La-Z-Boy's Q1 2026 Earnings Call: Navigating Contradictions in Store Productivity, Wholesale Margins, and Business Strategy

New store productivity and consumer conditions, distribution network redesign and impact on wholesale margin expansion, wholesale segment's margin decline, and casegoods and international business strategy are the key contradictions discussed in La-Z-Boy's latest 2026Q1 earnings call



Sales Growth and Industry Headwinds:
- La-Z-Boy Inc. reported consolidated sales of $492 million for Q1 2026, down slightly from the prior year, with growth in both Retail and Wholesale segments affected by industry headwinds.
- The decline was due to continued industry headwinds, particularly a challenged consumer environment and decreased store traffic.

Retail Segment Performance:
- Retail segment delivered sales increased 2% year-over-year, driven by new and acquired stores, while written sales increased 5%.
- Despite this growth, margin compression occurred due to de-leverage in same-store sales and investment in new store openings.

Wholesale Segment Growth:
- Wholesale segment delivered sales grew 1% to $353 million, led by growth in the core North American La-Z-Boy Wholesale business.
- This growth was supported by lower warranty and marketing expenses, as well as continued gross margin expansion in the core business, partially offset by international wholesale business transitions.

Distribution Transformation:
- La-Z-Boy successfully transitioned to its new Arizona distribution center, the first of three centralized hubs in its multiyear distribution transformation project.
- This project aims to reduce distribution footprint by 30%, improve inventory productivity, and enhance supply chain agility, contributing to an estimated 50-75 basis points of wholesale margin improvement over time.

Capital Allocation and Financial Position:
- The company ended the quarter with $319 million in cash and no external debt, generating $36 million in cash from operating activities.
- La-Z-Boy expects capital allocation in fiscal 2026 to be more weighted towards investments in the business through acquisitions, with minimal share repurchases due to strategic upcoming acquisitions.