Okay, good morning. Let's go ahead and get started. I'm Melinda Whittington. I am the CEO and President of La-Z-Boy Incorporated, and with me today is Bob Lucian, our CFO. We're gonna spend the next 25 minutes or so taking you through a little bit about La-Z-Boy Incorporated. I'll start with the standard disclaimer. I think you all know it well, and then we'll go ahead and get started. La-Z-Boy Incorporated was founded almost 100 years ago, based on the manufacture of the iconic La-Z-Boy chair. Since our beginning, we've all been around the transformational power of comfort. That was true almost 100 years ago, and it's true today. It's what we're known for.
We have, over the years, leveraged our courage to keep reinventing ourselves, which is true even as we speak today, and we're gonna go into more of those details. Another value of ours is our curiosity to continue to learn, and really, a big piece of our pivot in recent years has been around understanding the consumer and really turning ourselves from a purely manufacturing kind of mindset, but into a consumer-first mindset that ultimately impacts everything we do day to day. And then, our third core value is really on compassion, and that's really being a responsible party to all of our stakeholders, the communities in which we operate, our employees, our customers, our consumers. And that was true 100 years ago, and it's true, true today for our company.
So Bob's gonna take you through just a few of the financial highlights to get you grounded if you're not familiar as much with our operations.
Thanks, Melinda. I think everybody can agree that the last four or five years have been fairly challenging on a number of fronts. La-Z-Boy has emerged from COVID as a larger, stronger, and more disciplined company than we were going in. We've got a very, very healthy balance sheet with over $300 million worth of cash, and no external debt. Over this time, we have disproportionately grown our retail business, both on the top-line level and the bottom-line level. That growth has occurred via organic increases with same-store sales growth success, as well as opening new stores and acquiring some of our independent furniture gallery dealers. As a result, our direct-to-consumer business, which we view as our retail business plus Joybird, now represents about half of our overall sales mix.
While we've been doing this, we've been able to continue to invest in our capabilities that we need for the future growth, particularly in the supply chain and the IT areas.
So we're gonna spend a little bit of time covering 6 key areas on why invest in La-Z-Boy. And again, really helping you understand the evolving story of our 100-year company. So to kick it off, I would first highlight our management team. I've been with the company now, I'm at the end of my sixth year, 3 years in the CEO role. My background, as well as Bob's, is several decades at Procter & Gamble. My entire leadership team is a seasoned team that has grown up in some of the best training ground companies in business, and you see many of those represented there. The entire team, majority of the team has been in place since I stepped into the CEO role. Many of the team has been with the company for going on 10 years.
This is the leadership on top of an organization where many of our middle and senior management, and down through the company, have decades of furniture experience, which is incredibly powerful because furniture is a rather unique industry. It's important that we blend the best of both the state-of-the-art consumer understanding and manufacturing capabilities and just best practices from a variety of industries, but still understanding the heart of furniture. This team is just a very powerful team to help lead us through this next stage of our history.
The La-Z-Boy ranks near the top of the list when consumers think about purchasing furniture. We've had the leadership position in reclining chairs since our founding almost 100 years ago, and that was in 1927. We've been able to successfully broaden our assortment to provide design services and furniture solutions to consumers throughout their home. As a result, over the years, we became that iconic brand that Melinda just mentioned, with an impressive history in what is a very, very fragmented furniture category. Our scale and our vertical integration give us a point of differentiation that allows us to compete very successfully in this industry. We're also well-positioned to benefit from what will become, we hope, we expect, favorable industry dynamics.
The furniture and home furnishings market is very large and very, very fragmented, and it typically grows at 3%-4% per year over the long term. Now, clearly, the category has experienced some very, very, significant headwinds from higher interest rates and the related impact those have had, on the slower housing turnover that's happened in the marketplace. Over the medium to long term, however, the category is structurally well-positioned to return to strong growth due to a significant housing shortage, which has not kept up with population growth and, household formation growth. So depending on what source you look at, we're between 2-6 million housing units short, and as a result, as we see those...
The interest rates normalize, and as we see the market start coming back, we expect the furniture industry to begin to accelerate and get back to, or exceed some of the historical, most recent historical levels. We've got a demonstrated history of growing faster than the market. If you look at our performance versus the over the last five or six years, we've grown at double the market rate, and we expect to continue to grow at double the market rate as we execute our Century Vision.
... And importantly, as Bob highlighted, the furniture industry has been challenged for the last year and a half or so. We have still demonstrated very solid results during that time, while strengthening our company and preparing for when that tailwind eventually comes, for the long-term sort of macroeconomic climate for furniture. Part of what we're doing is, over the last three years, we created and are executing against our Century Vision, which is essentially our strategy for growth up to our hundred-year anniversary in 2027, and then beyond. What is that positioning us for to be an even stronger company for the future? There are really three key pillars to Century Vision. The biggest one by far is expanding our La-Z-Boy brand reach.
