La-Z-Boy Inc (LZB) is a leading furniture manufacturer and retailer, known for their iconic recliners and wide array of home furnishings. In this article, we will explore La-Z-Boy’s approach to stock-based compensation and some key market risks the company faces, according to their recently released SEC report for the fiscal year 2023.
Table of Contents
Stock-Based Compensation
Stock-based compensation is an integral part of La-Z-Boy’s employee remuneration strategy. These grants, which can come in the form of equity or liability-based awards, are designed to attract, retain, and incentivize employees while also aligning their interests with the company’s success. The value of these awards is based on their fair value at the grant date and is expensed over the vesting period.
To estimate the fair value of stock options, La-Z-Boy uses the Black-Scholes option-pricing model. This model considers factors such as historical volatility, average expected life, risk-free rate, and other market-driven variables. These estimates inherently involve uncertainties and require management’s best judgment. For performance awards that vest based on market conditions, La-Z-Boy uses a more complex Monte Carlo valuation model that simulates stock price distribution over the vesting period.
Managing Market Risks
La-Z-Boy faces various market risks in its operations, including the exposure to interest rate fluctuations, currency exchange rate variations, commodity and transportation costs, duties and tariffs, and competition from both domestic and foreign manufacturers. Their SEC filing disclosed several strategies the company employs to mitigate these risks.
Interest Rate Fluctuations: As of April 29, 2023, La-Z-Boy had no variable rate borrowings, making them less vulnerable to interest rate fluctuations. However, if the company incurs variable rate debt in the future, it could be exposed to market risk in this area.
Currency Exchange Rate Variations: La-Z-Boy operates manufacturing facilities and retail businesses in Mexico, Canada, the United Kingdom, and Thailand, exposing them to potential market risk from changes in foreign currency exchange rates. While the company does not currently expect gains or losses from foreign currency fluctuations to have a material effect on their consolidated results of operations, they closely monitor these risks and are prepared to make adjustments as necessary.
Commodity and Transportation Costs: La-Z-Boy is exposed to market risks associated with volatile commodity prices and transportation costs for raw materials as well as finished goods. The company continuously evaluates whether price increases to customers are warranted to offset these costs. In addition, it believes that should these costs materially impact operations, competitors would likely experience similar effects.
Duties and Tariffs: The furniture manufacturer imports raw materials, component parts, and finished goods, making it exposed to duties and tariffs. La-Z-Boy remains vigilant in evaluating whether price increases are necessary to mitigate these costs. Furthermore, it believes that competitors would face similar impacts in the event of increased costs or reduced tariffs, which could lead to increased competition and pressure on pricing.
In conclusion, La-Z-Boy has adopted a balanced approach in managing the risks associated with stock-based compensation and various market challenges. The company’s prudent strategies and transparent reporting practices serve to maintain the trust of shareholders, customers, and employees while positioning La-Z-Boy for ongoing success in an ever-changing global market.
Income Statement
Financials in millions USD. Fiscal year is May – April. source
| Year | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 – 1997 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 0 | Revenue | 2349.43 | 2356.81 | 1734.24 | 1703.98 | 1745.4 | 1583.95 | 1520.06 | 1525.4 | 1425.4 | 1357.32 | Upgrade |
