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La-Z-Boy (LZB -13%) is under pressure today after reporting its Q1 (Jul) results last night. This furniture retailer and manufacturer missed EPS estimates by its largest margin in 14 quarters. It also marked the company's second consecutive EPS miss following a streak of EPS beats. Revenue came in at the low range of its guidance of $490-510 mln, which was as expected given LZB's updated expectations on July 14. Revenue declined 0.7% yr/yr to $492 mln, its first decline in four quarters. Also, Q2 (Oct) revenue guidance of $510-530 mln was shy of expectations.

• While LZB delivered growth in its retail and wholesale segments, management noted that an increasingly challenged consumer and macroeconomic environment impacted store traffic and related same store sales. Furthermore, the combination of slower same store sales and investments in new store expansions pressured its adjusted operating margin, which came in at 4.8% compared to 9.4% in Q4 (Apr). Management noted that another headwind to industry traffic is that housing transactions continue to be near 30 year lows, and that it is exacerbated by an increasingly challenged consumer.
• The Retail segment reported a 2% yr/yr increase in delivered sales to $207 mln, driven primarily by new and acquired stores. This is a deceleration from the 8% growth seen in Q4, though Q1 is generally LZB's lowest sales and margin quarter of the year. Both total and same store written trends sequentially improved, with total written sales increasing 5%, offsetting the -4% decline in written same-store sales.
• Wholesale segment delivered sales increased 1% yr/yr to $353 mln, driven by growth in its core North America La-Z-Boy wholesale business and casegoods business, which more than offset the continued impact of customer transitions in its international wholesale business.
• Its Joybird segment remains a challenge. Delivered sales for the digitally native segment declined 20% yr/yr, a sharp deceleration from the 2% decline in Q4, while written sales decreased 14% yr/yr. As a result, the operating loss for the segment increased yr/yr. Encouragingly, management noted that trends did improve throughout the quarter, with continued strong performance in physical stores than online.
• LZB is expanding to benefit from the strength of its custom experience in its physical stores. The company recently announced an upcoming acquisition of a 15 store furniture galleries network in the Southeast region. The network currently drives roughly $80 mln in sales, which management noted will add an incremental $40 mln in sales on a consolidated basis.

Overall, this was a challenging quarter for LZB. Sales came in as expected, given that LZB announced it expected revenue to be at the low end of guidance on July 14. That said, the EPS miss was its largest in some time and the Q3 revenue guidance was below expectations. In fact, the midpoint of Q3 guidance reflects another modest yr/yr decline. With the downtrodden housing market and an increasingly challenged consumer clearly pressuring results, investors are stepping to the sidelines as they wait for signs of a turnaround.