by Company’s profitability increases during the quarter and the full fiscal year
DUBUQUE, Iowa — Flexsteel Industries reported a double-digit decrease in net sales for its fiscal fourth quarter and full year ended June 30.
Net sales fell by 15% to $105.8 million, compared to $124.5 million the same period last year. For the full year, net sales decreased 27.7% to $393.7 million, compared to $554.3 million in the prior fiscal year.
The company reported net income of $10.2 million, or $1.91 per share, for the quarter, compared to a loss of $271,000, or 5 cents per share, the same period last year. For the full year, it reported net income of $14.8 million, or $2.74 per share, compared to net income of $1.85 million, or 28 cents per share, for the previous fiscal year.
The company said that despite the quarterly decline, fourth-quarter net sales grew 6.8% compared to $99.1 million in the third quarter. Third-quarter sales also increased 6.4% compared to $93.1 million in the second quarter.
The company’s gross margin rose to 20% during the quarter compared to 14.2% in the same period last year, and to 18% for the full year, compared to 13.4% for the prior year.
It also reported GAAP fourth-quarter operating income of $4.2 million, which was 4% of net sales, compared to $3.6 million or 2.9% of sales during the same period last year. For the full year, it reported $10.5 million in operating income, or 2.7% of net sales, compared to $6.6 million, or 1.2% of net sales, for the prior year.
The company also said it ended the quarter with a cash balance of $3.4 million and working capital of $115.5 million along with about $45.8 million available under its secured line of credit. Capital expenditures for the full year were $4.8 million.
Company President and CEO Jerry Dittmer said he was pleased with the overall fourth-quarter results.
“The continued focus on our growth initiatives enabled us to deliver another quarter of solid sequential sales growth as fourth-quarter results climbed 6.8% above third-quarter sales, which in turn, grew 6.4% over second-quarter sales,” he said. “Despite near-term macroeconomic uncertainty and softening consumer demand within the industry, we are overcoming these headwinds and building strong sales growth momentum which we will carry into fiscal year 2024. As important, we are growing the business profitably. Our operating margins improved sequentially quarter-over-quarter throughout fiscal year 2023, even with increased strategic investments to support long-term growth. While challenging market conditions remain as we start our new fiscal year, I’m confident in our organization’s ability to grow both sales and profits year-over-year given our strong momentum and operational execution.”
He also applauded the team for its response to obstacles it faced during the entire fiscal year.
“To summarize fiscal year 2023, our team was presented with several hurdles that we had to rise above, most notably a return to pre-pandemic demand levels which was exacerbated by an additional curb in consumer demand due to higher interest rates, rising inflation and general economic uncertainty,” he said. “At the same time, the industry experienced pervasive price reductions as many manufacturers and retailers quickly dropped prices in response to lower ocean freight and other cost inputs, forcing others to follow suit. The downward shift in demand early in the year also left many retailers with an oversupply of inventory which subsequently created additional pricing pressures across the industry. Despite the significant decline in year-over-year sales caused by these challenges, our strong team of dedicated employees identified the obstacles early and executed plans to navigate them while delivering profitable growth, which resulted in higher full-year operating income of $10.5 million compared to $6.6 million in the prior year.”
He also noted that the company made strides in advancing various strategic growth initiatives including expanding its big-box distribution channel as well as new product initiatives including its Zecliner sleep solutions recliner, the launch of its Flex modular upholstery line and its new Charisma brand of opening price points in upholstery.
“We are also proud to have published our first annual ESG report which can be found on our website at www.flexsteelindustries.com,” he said. “This report lays out the foundation of our approach to environmental, social and governance matters while formalizing our ongoing commitment to sustainable and responsible business practices.”
He added that while external conditions are uncertain, he is confident that the company’s long-term outlook is promising.
“Our team’s commitment to profitable growth, combined with our market momentum, have positioned us to successfully deliver improved earnings and an even stronger balance sheet in fiscal year 2024,” he said. “We are focused on executing our strategic growth initiatives, investing in future innovation and other competitive advantages, and delivering sustainable profit improvement through operational efficiencies while continuing to reduce inventory levels and pay down debt. In summary, we’re enthusiastic about fiscal year 2024 and the long-term growth opportunities for the company while being attentive to navigating near-term ambiguity in the economy and furniture industry outlook.”
