Good morning, ladies and gentlemen, and welcome to the La-Z-Boy Fiscal 2023 Second Quarter Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Kathy Liebmann, Director of Investor Relations and Corporate Communications. Ma’am, the floor is yours..

Thank you, Hollie. Good morning, and thank you for joining us to discuss our fiscal 2023 second quarter results. With us this morning are Melinda Whittington, La-Z-Boy’s President and Chief Executive Officer; and Bob Lucian, CFO. Melinda will open and close the call, and Bob will speak to segment performance and the financials midway through.

We’ll then open the call to questions. Slides will accompany this presentation and you may view them through our webcast link, which will be available for one year, and a telephone replay of the call will be available for one week beginning this afternoon.

Before we begin the presentation, I’d like to remind you that some statements made in today’s call include forward-looking statements about La-Z-Boy’s future performance and other matters. Although, we believe these statements to be reasonable, our actual results could differ materially.

The most significant risk factors that could affect our future results are described in our annual report on Form 10-K. We encourage you to review those risk factors as well as other key information detailed in our SEC filings.

Also, our earnings release is available under the News and Events tab on the Investor Relations page of our website, and it includes reconciliations of certain non-GAAP measures which are also included as an appendix at the end of our conference call slide deck.

With that, I’ll now turn over the call to Melinda Whittington, La-Z-Boy’s President and Chief Executive Officer.

Melinda?.

Thanks, Kathy, and good morning, everyone. Yesterday afternoon, following the close of market, we reported excellent fiscal ‘23 second quarter results for the total company.

In addition to record consolidated results for sales and profits for our Q2, our company owned retail segment again turned in stellar performance with all-time quarterly record delivered sales, profits and non-GAAP operating margin.

These record setting results were enabled by a strong supply chain execution in the period and enabled us to reduce our backlog and improve service to customers and consumers, particularly for our retail business. Our lead times continue to improve and we are edging closer to our brand promise, custom furniture in four to six weeks.

A competitive differentiator for us in the marketplace, all supported by our North American manufacturing footprint. Delivering on this value proposition is good for us, good for our commercial customers and great for our consumers.

While we're pleased with our delivered results in the quarter, near term headwinds continue to slow the written trajectory across our industry, and we know this challenging environment will require ongoing adjustments and increased agility.

While still up versus pre-pandemic levels, our industry is experiencing a slower pace of store and e-commerce traffic versus last year.

A reflection of macroeconomic concerns and geopolitical uncertainty weighing on consumer sentiment, as well as a shift in discretionary spending patterns post-pandemic and these factors again impacted our written business in the quarter.

For the period, total written sales for our company owned retail business were down 5% versus last year's second quarter, with same-store written sales down 10% versus pre-pandemic, fiscal 2020 Q2 these total written results were up 18% and same-store written results up 12%.

The entire La-Z-Boy Furniture Galleries network experienced similar trends with the written same-store sales up 9% against fiscal 2020 Q2 and down 13% against last year's strong second quarter.

Joybird also comped positively against the pre-pandemic fiscal 2020 second quarter, up 43%, but was down 27% versus last year's Q2, reflecting similar consumer trends as well as the effects of changes in campaign execution with a key marketing partner, which have since been reversed.

Since the reversal, we are starting to see meaningful improvements in ROI and year-over-year trends. With written results trending more in line with the rest of the furniture industry, but it is too early to draw full conclusions.

In this difficult environment, we are focused on the long-term controlling what we can and positioning the company to move through this period successfully. We are driving agility across the entire enterprise as we adjust go-to-market strategies and optimize our supply chain operations marketing spend and capital project timelines.

As we proactively align our cost structure with the demand environment, we remain committed to making prudent investments to drive long-term profitable growth through Century Vision. To drive share growth, we are investing in the La-Z-Boy brand and leveraging its equity, history and reputation for quality and comfort.

