Why La-Z-Boy Stock Just Popped
Key Points
La-Z-Boy's focus on retail sales boosted profit margins significantly in Q4.
La-Z-Boy parlayed this into an earnings beat last night.
Next quarter could be different, with a steep fall in profit margins predicted.
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Notwithstanding the name, La-Z-Boy (NYSE: LZB) stock isn't lounging around the living room this morning. As of 10:55 a.m. ET Wednesday, shares of the upholstered furniture specialist are charging ahead 15.5% -- and earnings are the reason.
Analysts expected La-Z-Boy to earn $0.82 per share on $569.2 million in sales when it reported fiscal Q4 2026 earnings last night. Instead, La-Z-Boy earned $1.26 per share on $570.3 million in sales.
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La-Z-Boy Q4 earnings
Sales for the quarter were curious, with revenue flat to down year over year, but earnings way, way (way) up. Operating profit surged 40% on two full percentage points of improvement in operating profit margin, and GAAP profits more than doubled, hitting $0.81 per share. (The "$1.26" profit was a non-GAAP number, and improved 37% year over year.)
For the full-year fiscal 2026, sales inched up 1% versus fiscal 2025 to $2.1 billion. Operating profits declined, and GAAP profit improved only 5% to $2.35 per diluted share.
What's next for La-Z-Boy
Long story short, Q4 marked real improvement over fiscal 2026's results as a whole, and over 2025 as well. But what about fiscal 2027, already underway?
Well, as La-Z-Boy continues its shift toward more profitable retail rather than wholesale sales, buying up independent stores and opening more of its own, it anticipates even more improvement. Q1 sales might grow 4% this year, to between $490 million and $510 million.
Don't get too excited about that, however, because management warned that its "adjusted operating margin" this quarter could fall as low as 4% to 5.5% -- less than half the 9.9% it scored in Q4. To me, this implies a steep falloff in profits next quarter.
And more of a reason to sell La-Z-Boy than to buy.
Should you buy stock in La-Z-Boy right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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