Flexsteel Industries, Inc. Reports Fiscal First Quarter 2024 Results

Flexsteel Industries, Inc. (“Flexsteel” or the “Company”), one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, reported first quarter fiscal 2024 results.

Key Results for the First Quarter Ended September 30, 2023

• Net sales for the quarter of $94.6 million compared to $95.7 million in the prior year quarter, a decrease of (1.1%).
• Gross margin increased to 19.5% for the first quarter compared to 16.0% in the prior year quarter.
• GAAP operating income of $1.9 million or 2.0% of net sales for the first quarter compared to $0.4 million or 0.4% of net sales in the prior year quarter.
• GAAP net income per diluted share of $0.14 for the current quarter compared to net income of $0.05 in the prior year quarter.
• Non-GAAP net income per diluted share of $0.14 for the quarter compared to non-GAAP net income of $0.09 in the prior year quarter.

Management Commentary

“I am pleased with our first quarter results. We are competing well and gaining share in a challenging business environment,” said Jerry Dittmer, President and CEO of Flexsteel Industries, Inc. “While net sales were down 1% compared to the prior year quarter, sales in the quarter were adversely impacted by the elimination of ocean freight surcharges in the prior year when ocean container delivery costs were significantly inflated. Excluding the approximately $7 million impact from the surcharge elimination, growth from unit volume and sales mix was a robust 6.8% in the quarter, reflecting our strong sales execution and the momentum of our growth initiatives. In addition, we leveraged operational efficiencies and cost savings to expand gross margin and improve operating income from $0.4 million in the prior year quarter to $1.9 million this quarter.”

Mr. Dittmer concludes, “A variety of macroeconomic headwinds continue to weigh on industry demand and the outlook for consumer spending on higher priced discretionary purchases such as furniture. Despite these external challenges, our team isn’t deterred and remains intensely focused on profitably growing our business in fiscal year 2024. We enter the second quarter with positive momentum and are confident in our ability to grow sales both compared to last year and the first quarter, while also improving gross and operating margins over the first quarter. Our strategies are working. We’ll continue to innovate, drive expedient and relevant new product development, and build strong brands. Regardless of demand uncertainties, we remain aggressive in identifying new growth opportunities while prudently managing costs and investing for future growth and profit enhancement.”

Operating Results for the First Quarter Ended September 30, 2023

Net sales were $94.6 million for the first quarter compared to net sales of $95.7 million in the prior year quarter, a decrease of ($1.1) million, or (1.1%). The decrease was driven by lower sales in home furnishings products sold through retail stores of ($2.2) million, or (2.6%), led by a reduction of ($7.1) million due to the elimination of ocean freight surcharges which was partially offset by unit volume and product mix. Sales of products sold through e-commerce channels increased by $1.1 million, or 10.7%, compared to the first quarter of the prior year.

Gross margin for the quarter ended September 30, 2023, was 19.5%, compared to 16.0% for the prior-year quarter, an increase of 350 basis points (“bps”). The 350-bps increase was primarily driven by control of expenses related to material costs and the impact of strategic cost savings initiatives.

Selling, general and administrative (SG&A) expenses increased to 17.4% of net sales in the first quarter of fiscal 2024 compared with 15.2% of net sales in the prior-year quarter. The increase was mainly due to investment in growth initiatives.

Operating income for the quarter ended September 30, 2023, was $1.9 million compared to $0.4 million in the prior-year quarter.

The Company reported income tax expense of $0.6 million, or an effective rate of 44.2%, during the first quarter compared to a tax benefit of ($0.2) million, or an effective rate of (175.5%), in the prior-year quarter. The effective tax rate was primarily impacted by non-deductible stock compensation, state taxes, and foreign operations.

The Company reported net income of $0.8 million, or $0.14 per diluted share, for the quarter ended September 30, 2023, compared to net income of $0.3 million, or $0.05 per diluted share, in the prior-year quarter.

Liquidity

The Company ended the quarter with a cash balance of $3.0 million and working capital (current assets less current liabilities) of $118.3 million, and availability of approximately $27.6 million under its secured line of credit.

Capital expenditures for the quarter ended September 30, 2023, were $1.4 million.

For the full first quarter results, click here.

About Flexsteel

Flexsteel Industries, Inc., and Subsidiaries (the “Company”) is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States. Product offerings include a wide variety of furniture such as sofas, loveseats, chairs, reclining rocking chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs, kitchen storage, bedroom furniture, and outdoor furniture. A featured component in most of the upholstered furniture is a unique steel drop-in seat spring from which the name “Flexsteel” is derived. The Company distributes its products throughout the United States through its e-commerce channel and direct sales force.

Contact:

Derek Schmidt – Investor Relations – investors@flexsteel.com – (563) 585-8122

Source: Flexsteel Industries, Inc.