We are using consumer insights to drive brand strategies and true consumer-centric innovation, investing in technology to strengthen our digital and omni channel experience, executing selective promotions on key products to drive traffic to our stores, and developing new channel strategies to expand distribution opportunities.

At the recent High Point Furniture Market, we were thrilled with customer feedback on new product introductions across all brands and are pleased to report that energy throughout market was high, customers were engaged and positive for the long term.

Further, with the core La-Z-Boy consumer preferring to shop in store, we are expanding and improving the La-Z-Boy Furniture Galleries footprint with new and remodeled stores to provide consumers with an extraordinary end-to-end experience.

During fiscal ‘23, we are working to open seven new stores and remodel or relocate another 30 across our Furniture Galleries network. In Q2 alone, we opened two of these new La-Z-Boy Furniture Galleries and remodeled or relocated five stores within our own retail business.

And in September, we closed on the acquisition of one store and distribution center in Spokane, Washington, and have recently signed an agreement to acquire another store from an independent dealer in West Virginia.

As always, these store acquisitions are immediately accretive and allow the company to benefit from the integrated wholesale retail margin. Throughout the supply chain, as we reduce our backlog back to pre-pandemic lead times, we are optimizing staffing levels across our manufacturing facilities to align with current demand.

Additionally, we've made a series of changes within our plans that provide us with the ability to flex production to better service the order book, driving efficiency and improved execution. At Joybird, we continue to invest in the business to drive brand awareness and consumer acquisition.

In this environment, we are restructuring our marketing campaigns in terms of advertising channels and messaging to improve returns on advertising spend. We are also investing in Joybird retail stores, opening in high traffic urban markets where we continue to experience great results.

Our retail showrooms combined with a strong mobile optimized web platform provide consumers with a true omnichannel experience to engage with the Joybird brand.

We opened our new Manhattan store in November and we'll open three stores Seattle, Philadelphia and Los Angeles in the first half of the calendar, bringing our total to 10 Joybird stores to-date. While our long term plans include additional Joybird retail locations, we will align the pace of store openings with the overall business environment.

Importantly, a key differentiator for Joybird is that we are uniquely positioned as an online retailer that makes our own upholstered product. This vertical integration provides us with margin opportunity to keep investing in the brand. While we have some near term challenges to optimize the Joybird business, we remain bullish on the long term.

Over time, the execution of Century Vision will change the complexion of La-Z-Boy Incorporated. Over the next three to four years, we expect to be over half direct-to-consumer as our company owned retail and Joybird businesses grow at a faster rate than our traditional wholesale business.

This shift will contribute to consolidated operating margin enhancement as we grow. And as we tackle this and what is immediately ahead, we are starting from a position of brand and financial strength.

Our business remains larger than pre pandemic levels, as consumers continue to place a value on the comfort of their homes and then trust La-Z-Boy Incorporated to deliver it for them. We are confident we will navigate the environment well, build for the future and emerge even stronger.

Now let me turn the call over to Bob to review our second quarter results in more detail.

Bob?.

Thank you, Melinda, and good morning, everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis. We believe the non-GAAP presentation better reflects underlying operating trends and performance of the business.

Non-GAAP results exclude items which were detailed in press release and in the tables in the appendix section of our conference call slides.

On a consolidated basis, fiscal ‘23 second quarter sales increased 6% to $611 million versus the prior year quarter, with pricing and surcharge actions and a positive effects of product and channel mix, offsetting lower unit volume.

Consolidated GAAP operating income increased to $62 million and non-GAAP operating income increased to $61 million, a record for the second quarter and an increase of 19% versus last year's second quarter.

Consolidated GAAP operating margin increased to 10.1% from 9.4% and non-GAAP operating margin increased to 10% from 9% in last year's second quarter. GAAP diluted EPS increased to $1.7 for the fiscal 2023 second quarter versus $0.89 in the prior year quarter.

