Flexsteel Reports Key Operating Results for Third Quarter

April 27, 2025  by Karen Parrish in Business Strategy, Industry   

Key Results for the Third Quarter Ended March 31, 2025

Net sales for the quarter of $114.0 million compared to $107.2 million in the prior year quarter, an increase of 6.3% and the sixth consecutive quarter of year-over-year sales growth.

GAAP operating loss of ($5.1) million or (4.4%) of net sales, due to a $14.1 pre-tax impairment charge related to our leased facility in Mexicali, Mexico, compared to GAAP operating income of $3.0 million or 2.8% of net sales in the prior year quarter.

Adjusted operating income of $8.3 million or 7.3% of net sales for the third quarter compared to $5.6 million or 5.2% of net sales in the prior year quarter.

GAAP net loss per diluted share of ($0.71) for the current quarter compared to net income of $0.33 in the prior year quarter.

Adjusted net income per diluted share of $1.13 for the quarter compared to $0.67 in the prior year quarter.

Generated $12.3 million of cash from operations in the quarter resulting in $22.6 million of cash and no line of credit borrowings at March 31, 2025.

Management Commentary

“We continue to execute well and delivered strong results in the quarter,” said Derek Schmidt, president & CEO of Flexsteel Industries, Inc. “Our growth strategies are working and enabling us to continue our solid sales momentum as we delivered sales growth of 6.3% compared to the prior year quarter, which represents our sixth consecutive quarter of mid-single to low-double digit year-over-year growth. The drivers of our growth remain broad-based as we grew in both our core markets, largely due to new products and share gains with strategic accounts, and in our new and expanded market initiatives. I’m also especially pleased with our continued profitability improvement and strong cash generation. Our adjusted operating margin of 7.3% in the quarter represents our eighth consecutive quarter of year-over-year improvement and our second-highest quarterly adjusted operating margin over the past 7 years. Additionally, we delivered operating cash flow of $12.3 million in the quarter and bolstered our ending cash position to $22.6 million. Our strong financial position is a competitive advantage in this period of heightened economic uncertainty.”

Mr. Schmidt continues, “We enter our fourth quarter under a very tough economic backdrop with substantial uncertainty following the release of the proposed U.S. reciprocal tariffs on April 2^nd. Although the reciprocal tariffs rates that went into effect on April 9^th were temporarily delayed 90 days for many countries, the 10% baseline tariff rate remains in effect as the U.S. works to negotiate individual trade deals. Prior to these recent tariff announcements, many of our retailer partners noted considerably slower traffic which is likely a reflection of the sharp drop in consumer confidence over the past several months. Many economists now expect significantly higher U.S. inflation for the next year along with slower economic growth, and even a likelihood of a recession if the new proposed tariff rates are implemented and sustained for an extended period. While we remain hopeful the U.S. administration can successfully negotiate with its trading partners to reduce or eliminate the reciprocal tariffs and minimize the impact on the U.S. economy, our near-term outlook for the industry is moderately pessimistic. As such, we are prepared to navigate multiple demand scenarios, and as we’ve demonstrated over the past few years, we can deliver share gains even in challenging industry conditions.”

Mr. Schmidt concludes, “Until there is greater clarity and confidence in the stability of both the outlook for U.S. trade policy and economic growth, we expect the business environment to remain highly dynamic. As a Company, we have two main priorities near term. First, we will remain hyper-focused on continuing to execute our strategies which are working and enabling us to deliver strong sales growth and financial results. While we will prudently manage spending to remain financially nimble in response to changing consumer demand, we will not diminish our commitment to providing an exceptional customer experience and investing in new products, innovation, and marketing, as these are the underpinnings of our strategies and continued success. Second, we will continue to strengthen our supply chain agility and our plans to minimize tariff risks. We have strong relationships throughout our value chain and have confidence that we can work collaboratively with our partners to address the effect of tariffs while minimizing the impact on consumer prices in the short term. In the long term, we remain assured of our ability to reconfigure and optimize our supply chain if required due to permanent changes in global trade policies. The range of our sales and profit outlook for the fourth quarter is broader to reflect the uncertainty in the current environment, but we remain confident in our ability to deliver continued share gains in the coming quarter. Despite these challenging conditions, we see opportunities to strengthen our competitive position and will remain aggressive in investing for future growth while continuing to deliver exceptional value for our customers.”