Headquartered in Monroe, Michigan, the La-Z-Boy brand was founded in 1928 by Edward M Knabusch and Edwin J Shoemaker. Their goal was to design a chair that was, to quote them, “Nature’s way of relaxing.” Their design was a success and the next step was to think of a catchy name to help market the new product. A contest was held and the name La-Z-Boy was the winner. The rest, as they say, is history.
La-Z-Boy today is synonymous with comfortable, durable and luxurious recliners that are an aspirational buy for many homes. While the company’s product range has expanded to include a wide range of designs in sofas, stationary as well as lift chair and sleeper sofas, the La-Z-Boy brand is still associated with the upholstered recliner chair.
This year, La-Z-Boy (LZB) shares dropped 20% on August 23 as both earnings and sales estimates were below target. This drop has now taken the furniture maker to its lowest in the last 9 months. La-Z-Boy’s upholstery division, the biggest contributor to their margins, slipped from an 11.4% operating margin last year to 8.5% this year. This year’s earnings from the latest quarter were $11.7 million, which was a decline of 15.2% from the previous year. Earnings per share were at 24 cents, below the previous year’s 28 cents as well as FactSet’s 29 cents. While sales rose 5% to reach $357.1 million, up from $340.8 million, it did not meet the FactSet target of $358 million. While there was an increase in earnings in the first quarter, this was attributed to various acquisitions rather than sales.
Overall, the seasonal summer slump, lower manufacturing volumes, lower sales as well as investments have impacted the company’s margins.
To combat this slow down and drop in earnings, La-Z-Boy has developed a multi-pronged strategy, reaching core customers via their new and vibrant in store programs, through their dealer network and targeting the Generation X customers through a new e-commerce program.
La-Z-Boy traditionally has sold its products through its own stores across the US and other countries, and also through other furniture stores. However, while it has an online presence through Wayfair (W), and you can buy La-Z-Boy products on Amazon, the company does not have a targeted strategy for online sales. While its core customer still prefer to visit stores and physical locations before making a purchase, Gen X customers are more comfortable making such large purchases online.
A part of their strategy in attracting the Gen X customers will be through their own online shopping portal. La-Z-Boy has also announced that it is in talks with Amazon to see how the Amazon Marketplace could be leveraged to further opportunities. The talks are preliminary and no concrete proposal has been made yet.
The drive to attract the younger customers has meant a serious revamp in their marketing strategy as well as their product lines. Analyses show that the younger Gen X customers prefer non-traditional brands and experiences. To this end, the company has invested in some online players that have strong brands and business models that resonate with La-Z-Boys ideology. In fact, one of these investments is already paying off, with the new acquisition contributing to the earnings in the last quarter. Details were not given as to which brand this might be. In addition to acquiring new brands, the company has also revamped the presentation of their products online, with new videos and photos replacing the older versions. The Chief Executive, Kurt Darrow, said that these measures are already yielding results, with increased online traffic and engagement.