Why La-Z-Boy Incorporated (NYSE: LZB) stock is crashing

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La-Z-Boy Incorporated (NYSE: LZB) stock fell over 11.1% in the pre-market session of November 21st, 2019 (Source: Google finance) after the company posted lower than expected results for the second quarter of FY 20. LZB in the second quarter of FY 20 has reported the adjusted earnings per share of 52 cents, missing the analysts’ estimates for the adjusted earnings per share of 55 cents, according to Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 1.8 percent to $447.21 million in the second quarter of FY 20, missing the analysts’ estimates for revenue by 1.48%.

The company’s net increased to $22.59 million as compared to $20.01 million last year. For the second quarter, the company had generated $34.4 million in cash from operating activities. LZB ended the second quarter with $119.5 million in cash, cash equivalents, and restricted cash, and $33.2 million in investments to enhance returns on cash.Non-GAAP operating margin expanded to 7.5% in the second-year quarter versus 7.3% in last year’s second quarter, due to improvement in the Upholstery and Retail segments.

For the second quarter, sales in the company’s Upholstery segment grew 1.2% to $320.9 million. The non-GAAP operating margin expanded to 10.9% versus 10.2%, excluding a $2.8 million charge for costs related to the supply chain optimization initiative. In the Casegoods segment, the sales declined 6.3% to $29.4 million, due to industry challenges and the impact of tariffs on the occasional table business, as well as a delay on goods from one supplier.  Operating margin of the segment had fallen to 7.5% compared with 12% in the prior-year period. Sales in the Retail segment grew 6.2% to $148.4 million in the second quarter of fiscal 2020.  Non-GAAP operating margin rose to 5.8% in the current-year quarter from 5.4% in last year’s second quarter, driven primarily by higher volume. The sales for Joybird rose 11.9% to $20.8 million.  Joybird has improved its gross margin but delivered a higher operating loss than in the prior-year quarter, due to ongoing investments related to customer acquisition, partially offset by supply chain synergies.

Additionally, LZB had declared a regular quarterly dividend to shareholders of $0.14 per share, which is an increase of 8% over the prior quarter. LZB during the second quarter incurred the capex of $10.7 million, paid $6.0 million in dividends, and spent $10.9 million purchasing 0.3 million shares of stock its existing authorized share purchase program, leaving 5.2 million shares of purchase availability in the program.

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