February 19, 2021

La-Z-Boy’s CFO Prepares to Become CEO Amid Surge in Furniture Buying – The Wall Street Journal

La-Z-Boy’s CFO Prepares to Become CEO Amid Surge in Furniture Buying - The Wall Street Journal

La-Z-Boy Inc.’s finance chief is preparing to take the furniture maker’s helm as the company confronts a surge in demand and faces longer-term questions on how it will continue growing after the pandemic home-improvement craze ends.

The Monroe, Mich.-based company, known for its recliners, this week named Melinda Whittington its chief executive officer, succeeding longtime CEO Kurt Darrow, who is retiring. The changes take effect on April 25.

Ms. Whittington has served as chief financial officer of La-Z-Boy since 2018 and previously held the same title at Allscripts Healthcare Solutions Inc., a healthcare technology company. Robert Lucian, the company’s vice president of finance, will succeed Ms. Whittington as CFO.

The furniture industry, after closing stores and plants early in the pandemic, has benefited from recent changes in consumer spending patterns. Virus-related restrictions and the shift to remote work is forcing people to spend more time at home, prompting them to pay more for items such as furniture.

La-Z-Boy’s CFO Prepares to Become CEO Amid Surge in Furniture Buying - The Wall Street Journal

Melinda Whittington, La-Z-Boy’s finance chief, will become its chief executive on April 25.

Photo: La-Z-Boy

At La-Z-Boy, written same-store sales across its store network—meaning orders booked in stores—increased 6.3% in the quarter ended Jan. 23 from a year earlier. The same metric rose 34% in the previous quarter ended Oct. 24.

“Normally, you’re out trying to build demand. We’re actually trying to build furniture to fill that demand,” Ms. Whittington said.

That is a challenge Ms. Whittington will have to tackle as chief. Covid-19 infections and quarantine requirements among workers have slowed production, compounding other pandemic-related difficulties such as shipping delays. La-Z-Boy operates plants in Tennessee, Missouri and Arkansas as well as Mexico. Delivered same-store sales at company-owned stores—a measure of revenue from delivered orders—in the most recent quarter dipped 6.3% compared with the prior year period, and profits declined 15%, to $29.2 million.

“La-Z-Boy and the industry have really been whipsawed,” said Bradley Thomas, a managing director at KeyBanc Capital Markets, an investment banking firm. Sales of furniture and home furnishings across the industry jumped 9.3% in January compared with a year earlier, according to a recent KeyBanc report, citing U.S. Census Bureau data. That is up from a 5.7% pace in December.

La-Z-Boy has taken steps to increase capacity. The company last year brought back furloughed workers and temporarily reopened an upholstery plant in Newton, Miss., that was slated to close permanently. But the company has limited options, as training temporary staff would take several months and facilities are already running at full capacity, Ms. Whittington said.

The company is actively hiring to increase capacity and reduce its backlog, it said. Early in the pandemic, it had furloughed 6,800 employees and permanently laid off 850, including by closing the Newton plant. Its head count currently stands at about 10,000, or roughly the same as at the beginning of its fiscal year last April.

“Our folks have worked so much overtime already, there are no shifts to add to make up,” Ms. Whittington said, adding that it will take months for the company to catch up. Lead times for deliveries currently range from five to nine months, compared with four to six weeks before the pandemic, according to the company.

Ms. Whittington has taken a relatively uncommon path to the CEO role. Only around 7% of top managers at Fortune 500 and S&P 500 companies in 2020 were promoted from the CFO spot, a figure that has remained largely flat in recent years, according to recruiting firm Crist|Kolder Associates. Many companies look for candidates with strategy and operational experience, such as from running a business line, analysts and recruiters said.

Ms. Whittington said she gained that experience as La-Z-Boy’s finance chief. Mr. Darrow, the company’s chief executive, included her in meetings on manufacturing, supply chain issues and other business-line topics throughout her tenure, and particularly when the succession plan took shape, she said. He also introduced her to industry leaders, suppliers and customers, she said.

La-Z-Boy’s CFO Prepares to Become CEO Amid Surge in Furniture Buying - The Wall Street Journal

Robert Lucian, La-Z-Boy’s vice president of finance, will succeed Ms. Whittington as finance chief.

Photo: La-Z-Boy

La-Z-Boy is working to maintain growth once consumers scale back home-improvement spending and vaccination rates rise, Ms. Whittington said. The company had $393 million in cash as of Jan. 23, more than double the amount in the same period a year earlier. This was largely due to customer deposits on same-store written orders, which require a 50% deposit at company-owned stores, and online sales, some of which are paid in full.

Among the company’s options are acquisitions, she said. In 2018, La-Z-Boy bought Joybird, an online furniture retailer that targets younger customers. The company is also buying stand-alone stores from independent retailers that license the La-Z-Boy brand and sell its furniture. The company owned 45% of its network of 351 stand-alone furniture stores as of Jan. 23.

“It’s giving us opportunities to decide what comes next,” Ms. Whittington said of the company’s cash reserves.

How will the pandemic affect America’s retailers? As states across the nation struggle to return to business, WSJ investigates the evolving retail landscape and how consumers might shop in a post-pandemic world.

Write to Kristin Broughton at Kristin.Broughton@wsj.com

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