La-Z-Boy’s CFO Prepares to Become CEO Amid Surge in Furniture Buying
CFO prepares to take the helm of furniture maker as the company faces spike in demand and longer-term questions about how it will continue to grow after the pandemic home improvement craze ends.
The Monroe, Michigan-based company known for its loungers this week named Melinda Whittington as chief executive officer, succeeding longtime CEO Kurt Darrow, who is retiring. The changes will take effect on April 25th.
Ms. Whittington has been La-Z-Boy’s Chief Financial Officer since 2018 and previously held the same title at Allscripts Healthcare Solutions Inc.,
a health technology company. Robert Lucian, Vice President of Finance for the company, will succeed Ms. Whittington as CFO.
The furniture industry has benefited from recent changes in consumer behavior after shops and factories closed at the start of the pandemic. Virus-related restrictions and the move to remote working are forcing people to spend more time at home and making them pay more for items like furniture.
Melinda Whittington, La-Z-Boy’s CFO, will become its managing director on April 25th.
At La-Z-Boy, sales in the same store via the branch network – ie orders booked in branches – rose by 6.3% in the quarter ended January 23 compared to the previous year. The same metric rose 34% in the previous quarter ended October 24th.
“Usually you try to increase demand. We are actually trying to build furniture to meet that demand, ”said Ms. Whittington.
This is a challenge that Ms. Whittington has to face as a boss. Covid-19 infections and quarantine requirements on workers have slowed production and exacerbated other pandemic-related issues such as shipping delays. La-Z-Boy has plants in Tennessee, Missouri and Arkansas, as well as Mexico. Revenue from the same in-house store – a measure of revenue from orders shipped – declined 6.3% in the most recent quarter from the year-ago period, and profits declined 15% to $ 29.2 million.
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“La-Z-Boy and the industry are really excited,” said Bradley Thomas, general manager at KeyBanc Capital Markets, an investment bank. According to a recent KeyBanc report citing data from the US Census Bureau, furniture and home furnishings sales in the industry rose 9.3% in January year over year. That is an increase of 5.7% in December.
La-Z-Boy has taken steps to increase capacity. The company brought back workers on leave last year and temporarily opened an upholstery plant in Newton, Miss., To close permanently. However, the company has limited options as it would take several months to train temporary workers and the facilities are already at full capacity, Ms. Whittington said.
The company is actively hiring to increase capacity and reduce order backlog. At the beginning of the pandemic, the company had 6,800 employees on leave and 850 permanently laid off, including by closing the Newton plant. The number of employees is currently around 10,000 or roughly the same as at the beginning of the financial year last April.
“Our people have already worked so much overtime that there are no more shifts to make up,” Ms. Whittington said, adding that it will be months before the company catches up. Lead times for deliveries are currently between five and nine months, compared to four to six weeks prior to the pandemic, the company said.
Ms. Whittington has embarked on a relatively unusual path into the role of CEO. Only around 7% of top managers at Fortune 500 and S&P 500 companies were promoted from the CFO location in 2020, a number that according to recruiting firm Crist | Kolder Associates has remained largely unchanged over the past few years. Many companies are looking for candidates with strategic and operational experience, for example from leading a business unit, such as analysts and recruiters.
Ms. Whittington said she had that experience as the chief financial officer of La-Z-Boy. Mr. Darrow, the company’s chief executive officer, took her to meetings on manufacturing, supply chain, and other business unit issues during her tenure, particularly as the succession plan was taking shape, she said. He also introduced her to industry leaders, suppliers and customers, she said.
Robert Lucian, La-Z-Boy’s vice president of finance, will succeed Ms. Whittington as chief financial officer.
La-Z-Boy is working to sustain growth once consumers cut 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 for the same period last year. This was mainly due to customer deposits on written orders in the same store that require a 50% deposit in company-owned stores, as well as online sales, some of which are paid for in full.
The company’s options include acquisitions, she said. In 2018, La-Z-Boy bought Joybird, an online furniture retailer aimed at younger customers. The company also buys standalone stores from independent retailers who license the La-Z-Boy brand and sell their furniture. As of January 23, the company owned 45% of its network of 351 independent furniture stores.
“It gives us a chance to decide what’s next,” Ms. Whittington said of the company’s cash on hand.
How will the pandemic affect American retailers? As states across the country struggle to get back to business, WSJ is researching the evolving retail landscape and how consumers might shop in a post-pandemic world.
Write to Kristin Broughton at [email protected]
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