Aging Population And Remote Work Will Redefine Home Comfort

Key Takeaways

• Accelerated store expansion, regional acquisitions, and supply chain upgrades are set to boost La-Z-Boy's margins, earnings stability, and industry leadership beyond current expectations.
  
• Demographic trends and investment in omnichannel retail uniquely position La-Z-Boy for sustained high-margin growth, market share gains, and outperformance in a fragmented industry.
  
• Shifting consumer preferences, digital disruption, limited product diversity, and rising costs threaten La-Z-Boy's core business model, growth prospects, and margin stability.

Catalysts

Manufactures, markets, imports, exports, distributes, and retails upholstery furniture products in the United States, Canada, and internationally.

• Analyst consensus sees company-owned store expansion as a driver of steady revenue and margin improvement, but this likely understates the step-change in long-term earnings power from accelerated store and regional acquisitions, which should deliver both outsized revenue growth and stronger operating leverage as La-Z-Boy rapidly increases company-controlled market share.
  
• Analysts broadly agree La-Z-Boy's Century Vision supply chain overhaul will gradually expand margins, but this catalyst is likely more potent, as highly centralized logistics and U.S.-based manufacturing position La-Z-Boy to leapfrog peers when industry volumes rebound, translating into a structural uplift to both gross margins and earnings stability not yet reflected in current valuations.
  
• The demographic wave of baby boomer retirements and increased health-consciousness among consumers is poised to drive a sustained surge in high-margin recliner and ergonomic product sales, significantly enhancing average order values and longer-term revenue growth well above current expectations.
  
• Investment in La-Z-Boy's direct-to-consumer and omnichannel retail-combined with a proven ability to scale Joybird's showroom format-gives the company a unique pathway to capture the structurally rising demand from remote and hybrid workers who are upgrading their home office and living environments, translating to durable double-digit revenue expansion and higher net margins through superior customer engagement.
  
• With a fortress balance sheet and no external debt, La-Z-Boy is positioned to opportunistically accelerate acquisitions and rapidly consolidate a fragmented branded furniture industry whenever cyclical downturns occur, allowing for outsized earnings per share growth via both aggressive market share gains and increased capital returns as industry conditions normalize.

La-Z-Boy Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on La-Z-Boy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming La-Z-Boy's revenue will grow by 3.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.3% today to 5.5% in 3 years time.
• The bullish analysts expect earnings to reach $126.5 million (and earnings per share of $3.14) by about August 2028, up from $91.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.4x on those 2028 earnings, up from 16.5x today. This future PE is greater than the current PE for the US Consumer Durables industry at 11.8x.
• Analysts expect the number of shares outstanding to decline by 1.48% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.03%, as per the Simply Wall St company report.

La-Z-Boy Future Earnings Per Share Growth

Risks

• The sustained decline in home ownership rates among younger generations and prolonged weakness in the housing market limit household formation, which suppresses demand for La-Z-Boy's core big-ticket furniture offerings and puts downward pressure on future revenue growth.
  
• A rising consumer shift towards e-commerce and direct-to-consumer furniture brands threatens La-Z-Boy's traditional brick-and-mortar model, while recent challenges in growing online channels like Joybird-where sales dropped twenty percent versus the prior year-may further erode market share and impede overall company revenue expansion.
  
• Increasing consumer appetite for fast, affordable, and modular furniture is at odds with La-Z-Boy's legacy as a premium, customized, and largely upholstered provider, which could pressure pricing power and compress both gross margins and total revenue as La-Z-Boy adapts to compete in lower-margin market segments.
  
• Heavy concentration in recliners and upholstered furniture, with limited diversification or innovation in product categories, exposes the company to demand shifts towards minimalist or multi-functional furniture, risking longer-term sales declines and reducing earnings resilience.
  
• Ongoing investments in store expansion and multiyear distribution transformation create margin headwinds in the near term; combined with persistently higher material costs, input volatility, and labor inflation in North America, this could constrain net margins and delay material improvements to earnings per share.

Valuation

• The assumed bullish price target for La-Z-Boy is $46.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of La-Z-Boy's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $46.0, and the most bearish reporting a price target of just $36.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.3 billion, earnings will come to $126.5 million, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 9.0%.
  
• Given the current share price of $36.58, the bullish analyst price target of $46.0 is 20.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.