Flexsteel Industries Reports First Quarter Fiscal Results

October 28, 2026  by Karen Parrish in Business Strategy, Industry   

Key Results for the First Quarter Ended September 30, 2026

- Net sales for the quarter of $114.0 million compared to $110.4 million in the prior year quarter, an increase of 3.2%. Sales of Flexsteel branded product grew 5.1% versus the prior year quarter.

- GAAP operating income of $6.9 million or 6.0% of net sales for the first quarter compared to $9.0 million or 8.1% of net sales in the prior year quarter.

- GAAP net income per diluted share of $1.24 for the current quarter compared to net income per diluted share of $1.31 in the prior year quarter.

- Share repurchases of $2.2 million and dividends paid of $1.1 million in the quarter.

Management Commentary

“I'm pleased with our first quarter results and the continued momentum of our growth strategies despite a challenging macroeconomic environment,” said Derek Schmidt, CEO of Flexsteel Industries, Inc. “Net sales increased 3.2 percent compared to the prior year, toward the upper end of our guidance range, marking our twelfth consecutive quarter of year-over-year growth. Sales of Flexsteel branded products grew approximately 5 percent, while sales in our Homestyles ready-to-assemble category, which we are exiting, were down $1.9 million or 57% compared to the prior year quarter. Encouragingly, orders increased 5 percent and our ending backlog grew 8.2 percent versus the prior year period, reinforcing our confidence in the underlying strength of our business. New product introductions, strategic account share gains, and continued expansion in health and wellness remain strong contributors to our growth, providing further evidence that our strategic investments are strengthening our competitive position.”

Mr. Schmidt continued, “From a profitability standpoint, we delivered a GAAP operating margin of approximately 6 percent, which included a $0.8 million or 70 bps unfavorable foreign currency translation impact related to our peso-denominated asset exposure in Mexico. Excluding this impact, operating margin was in line with our expectations for the quarter and reflected solid operating performance considering the significant inflationary pressures currently impacting our industry. Ocean transportation rates have nearly doubled over the last six months, while sharply higher fuel prices and rising material costs continue to pressure margins. Our teams have mitigated a meaningful portion of these headwinds through cost savings initiatives, productivity improvements, and disciplined product portfolio management. Looking ahead, we expect the operating environment to remain challenging as consumer confidence, affordability constraints, geopolitical uncertainty, and evolving tariff policies continue to weigh on industry demand and costs.”

Mr. Schmidt concluded, “What gives me the greatest confidence in Flexsteel's future is the progress we're making strengthening our competitive advantages through consumer insights, innovation, and disciplined execution. These capabilities are increasingly working together as an integrated system, enabling us to translate consumer needs into differentiated products and compelling growth opportunities. Our recent Fall High Point Market introductions demonstrate this progress, including our next-generation SixFlex^TM seating technology and Comfort Choice^TM program, expansion of our wellness portfolio across multiple consumer life stages, continued innovation in our Flexsteel Pulse^TM immersive sound seating platform, and new offerings within our Flexsteel Statements^TM casegoods collection. While the external environment may remain difficult, we are not standing still. We are strengthening the core capabilities that have made Flexsteel a trusted brand for generations while creating new reasons for consumers and retailers to choose us. With a strong balance sheet, disciplined operating model, and clear strategic priorities, we remain confident in our ability to continue gaining share and creating sustainable long-term shareholder value.”

Operating Results for the First Quarter Ended September 30, 2026

Net sales were $114.0 million for the first quarter compared to net sales of $110.4 million in the prior year quarter, an increase of $3.5 million, or 3.2%. The increase was driven by growth in Flexsteel branded soft seating products of $5.5 million, partially offset by a decline of $1.9 million in Homestyles ready-to-assemble products. Sales of Flexsteel branded casegoods products were relatively flat compared to the prior year period.

Gross margin for the quarter ended September 30, 2026, was 22.0%, compared to 23.5% for the prior-year quarter, a decrease of 150 basis points (“bps”). The 150-bps decrease was primarily driven by a 130-bps unfavorable impact from foreign currency translation of our peso-denominated assets in Mexico and inflation driven by elevated energy prices.

Selling, general and administrative (SG&A) expense was 16.0% of net sales in the first quarter of fiscal 2027 compared to 15.4% of net sales in the prior year quarter. The increase was primarily due to investments in consumer insights, innovation, new products, marketing and demand generation and talent to strengthen our capabilities and execute our growth strategy.

Operating income for the quarter ended September 30, 2026, was $6.9 million compared to $9.0 million in the prior year quarter.

The Company reported income tax expense of $1.5 million, or an effective rate of 21.8%, during the first quarter compared to tax expense of $2.1 million, or an effective rate of 21.9%, in the prior year quarter.

The Company reported net income of $5.4 million, or $1.24 per diluted share, for the quarter ended September 30, 2026, compared to net income of $7.3 million, or $1.31 per diluted share, in the prior year quarter.

Liquidity

The Company ended the quarter with a cash balance of $4.4 million, and working capital (current assets less current liabilities) of $80.5 million, and availability of approximately $29.1 million under its secured line of credit.

Capital expenditures for the quarter ended September 30, 2026, were $1.0 million.

Financial Outlook

For second quarter fiscal 2027, the Company expects sales growth of 1% to 4%, or 3.5% to 6.5% excluding the impact of the homestyles brand exit, compared to the prior year quarter and operating margin of 6.5% to 7%. The most significant drivers of variability in the financial outlook are consumer demand and logistics and material cost inflation driven by elevated energy prices.

Conference Call and Webcast

The company will provide an archived webcast of the conference call at https://ir.flexsteel.com.