Good morning, everyone. I'm Simeon Gutman, Morgan Stanley's Hardline, Broadline, and Food Retail Analyst. It's my pleasure to welcome La-Z-Boy, represented by Melinda Whittington, President and CEO, and Bob Lucian?
Lucian.
Lucian, sorry, SVP and CFO. This is not covered for Morgan Stanley, but it's a treat for them to be here, with us to tell the story. Are we okay on the webcast? Okay. Mine? Oh, I'm sorry. Okay. I'm gonna read some disclosures, and then we will get into a discussion. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Thanks again for being here.
Thanks for having us.
Thank you.
We'll start, maybe for the benefit of myself and for the audience, a little bit of an overview, how you're telling the story, how it's positioned, and then we'll get into some of the back- and- forth.
Absolutely. So thanks for having us today. La-Z-Boy Incorporated is going on our 97th year. Our history as a manufacturer off of an iconic reclining chair. Our recent history is much more about still being that world-class manufacturer of high-quality furniture, but we're very much on an evolution of expanding much more into the D2C side of things. So over the last 10 years, we have significantly built our own retail presence. We have 350 La-Z-Boy Furniture Galleries in North America, and just with this last quarter, over half of those are now owned by our company and our own company retail. Bob and I have been in our seats for...
This is our third year, and with that, we kicked off our Century Vision strategy, which is really around how do we finish our first 100 years strong and build a company that will be around for the next 100 years. And with that, a lot of our focus is on building consumer capabilities and really driving consumer insights, that really educate us as to how do we speak to our consumer, what is the products, what is the shopping experience, omnichannel shopping experience, and how do we speak to a broader base of consumers? Everyone knows us for our quality, and our long-standing comfort.
They may not think of us as being available for them, so we're excited with that consumer understanding to launch a broader Long Live the Lazy campaign and leverage our strong channel strategy on our own Furniture Galleries to really drive strength in the business overall. Our last couple of quarters, we've been significantly outperforming a pretty challenged industry right now and a pretty challenged consumer with you know, just our last quarter that we just announced about a week ago, where our industry was down about 9% on the quarter. Our Furniture Gallerie across all of our Furniture Gallerie s wrote a positive 1%, and that's been a pretty consistent trend lately.
What do you think is driving that outperformance?
A lot of things. Strength of the brand, and the strength of the brand due to, enhanced by this new Long Live the Lazy campaign and making sure we're still playing offense, we're still investing into marketing in a time when many are sort of just realizing that the, you know, the consumer has turned away from furniture near term. Long term, they'll come back. We have, you know, we have a housing shortage in, in North America, and that will be a strength for the long term. But consumers are out doing revenge travel and all those kind of things right now. But we're still playing offense. We're talking to the consumer. We're getting better every day on how we're talking to them. And then it's in-store execution, and that's across all of our Furniture Gallerie . On...
While traffic may be, you know, may be down, every other metric is strong around how are we converting, how are we really meeting with that consumer, getting to their needs. An important thing in our own stores is, or in any of our stores, is also our design sales. So we offer, free design services that will come to your home, and that makes for a stickier transaction. It makes for a bigger transaction overall on the average ticket side of things. And, you know, when traffic's a little slower, we have the ability to invest even more time in each consumer that does come in the door and make sure we're meeting their needs, building that relationship, and making the most out of each of those transactions.
I started almost all of these firesides with the same question: When you stood at the end of 2022 and you looked forward into 2023, what surprised you in how 2023 has played out, whether sales, margin, health of the consumer, anything?
For us, so we're in the middle of our fiscal 2024 that ends at the end of April. I would say, overall, we planned prudently. We know that furniture can be a, you know, a challenging and cyclical industry, so we planned prudently, and that's more or less how things have played out. We are pleased that we are able to consistently out-execute our industry at this point. The other thing we expected this year that came exactly through that is, a year ago, we were still. So normally, we provide custom furniture in four to six weeks. And throughout the pandemic, with the disruption, even though we do own our own manufacturing, with all the disruption, we were out as much as six to nine months.
