Flexsteel reports preliminary Q2 results

Sales are estimated at $100.1 million, up 7.5% from the $93.1 million reported the same period last year

DUBUQUE, Iowa – Full-line case goods and upholstery manufacturer Flexsteel Industries has released preliminary financial results that estimate a 7.5% increase in net sales for its second quarter ended Dec. 31.

Sales for the quarter are estimated at $100.1 million, up 7.5% compared to the $93.1 million reported the prior-year quarter. The company also estimates sales orders of $104.8 million, up 13.9% from the $92 million reported the same period last year.

Flexsteel also expects to report a 21.9% gross margin compared to 17% in the prior quarter and GAAP operating income of $4.6 million, or 4.6% of net sales, compared to $3.8 million, or 4% of net sales, the same period last year. Non-GAAP operating income is estimated at $4.6 million, or 4.6% of net sales, compared to $1 million or 1% of net sales the same period last year.

Other highlights of the preliminary report are as follows:

+ The company expects to report GAAP net income of 57 cents per share compared to net income of 53 cents per share in the prior-year quarter.

+ It also anticipates non-GAAP net income of 57 cents per share compared to non-GAAP net income of 8 cents per share in the prior-year quarter.

+ Cash flow from operations is expected to be $18.9 million for the quarter. The company said this was driven by higher profits and a $15.6 million reduction in inventories.

+ It also expects debt repayments of $15.1 million for the quarter, which the company said equates to a 46% reduction in borrowings under its line of credit.

Jerry Dittmer

In a statement, CEO Jerry Dittmer said he is pleased with the company’s second-quarter results.

“We are competing well, growing and gaining share, improving profitability, and generating cash to reduce debt and further strengthen our balance sheet,” Dittmer said. “While macroeconomic conditions combined with discretionary consumer spending shifts away from home furnishings continue to present headwinds to the industry, our growth initiatives are enabling us to profitably grow despite difficult conditions.”

He also noted that the net sales of $100.1 million were above its sales guidance range of $94 million to $100 million.

“Comparisons to prior year continued to be adversely impacted by the elimination of ocean freight surcharges in the prior year when ocean container delivery costs were inflated,” he said. “Excluding the approximately $3.5 million impact from surcharge reductions, growth from unit volume and sales mix was an impressive 11.7% in the quarter, reflecting our strong sales execution.”

He also said that the company is executing well operationally and “leveraging the combined benefits of continued productivity and cost savings, pricing discipline and ongoing product portfolio management to meaningfully expand gross margin and improve operating income.”

“As a result, our operating margin of 4.6% in the second quarter was a significant improvement compared to the first quarter and prior-year quarter, and above our guidance range of 2% to 4%,” Dittmer noted. “We also expect to further improve operating margins in the second half of fiscal year 2024 and fiscal year 2025.”

He also said that the company is making “strong progress in improving working capital efficiency.”

“Given improved demand stability and better supplier lead times, we optimized and reduced our inventories by $15.6 million in the second quarter while continuing to provide exceptional service levels to customers,” he said. “Our strong cash flow was largely used to reduce debt in the quarter. We are pursuing additional working capital improvements in the second half of the year, and when combined with improved profits, we expect to end fiscal year 2024 with nominal to no debt.”

“Our strategies are working, and we’re seeing the outcomes in our improved financial performance,” he added. “While I’m encouraged by second quarter’s results, I’m more enthused about the results yet to come. Our organization is driven and executing well on multiple fronts which gives me confidence in our ability to continue to profitably grow and generate cash near-term, but more importantly, to generate significant value for our shareholders and customers long-term.”

The company will issue its official second-quarter earnings report on Feb. 5.

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at tom@homenewsnow.com and at 336-508-4616.

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