La-Z-Boy Incorporated (LZB)

Short-term

Turnover ratios

The analysis of La-Z-Boy Incorporated's activity ratios over the period from mid-2022 to early 2025 reveals several notable trends and insights:

1. Inventory Turnover:
The inventory turnover ratio exhibits relative stability with minor fluctuations, averaging approximately 4.4 to 4.6 times per period. Periods from January 2023 to April 2023 experienced slightly higher turnover nearing 4.84, indicating improved inventory management and quicker sales cycles. Conversely, by October 2023, the ratio declined slightly to around 4.21-4.25, suggesting a modest slowdown in inventory movement. The pattern indicates consistent inventory efficiency with intermittent periods of acceleration and deceleration, possibly reflecting seasonal changes or shifts in demand.

2. Receivables Turnover:
The receivables turnover ratio demonstrates variability, with a notable rise from around 9.32-15.65 in late 2022 to peak at approximately 19.64 in July 2023. This suggests that La-Z-Boy improved its collection efficiency during this period, turning receivables into cash more rapidly. Post-July 2023, the ratio declined to approximately 11.71-15.15 by October 2023, indicating a decrease in collection efficiency, potentially due to credit policy adjustments or challenging market conditions. The ratio recovered somewhat in early 2024, reaching levels around 16.52-16.79, before stabilizing near 15.12-16.39 by April 2025.

3. Payables Turnover:
The payables turnover ratio displays fluctuations, with a generally increasing trend from about 12.04-12.12 in mid-2022 to a peak of approximately 16.38 in January 2023, reflecting shorter credit periods extended by suppliers. Subsequently, the ratio declined to a low of approximately 11.52 in October 2023, indicating longer payable periods, which could enhance liquidity but might strain supplier relationships. The ratio then normalized around 12.19-13.27 in early 2024 and remained relatively stable through 2024 and into 2025.

4. Working Capital Turnover:
The working capital turnover ratio shows a decreasing trend from levels above 8.7 in mid-2022 to approximately 4.85-5.53 during late 2023 and early 2024. This decline suggests that the company is generating less sales per dollar of working capital over time, which could point to increased working capital requirements or reduced operational efficiency. Nonetheless, there is a slight recovery trend starting in late 2024, with ratios approaching 5.48 by April 2025, indicating marginal improvements in leveraging working capital.

Overall, La-Z-Boy's activity ratios reflect a company experiencing periods of operational efficiency improvements and some challenges in collection and inventory management. The stability in inventory turnover suggests steady inventory control, while fluctuations in receivables and payables ratios highlight changing credit management practices. The declining trend in working capital turnover warrants attention, as it may impact overall financial efficiency if not addressed. Continuous monitoring of these ratios will be essential to assess ongoing operational performance and liquidity management strategies.

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Average number of days

The activity ratios of La-Z-Boy Incorporated, specifically the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Days of Payables (DPO), illustrate trends in operational efficiency over the period from mid-2022 to early 2025.

Days of Inventory on Hand (DOH):
The DOH ratio reflects the average number of days inventory is held before sale. The data indicates a general upward trend, rising from approximately 81.25 days in July 2022 to around 88.58 days by January 2024. After reaching a peak near 88.58 days, the ratio exhibits some fluctuation but remains relatively elevated, fluctuating between mid-80s and nearly 89 days through late 2024. This increasing trend suggests that inventory is being held longer over time, which may indicate slower turnover or changes in inventory management practices.

Days of Sales Outstanding (DSO):
The DSO measures the average collection period for receivables. The data shows a reduction from roughly 23.42 days in July 2022 to a low of approximately 18.59 days in July 2023, implying improved receivables collection efficiency during this period. However, there is a notable increase starting around October 2023, where the DSO rises to approximately 31.17 days, suggesting a lengthening of the collection cycle. By early 2025, the DSO stabilizes around 22 to 24 days, indicating some normalization after the fluctuation.

Number of Days of Payables (DPO):
The DPO shows variation but an overall upward trend, especially from late 2022 through late 2023. Initially around 30 days, the DPO increases to approximately 31.7 days in late 2023, then varies around 29 to 33 days into 2024 and early 2025. This suggests that La-Z-Boy is extending its payment terms with suppliers over time, potentially aligning payables management with its inventory and receivables activities.

Overall Assessment:
The activity ratios reflect a pattern of gradually increasing inventory levels and extended payment periods, with some variability in receivables collection efficiency. The lengthening of inventory holding periods coupled with an increasing trend in accounts payable days could indicate strategic inventory buildup or cautious cash flow management. Conversely, the improvement in receivables collection during certain intervals demonstrates operational adjustments aimed at optimizing cash flow. Overall, these ratios suggest La-Z-Boy has been balancing its inventory and payables management practices, with periods of efficiency gains and some slowdown in collection processes, consistent with typical operational adjustments over this period.

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Long-term

The long-term activity ratios of La-Z-Boy Incorporated, specifically the Fixed Asset Turnover and Total Asset Turnover ratios, demonstrate certain patterns over the observed periods.

Fixed Asset Turnover Ratio Analysis:

- The ratio exhibits a notable decline from early periods, with values around 9.26 in July 2022 to 9.38 in July 2022, and a relatively steady level near 9.30 in October 2022.
- A significant drop occurs in the subsequent period, where the ratio falls sharply to 3.61 in October 2022, indicating a reduction in sales generated per dollar of fixed assets.
- From early 2023 onward, the ratio continues to decrease gradually, reaching approximately 8.97 and 8.85 in January 2023, and further declining to around 8.32 and 8.14 by April 2023.
- The decline accelerates in the late third quarter to July 2023, with the ratio decreasing to approximately 7.85 and 7.52, and then further declining to 2.75 in October 2023.
- In early 2024, the ratio slightly recovers to around 7.05 in January but then continues to decline again, reaching approximately 6.93 by April 2024.
- Subsequent data points are unavailable beyond April 2024, but the trend suggests a notable decrease in the efficiency of fixed asset utilization over time, especially evident in the sharp drop in October 2023.

Total Asset Turnover Ratio Analysis:

- The total asset turnover ratio shows a gradual downward trend from about 1.27 in July 2022 to roughly 1.13 in October 2022.
- It then declines slightly further to approximately 1.30 in January 2023, and continues to decrease through mid-2023, reaching around 1.24 in April 2023.
- The ratio continues its decline, with values around 1.18 in July 2023 and approximately 1.08 in October 2023.
- In early 2024, the ratio slightly stabilizes around 1.05, then increases marginally to approximately 1.08 in April 2024.
- The ratios for subsequent periods stabilize near 1.10, with slight fluctuations, indicating a relatively consistent but modestly declining efficiency in utilizing total assets to generate sales over time.

Summary:

Overall, La-Z-Boy's fixed asset turnover ratio has experienced a significant fluctuation, particularly a marked decrease in October 2023, suggesting a reduction in the efficiency of generating sales from fixed assets, possibly due to asset underutilization or changes in operational efficiency. The total asset turnover ratio has shown a more gradual decline over the period, reflecting continuous but less volatile changes in overall asset utilization efficiency. These patterns may indicate shifts in strategic focus, asset management practices, or market conditions affecting sales performance relative to long-term assets.