named therein and the other parties thereto (as amended prior to July 1, 2025, the "Credit Agreement").

The Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of $200 million, which includes a $50 million letter of credit sub-limit (the "Credit Facility").

On July 1, 2025, we entered into an amendment to the Credit Agreement (the "Credit Agreement Amendment").

The Credit Agreement Amendment, among other things, (i) extended the maturity date of the Credit Facility from October 15, 2026 to July 1, 2030, (ii) increased the accordion basket for additional revolving commitments and/or incremental term loans from $100 million to $125 million, (iii) removed the secured overnight financing rate ("SOFR") credit spread adjustment, and (iv) decreased the consolidated fixed charge coverage ratio required to be satisfied under the Company’s financial covenant.

Borrowings under the Credit Facility may be used by the Company for general corporate purposes.

The Credit Facility will mature on July 1, 2030, and provides us the ability to extend the maturity date for 2 additional P1Y-year periods, subject to the satisfaction of customary conditions.

As of April 25, 2026, we have no borrowings outstanding under the Credit Facility and we were in compliance with our financial covenants under the Credit Facility.

Exchange Rate Changes

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Indefinite-Lived Intangible Assets and Goodwill

Indefinite-lived intangible assets include our American Drew trade name and the reacquired right to own and operate La-Z-Boy Furniture Galleries ® stores we have acquired.

Prior to our retail acquisitions, we licensed the exclusive right to own and operate La-Z-Boy Furniture Galleries ® stores (and to use the associated trademarks and trade name) in those markets to the dealers whose assets we acquired, and we reacquired these rights when we purchased the dealers' other assets.

The reacquired rights to own and operate La-Z-Boy Furniture Galleries ® stores are indefinite-lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options.

Indefinite-lived intangible assets include our American Drew ® trade name and the reacquired right to own and operate La-Z-Boy Stores we have acquired.

Prior to our retail acquisitions, we licensed the exclusive right to own and operate La-Z-Boy Stores (and to use the associated trademarks and trade name) in those markets to the dealers whose assets we acquired, and we reacquired these rights when we purchased the dealers' other assets.

The reacquired rights to own and operate La-Z-Boy Stores are indefinite-lived because our retailer agreements are perpetual agreements that have no specific expiration date and no renewal options.

A retailer agreement remains in effect as long as the independent retailer is not in default under the terms of the agreement.

Our goodwill relates to the acquisitions of La-Z-Boy Furniture Galleries ® stores, the La-Z-Boy wholesale business in the United Kingdom and Ireland, the La-Z-Boy manufacturing business in the United Kingdom, and Joybird ® , an e-commerce retailer and manufacturer of upholstered furniture.

The reporting unit for goodwill arising from retail store acquisitions is our Retail operating segment.

Goodwill arising from the acquisition of our wholesale business in the United Kingdom and Ireland and the acquisition of our manufacturing business in the United Kingdom is combined into the United Kingdom reporting unit.

The reporting unit for goodwill arising from the acquisition of Joybird is the Joybird operating segment.

Our goodwill relates to the acquisitions of La-Z-Boy Stores and Joybird ® , an omni-channel retailer and manufacturer of upholstered furniture.

The reporting unit for goodwill arising from retail store acquisitions is our Retail operating segment and the goodwill arising from the acquisition of Joybird is the Joybird operating segment.

We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

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If the qualitative assessment leads to a determination that the intangible asset/reporting unit’s fair value may be less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test by calculating the fair value of the intangible asset/reporting unit and comparing the fair value with its associated carrying value.

When we perform the quantitative test for indefinite-lived intangible assets, we establish the fair value of our indefinite-lived trade names and reacquired rights based upon the relief from royalty method, which requires the use of significant estimates and assumptions including forecasted sales growth and royalty rates.

When we perform the quantitative test for indefinite-lived intangible assets, or when we apply purchase accounting for acquisitions of retail stores, we establish the fair value of our indefinite-lived trade names and reacquired rights based upon the relief from royalty method, which requires the use of significant estimates and assumptions including forecasted sales growth and royalty rates.

When we perform the quantitative test for goodwill, we establish the fair value for the reporting unit based on the income approach, in which we utilize a discounted cash flow model, the market approach, in which we utilize market multiples of comparable companies, or a combination of both approaches.

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Joybird Reporting Unit

The Joybird reporting unit, which has goodwill of $55.4 million at April 26, 2025, has an estimated fair value that exceeds its carrying value by approximately 16%.

The Joybird reporting unit, which had goodwill of $55.4 million at the time of the impairment test, was deemed to be impaired as the carrying value of the reporting unit exceeded its fair value, and was reduced to $35.5 million during the fourth quarter of fiscal 2026 .

We determined the fair value of this reporting unit by applying a combination of the income approach based on its future cash flows and the market approach based on the guideline public company method, weighted 75% and 25%, respectively.

The key assumptions that factored into the valuation under the income approach were the projections of revenue and operating income of the business, as well as the terminal growth rate, tax rate, and discount rate used to present value these future cash flows.

We performed a sensitivity analysis on the discount rate and terminal growth rate and using a range of reasonable inputs, the fair value of the Joybird reporting unit exceeded its carrying value for each of the various scenarios analyzed.

The key assumption that factored into the valuation under the market approach was the market multiples applied to revenue.

United Kingdom Reporting Unit

The United Kingdom reporting unit, which had goodwill of $20.1 million at April 27, 2024, and $20.6 million at the time of the impairment test, was deemed to be impaired and was reduced to zero during the fourth quarter of fiscal 2025 as the carrying value of the reporting unit exceeded its fair value by an amount greater than the goodwill existing at the time of the impairment test.

Retail Reporting Unit

The Retail reporting unit, which has goodwill of $207.8 million at April 25, 2026, has an estimated fair value that significantly exceeds its carrying value.

We determined the fair value of this reporting unit using the income approach based on its future cash flows.

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As a result, if we revise our assumptions and estimates, our stock-based compensation expense could be materially different in the future.

If we grant options, we estimate the fair value of each option grant using a Black-Scholes option-pricing model.

We estimate expected volatility based on the historic volatility of our common shares.

We estimate the average expected life using the contractual term of the stock option and expected employee exercise and post-vesting employment termination trends.

We base the risk-free rate on U.S.

Treasury issues with a term equal to the expected life assumed at the date of grant.

We have elected to recognize forfeitures as an adjustment to compensation expense in the same period as the forfeitures occur.

We estimate the fair value of each performance award grant that vests based on a market condition using a Monte Carlo valuation model.

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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 7. Management’s Discussion and Analysis