Non-GAAP diluted EPS increased 24% to $1.5 in the current year quarter versus $0.85 in last year's second quarter. Over the 12 months, non-GAAP diluted EPS was $3.68, a 22% increase versus the year ago period. In the second quarter, we delivered disproportionate profit growth as we shifted supply chain capacity towards servicing our retail business.

As we have discussed, many of our wholesale customers had warehouse constraints that limited their ability to take delivery of new product during the quarter.

These short-term dealer constraints once again allowed us to pivot and increase deliveries of our own retail backlog during the quarter, improved service to consumers and drive strong operating margin as we leverage the benefits of selling through our company owned retail business.

As I move to the segment discussion, my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. Starting with our Retail segment, delivered sales increased by 31% to an all-time record $252 million, as we improve service to consumers and make progress towards returning to our pre-pandemic lead times.

For the quarter, delivered same-store sales increased 25% versus a year ago. Retail posted record high non-GAAP operating profit dollars and non-GAAP operating margin increased to a best average 16.5% versus 12.5% in the prior year quarter. These results were driven primarily by higher delivery sales relative to selling expenses and fixed costs.

Our retail team's focus continues to provide an incomparable consumer experience and we congratulate them on their outstanding performance. As Melinda noted earlier, growing the La-Z-Boy Furniture Galleries network is a central element of Century Vision.

Disproportionately growing our company owned retail will allow us to provide more consumers with a full end-to-end brand experience and will serve as a key driver as we shift our consolidated business mix to be more direct-to-consumer driving sales and operating margin expansion in the process.

For the quarter, delivered sales in our wholesale segment grew to $446 million, a 2% improvement compared with the prior year period and a record for a second quarter. The growth was driven primarily by pricing and surcharge actions coupled with a favorable channel and product mix.

The increase was partially offset by lower volume, primarily the result of dealers delaying receipt of finished goods due to warehouse constraints. Non-GAAP operating margin for the Wholesale segment was 8.6% versus 9.1% in last year's second quarter.

Pricing and surcharge actions were more than offset by increased raw material costs, plant inefficiencies due to lower unit volume and an increase of marketing spend to pre-COVID levels. I'll now spend a few moments on Joybird, which is reported in corporate and other.

Joybird’s delivered sales decreased 5% to $38 million versus the prior year second quarter and written sales were up 27% against the comparable period, reflecting slowing e-commerce trends and the effects of changes in campaign execution with a key marketing partner, which have since been reversed.

As a result, Joybird posted a loss for the quarter -- for the period, primarily reflecting lower volume and unfavorable shift in product mix and a lower return on advertising spend.

To improve performance in the current environment, our team is making changes to our marketing, platform and social media mix with a focus on building brand awareness while tailoring messages to better resonate with a post-COVID consumer and we are beginning to see improvement.

We are also optimizing marketing spend and cost in all areas of the Joybird business as we navigate this post-COVID e-commerce consumer market. For the full fiscal year, we now expect Joybird to post a loss reflecting the impact of external headwinds and continued prudent investments and marketing and retail locations to drive long-term growth.

We are making improvements across all areas of the business model and it will balance investments in growth with bottom line performance and expect it will take several quarters for the business to return to profitability.

While the full enterprise consolidated non-GAAP gross margin for the quarter increased 380 basis points versus the prior year period, and increased 250 basis points sequentially from Q1, primarily driven by price, mix and better plant performance.

The improvement in gross margin versus year ago was driven primarily by the change to our consolidated business mix with retail becoming a larger portion and carrying a higher gross margin than our wholesale business as well as favorable pricing and surcharge actions, partially offset by the combination of higher raw material and plant costs.

Consolidated non-GAAP SG&A as a percentage of sales increased 280 basis points versus last year's second quarter. Again, this primarily reflected changes in our consolidated business mix driven by the growth of retail, which carries a higher level of SG&A expense as a percentage of sales than our wholesale business.

SG&A as a percentage of sales was also higher due to restoring marketing investments to pre-COVID levels to drive written sales. Our effective tax rate on a GAAP basis for the fiscal ’23 second quarter was 25.8% versus 26.6% in last year's second quarter. Our effective tax rate varies from 21% federal statutory rate, primarily due to state taxes.

