La-Z-Boy Earnings Preview: Fiscal Fourth Quarter 2009

La-Z-Boy [[LZB]] is scheduled to report their fiscal fourth quarter 2009 results before the market opens on Monday, June 15. Based on our analysis, we at are expecting LZB to report slightly better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $300.7 million and EPS of ($.10). This would represent an 18% decline in revenues from last year’s $368.0 million in the same period. The current analyst consensus estimates calls for revenues of $297.4 million and EPS of ($.11).


While economic conditions have not improved significantly over the last three months, we believe that the rate of decline will moderate from last quarter’s 23% y/y decline in revenues. In addition, management appears to have grasped the severity of the current recessionary climate and has made significant changes to the company’s cost structure. The quarterly dividend was eliminated, the workforce was trimmed by 24% or 2,500 employees, and $60 million in annual structural costs were eliminated.


As the economy begins to improve, La-Z-Boy is well positioned to benefit as consumers begin making furniture purchases once again. Just last week, Raymond James upgraded the stock to ‘strong buy’ based on the company’s opportunity to capitalize on an economic recovery. However, there remains a great deal of uncertainty as to the timing of a true economic recovery.  Aggressive investors may have already pushed the stock too high when you consider the current challenging sales environment.


Share Performance

Since the beginning of the year, La-Z-Boy’s shares have soared over 44% largely due to the Raymond James upgrade earlier this month. In 2008, LZB’s shares fell over 72% as the stock poorly under-performed the 34% decline in the Dow Jones industrial average.



While shares have appreciated significantly over the last few weeks, we believe that the anticipated economic recovery may be a bit pre-mature. If the economy fails to recover in the second half of 2009, LZB’s shares could be hit hard once again.


Recommendation: None


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