As all-American as a La-Z-Boy recliner….

June 19, 2008

Is there anything more quintessentially American than a La-Z-Boy (LZB) recliner? There’s that famous scene in Idiocracy (one of my all-time favorite movies) where Frito is sitting in a La-Z-Boy-like chair that includes a toilet and a refrigerator and thus, never has to get up. Back in 1999, when I wrote about the company for the NY Times, they were beginning to roll out a chair called the Oasis, which did include a refrigerator big enough to keep a six-pack cool (but thankfully no toilet). The chair has since been discontinued.

I thought about this after taking a scan through the 10K that the company filed yesterday because while the company is still based in Monroe, Mich., the filing had a decidedly international flair. In addition to the annoucement back in early April that it was eliminating 1,050 jobs here in the U.S. and replacing them with 1,200 jobs in Mexico, which the company said would save either “over $20 million” (the amount cited when the announcement was made) or, in Tuesday’s conference call more than $25 million, there was a significant change to the company’s sourcing from China.

The filing notes that 98% of the company’s “cut and sewn sets” come from China, a substantial change over the previous year, when both Argentina and Brazil were part of the mix and that in fiscal 2009 “we expect all of our cut and sewn parts to be supplied from suppliers in China or from our Mexico facility because there are few sources of these products domestically at these labor costs.”

But as the filing notes, China isn’t as cheap as it once was, which is forcing La-Z-Boy to raise its wholesale prices. “The most notable increases were on products produced in China, which is experiencing increases related to higher labor, raw materials, currency valuations and transportation costs,” the filing noted.

The filing also shows that the company had 11,729 employees as of April 30, which presumably includes the 1,050 jobs that have not yet been eliminated. Compare that to the nearly 20,000 people the company employed back in 2001. And yet, the stock has continued to fall since April 2002, which seems surprising given the formerly strong housing market. Back in January, Wendy Fried footnoted about how the company was relaxing its standards for setting executive compensation.

Given that track record, you have to wonder whether cost-cutting is really the best strategy for La-Z-Boy.

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