Last year, we were still catching up on all that backlog. In fact, of our $2.3 billion in sales for our last fiscal year, we, throughout the entire year, were still catching up on that backlog to the tune of about $300 million. We knew this year's delivered sales would be down a bit, and that has played out exactly according to expectation. But we're pleased that the consumer has stayed. You know, the new written trends have been positive. It'd be great to have a tailwind at some point, but in the meanwhile, I think things are going pretty much according to what we expected.
Yeah, we had expected to continue to open new stores. We're doing that. We expected to continue purchasing and buying out some of these independent furniture gallery dealers when they wanna kinda exit the business. We've continued to do that. We've done two so far. I'm sorry, three so far. We're gonna close on six more stores next week. We've got some more in the pipeline we're working on. So all the plans we put in place, we're doing. Our biggest challenge right now is just where the industry is. And versus our plans, we're doing even better than we thought versus the industry. It's just that the industry is very far down, so as a result, being up 1%, feels good. Doesn't normally feel good, but...
It won't in the future. When things come back, we'll do much better than that.
Profit-wise, sounds like sales, you planned well. I assume that, that has flowed through to the bottom line?
It is. We're seeing a continued improvement in margins as we're moving out through this fiscal year. And we just made some decisions this past quarter, where we shut down one of our manufacturing facilities we had opened up during COVID, so that we could offset and work down this backlog. We now have that backlog where it needs to be, and our other plants have become more efficient and productive, so we were able to shut that down. We'll be shutting that down over the next two quarters. And what we mentioned in our conference call last week, that'll be a 50 to 60-basis-point tailwind for next year for our wholesale business.
We're doing the things we need to do to continue to bring our wholesale business back to the profitability it was pre-COVID.
Yeah, I would just build on that to say, when you look at our business, we have the wholesale business, and we've presented as two separate segments. We have our wholesale business, which is our manufacturing, that sells to a broad channel array, and then we have our own company-owned stores. Over the course of the last 10 years, we've gone on a journey from losing money in our own retail, to five years ago, we were at mid-single digit margins, to we're now at mid-teens kind of margins. And we believe that's sustainable, and we've continued to do that through this year, even with fluctuations in volumes and all. On our wholesale business, historically, we were coming up on a fiscal year basis to about 10% margins. Over the last couple of years, that was significantly disrupted.
As Bob said, we had a big backlog. We invested a lot in lease space and people to catch up on that backlog, 'cause we put our consumers and our customers first. As the dust has settled, we are getting back and making progress. Bob just talked about right-sizing some of that footprint again, and I would say that's probably one thing. To your point on expectations for the year, I'm very pleased with the progress we've made already in getting back in that supply chain and to a, you know, a more both an efficient and productive environment, and we still have room to go, but also more agile than we've ever been before.
The home furnishing backdrop, it's tough. We had a home furnishing company yesterday describe it as recessionary, which is probably fair.
Yeah.
They happen to be growing. And we debated whether it's recessionary versus reversionary, meaning we all bought recliners two years ago while we were sitting at home, and because it's a longer dated purchase cycle, we don't need to buy it again for a couple of years.
Sure.
So what - those crosscurrents, taking both, curious how you think about it, and is the environment further changing, the backdrop? I know October, a lot of retailers we've covered talked about October malaise. Fine, but structurally, is it furniture consumption getting better, worse, or about the same?
I would speak to two things. The first one is, if you really look at what happened through the pandemic, there was incredible amounts of disruption. Even for someone like us, making our own product here in the United States, the global supply chain that goes into that was highly disrupted. And so even our backlog had a lot to do with timing of when orders when the consumer was active, we were shut down for a bit, then the consumer got super active, and then there was disruption in being able to keep up with that. But actual pull forward of orders was not as significant as I think some people think. In fact, in an industry that's been somewhat reticent to price, our industry saw a 30%+ pricing over the course of the pandemic.
You know, 2/3 of which is help, which is a good thing.
Right.
But so really, a lot of that, you know, that perceived bubble was as much about pricing and not so much about unit pull forward. It was sporadic...
