What happened
Shares of furniture company La-Z-Boy(NYSE: LZB) enjoyed anything but a lazy day on Wednesday. As of 11:15 a.m. ET today, the stock was up a whopping 17% and hitting a 52-week high thanks to results for the third quarter of fiscal 2023 that blew guidance out of the water.
So what
In the second quarter, management said that consumer-discretionary spending was challenged, and so it expected third-quarter sales of only $535 million at best. In reality, the company generated third-quarter sales of $573 million, in line with the revenue in the prior-year quarter.
Higher-than-expected sales led to higher-than-expected profitability for La-Z-Boy as well. The company's third-quarter operating margin grew from 6.9% last year to 7.5% this year. And its quarterly diluted earnings per share (EPS) surged 14% year over year to $0.74.
Now what
So far during its fiscal 2023, La-Z-Boy has had the benefit of working through a higher-than-normal backlog of orders. But this tailwind is quickly fading. Chief financial officer Bob Lucian said, "We have essentially worked down our backlog to pre-pandemic levels."
Because of this, La-Z-Boy expects fourth-quarter sales of only $525 million to $545 million. For perspective, that would be a 20% to 23% year-over-year drop. However, the fourth quarter of fiscal 2022 was a record for the company, which is important context to keep in mind.
Considering the brand is nearly 100 years old, investors perhaps shouldn't expect robust growth numbers every quarter. I wouldn't be too concerned about fourth-quarter guidance if I were a shareholder. The company is solidly profitable, has no debt, and is paying a dividend yielding over 2.5%. Therefore, if I owned the stock, I would keep holding it even at 52-week highs.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