| 1 | Revenue Growth (YoY) | -0.31% | 35.90% | 1.78% | -2.37% | 10.19% | 4.20% | -0.35% | 7.02% | 5.02% | 6.55% | Upgrade |
| 2 | Cost of Revenue | 1340.73 | 1440.84 | 993.98 | 982.54 | 1042.83 | 961.2 | 910.76 | 940.42 | 920.9 | 892.86 | Upgrade |
| 3 | Gross Profit | 1008.7 | 915.97 | 740.26 | 721.45 | 702.57 | 622.75 | 609.3 | 584.98 | 504.49 | 464.45 | Upgrade |
| 4 | Selling, General & Admin | 797.26 | 709.21 | 603.52 | 575.82 | 572.9 | 493.38 | 475.96 | 459.65 | 401.33 | 375.16 | Upgrade |
| 5 | Other Operating Expenses | 0 | 0 | 0 | 26.86 | 0 | 0 | 2.51 | 0 | 0 | 0 | Upgrade |
| 6 | Operating Expenses | 797.26 | 709.21 | 603.52 | 602.68 | 572.9 | 493.38 | 478.47 | 459.65 | 401.33 | 375.16 | Upgrade |
| 7 | Operating Income | 211.44 | 206.76 | 136.74 | 118.76 | 129.67 | 129.37 | 130.83 | 125.33 | 103.17 | 89.3 | Upgrade |
| 8 | Interest Expense / Income | 0.54 | 0.9 | 1.39 | 1.29 | 1.54 | 0.54 | 1.07 | 0.49 | 0.52 | 0.55 | Upgrade |
| 9 | Other Expense / Income | 6.39 | 2.68 | -9.5 | 3.81 | 34.37 | 0.67 | 0.08 | 1.51 | -5.09 | 2.31 | Upgrade |
| 10 | Pretax Income | 204.51 | 203.18 | 144.85 | 113.66 | 93.76 | 128.16 | 129.68 | 123.33 | 107.73 | 86.44 | Upgrade |
| 11 | Income Tax | 53.85 | 53.16 | 38.38 | 36.19 | 25.19 | 47.3 | 43.76 | 44.08 | 36.95 | 31.38 | Upgrade |
| 12 | Net Income | 150.66 | 150.02 | 106.46 | 77.47 | 68.57 | 80.87 | 85.92 | 79.25 | 70.77 | 55.06 | Upgrade |
| 13 | Net Income Growth | 0.43% | 40.91% | 37.42% | 12.97% | -15.20% | -5.88% | 8.42% | 11.98% | 28.55% | 18.68% | Upgrade |
| 14 | Shares Outstanding (Basic) | 43 | 44 | 46 | 46 | 47 | 48 | 49 | 50 | 52 | 52 | Upgrade |
| 15 | Shares Outstanding (Diluted) | 43 | 44 | 46 | 47 | 47 | 48 | 49 | 51 | 52 | 54 | Upgrade |
| 16 | Shares Change | -2.38% | -4.47% | -0.79% | -1.26% | -1.67% | -2.70% | -2.55% | -3.02% | -2.76% | 0.27% | Upgrade |
| 17 | EPS (Basic) | 3.49 | 3.41 | 2.31 | 1.67 | 1.46 | 1.69 | 1.75 | 1.57 | 1.36 | 1.04 | Upgrade |
| 18 | EPS (Diluted) | 3.48 | 3.39 | 2.30 | 1.66 | 1.44 | 1.67 | 1.73 | 1.55 | 1.34 | 1.02 | Upgrade |
| 19 | EPS Growth | 2.65% | 47.39% | 38.55% | 15.28% | -13.77% | -3.47% | 11.61% | 15.67% | 31.37% | 20.00% | Upgrade |
| 20 | Free Cash Flow Per Share | 3.16 | 0.06 | 5.91 | 2.55 | 2.19 | 1.67 | 2.61 | 1.79 | 0.32 | 1.09 | Upgrade |
| 21 | Dividend Per Share | 0.693 | 0.630 | 0.360 | 0.540 | 0.500 | 0.460 | 0.420 | 0.360 | 0.280 | 0.200 | Upgrade |
| 22 | Dividend Growth | 10.00% | 75.00% | -33.33% | 8.00% | 8.70% | 9.52% | 16.67% | 28.57% | 40.00% | 150.00% | Upgrade |
| 23 | Gross Margin | 42.93% | 38.86% | 42.68% | 42.34% | 40.25% | 39.32% | 40.08% | 38.35% | 35.39% | 34.22% | Upgrade |
| 24 | Operating Margin | 9.00% | 8.77% | 7.88% | 6.97% | 7.43% | 8.17% | 8.61% | 8.22% | 7.24% | 6.58% | Upgrade |
| 25 | Profit Margin | 6.41% | 6.37% | 6.14% | 4.55% | 3.93% | 5.11% | 5.65% | 5.20% | 4.97% | 4.06% | Upgrade |
| 26 | Free Cash Flow Margin | 5.80% | 0.10% | 15.68% | 6.94% | 5.86% | 5.01% | 8.40% | 5.89% | 1.15% | 4.21% | Upgrade |
| 27 | Effective Tax Rate | 26.33% | 26.17% | 26.50% | 31.84% | 26.86% | 36.90% | 33.74% | 35.74% | 34.30% | 36.31% | Upgrade |
| 28 | EBITDA | 321.75 | 316.79 | 244.83 | 213.81 | 126.45 | 160.47 | 159.88 | 150.34 | 130.53 | 110.17 | Upgrade |
| 29 | EBITDA Margin | 13.69% | 13.44% | 14.12% | 12.55% | 7.24% | 10.13% | 10.52% | 9.86% | 9.16% | 8.12% | Upgrade |
| 30 | Depreciation & Amortization | 116.7 | 112.71 | 98.59 | 98.87 | 31.15 | 31.77 | 29.13 | 26.52 | 22.28 | 23.18 | Upgrade |
| 31 | EBIT | 205.05 | 204.08 | 146.24 | 114.95 | 95.3 | 128.7 | 130.75 | 123.82 | 108.25 | 86.99 | Upgrade |
| 32 | EBIT Margin | 8.73% | 8.66% | 8.43% | 6.75% | 5.46% | 8.13% | 8.60% | 8.12% | 7.59% | 6.41% | Upgrade |
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!