On April 21, 2025, Flexsteel Industries Inc (FLXS, Financial) released its 8-K filing detailing its financial performance for the third quarter of fiscal 2025. The company, a prominent manufacturer and marketer of residential furniture in the United States, reported a notable increase in net sales and adjusted earnings per share (EPS), despite facing challenges related to trade policy and economic uncertainty.
Company Overview
Flexsteel Industries Inc is a leading U.S.-based company specializing in the manufacture, import, and marketing of residential upholstered wooden furniture products. Its diverse product range includes sofas, loveseats, chairs, rockers, desks, tables, and bedroom furniture, catering to home, office, hotel, healthcare, and other contract applications. A key feature of its upholstered furniture is the durable Blue Steel Spring.
Performance Highlights and Challenges
For the third quarter ended March 31, 2025, Flexsteel Industries Inc reported net sales of $114.0 million, surpassing the analyst estimate of $111.94 million. This marks a 6.3% increase from the prior year quarter. This growth represents the sixth consecutive quarter of year-over-year sales growth, driven by higher unit volume and ocean freight surcharges.
However, the company faced a GAAP operating loss of $5.1 million, primarily due to a $14.1 million pre-tax impairment charge related to its leased facility in Mexicali, Mexico. This compares to a GAAP operating income of $3.0 million in the prior year quarter. The impairment charge reflects challenges in subleasing the facility amid changes in U.S.-Mexico trade relations.
Financial Achievements
Despite the GAAP operating loss, Flexsteel Industries Inc achieved an adjusted operating income of $8.3 million, up from $5.6 million in the prior year quarter. The adjusted net income per diluted share was $1.13, significantly exceeding the analyst estimate of $0.88. It also exceeded the prior year quarter's $0.67. This improvement underscores the company's effective growth strategies and cost management.
Key Financial Metrics
The company's gross margin improved to 22.2% from 21.7% in the prior year quarter, benefiting from leverage of fixed costs on higher sales and a favorable mix. Selling, general, and administrative expenses decreased to 15.0% of net sales, down from 16.5% in the prior year quarter, due to cost savings and higher sales leverage.
Flexsteel Industries Inc generated $12.3 million in cash from operations during the quarter, ending with a cash balance of $22.6 million and no line of credit borrowings. This strong cash position provides a competitive advantage amid economic uncertainty.
Management Commentary
“We continue to execute well and delivered strong results in the quarter,” said Derek Schmidt, President & Chief Executive Officer 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.”
Analysis and Outlook
Flexsteel Industries Inc's performance in the third quarter of fiscal 2025 highlights its resilience and strategic execution in a challenging economic environment. The company's ability to achieve sales growth and improve adjusted profitability, despite the impairment charge, demonstrates its operational strength and adaptability.
Looking ahead, the company anticipates a challenging fourth quarter due to economic uncertainties and potential impacts from U.S. trade policies. However, Flexsteel Industries Inc remains focused on executing its growth strategies, managing costs, and strengthening its supply chain to navigate these challenges effectively.
Explore the complete 8-K earnings release (here) from Flexsteel Industries Inc for further details.
