by Decrease was driven by $36.7 million drop in sales of furniture sold through retail stores and $4.7 million decrease through e-commerce channels
DUBUQUE, Iowa — Full-line furniture manufacturer Flexsteel Industries reported a 29.5% decline in net sales for its third fiscal quarter ended March 31.
Net sales totaled $99.1 million compared to $140.4 million for the same period last year.
The company said the decrease occurred as “home furnishings sales have reverted to be in line with pre-pandemic volumes.” It was driven by a $36.7 million decrease in sales of furniture sold through retail stores and a $4.7 million decrease in sales sold through e-commerce channels. It noted that sales in the prior-year quarter were particularly strong due to a Covid-related surge in furniture spending among consumers.
Net income totaled $1.5 million, or 28 cents per share, compared to $5.3 million, or 82 cents per share, the same period last year.
However, gross margin rose to 18.8% for the quarter compared to 15.7% for the same period last year. The company said this represented an improvement of 310 basis points, which was driven by the control of expenses “mainly related to ancillary changes and the impact of strategic cost savings initiatives.” It was partially offset by the impact of “volume deleverage of fixed manufacturing costs and increased costs of delivery due to higher diesel fuel costs.”
Meanwhile, selling, general and administrative expenses rose to $16.5 million, compared to $16.3 million last year. The company said this was mainly due to investment in growth initiatives and partially offset by controlled spending in other areas of the business.
The company reported cash flow from operations of $30.5 million and debt repayments of $20 million for the first nine months of the fiscal year. It ended the quarter with a cash balance of $2.4 million, working capital — current assets less current liabilities — of $106.6 million and about $43.2 million available under its secured line of credit.
Company President and CEO Jerry Dittmer said he was pleased with the results and the progress the company has made, especially given “the many consumer and macroeconomic headwinds we continue to face.”
“Despite the market challenges, we delivered net sales for the third quarter of $99.1 million, representing sequential quarter-over-quarter growth of 6.4% compared to the second quarter,” he said. “Our growth initiatives are working and gaining momentum, and we anticipate continuing that drive to deliver even higher sales in the fourth quarter compared to the third quarter results. At the same time, we are improving profitability and generating solid free cash flow. Our operating income of $2.1 million, or 2.1% of revenue, was in the upper range of our guidance of 1.0% to 2.5%.”
He added that the company is working through higher-cost inventories and “realizing the benefits of cost savings initiatives to drive margin accretion.”
“Similar to our sales outlook, we expect profitability to sequentially improve in the fourth quarter compared to the third quarter, bolstered by the traction of our growth initiatives which have an attractive margin profile,” he said. “I’m very excited about the trajectory of our business. We’ve been transforming the company for several years. As a result, we are well positioned to grow profitably for the remainder of fiscal year 2023 and into fiscal year 2024 despite the macroeconomic hurdles that are likely to dampen overall demand for furniture.”
He also said that the company is competing well in the marketplace, “and our customers validated this view during last week’s April High Point Market.”
“The energy in our showroom and positive customer feedback was outstanding,” he said. “We continue to modernize the Flexsteel brand by introducing new, on-trend products and covers at more competitive price points while maintaining the differentiated comfort and quality that defines the brand. We also expanded the product offering of our new Charisma brand, targeting the style and price preferences of younger consumers. In addition, we successfully launched our new Zecliner sleep solutions recliner in March. We expanded the line recently and have more innovation planned for release at next October’s market. Lastly, Flex, our small parcel, contemporary modular furniture solution, was launched in the big box channel this month and will be extended to multiple, e-commerce partners in the fourth quarter. The future is exciting for Flexsteel. We’re investing, innovating and transforming to strengthen our market leadership and drive long-term profitable growth. Our associates have conviction in our strategy and are deeply committed to executing our growth plans.”
