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From Home Furnishing Business

Flexsteel Reports Double-Digit Profit Hike in Fiscal Q2

Upholstery and case goods resource Flexsteel Inds. (NASDAQ: FLXS) said sales jumped 9.2% to $129.4 million in the quarter ended Dec. 31, while net income was up more than 15% due largely to the recently enacted Tax Cuts and Jobs Act.

Nearly all of the top-line growth came from the company’s residential furniture segment, which recorded a 10.3% increase. Contract furniture sales edged up 3.3% to $18.6 million.

Net income totaled $6.22 million or 78 cents per share, up 15.4% from $5.39 million or 68 cents per share in the same quarter the previous year.

Flexsteel said its effective tax rate tumbled to 21.1% from 36.7% in the comparable quarter.

Increased labor costs and price increases for raw materials squeezed margins in the quarter, as the gross margin fell to 21.2% from 22.6% in the same quarter the previous year.

In response to the margin pressure, the company said it implemented selective price increases late in the most recent quarter.

“During the remainder of fiscal year 2018 (which ends June 30), the company expects high single- digit revenue growth, including the previously disclosed intentional decrease in sales to certain contract customers,” Flexsteel said in a statement announcing the quarterly results.

“The company expects continued inflationary pressure on certain raw materials and moderating labor cost increases. The company is focused on gross margin expansion through targeted sales price increases, enhanced service levels and driving operational efficiencies.”

For the six months ended Dec. 31, sales rose 8.1% to $249.2 million. Six-month net income totaled $12.4 million or $1.56 per share. That was up 22.3% from $10.1 million or $1.29 per share in the first half of the previous fiscal year.

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