We have an iconic brand, again, in existence for almost 100 years, but still a relatively small market share in a very fragmented industry. So the first thing we've done is invest heavily in consumer understanding, which is a space that there's not a lot of capability within our industry to really think about the consumer first. That understanding, and a database understanding of the consumer, is then educating us in what we're doing on messaging around the brand, how we're going to market, who we're speaking to, what our products look like, and what the shopping experience looks like. Importantly, on that shopping experience, we are expanding on our wholesale manufacturing base to own more and more of the retail experience for our consumers as well. And so a very big piece of our growth strategy for the future is to expand that retail base.
That is good for our consumer because then we own that end-to-end experience. It's also good for our financials because then we own the vertically integrated profit. Also important to our Century Vision is profitably growing our Joybird brand. This is an acquisition, a small acquisition we did about 5 years ago, in the e-commerce space. It's created a lot of learning for our business, and we're excited to grow that business in a profitable way over the longer term. And then, importantly, this is all on a base of enhancing our enterprise capabilities. So again, I talked about building a foundation that we're really ready to have a stronger company to leverage for the next 100 years.
That's around the supply chain that has been our foundation for 100 years, that has always been very efficient, but growing the agility of that supply chain and taking all the learnings of the last several years to really build that capability on the agility side. It's around advancing our technical capabilities so that we have a modern experience, both in how our company is enabled, but how we go to market with the consumer. And then, of course, always valuing our employees as that core asset of our company.
By doing this, we will continue to grow our business at 2 times the industry rate on the top line, and deliver a double-digit bottom line, which we're making progress against it from where we are today, but continue to grow that to the, you know, end of the first hundred years and onward into the next hundred.
So how are we going to do that double-digit margin that Melinda just mentioned? It's gonna be two specific areas that I want to talk about briefly. One is on the retail side. Over the past 5 years, we have been investing significantly in the retail business, and we are starting to see the results of that investment. We've basically just become a better operator. We've remodeled our stores and updated our store formats while improving in-store technology, and that's really helped to provide a much better in-store consumer experience. And this has led to higher customer conversion, a higher average ticket sales, and a higher percentage of sales coming from design, where the ticket sales are typically 2-3 times an average ticket.
This has all enabled us to to grow our operating margins in the retail business sustainably in the mid-teens range, and we expect to be able to continue to do that in the future, based on our retail performance. On the wholesale segment side, we experienced a significant amount of disruption from the pandemic, including major expansions of our manufacturing facilities to deal with the backlog that was unprecedented at the time. And that backlog has returned to pandemic levels now. We're back to 4-6 weeks of delivery, and we're now focusing on getting our supply chain efficiencies back to where they were pre-pandemic, and that's what will enable us to get our wholesale business back to that roughly 10% margin that we were consistently delivering year in, year out, pre-pandemic.
If we take those two pieces, retail in the mid-teens, wholesale back to 10%, and getting our Joybird business back to profitability, we'll be in that consistent and sustainable double-digit operating margin area.
So a couple other proof points I mentioned are the importance of understanding the consumer and how we're speaking to them. Hopefully, you've seen, in August, we launched our Long Live the La-Z campaign. This is about really understanding what does the consumer know and trust La-Z-Boy for? Everybody knows the La-Z-Boy name, but how do you make it relevant for them? And so this is, as I've said several times, a very data-based approach to speaking to the consumer and making this relevant on own-able attributes of a brand. The Long Live the La-Z campaign, as I said, is a couple of months in, and off to a really solid start.
We're really excited about what that's seeing, both in bringing us top of mind to the consumer and then driving traffic into our stores that is highly qualified to be the right consumer that's going to want to make that transaction. And importantly, we've changed how we're going to market to a broader set of marketing mix to really leverage the fact that we are this iconic brand that shows up, you know, like the Band-Aids and the Kleenex of the world. But how do you leverage that into a very relevant brand persona for the day? And we're really excited about how this has started off. Also, just to spend a little bit more time, Bob talked about our retail business. There are three ways for us to drive this retail business.
The first one is execution in store, which we have dramatically improved over recent years in a very sustainable way, and so therefore driving same-store sales. More design sales growth, about a third of our sales today in store are leveraging our free in-home designers, which builds a stronger ticket and a better consumer experience, and really just overall execution in store. The second one is increasing the number of stores. We're right around 350 stores in North America today. We're building to 400 at a rate of about 8-10 a year, to get up to the 400, and we have those locations identified where, where it makes sense for our brand to exist. And then importantly, we are significantly increasing the number of stores that are company-owned.
