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The focus on plant efficiencies in Mexico is part of La-Z-Boy’s larger strategy to build a more dynamic supply chain, according to Whittington. She added that the furniture maker considers its North American manufacturing footprint as a “key differentiator” for production.
“As we mentioned in last quarter's call, we are prudently managing the consolidation of our cut and sew operations in Mexico to optimize costs, while ensuring no service disruptions,” the CEO told analysts. However, there have been some delays related to the work La-Z-Boy is doing in Mexico, particularly when it comes to securing labor from a quality and productivity perspective, SVP and CFO Bob Lucian said during the call.
More than half of the company’s cover materials are purchased from suppliers in countries like China and the U.S., before being cut and sewn in its Mexico facilities, according to the securities filing. As of April 27, La-Z-Boy operates four facilities in Mexico to support its “speed-to-market and customization strategy.”
La-Z-Boy has also looked to optimize staffing levels across the company’s Mexico operations. The furniture maker's number of full-time equivalent employees dropped from 10,500 at the end of fiscal year 2023 to 10,200 the following year, per the filing.
The consolidation comes after active efforts to build its production network in Mexico. In 2022, La-Z-boy expanded its North America operations with several new factories in the country after having to make structural changes to its supply chain to shorten lead times and tackle backlog. At the time, the furniture maker had opened at least two leased manufacturing plants in Mexico.