In the first quarter of the 2026 fiscal year, Lazy Boy Company saw growth in both retail and wholesale sales. Retail sales increased by 5%, and the wholesale business successfully transformed and improved operational efficiency. The company announced plans to acquire 15 stores in the Southeast region, while also emphasizing progress in the construction of new distribution centers. With strong operating cash flow of $36 million and cash reserves of $319 million, the company demonstrates solid financial performance despite industry challenges.

Despite a challenging background in both consumer and macroeconomic environments, the retail and wholesale business has achieved growth. However, foot traffic and same-store sales in the retail sector have been impacted, leading to a decrease in quarterly sales for Joybird, consistent with the downward trend in the fourth quarter. The company has adjusted its operational strategy to counteract the effects of the current environment, with new store openings and acquisitions in the retail sector offsetting the decline in same-store sales. Physical stores for Joybird have outperformed online sales. In the future, the company plans to drive sales growth and profit margins by controlling costs and optimizing resources.

The company continues to promote its vision for the century, significantly expanding its direct-to-consumer business and strengthening its retail network layout through measures such as acquiring 15 Lazy Boy Furniture stores and operating Lyne New Stores. At the same time, successfully opening Joybird physical stores, achieving the honor of being named the top furniture retailer in the United States in 2025 by Newsweek, showcasing its market competitiveness, and brand influence in product, service, and shopping experience.

The conversation mentioned the company's collaboration with strategic partners such as Farmers Furniture, as well as the launch of a new brand identity and marketing campaign to continuously expand the brand's influence. At the same time, the company is advancing a multi-year supply chain transformation project to optimize the logistics network, reduce operating costs, and improve efficiency, in order to support a broader consumer base and achieve double-digit gross margin targets. Additionally, the company emphasized its commitment to customer-centricity, adapting flexibly to market changes, and leveraging its strong brand and supply chain advantages to build a solid foundation for the future recovery of the industry.

In the first quarter of the 2026 fiscal year, the company's overall sales decreased slightly by 1% to 492 million, with mixed performance in retail and wholesale. Retail sales were boosted by new and acquired stores, leading to an increase in sales, but the gross profit margin was under pressure due to fixed cost pressures and new store investments. Wholesale performance improved, especially in North America and international business, leading to an increase in gross profit margin. The company effectively responded to trade and tariff challenges through strategic inventory adjustments, supply chain optimization, and pricing strategies. In the future, the company will continue to optimize operations and drive performance growth.

The conversation outlined the company's performance in the first quarter of fiscal 2026, including a decrease in sales, an increase in operating losses, and a decrease in gross margin due to rising supply chain costs. At the same time, the company emphasized the leverage of fixed costs in retail and new store investments, as well as its cash return strategy for shareholders, including dividend payments and stock buyback plans. In addition, the company updated details about its credit facilities, indicating an increase in financial flexibility.

In the 2026 fiscal year, the company will focus its capital allocation on business investments, including the acquisition of the largest independent furniture store, with the expectation of increasing EBITDA and reducing share buybacks. At the same time, it is expected that the adjusted operating profit margin will be between 4.5% and 5%, with investments in new store openings and strategic transformations, while maintaining stable capital expenditures, in line with long-term capital allocation goals.

The speaker thanked the global team for their contribution to the mission, emphasizing the use of 98 years of experience and solid financial position to address market challenges, while also strengthening core business to ensure consumers receive comfort and quality. The company promises strategic improvements to drive long-term shareholder value and expresses optimism for future opportunities. Following that, the meeting moved into a question and answer session.

Discussed the improvement of quarterly trends in retail performance, the impact of new stores on profits, and market strategy adjustments when facing consumer pressure and industry uncertainty. Mentioned promoting sales through optimizing marketing and enhancing consumer experience, while explaining the profitability cycle of new stores, pointing out that they may initially drag down profits but are expected to gradually improve within the next two years. Finally, addressing the hesitation of wholesale customers in placing orders, emphasized the advantages of local supply chains, and expressed a cautiously optimistic attitude towards the market environment.

In the conversation, it was mentioned that the wholesale business achieved growth in this quarter, and this trend continued into the early part of the next quarter. Despite concerns about uncertainty in consumer behavior, the company effectively avoided the impact of tariffs by having most products manufactured locally in North America, ensuring a stable supply to consumers. The company is actively collaborating with long-term partners and new customers, such as farmers, to maintain the stability and affordability of product supply, in order to address market challenges.

The discussion focused on the impact of geographical differences on transportation and sales in the North American business. It was pointed out that the overall performance of the US market is stable, with no significant regional differences. However, the Canadian market has seen a decline in sales due to a 25% retaliatory tariff, despite the fact that the products are mainly manufactured in the US. The decrease in sales was partially offset by raising prices.

The conversation revolves around evaluating solutions to alleviate financial pressure caused by non-core business, discussing strategies to mitigate economic burden, aimed at optimizing corporate structure and enhancing overall operational efficiency.

The conversation emphasized the company's expansion strategy for the Lazy Boy brand, including cross-channel coverage and strengthening of self-operated retail, as well as continued investment in direct-to-consumer businesses like Joybird. At the same time, the company is committed to improving the performance of its domestic and international businesses, evaluating its future development path, and ensuring the overall optimization and growth of the business.

Discussed maintaining the current expansion strategy in the situation of unstable industry demand, while actively addressing challenges through financial advantages. For product promotions, especially seasonal promotions, the company has adopted short-term strategies to clear non-performing inventory, optimize product mix, especially adjusting before the peak season of furniture sales to ensure healthy inventory.

The conversation discussed the performance of the retail industry from the first quarter to August, pointing out that although May had good performance, June and July were weak, with some improvement in August. The decline in performance is mainly attributed to lack of consumer confidence, increased investment in new stores, and the impact of discount promotion strategies. Management emphasizes that although supply chain reform brings short-term cost pressures, significant profit margin improvements are expected in the next four years, especially in the fourth year, where the adjusted profits for retail and wholesale businesses are expected to increase by 50 to 75 basis points respectively.

Discussed the current situation and goals of improving productivity in new stores, pointing out that in the background of industry fluctuations, new stores need to achieve expected productivity within 1-3 years. We are accelerating this process through optimizing operational strategies. At the same time, we emphasize the continuous improvement of retail performance in response to changes in consumer behavior, in order to achieve more efficient improvement in productivity in new stores.

In the conversation, one party expressed gratitude for the detailed information received, and confirmed the presence of the other party by repeating their name, demonstrating the importance of expressing appreciation and confirming details in communication.

The meeting host announced that no further questions would be taken, and handed the meeting back to the organizer, indicating that the office will provide ongoing support, and thanked the participants for their involvement, then ended the meeting.