Our history has been that we had independent ownership of La-Z-Boy Furniture Galleries, and in the last several years, we have made a dramatic increase in the portion of those stores that are company-owned. When that all comes together, what you'll see in sort of that bottom-left quadrant, is that we will become a significantly larger, and already are becoming a significantly larger, direct-to-consumer business. Which again, is best for our consumer because we own that entire experience, and best for our margins overall. Importantly, though, we have not forgotten about our foundational wholesale business and are not taking our eye off the ball there. First of all, it obviously is powering our retail segment, but importantly, a significant portion of our units sold across the company are going through general dealers.
We still see this as a very important part of our overall mix, because in a highly fragmented market, you have consumers that are never gonna come into a furniture gallery. They're gonna shop entities where they can see a lot of different brands. Important for us is a significant portion of our business through those types of retailers are still in branded spaces with our La-Z-Boy Comfort Studios, where the brand stands out, and we are one of the few brands, really manufacturing brands in furniture, that is consumer relevant. So today, over three-quarters of our sales of units sold are actually being sold through some type of branded space, which is a very powerful differentiator for us in this marketplace. When you bring it all together, a very important part of this vertical integration is this personalization at scale.
Consumers want choice, and what we're able to bring to a middle-income consumer is customization. In 4-6 weeks, you can come into a La-Z-Boy Furniture Gallery, select your style of furniture, you can select your fabrics, your wood tones, and so forth. You want rivets or not? Lots of different creative side for the consumer, and in 4-6 weeks, you can have that delivered to your home, which is what today's consumer wants. We can only do that by owning that entire chain. We still have the ready-for-you today with the high quality that you know, but if you want that personalization, almost half of our business is sold from that, from a customized, personalized level. Bob's gonna take us a little bit more through the financials now.
So our capital allocation principle is that over the long term, we'll invest about half of our operating cash flow back into the business via capital spending and acquisitions, and return the remaining 50% to shareholders. More recently, we've navigated our way through the pandemic, and that's required us to go and spend a lot of money on manufacturing and capacity. And we've continued to invest in supporting Century Vision initiatives. We mentioned about retail, the remodels, the new stores, and the Furniture Gallery acquisitions, and that's slightly skewing capital usage towards the business. That said, we've just recently increased our dividend by 10% in December, and we are now consistently back in the market, repurchasing shares under our share repurchase authorization. We've got a very strong balance sheet.
I mentioned before, $333 million in cash and no external debt. We've maintained a very conservative high cash balance due to the disruption from COVID, as well as the macroeconomic and geopolitical uncertainty that we're currently experiencing, and to ensure that we have the ability to continue to execute these Furniture Gallery acquisitions as they become available. We'll continue to look for the best opportunities to invest this cash to generate the highest return for our investors. So to summarize, as I started with, our business is materially stronger and larger than it was pre-COVID. Sales are 20% higher on the top line, and our EPS is up nearly 50% from fiscal 2019.
We're now positioned as a company with Century Vision and all the e-efforts we have in place to continue to grow from these levels.
Last but not least, I would just call out that we do all this being a fundamentally good citizen of the communities in which we operate. This has been a part of our core since our beginnings almost 100 years ago. Leveraging our capabilities to ensure we're a responsible member of the planet, that our designs are sustainable, and that our culture is part of being responsible to all of our stakeholders. Our latest sustainability report actually will be published a little bit later this month, so I'd call your attention to that for some additional details on where we've come along on the sustainability side of things. With that, I would just thank you for your time, and I think we've got a couple of minutes.
If folks have questions, we'd be happy to announce them to the extent we can see you out there. Yes, sir.
Over the last several years, Wayfair has come from nowhere to being almost the online purchase of choice, particularly for millennials and, and of course, those who want to, want to buy online. What, what's your strategy to?... to combat that, or at least have your, offering, not as just a side gig, but truly a competitor to, to Wayfair?
Like, I would start by saying, so a couple of thoughts. Certainly, the Wayfair story is very interesting, and we actually, we actually sell some of our products. When we talk about some of the general dealers, we do sell a limited amount of product through Wayfair, so they are a customer of ours and a good learning experience for us. The distinctions I would make, though, is that Wayfair, I believe average ticket on Wayfair is in the $200, so there's a lot of furniture furnishings. So in general, it's a, you know, a lower-end ticket. It's a ticket, it's a much more lamps, tables, accessories, those type of things. Whereas our core product is that, is that upholstered product of long-term quality furniture that you're going to invest in. Our average ticket is in the $1,000s.
