La-Z-Boy (LZB)

Furniture company La-Z-Boy (NYSE:LZB) announced better-than-expected revenue in Q4 CY2025, with sales up 3.8% year on year to $541.6 million. On the other hand, next quarter’s revenue guidance of $570 million was less impressive, coming in 3.2% below analysts’ estimates. Its non-GAAP profit of $0.61 per share was 2.8% above analysts’ consensus estimates.

Company Overview

The prized possession of every mancave, La-Z-Boy (NYSE:LZB) is a furniture company specializing in recliners, sofas, and seats.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Home furnishings companies design, manufacture, and sell furniture, décor, bedding, and related household products for residential and commercial spaces. Tailwinds include e-commerce expansion enabling broader distribution, continued remote-work trends sustaining home improvement interest, and premiumization as consumers invest in living spaces. However, headwinds are considerable: demand is closely tied to housing market activity, and rising mortgage rates have slowed home sales—a key purchase trigger. Bulky products carry high shipping costs and complex logistics. Intense competition from low-cost imports and mass-market retailers compresses margins, while consumer spending on furnishings is among the first categories deferred during economic downturns.

La-Z-Boy’s primary competitors include Ethan Allen Interiors (NYSE:ETH), Bassett Furniture Industries (NASDAQ:BSET), Haverty Furniture Companies (NYSE:HVT), Flexsteel Industries (NASDAQ:FLXS), and private company Ashley Furniture.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, La-Z-Boy’s sales grew at a weak 6.1% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. La-Z-Boy’s recent performance shows its demand has slowed as its annualized revenue growth of 1.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Wholesale and Retail, which are 59.3% and 40.7% of core revenues. Over the last two years, La-Z-Boy’s Wholesale revenue (sales to retailers) was flat while its Retail revenue (direct sales to consumers) averaged 5.6% year-on-year growth.

This quarter, La-Z-Boy reported modest year-on-year revenue growth of 3.8% but beat Wall Street’s estimates by 1.1%. Company management is currently guiding for flat sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not lead to better top-line performance yet.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

La-Z-Boy’s operating margin has shrunk over the last 12 months and averaged 6.5% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q4, La-Z-Boy generated an operating margin profit margin of 5.5%, down 1.2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

La-Z-Boy’s EPS grew at a weak 4% compounded annual growth rate over the last five years, lower than its 6.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q4, La-Z-Boy reported adjusted EPS of $0.61, down from $0.68 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.8%. Over the next 12 months, Wall Street expects La-Z-Boy’s full-year EPS of $2.71 to grow 7.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

La-Z-Boy has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 6.4%, lousy for a consumer discretionary business.

La-Z-Boy’s free cash flow clocked in at $71.56 million in Q4, equivalent to a 13.2% margin. This result was good as its margin was 5.9 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict La-Z-Boy’s cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 7.4% for the last 12 months will decrease to 5.2%.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

La-Z-Boy historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 16%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, La-Z-Boy’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

It was good to see La-Z-Boy narrowly top analysts’ revenue expectations this quarter. On the other hand, its revenue guidance for next quarter missed. Overall, this was a weaker quarter. The stock traded down 6% to $35.60 immediately following the results.

Updated: February 17, 2026 at 9:48 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in La-Z-Boy.

La-Z-Boy falls short of our quality standards. On top of that, La-Z-Boy’s Forecasted free cash flow margin suggests the company will ramp up its investments next year, and its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

La-Z-Boy’s P/E ratio based on the next 12 months is 13.2x. This valuation multiple is fair, but we don’t have much confidence in the company. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $44.50 on the company (compared to the current share price of $35.37).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.