Flexsteel aims to increase prices, reduce overseas shipping in wake of quarterly loss

A Dubuque-headquartered furniture manufacturer will raise product prices and reduce its reliance on overseas shipping in a bid to reduce the impacts of global supply-chain issues that contributed to a net loss in its just-completed quarter.

Flexsteel Industries reported a net loss of $7.5 million for the quarter that ended on Dec. 31, compared to a net income of $8.5 million in the same quarter in 2020.

President and CEO Jerry Dittmer said Tuesday that although the company’s sales remained strong, supply-chain issues have left containers of products stranded at ports and rail yards and driven up costs.

“We’re contending with several global supply-chain challenges,” Dittmer said during a conference call. “Our ancillary costs, which used to be negligible, soared to $15 million in the recent quarter.”

He said Flexsteel imported a record number of containers during the past seven months to support sales and build inventory.

“Severe congestion at ports and railroads have left our containers stranded for days or weeks, and the trucking industry is in crisis due to a lack of drivers,” he said.

Chief Financial Officer and Chief Operating Officer Derek Schmidt said the cost of receiving global shipments has risen due to continuing congestion and delays.

“Over the last six months, there has been so much disruption in the global supply chain,” Schmidt said. “There are so many parties involved in moving containers, and all of them to a varying extent have implemented new charges or raised prices on existing charges.”

Flexsteel officials pledged to address those rising shipping-related costs and inflation pressures in two ways.

“We are implementing pricing increases across most of our products,” Schmidt said. “Those revised prices will be implemented with new February orders.”

Dittmer said all furniture manufacturers have been broadly impacted by inflation and are taking similar pricing actions.

“No one in the industry likes it, but they understand the inflationary demands behind it,” he said.

Flexsteel also plans to reduce its reliance on overseas shipping.

“Our inventories are in a good place right now, but we’re still seeing container charges rise, so until this starts to stabilize, we will be bringing in a lot less containers,” Dittmer said.

Schmidt said Flexsteel was averaging about 880 incoming containers per month two quarters ago.

“For (this quarter), we are anticipating (receiving) 250-300 containers per month — significantly lower than our peak period,” he said.

Flexsteel ceased manufacturing operations in Dubuque in 2020. The company has ramped up production in Mexico, where it boasts three manufacturing operations in Juarez, and a new facility in Mexicali is nearing completion.

Dittmer said the company plans to continue to increase its North American manufacturing capacity to “increase our supply-chain resiliency.”