La-Z-Boy works so that its customers can kick back and relax. A top US maker of upholstered furniture, La-Z-Boy sells its ubiquitous recliners, plus chairs, sofas, tables, and modular seating units. One recliner boasts a drink cooler, phone, and massage and heat system. Its brands include La-Z-Boy, Bauhaus, England, Hammary, American Drew, Lea, and Kincaid. La-Z-Boy sells its products through about 85 company-owned stores, some 220 independent La-Z-Boy Furniture Galleries, and 550-plus Comfort Studios (about 5,000 sq. ft. of dedicated La-Z-Boy space hosted by an independent retailer). La-Z-Boy also makes wood desks and bedroom items and licenses its name for use on furniture for the health care industry.
While the company enjoys a global reach, La-Z-Boy primarily sells its products in the US and Canada to furniture retailers and directly to consumers through its company-owned stores. The US has generated 87% of its revenue in both fiscal 2012 and 2011.
La-Z-Boy operates its business through three segments: Upholstery (such as recliners, sofas, chairs, and ottomans), Retail (company-owned stores located in nine markets), and Casegoods (consisting of bedroom and dining room sets, entertainment centers, and accent pieces).
As part of its business, La-Z-Boy operates a manufacturing joint venture in Thailand that distributes furniture in Australia, New Zealand, Thailand, and other Asian countries. It also runs a sales and marketing joint venture in Asia to sell and distribute furniture in Korea, Taiwan, Japan, and Malaysia, among other countries there.
Sales and Marketing
La-Z-Boy gains dedicated retail space -- either in stand-alone stores or dedicated galleries or studios within department stores -- through formal agreements with other furniture retailers. Deemed "proprietary" customers, they display and merchandise La-Z-Boy's products. Its customer mix in 2012 across its upholstery and casegoods segments include 57% proprietary, 11% major dealers (such as Star Furniture, Art Van Furniture, Haverty Furniture, and Raymour & Flanigan Furniture), and 32% other independent retailers.
The company's upholstered items accounted for 79% of its sales in fiscal 2012 (ends April). Spurred by sales volume increases across its upholstery and retail business segments, La-Z-Boy logged a 4% increase in net sales in fiscal 2012 as compared to 2011. The furniture retailer points to effective promotional efforts that boosted sales of La-Z-Boy branded items and improved performance across both the company's owned and independent-licensed stores. During the same reporting period, La-Z-Boy posted net income increases of 266% due to the rise in net sales and the positive impact of its net tax benefit of 33%. The company also benefitted from having previously streamlined its selling, general, and administrative functions when it combined its Hammary operations with those of American Drew/Lea, as the move resulted in a reduction in headcount. (During Q4 2010, the furniture maker consolidated its American Drew/Lea and Hammary operations and transferred some 90% of its domestic fabric cut-and-sew operations to its facility in Mexico; it also transitioned its leather cut-and-sew operation to the same facility.)
La-Z-Boy's effort to streamline its manufacturing operations is intended to save some $25 million annually. The furniture maker started the task several years ago as it sensed the onset of an economic downturn by adopting a plan to consolidate all of its cutting and sewing operations at a handful of US plants into one centralized facility in Mexico. (The firm began production in Mexico in 2009 and hired about 1,200 employees to staff the plant there.) Also, La-Z-Boy combined two of its plants in North Carolina that make hardwood furniture into one.
An influx of cost-conscious competitors, such as Costco, IKEA, and Home Depot, has eroded La-Z-Boy's revenue, as well. The weakening US housing market also led to a decline in sales at the furniture maker, particularly through its upholstered products segment. Compounding the problem, IKEA's and Costco's alternative distribution and rivals that offer online furniture shopping have lured some customers away from traditional furniture retail outlets and brick-and-mortar shopping. The company has agreed to acquire nine La-Z-Boy Furniture Galleries, with a combined revenue of about $30 million, and a supporting distribution center in Southern Ohio, raising its company-owned store count. – less