Flexsteel reports 5th consecutive quarter of year-over-year sales growth

Company fiscal Q2 net income also increased to $9.1 million, from $3.1 million the same period last year

DUBUQUE, Iowa — Bolstered by improved traffic and sales among its retail partners, Flexsteel reported an 8.4% increase in net sales for its fiscal second quarter, its fifth consecutive quarter of year-over-year sales growth.

Net sales totaled $108.5 million for the quarter ended Dec. 31, 2024, compared with $100.1 the same period the previous year. The company also reported an increase in net income, which totaled $9.1 million, or $1.62 per share, compared with $3.1 million, or 57 cents per share the same period last year.

The company said the increase in net sales was because of higher furniture sales through retail stores, of $9.2 million, or 10.3%, led by unit volume increases. Meanwhile, sales through e-commerce channels decreased by $800,000, or 7.1%, which it attributed to softer consumer demand.

GAAP operating income for the quarter was $11.7 million, or 10.7% of net sales, compared with $4.6 million, or 4.6% of net sales the same period the prior year. Its gross margin for the quarter ended Dec. 31 was 21% compared with 21.9% the same period in 2023, down 90 basis points. It attributed this to margin dilution related to higher ocean freight costs.

SG&A expenses decreased to 14.9% of net sales, compared with 17.3% the same period in 2023, which the company said was because of leverage on higher sales and structural cost savings, partially offset by investments in growth initiatives during the quarter.

“We are competing well and gaining share in a challenging business environment,” said Derek Schmidt, president and chief executive officer of Flexsteel Industries Inc. “We continued our strong momentum from the first quarter, delivering sales growth of 8.4% compared to the prior-year quarter, which represents our fifth consecutive quarter of mid-single-to-low-double-digit year-over-year growth. I’m especially encouraged because our growth was broad-based. We solidly grew in our core markets while simultaneously delivering growth in all our new and expanded market initiatives. Additionally, we continue to expand our operating margin and deliver strong positive free cash flow which has allowed us to pay off our remaining bank debt and begin accumulating cash.

Derek Schmidt

“While overall industry demand remains soft, many of our retailer partners were encouraged by improved traffic trends and sales close rates during the recent holiday season, which provides optimism that demand declines may have bottomed and the industry could be positioned to start growing again, albeit modestly, in calendar 2025. As we’ve demonstrated over the past 15 months, we can deliver attractive profitable growth and gain share even in challenging industry conditions. Given our confidence in continuing our strong execution, we are increasing the midpoint of our sales guidance range for fiscal year 2025.”

For the full first half, net sales totaled $212.5 million, up 9.1% from $194.7 million the same period the prior year. Net income totaled $13.2 million, or $2.38 per share, compared with $3.8 million, or 71 cents per share, in the first half of the prior fiscal year.

Other highlights of the report were as follows:

+ The company said it generated $6.7 million of cash from operations during the quarter and paid off all outstanding borrowings on its line of credit.

+ During the quarter the company completed the sale of its Dublin, Georgia, facility, reporting a pre-tax gain of $5 million related to the sale.

+ It ended the quarter with a cash balance of $11.8 million and working capital (current assets less current liabilities) of $98.2 million. It said it also had about $60.8 million available under its current line of credit

+ Capital expenditures for the six-month period ended Dec. 31 were $1.3 million.

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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