ATLANTA – Furniture maker La-Z-Boy Inc. (LZB) Tuesday warned that sales and earnings would "significantly miss" estimates for its second quarter that ends later this month because of limited availability of a key component used in upholstery.
The company said the expected shortfall was not readily quantifiable and that its guidance would be updated the week of Oct. 17.
La-Z-Boy said recent hurricanes in the U.S. Gulf were resulting in limited supplies of a key chemical used in polyurethane foam (search). The foam is used in upholstery and bedding.
"This situation will have a greater impact on us relative to the rest of the furniture industry given the higher percentage of upholstery in our overall product mix," La-Z-Boy CEO Kurt Darrow said in a statement.
The company said it expected the price of the foam to increase and that production will be modified based on supply.
Additionally, the company said its plant in Mississippi that makes frame parts for home upholstery was damaged by a tornado from Hurricane Rita (search). Though production has been shifted to other facilities, La-Z-Boy is not operating at normal levels of efficiency or cost effectiveness, it said.
Analysts, on average, were expecting a profit of 18 cents a share for the quarter ending Oct. 29, according to Reuters Estimates. La-Z-Boy said these issues and a continued soft retail environment could have effects beyond the second quarter.
The warning points to potential problems from materials shortages for makers of furniture and bedding, some of whom are already taking a beating because of weak demand and high energy and commodity costs.
A number of companies, including bed spring maker Leggett & Platt Inc. (LEG) and mattress maker Tempur-Pedic International Inc. (TPX), have recently cut their earnings forecasts, citing increasing competition for consumers' discretionary money.
At last week's Reuters Consumer and Retail Summit, the chief executive of Ethan Allen Interiors Inc. (ETH) said shortages of oil-based materials like foam cushioning had "reached a level of concern."
Farooq Kathwari, the Ethan Allen CEO, said his firm was mulling options such as switching to products made with natural fibers instead of petroleum-based products. But he said that could cause more price increases.
La-Z-Boy issued its warning after the regular close of markets. Its shares ended 12 cents higher at $13.30 on the New York Stock Exchange.