NEW YORK (TheStreet) -- La-Z-Boy (LZB - Get Report) stock is falling Wednesday after the furniture maker experienced its first same-store sales decline in more than 3 years and as the company guided for a weak current quarter. By midmorning, shares had tumbled 9.3% to $22.54.
In its fourth quarter ended April, the company reported a 0.9% drop in same-store sales at its furniture galleries, a result of harsh winter conditions particularly over February. A quarter earlier, same-store sales jumped 11.2%.
CEO Kurt L. Darrow said weakness will continue in the first quarter. In a statement, he explained, "The furniture industry typically experiences weaker demand during the summer months and, as a result, our plants shut down for one week of vacation and maintenance during the first quarter, which ends in July. Accordingly, the first quarter is usually our weakest in terms of sales and earnings."
Separately, TheStreet Ratings team rates LA-Z-BOY INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate LA-Z-BOY INC (LZB) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LZB's revenue growth trails the industry average of 17.4%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- LZB's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, LZB has a quick ratio of 1.86, which demonstrates the ability of the company to cover short-term liquidity needs.
- 36.55% is the gross profit margin for LA-Z-BOY INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.70% is above that of the industry average.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.20% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- LA-Z-BOY INC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LA-Z-BOY INC reported lower earnings of $0.84 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $0.84).
- You can view the full analysis from the report here: LZB Ratings Report