Right
... right? But, we believe there's still a lot of units out there. Certainly, people were spending more time at home...
Right
... during the pandemic, but I think we see people still invested much more in their homes post-pandemic and whatever this new normal is. The other thing I'd pull out or call out is, while housing transactions are super slow right now, the reality is, there is a housing shortage in North America, and eventually, some of the interest rates and all will moderate. Housing affordability will moderate. And so, you know, the numbers, depending on who you look to, would say we are anywhere from 2 million to 6 million , you know, units short in housing. So we believe there's actually a pretty nice tailwind waiting for the furniture business once we just get through some of the slow housing transactions in the near term.
It seems like the industry is almost resigned to say: "Hey, the business or the in-demand is gonna be soft." It doesn't feel too promotional from the public companies we cover. Why hasn't that happened? Why, you know, why does the industry have such discipline? And so, we're keeping the price that we set. So far, so good, but it's almost hard to see this happen because this industry historically hasn't really had this pricing benefit.
For sure.
Yeah, and the biggest... I think the biggest impact from that is, prices are still, like, input costs are still up.
Yeah.
Wood's down, steel's down, but there's a lot of other costs, particularly anything that has to do with labor, including their, excuse me, including their plants and their production. Those costs haven't gone down. They've actually continued to go up, and as a result, for us, the way we think about it is, we going off and just promoting is gonna be just driving profit out of the industry, because everybody else, including ourselves, have those increased costs that were still there. So it's not like the costs have all come back down to where they were pre-COVID, and we're sitting on, like, gobs and gobs of cash. That would then just go ahead and be priced away.
I think everybody's behaving rationally right now, just because the inflation has stuck around in the industry.
The other thing I would call out from a manufacturing standpoint is different than, like, an auto industry or whatever, you know, for better or for worse.
Furniture is inherently an artisan manufacturing process. Because of the combination of fabric, and foam, and wood, and steel, the... It's a very people-intensive process. And so it's not like you have you have really significant capital-intensive, you know, plants that you, that you're looking to fill almost at any cost, right? To keep those units going through. You have a little bit more flexibility in being able to flex up and down that capacity. You know, for the most part, our locations are either, you know, fully paid for, long-time locations and/or leased locations with, you know, several million dollars worth of machinery, and then people. And so that gives you a little bit of a variable cost flexibility as well.
The competitive environment, same, getting more competitive, getting less competitive? No one's really chosen the less competitive.
You know, furniture, both at the manufacturing and the retail level, is highly fragmented. There are a lot of... There are quite a few players, a lot of privately held players as well. And so it's always an interesting industry in which to operate. And you always need to be looking at what's going on, both with your consumer and how they're being attracted, and your customer. But broadly, I wouldn't say we're seeing any big difference. What we are seeing is some of the smaller players, both retail and on the manufacturing side, are dropping out because this has been a, you know, an 18-month or so, you know, fairly slow period for furniture.
We've seen some high-end. Have you also seen mid-tier and lower tier drops?
Yes.
Yeah. You mentioned the plus one. Can you talk and then that's very resilient. Can you talk about, I guess, ticket, or units versus pricing? You mentioned what the industry has seen over the last few years. How are your units, and do unit trends look stable, the way, you know, the way you look at it across your business? Year-over-year, written unit trends are stable. There's a little bit of mix, and most of the pricing has already been worked through over the last couple of years. So right now, what's causing or giving us that slight positive is relatively stable units with a little bit of positive mix. A lot of it driven by the design sales that we're able to do from an upsale standpoint.
And this positive units, you would say self internal driven versus something cyclical? It's because, meaning you - it's your merchandising and your effectiveness that's driving that 'cause the units, for the most part, are down across most of the durable...
Absolutely
... categories we follow.
Yeah, and again, it goes back to some of our fundamentals, right? It is our upper middle income consumer that's coming in. It's our ability to offer customized for mass customization. And so the consumer that comes in is really interested in particularly working with our designer, is gonna look at, you know, upscaling into leather, upscaling into power, and a lot of features that enables them to kinda get what they most want. And, you know, and again, working with the right sales associates in our stores in particular.