Wayfair's is in the hundreds. Given that we're a highly fragmented industry, there is plenty of room for both of those places to play. But what Wayfair has really brought to the industry, and part of the reason we use them as a, you know, as a customer as well, is really exploring how the consumer wants to shop. And it's afforded our—when we talk about our expansion to retail, I didn't spend as much time on it today, but really, retail to make retail work, it's around the omni-channel experience. Our consumer today, even though the majority of transactions are still finished in store because it's high ticket and it's a comfort purchase, so you want to experience it, the majority of those transactions are starting online. Our consumers are doing their research online and looking at everything.
You need to be relevant in how you shop there. They're probably gonna then spend some time on a variety of websites to sort of do a little more product selection and then go in store to finish that purchase. So it's an important model to watch. There is space for both, but really, in many ways we're a very different business because of the product that we focus on. Mm-hmm. Others? Yes, sir.
So when you go back to the early stages of COVID, when people were basically nesting, how do you think about the pull forward in demand? And then you talked about the pent-up demand as, more homes were built and things of that nature, but how do you think about the pull forward in demand in the early stages of COVID, and when you think the furniture market, will return to that 3%-4% CAGR you talked about?
I'll start. I'll let Bob say, but I'll start by saying I think there was less pull forward. There's a lot more pricing pull forward than units. We still believe there's a lot of growth opportunity. I'll, Bob, give some comments.
Yeah, it's early on in COVID, and this is something we've looked at relative to the number of units that we were producing and manufacturing. For the first 4 or 5 months of COVID, particularly the first couple, there were no furniture sales. Our stores were closed. All the stores were closed. So all of that there was actually a short, like, a pull back, if you will, on that. And then consumers started getting in the marketplace and started ordering, but it took them a while to be able to get that product. And now it's kind of normalized back down. We view that the pull forward that happened on the units is already finished, and we're now in a, what I'll call a trough relative to the number of units.
Some of that's due to the fact that it was such a low amount of units that were actually made in the first part, call it six months after COVID. Then after that, that kind of got caught up. Now we're back in this, you know, furniture depressed demand due to the, what's going on with the housing market, et cetera. So we're less concerned about, you know, everybody has a sofa, so no one's gonna buy one for the next five years. People still need they still need the furniture, they still need the units, and we think about units as opposed to just thinking about dollars. There's a lot of unit demand that's still going to be out there.
And the return to the growth we would expect to see probably in the next 18-24 months, we'll be back to that, three to four percent. And I still believe once this economy gets through whatever it's getting through right now, and that housing market starts working, we're gonna see that growth rate exceed that. Because I believe right now we've got a shortfall of units that consumers will go out and start buying, when the market gets a little bit more stable, when interest rates get more stable, and we start seeing more housing turnover.
Thank you.
Mm-hmm. Anything else? We have two minutes. Yes, sir.
What percentage of the sales are originated online?
Very small portion. Oh, originated online? Yeah, I mean, closed online is still a very small portion. And, I mean, generally, the consumer in furniture on average, there's about 20%-30% of sales are online. Our numbers are much lower than that. And we will see when we follow the consumer journey, they'll start that research process online, but they ultimately, to make that investment, and, you know, we are, we are a higher quality product, and so to make that investment, we see the majority of consumers still very much interested in finishing that online. It's even been, or, you know, it's a much smaller brand, but even with our Joybird brand, that started off as a pure e-commerce play and, addressing a, you know, a younger consumer in general, in more urban settings.
As we've opened up, we're now up to 12 stores. We've seen those stores really popular, again, because you're making a you know a comfort purchase at a fairly high ticket, and so where stores are available, we're seeing consumers prefer to come in and finish that transaction often in the store.
Are you guys planning on trying to drive more sales online, you know, initially closing?
It's really about, it's really about the omni experience. So yes, we are actively improving our online experience, but I think as we go forward, it's less about a measure of, of what is online and what is in store, and it's really enabling that consumer. We have work to do, honestly, in enabling that consumer to make that a seamless journey. I might start my research online, build a cart, come in, experience it. I may wanna go home and finish that transaction. But how do you meet that consumer wherever they are and make that as seamless as possible, while still protecting the privacy of the consumer to the extent they want?
I guess my question is, how do you compare, can you compare yourself to, like, a Restoration or others, or other brands doing a better job of converting the final sale online? Like, there's, are other brands doing a better job than you benchmark at selling online and converting online?
It varies greatly in a very fragmented industry, and again, like we talked about Wayfair before, you know, majority of Wayfair's transactions are much smaller ticket purchase. It's a lamp, it's a chair, it's a, you know, it's decor. When you look at, there's a lot of different stories there, but I think when you look at overall, the larger ticket, big upholstered furniture standpoint, you're gonna see still a very heavy bent towards shopping in store. But again, we wanna be ready either way, right, for where that consumer evolves over time.
Thank you.
Mm-hmm. Okay.