We continue to expect our effective tax rate to be in the range of 25.5% to 26.5% for fiscal 2023. Turning to cash, year-to-date we generated $31 million in cash from operating activities versus $15 million in the fiscal 2022 six month period.

The slightly negative operating cash generation in the second quarter was due primarily to a decrease in customer deposits as we reduced our retail backlog. In addition, inventory increased slightly reflecting the timing of the receipt of certain components and case goods and the flow of finished goods to our consumers, excuse me, customers.

We have plans in place to proactively work down inventory in the back half of the year. We ended the period with $208 million in cash and no debt and held $19 million in short term investments to enhance returns on cash.

Year-to-date, we have spent $40 million in capital primarily related to La-Z-Boy Furniture Galleries store projects and new retail stores as well as upgrades at our manufacturing and distribution facilities. In the first half, we returned $14 million to shareholders through dividends.

Subsequent to quarter end demonstrating its confidence in the company's long term growth prospects, the Board of Directors increased regular quarterly dividend by 10%.

Given the uncertain macroeconomic environment, we have temporarily paused share repurchases other than to offset dilution to enable prudent capital investment in the business and maintaining a strong balance sheet. We have 7.3 million shares left in our existing authorized share repurchase program.

Our capital allocation strategy over the long term is to invest roughly half of operating cash flow back into the business via CapEx and M&A and return the remainder to shareholders via dividends and share repurchases.

For the near-term, that mix will skew towards business investment as we manage through an uncertain economic environment and strengthen our internal capabilities. Before turning the call back to Melinda, let me highlight several important items for the third quarter and full fiscal year.

Please keep in mind that fiscal ‘23 will be a 52 week year and comparisons will be against the 53 week fiscal '22. The extra week fell in the fourth quarter of last year. The fiscal ‘23 third quarter will include 12 production weeks versus 13 in our just completed quarter due to shutdowns over the holiday period.

We expect to work down our backlog to pre-pandemic levels during the third quarter and as such we will begin delivering sales at levels consistent with what we write and consistent with our historical seasonality.

While we maintain our long term commitment to steady sales and margin growth, we expect external headwinds to weigh on results throughout the back half of the year.

Against COVID driven demand in Q3 last year, we expect written sales will compare unfavorably for our direct-to-consumer businesses as well as for our wholesale customers as they manage fluctuating consumer demand and adjust their inventories accordingly.

We still have a number of larger customers who have delayed receiving product due to warehouse constraints and this will continue to impact delivery sales in our Wholesale segment in Q3. We expect these delays to normalize during Q4.

However, as we start to anniversary the slowdown in written sales that began on early part of calendar '22, we expect written comps in the back half of fiscal '23, we will begin to improve relative to written comps in the first half of this fiscal.

The combination of inventory working through the system and backlog return to pre-pandemic levels will shift our distribution channel mix back to pre-pandemic levels by the end of Q3. We will continue to invest in marketing to drive traffic, demand and long term brand equity during this challenging period.

As a result, we expect delivered sales for the fiscal ‘23 quarter to be in a range of about $525 million to $535 million down versus the third quarter of fiscal '22, but higher than pre-pandemic levels and consolidated non-GAAP operating margin in a range of about 7% to 7.5%. The fourth quarter is expected to be similar to the third quarter.

We expect non-GAAP adjustments for purchase accounting changes -- charges for the year to be in the range of $0.01 to $0.03 per share. Given the demand environment, we have extended capital project timelines and now expect capital expenditures for fiscal '23 to be in the range of $75 million to $80 million.

We will continue to make prudent investments to strengthen the company for the future, consistent with our Century Vision strategy. And now, I will turn the call back to Melinda..