Yep.
You know, consumers are gonna opt for that customized piece and get it exactly the way they want it, and hopefully fill a lot of room as they're doing that.
So leather and power, that's a good segue to, you know, sensitivity around price and trading down. Are they still choosing those best options, even in this backdrop, or are they taking a few out to save on price?
We haven't seen a real trade-down. Now, we have sharpened some opening price points, 'cause we have our consumer that will come in to buy a basic recliner, right? Our traditional La-Z-Boy recliner. And so we've sharpened some opening price points to make sure we have something for a broad array of folks. But, you know, at the higher end, we haven't seen... If anything, as Bob said, mix has actually been a positive factor for us.
It's a combination of improved conversion, improved ticket price, that are helping us offset the traffic that we're seeing, where the consumer's just not coming in. So that's how we're getting to that plus one.
Product mix, and then feature mix, I don't know what percentage ends up leather, and pardon my ignorance. but, product mix by type of product, how has that evolved versus, and as well as feature mix?
Not a big change, honestly, in mix. Just a little under half of our business still remains an iconic recliner. Now, that recliner can look a whole lot different. It could look like the chair we're sitting in, honestly, with a high leg, and you wouldn't know it was a recliner, to something big and man cave comfortable, if you wanted. But in general, we still have, you know, a very healthy portion of our business that is some version of an iconic recliner that is all about the comfort that we're known for. But over half of our business is whole room, primarily upholstered furniture. We do offer some what we call case goods, wood and accent pieces, and also that we can flesh out the whole home, as well as tables, lamps, accessories.
But really, our core is that upholstered furniture, chairs, sofas, and love seats.
You mentioned the connection to the housing market, and it seems like it's logical once homes start to turn over a bit more. There was also this lock-in effect, because we can't leave our homes, given the low price of mortgages. That's not triggering the, "Hey, it's time to spruce things up." We've seen that at a prior cycle. It doesn't feel like we're seeing that play out this time around.
Not yet. We're crossing our fingers over time that will happen. But so we're keeping an eye out on that and seeing if there's opportunities that we can do to leverage that from a marketing perspective.
Yeah. And if, you know, given that the business is connected to housing, are, I guess, a lot of housing markets, some of them are in unison, some of them are asynchronous in terms of pricing and turnover. Are there differences that you look across based on housing turnover or prices that drive this business?
Yeah. Can you go ahead?
Go ahead.
Okay, just as we look at housing turnover, both existing home sales, new housing starts and sales, we've used to think about consumer sentiment being our biggest driver around how's the consumer thinking about it? Are they willing to go spend that money? The work that we've done, we're a lot more correlated to that housing transaction, that turnover. And that's what we've been tracking, and that's what we're looking at. And that's where, as we start seeing that moving, we'll be able to do the things we need to, to be ready for what we expect to see an increase again in the number of units and the number of dollars sold in the furniture industry.
Can you speak to the progress you're making or pursuing on the Century Vision objectives?
Absolutely. So, you know, in big blocks, we talked about expanding the La-Z-Boy brand reach. We talked about profitably growing our Joybird brand, and then enhancing our enterprise capabilities. By far, the biggest piece of that is the La-Z-Boy brand reach. Big milestones recently would be expansion of stores. We're currently at 350. We opened two new last quarter, 353, I guess, across the entire network. We opened two new last quarter. We see the potential to 400 stores over the, I'd call it the medium term, three to five years. And then increasing the amount of company-owned stores that we have, and as Bob talked about, we just closed one this past quarter, and we'll close next week, another six store deal. So that continues to be on our time.
And again, we're most excited about those stores because the consumer gets the best full La-Z-Boy experience. We can own that from the manufacturing all the way to the shopping experience and the delivery. Another big milestone in March, or in August, we launched our Long Live the Lazy campaign. This is, you know, two years since we launched Century Vision, really of, of consumer data-based research on really who - what does our brand stand for? Who do we resonate with? The psychographics around how do you speak to a broader consumer base, that still appeals to our traditional consumer, but helps people realize La-Z-Boy is really for them across the - a broader spectrum of consumers. Early signs are real positive on the Long Live the Lazy launch that we just rolled out in August.
