Officials for a Dubuque-headquartered furniture manufacturer anticipate continued growth despite inflationary pressures and falling customer demand on the heels of a strong recently completed quarter.
Flexsteel Industries reported net sales of $140.4 million for the quarter that ended March 31, up from $118.4 million during the same period a year prior. The company also reported net income of $5.3 million for the recently completed quarter, up from $4.9 million for the same period a year ago.
Flexsteel President and CEO Jerry Dittmer said in a conference call on Tuesday that the company faces two “major headwinds” in the near term — continued inflation and slowing consumer demand for furniture.
“Demand is reverting to more normalized levels after an extraordinary period of pandemic-induced consumer buying for everything related to the home,” he said, noting that individuals are spending more on travel, entertainment and similar experiences they may have avoided during the height of the COVID-19 pandemic. “This shift is likely to be evident in the coming months as summer travel picks up.”
Dittmer emphasized that demand still is expected to remain above pre-pandemic levels and that he “remains energized” by Flexsteel’s prospects for long-term growth through new customers and products. These include efforts to expand the company’s footprint in retail and big-box stores, as well as to develop relationships with partners in Mexico, South America and central Europe.
Flexsteel ceased manufacturing operations in Dubuque in 2020. The company since has increased production in Mexico, including a new facility in Mexicali that is slated to open by late summer and three facilities currently operating in Juarez.
“With the addition of our third manufacturing plant in Juarez, we have been able to aggressively work down the large pandemic induced backlog … and expect lead times to be reduced to pre-pandemic levels of 4 to 6 weeks by early June,” said Chief Financial Officer and Chief Operating Officer Derek Schmidt.
He and Dittmer said company officials feel those reduced lead times will keep Flexsteel competitive. However, they also said pandemic-related supply chain disruptions and delays continue. Dittmer said many retailers have told him their warehouses are full of products ordered six to nine months ago that just arrived, leaving them with no room to order additional inventory from Flexsteel.
Schmidt did note that the company is starting to realize the positive impacts of a February price increase of about 8% across most product lines, which will help combat the obstacles of inflation and diminished demand.
“While uncertainty lingers about economic growth and trajectory on inflation, we are confident we can sustain profit in future periods,” Dittmer said.