Thanks, Bob. I'm extremely optimistic about the future of La-Z-Boy Incorporated, while being realistic about the near term economic environment and that it will be challenging for our industry. We have a long history of being prudent and cash conscious earning us the financial strength to manage through this period.

We are honing our marketing messages and investing in consumer insights and innovations to drive disproportionate growth even in this environment. And keeping our focus on the long term, we are making proactive and selective investments in Century Vision to bolster our brands and build our underlying capabilities to drive the future.

We believe that even with consumers spending more discretionary dollars on travel and other experiences, they will continue to prioritize comfort in their homes. which will provide longer term opportunities for growth.

We are confident we will continue to navigate whatever challenges come next and deliver custom, quality furniture fast for our customers and our consumers now and in the future. I'd like to thank our amazing team for their hard work and dedication and for delivering excellent results yet again this quarter.

I thank you for being on our call this morning, and I'll turn it back to Kathy..

Thanks, Melinda. We will begin the question-and-answer period now. Hollie, will you please review the instructions to get into the queue to ask questions..

Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question for today is coming from Bobby Griffin at Raymond James..

Good morning, everybody. Thanks for taking my questions..

Good morning..

Good morning, Bobby..

I guess the first question is more a little bit of High Industry Level question and maybe some commentary on what you're hearing from the wide range of your kind of wholesale customers.

But when I think about their inventory situation and trying to work through kind of this excess inventory that you have in the channel, are you hearing any type of timeline on it couple of quarters into 2023 calendar year 2023 or anything just to kind of help us get a sense of when we might get industry back to more of a normal inventory position?.

Yeah, Bobby. It obviously it varies, right.

It varies by customer, it varies by all of their sources of products, those that are more heavily balanced towards some Asian manufacturing in their mix probably are suffering the most for us and that catch up of orders that they put in on the books a long time ago that finally containers freed up and showed up.

So we're talking about general dealer type folks sitting on a lot of stock inventory as opposed to custom. What we tend to hear is kind of for the ones that are still backed up is three to four months, but if I’m honest that it’s perpetually three to four months here, we've been saying that for a bit.

What I can tell you is, we do see progress and certainly for custom orders, we're seeing that movement. And within our own retail, we're able to move through that and we're seeing lead times come down and we're intentionally bringing our in stock levels back up getting close to where they were pre-pandemic.

So if the consumer does want to come in and buy something and have it delivered not custom, but have it delivered in the near term. We're getting back up to levels in our own warehouses to be able to support that as well..

Okay. That's helpful. I appreciate it. And then, Bob, I guess, when I look at the implied sales per week of production here and third quarter coming up, it steps down a little bit from 2Q. I think $47 million to $44 million.

Is that just a function of that inventory aspect in the renewals just talking about or is there something else that would cause the weekly production, the weekly delivered sales for production week to drop down? Because I think you guys did mention you still have a good bit of the backlog to still try to deliver in the third quarter..

It's a function of the fact that during the third quarter that backlog will be gone. So during Q2, we were able to use that backlog all throughout the entire quarter to drive those sales at $47 million a week you just mentioned.

During Q3, that will end up going away during the quarters and that's why the average per week is going to end up going down..

Okay. That makes sense.

And then to take that a step further, given where we are in the demand side, out of the flexibility inside the plants and stuff going to look going forward on for kind of a new demand environment now that we've worked through this backlog?.

So as we've talked because our product manufacturing is so inherently manual, it's mainly about people and flexing down is in many ways easier than flexing up, right? So we had over the last several years had people working really significant levels of over time.

And we've slowly backed that off and are actually have people working hours that they like now in reasonable amounts of time. We backed off the overtime. We backed off in a few places like second shift. We're actually seeing efficiencies go up as we're doing that.

And then we're -- because we're just not working people quite as hard as we had to a while back and we appreciate the fact that our folks stuck with us and work through that time.

The other thing we're taking advantage of is just natural attrition and manufacturing environments, particularly those like ours, still have a fairly meaningful amount of attrition that happens naturally and we're letting that happen to sort of downsize as we go. Those are really the main drivers to-date on how we've downsized..