And even where we're speaking to consumers is a little more broad. We have, you know, male and female consumers. We have... And so how do you reach those consumers? On the Joybird brand, which is a small portion of our business, but is a primarily e-commerce business that we bought about five years ago. Like most e-commerce businesses, that one got a bit challenged over the last year or two. So we've really spent a lot of time on getting the discipline into that business that's needed to get it to... We're almost back to profitability, pretty close, and getting it on a good path for growth.
I think the sort of 20% growth that e-commerce was seeing, just for being e-commerce, is probably going to look a lot more like just looking like industry averages, but that's where it'll be important for brand and execution to really outperform. So we're happy about the progress we're making there. And then the last piece is really the enterprise capability enhancement, biggest one being the supply chain, and both the getting back, as Bob talked about, getting back to the productivity levels that we've had, but with an all-new enhanced agility capability.
And finally, investment in technology, and what does that mean from everything from data and analytics to sort of inform every action we're taking, to what does technology look like in the store and with the consumer, and the ability for, like, digital comfort guides that our sales associates are working with to help the consumer as they're walking around the store. So we're pretty pleased across each of those. They're all a journey, right? But we're pleased with milestones on each of them.
I have a couple follow-ups to that. I would just want to let the audience know, feel free to raise hands if you have questions. We'll incorporate as we go. The Long Live the Lazy campaign, the Lazy, you said, reaching multiple customers. Are you reaching lapsed? Is it new? How well do you know the demographic or the people that you're reaching today?
So when we think about what we're now doing, you know, our core consumer, we spent a bit of time really looking at how do we make sure we can continue to appeal to that. That upper-income consumer is going to be more of a suburban consumer, a little bit older in demographic and so forth. As we're looking at that, what we're realizing is our core consumer really is interested in investing in comfort. They still want fashion, they want the room to look beautiful, their home to look beautiful. They're proud of their home, but it's a place that they bring in people to entertain, but they want it to be a comfortable space for them. They want it to be something, it's a lived-in.
It's not fashion for the sake of fashion's sake. What we've realized is we can speak to that consumer, and it's not, again, not so much a specific demographic, but we will inherently age down our consumer and appeal to a younger consumer because we do have people in a younger population that are interested in that, right? "I want the comfort, I want the quality. I'm going to invest in a piece that's going to be durable and stick with me for a long term." So a simple example, you'll see in our ads now, we have you show people using the furniture, as opposed to this very pristine setup in our ads. You see people with a little bit of humor, a little bit of stickiness, actually using and making the furniture a part of their life.
The other corollary, you mentioned Joybird. Won't focus on it, but you said reaching profitability. What is your view on what that profitability can look like over time?
Still developing, because it, you know, what we believe, because it is a smaller business, and it, and it's a slightly different consumer, we, we're looking at how high is up and what is the right pace. We're not gonna chase growth for the sake of, you know, for, at, at the, at the complete, you know, giving up all profitability. But it is important that it's making a, you know, making a reasonable contribution to the bottom line, while, you know, we believe it can be growing disproportionately as well.
Right.
We'll continue to work on... We've done some work to integrate it into parts of our manufacturing and supply chain, particularly on the procurement side and the delivery side. The next phase to help improve profitability will be to completely bring it into the manufacturing piece of it as well, and that'll really help us, in addition to what Melinda talked about, get us to a much more solid, profitable base.
Overall, our Century Vision is we believe that we have a demonstrated track record that we can grow double our industry over time on the top line. With Century Vision, we'll get ourselves to a sustainable double-digit operating margin, which is really about having Joybird stable, retail at sort of that mid-teen margin that we're achieving today, and wholesale back to a you know right around a double-digit margin like we had been doing pre-pandemic disruption.
Perfect segue. I was gonna ask the puts and takes to that sustainable double-digit EBIT margin. You listed them, but maybe we can... Joybird, I think we hit the stable, you know, traditional business. Can we, we hone in on that? What are the puts and takes to get there? I guess you're kind of punching there today.
