La-Z-Boy Incorporated (LZB), Hooker Furniture Corporation (HOFT): The Housing Rebound Is Benefiting These Furniture Companies

Furniture companies are looking like a great way to play the housing rebound. As more new homes are bought, the demand increases for furniture to go with all those new homes. Furniture companies are also benefiting from the overall rebound in the economy. As the wealth effect spreads from rising home and stock prices, consumers are choosing to spend on items they have previously put off, and among those purchases are new furniture for their existing homes. These three furniture companies target the middle market and have built great businesses.

La-Z-Boy Incorporated (NYSE:LZB)

You’ll do more than recline with La-Z-Boy Incorporated (NYSE:LZB)

La-Z-Boy Incorporated (NYSE:LZB) is best known for its signature recliners. The company now manufactures furniture that is sold in thousands of retail outlets in the U.S. and Canada. The company also has a network of La-Z-Boy Incorporated (NYSE:LZB) Furniture Galleries and Comfort Studios.

In the company’s latest fourth quarter earnings report, consolidated sales increased 9.8% and same-store sales for La-Z-Boy Incorporated (NYSE:LZB) Furniture Galleries increased 11.2%. La-Z-Boy Incorporated (NYSE:LZB) was able to increase margins at all its divisions.

In looking forward, the company still has 4.2 million shares remaining to purchase in its authorized buyback program. La-Z-Boy Incorporated (NYSE:LZB) has $119.58 million in cash and only $7.63 million in debt to fund the buyback. The stock pays an annual dividend of $0.16 for a yield of 0.80%. The dividend payout ratio is only 5%, so there’s more room to increase the dividend.

The stock just hit a new 52-week high and is up over 76% in the past year. The company is now entering the first quarter, and summer months are typically its slowest time–the company will even idle its plants for one week of maintenance and vacation time for employees. Considering these factors, it would be best to wait and buy on a pullback or after the first quarter.

An all-in-one shop

Ethan Allen Interiors Inc. (NYSE:ETH) not only manufactures furniture, but offers a full design service. It’s business model is focused on providing a one-stop shop for its customers to furnish their entire house. An added bonus for buyers is free local delivery. The company operates approximately 300 design centers.

In the latest quarter, consolidated net sales decreased 4.4% to $168.1 million. Adjusted earnings, however, grew 50% to $6.1 million. For Ethan Allen Interiors Inc. (NYSE:ETH), this quarter is typically its slowest delivery quarter and that explains the net sales drop. Earnings increased as management has been reducing costs and boosting the bottom line.