Okay. I appreciate the details. I'll jump back in the queue, but thanks again for answering my questions this morning..

Thanks, Bobby..

Your next question is coming from Anthony Lebiedzinski at Sidoti and Company..

Good morning, and thank you for taking the questions. So first, just curious about coming off of Black Friday.

Can you just comment as to what you saw in your stores in terms of traffic and written sales for the -- when -- I think you guys talked about before that the industry overall is returning to just people buying more furniture around the holidays.

So just curious to get your input as to what you saw over Black Friday?.

Yeah. Good morning, Anthony. I'd start by saying, if you look at year-on-year comparisons for like our furniture galleries, we actually saw some improvement in pace Q2 versus what we were seeing in Q1. So that -- and that's over three months, that's a little more of a trend.

As far as over this last holiday, last Friday is Cyber Monday, we're actually generally pleased with our performance in both our furniture galleries and for Joybird, right, which are real consumer businesses where we have to some (ph) on the pulse and what the consumers doing.

We saw continued strengthening thus far in November of sort of that pace year-on-year, too early to call a trend, right? But in general, we've seen a trajectory of improvement..

Got it. Okay. That's good to hear.

And then in terms of dealers delaying the receipt of finished goods because of warehouse constraints, are those mostly firm orders or is there maybe potential risk that some of those orders could be canceled? How should we view that?.

Mostly firm orders, and to be clear, some of that sits in, if you think about some of our case goods and all, where we're importing finished product that's a driver where we're manufacturing in some cases that's just slowing the pace of the manufacturing to get those things out the door as well as we're communicating with our customers on the timing they'll take..

Got it. Okay.

And then in terms of the demand levers, is increased advertising the main tool that you're using or do you think perhaps you'll need to be more promotional given the current demand environment?.

We'll likely end up in doing both. The marketing piece is important for the retail stores to drive traffic. And once we get them in the store, we're able to do a great job converting them and upselling them with design sales.

On the promotion side, we haven't seen a very large -- we're looking, we're watching, we're waiting for somebody to go out there and start doing some crazy things get product moving off their floors or out of their warehouses. We haven't seen that yet. We'll be keeping our eye on that.

We continue to say that we don't want to leave down crazy amounts of discounts, but we also want to make sure we maintain share. So we will ensure that we remain competitive as we move through the holiday period into -- in the President Day and we see what happens with the economy, with the consumer and with what our competition is going..

Got it.

And then lastly, how should we think about segment profitability near term and long term, if you could just give us different puts and takes as to how we should think about that?.

We made a number of comments. We continue to make a number of comments. Our goal as part of Century Vision is to reinvigorate that La-Z-Boy brand. The biggest part of that is really just proportionately growing our La-Z-Boy retail network.

And that's new stores, that's some new formats as well as remodeling our stores and getting more other formats that we have.

That coupled with the Joybird growth, we expect the business prior to -- if you go back two or three years, we were more of a kind of a 40 -- low 40% direct-to-consumer, high 50% -- high-50%’s wholesale and we expect that to kind of flip flop over the next call it three to four years.

It’s where we're close to 60% direct-to-consumer and over 40% for wholesale. And that's not going to be the wholesale business shrinking, it's going to be more just growing that direct-to-consumer business at an accelerated rate.

And that's as part of Century Vision, that will be higher profits because we have higher gross margins, we get higher fixed cost leverage. So that will be a key part of how we drive our operating margin into that double-digit range on a more consistent basis over time..

Got it. Thank you very much and best of luck..

Thanks, Anthony..

Your next question for today is coming from Brad Thomas at KeyBanc..

Hi. Good morning. Thanks for taking my question.

I was hoping to talk a little bit more about Joybird and I was wondering, if you could talk a little bit more about how much some of the marketing dynamics are affecting sales, your underlying enthusiasm for the business? And if you could talk a little bit more about maybe putting aside any kind of one-time issues? what you think sort of underlying unit economics are looking like in your enthusiasm for the business as we look out a little bit longer term? Thanks..

