by Net income, gross margin rise due to expense controls, other cost savings initiatives
DUBUQUE, Iowa — Full-line furniture resource Flexsteel Industries reported a slight decrease in net sales and an increase in net income for its first fiscal quarter ended Sept. 30.
Net sales totaled $94.6 million, down 1.1% from $95.7 million during the same period last year.
The company said that the decrease was driven by $2.2 million in lower sales of home furnishings products sold through retail stores, a 2.6% decrease. This was led by a $7.1 million reduction resulting from the elimination of ocean freight surcharges that was partially offset by unit volume and product mix. The sales of products sold through e-commerce channels also rose by $1.1 million, or 10.7% compared to the first fiscal quarter of last year.
Net income totaled $752,000, or 14 cents per share, up from $289,000, or 5 cents per share last year. Its gross margin also rose to 19.5% compared to 16% in the same period last year, which the company said was primarily driven by control of expenses related to materials cost and the impact of strategic cost savings initiatives.
It also said that its GAAP operating income totaled $1.9 million, or 2% of net sales during the quarter compared to $400,000 or .4% of net sales the same period last year.
Other highlights of its operating results were as follows:
+ SG&A expenses rose to 17.4% of net sales in the first quarter compared with 15.2% of net sales the same period last year. This was due to investment in growth initiatives, the company said.
+ The company reported capital expenditures of $1.4 million during the quarter.
+ It also ended the quarter with a cash balance of $3 million and working capital of $118.3 million and the availability of about $27.6 million under its secured line of credit.
Company President and CEO Jerry Dittmer said he was pleased with the first quarter results.
“We are competing well and gaining share in a challenging business environment,” Dittmer said. “While net sales were down 1% compared to the prior year quarter, sales in the quarter were adversely impacted by the elimination of ocean freight surcharges in the prior year when ocean container delivery costs were significantly inflated. Excluding the approximately $7 million impact from the surcharge elimination, growth from unit volume and sales mix was a robust 6.8% in the quarter, reflecting our strong sales execution and the momentum of our growth initiatives. In addition, we leveraged operational efficiencies and cost savings to expand gross margin and improve operating income from $0.4 million in the prior year quarter to $1.9 million this quarter.”
He added that a variety of macroeconomic headwinds continue to weigh on industry demand and the outlook for consumer spending on higher priced discretionary purchases such as furniture.
“Despite these external challenges, our team isn’t deterred and remains intensely focused on profitably growing our business in fiscal year 2024,” he said. “We enter the second quarter with positive momentum and are confident in our ability to grow sales both compared to last year and the first quarter, while also improving gross and operating margins over the first quarter. Our strategies are working. We’ll continue to innovate, drive expedient and relevant new product development, and build strong brands. Regardless of demand uncertainties, we remain aggressive in identifying new growth opportunities while prudently managing costs and investing for future growth and profit enhancement.”