I'm sorry, on the retail side or the wholesale?
Retail.
Oh, on the retail side, it's just a continued work that we're doing right now on increasing the same- store sales, so more throughput through the stores. Opening up new stores, and those, generally speaking, become very profitable very quickly. And then these Furniture Gallery acquisitions, there's an element to those that are just automatically margin accretive. You know, we've already sold, so if I sell you a $1,000 sofa at one of these independent Furniture Gallery dealers, I've already sold that sofa to you or to that dealer for $450. I've made my money on it. I'm buying a dealer's $550 of sales, but I'm buying that dealer's profit, and that profit may be $100 or $150 on that sale.
So that's much more margin accretive, so the more of these Furniture Gallery acquisitions we'll do, we'll see the margin accretion. That's how we'll stay up there where we need to be on the retail side.
Sorry, the wholesale is a path as well, or you're where you want to be?
No, the wholesale, we want to get back to the 10% we were pre, pre-pandemic, and that's really just - there's two things there.
Uh-huh.
One is to continue the productivity improvements that we've done relative to how quickly people are able to make furniture. And the second one, quite honestly, is just the units getting back to where they were pre-pandemic. Where units versus, like, what I'll call fiscal, our fiscal 2019 fiscal 2020 are down about 15%.
Right.
So, I expect over time, as the housing market starts to move and as consumers start to get back out there, the units for the industry, and as a result, the sales for the industry will start moving back up again. Because right now, they're - i f you track that industry, we're down below the trend line. If you would just draw a trend line and COVID never had happened, we're now down, like, scarily so, significantly down below that trend line. That will end up reverting back-
Right
and we'll get those units. So the combination of the extra units as well as the productivity will get us to that 10%.
One more industry question, going way back to the beginning. Industry was growing on, I don't know, three, four, five, even some models we look at, say six, depends on the categories that you're using. Was that mostly units? Because it looks like the trend had been somewhat deflationary over, like a decade, not in micro periods, but over a longer period of time.
It was primarily units. There wasn't a lot of pricing in the industry on a regular basis, and that's why COVID was such a disruptor, because costs went crazy, and pricing had to go up to offset that.
Supply chain manufacturing, you mentioned you closed the facility. Can you lay out what your manufacturing looks like, capabilities, and then supply chain side of it? I don't know, cost of material and then moving product around.
Pre-pandemic, we had just a cut-and-sew facility in Mexico, and now that we've made this final change, we'll have one upholstery manufacturing facility in Northwest Mexico, servicing the West Coast. And then we'll have the facilities we had in the U.S. beforehand, which is primarily our Dayton, Tennessee, Neosho, Missouri, and Siloam Springs, Arkansas, plants. And that's where we'll be able to manage our demand within those plants because of the improvements that we're seeing in productivity.
It's important that we do manufacture within North America because of this custom furniture. Our custom furniture in four to six weeks has been sort of, you know, what the consumer can expect out of La-Z-Boy, and you can't do that with a pure import supply chain. Which then also makes it super important that we are agile and cost competitive to be able to do that.
Two more from me. Promotions, which we talked about on an industry level, didn't get your own posture on it, how much you're sticking to whatever promotional plan you're setting up versus how much you're deviating from it?
Truly, no, no big changes. Now, furniture, by definition, has a couple of big holidays during which people purchase. And so even when we had significant backlogs across the industry, you'd see these 30% off sales for President's Day and some of these key events, July 4th, you know, Labor Day, Black Friday. So that's just sort of the rhythm that drives a sense of urgency with the consumers, and it is built in across the industry into sort of how we think about our overall profitability. We really are not doing anything dramatically different there, nor are we seeing that in any significant way across the industry, any big change.
T he doomsday, if macro gets worse in 2024, levers that you can pull. It seems like, you know, you're taking share, you're in a good place, but, you know, first half could be tough. Who knows what next year looks like? How do you think about it?
Yeah, you know, first thing is, it's why we are conservative and how we manage our financials. That's. There's a reason we've been around almost 97 years. And so we are debt-free. We do have leases for our stores, but we are a debt-free business. And we, you know, maintain fairly significant cash balances, recognizing that at any given time you can have some challenges there. That said, as we've just given some descriptors around, you know, we have a decent amount of variable costs that we can toggle up and toggle down to weather what's going on.
In the meanwhile, what we're doing is making sure we're using that strong balance sheet to continue to strengthen our company for the long- term, kind of, regardless of the macro environment, and continue to drive everything we can out of the consumer. That's why we're still out there actively marketing.
Yep. Oh, please.
Thank you. A little bit, just tacking off, I mean, point on the macro. Have you done any work or... And by the way, you've done a great job. It's been great to - especially in a very difficult environment.
Thank you.
But just sort of taking the other side, you know, I get paid to look at both sides. Have you done any work on sort of the correlation between unemployment rate and your business activity, whether maybe some metrics in terms of, you know, how many people coming through the turnstile, ringing the register? However you can answer that question, because there's some probability that unemployment goes up over the next 12 to 18 months. And it would be interesting to sort of be able to put that into our models, how to think about that.
First of all...
Thank you
... you say you get paid to look at both sides, so do we. That's why we operate fairly conservatively. Broadly, I would say, and I'll let Bob build on this, but I would say, given that we have a you know, broadly an upper- income consumer, and given the fragmentation of the market overall, where we are the second biggest player in furniture and yet still have a relatively small share, we don't see dramatic correlations, and certainly not thus far on you know, any unemployment rate shifts.
Yeah, the only thing I'd say is, if unemployment starts moving up to where the Fed wants it to, that'll start getting them to drop rates. And if the rates actually start coming down, then we're gonna start seeing some movement in the housing market. So there may be a little bit of a lag effect on that, but that would actually lead to some positive events when that would occur. It would just take some time for it, but it would get us in the right direction of where we need to be going.
Thank you. Yeah, my question is, the written sales that were running flattish in the most recent quarter, that significantly outperformed the broader market. What do you think is driving that market share change?
Yeah, and yeah, significantly outperforming, right? The overall market in the last quarter was down 9%, and we were, you know, flat in our own company-owned and across all of our furniture galleries were up 1%. A similar quarter ago, that same market was down 6%, and we were up 3%. And so we are definitely seeing outstanding performance. And as we spoke, it's everything we've spoken about here. It's the strength of the brand, it's the strength of the marketing campaign, and then it's in-store execution and really spending time with the traffic that is coming in the door.
Really, virtually every metric, if you kinda think about traditional retail around, what's your average ticket, you know, and every conversion levels and all, it just continue to strengthen. So it, it's block and tackle. And, you know, one of the big levers we pull is that we have free in-home design. And when we can spend the time with the consumers to get them involved in that in-home design, that dramatically increases, like, double to triples the average ticket, and makes that consumer sticky because we begin to build a relationship with them, and they're more likely to come back and do continued business with us as well.
The in-home design, how long has that been in play? Is that... I mean, if there's, like, a waterfall effect there, could you maybe describe that? Then consumer credit, how many purchases are made on credit and how that's been changing? You know, as the year has progressed? Thank you.
We do about a third of our sales, our design sales, but I think our biggest opportunity there is growth and consistency across our stores. So our best stores are doing almost half their sales using leveraging designer, where stores may be, you know, less than 10%. So really, it's continuing to drive that and the strength of that staffing across the business. Do you wanna hit that?
Yeah, just on the majority of our consumers buy their product from us just with their own credit card. We have a program with Synchrony, but that's in the mid to high teens. We haven't seen that change over the last, call it, two years, while all this has been going on. So our consumer is a little bit more middle to upper income, and as a result, there's less of a need or less of a desire for that extra financing. A lot of people just wanna put it on their card, get their air mile points or whatever they're doing with their cards. Any other questions? If not, I wanna thank you for participating.
Thank you.
Your debut and for defying gravity with your results. Thanks for being here. Good luck in your next fiscal year.
Great. Thanks for having us.
Thank you very much.
Appreciate it.