Good morning, Brad. Yeah. So Joybird, two things are happening.

I think if you look across e-com, you're starting to see that consumer growth more broadly look like the broader furniture industry, right? So I think there's some pacing there that we'll take out execution, right to really over perform and we're still very bullish on what the Joybird brand can do.

In this quarter, as you alluded to, we had sort of a one-time effect as well that we're still working our way through. And it's just a matter of, you think about marketing mix modeling that you've done over the years, now it's more technical, right and involves more algorithms and artificial intelligence and so forth.

And as we move to some more automated solutions, we just affected the traffic that we had coming to our site. So that's been reversed. And again, too early, as I said in my prepared comments, too early to claim complete victory, but we're certainly seeing improvement as we back that out.

But that said, I do think that consumer is going to -- so the movement in the growth I expect is probably going to look a little bit more like the rest of the industry, like our more brick-and-mortar type of businesses. So what that says for us is, one, it takes out execution, it takes a great brand.

And it also says, we need to optimize costs and sort of structure the business to prepare for that type of an execution. So with all of that kind of rounded out, we still feel great about the brand, it still resonates very well with consumers. Our stores are doing well.

As I noted, we're going to be up to 10 stores by this summer and our path as we have 25 identified, we may manage pace a bit, but we'll have 10 open here by this summer.

And we're going to continue to invest on that brand even some of the honing we've done over the last quarter on the messaging to make sure we're really enticing that that consumer with fresh post-pandemic messaging just like we're doing across the rest of our brands looks to be resonating.

So we still feel good about the long term, not thrilled about some of the challenges in the near term, but we'll work our way through that..

That's really helpful, Melinda. And if I could just ask a follow-up about kind of the state of promotions in the industry. It's one that obviously always has promotions over the holiday weekends.

It feels like a number of brands out there trying to kind of still stay disciplined on promotions and not do kind of blanket store wide, getting discounts and only use some closer selling items. But every month that goes by, it feels like we're sending more and more promotions as we do our checks.

I'd be curious what you're seeing out there and how much you think that might be a risk to your medium doing more promotions over the next six to 12 months here?.

Yeah, Brad. As you -- we started, so think of Labor Day, from Labor Day all the way through Presidents' Day, that's the promotions kind of continue to increase over that period because you see some over Columbus and you see a lot in Black Friday, but you see more New Year's.

And then finally, the biggest one is of the year for everybody is going to be Presidents' Day. So just to seek increased promotions -- promotional activity like that is not unexpected.

Generally speaking, very few things are sold on a non-promotion basis and they're priced that way, so that they can do a 30% off or 35% off and hit the margins that we're delivering in the marketplace.

What we're keeping an eye on is people doing 50% off, 60% off, those types of items that's where folks are getting desperate trying to get rid of inventory, trying to generate cash from their inventory if they're running into -- if they're running into again cash flow problems, et cetera. So that's what we have our eye on.

Again, we continue to look at that, we are working with our sales force to understand what's happening out there and we are making sure that we are putting out promotions as we do our planning for the back half of the year that will ensure that we stay competitive..

I would just add that input costs overall, while they're mitigating somewhat from all-time highs, we're not seeing dramatic relief beyond sort of containers for ocean freight. And so you tend to see a little bit more those Asian import kind of products where there's more room and a cost deceleration.

As Bob said, we're going to keep our -- very much keep our thumb on the pulse of what the consumers -- how the consumer is acting and what they're looking for. But we also believe that quality certainly deserves a little bit of a price premium, but it's got to be within the right range, no doubt..

Really helpful. Thank you all so much..

Thanks, Brad..

There appear to be no further questions in queue. I would like to turn the floor back over to the management team for any closing comments..

Thank you everyone for your time today and thank you for your interest in La-Z-Boy Incorporated. Have a great day..

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation..