Flexsteel reports 4th-quarter decline in sales, announces new initiatives

Officials for a Dubuque-headquartered manufacturing company reported that they felt the impact of slowing consumer demand during the fourth quarter of the recently completed fiscal year.

Flexsteel Industries reported net sales of $124.5 million for the quarter ending June 30. That marks an 8.6% decrease from the $136.2 million in sales during the fourth quarter of the 2021 fiscal year. However, net sales for all of fiscal year 2022 increased by 13.6% to $544 million, compared to $478.9 million during the prior fiscal year.

Flexsteel reported a net loss of $0.3 million for the recently completed quarter, compared to $5.8 million during the same period last year. The company saw a net income of $1.9 million for all of fiscal year 2022, down from $23 million in the prior fiscal year.

“We performed well given challenging conditions,” Flexsteel President and CEO Jerry Dittmer said during a conference call with investors this morning. “It was a year of significant challenges.”

Dittmer cited supply chain disruptions, rising fuel costs and reduced consumer demand driven by fears of a potential economic recession as contributing to challenges facing the furniture industry as a whole.

“Ocean container rates have begun to fall but remain high, and disruptions in the supply chain have eased but remain a challenge in our industry,” Dittmer said.

Dittmer said production at Flexsteel’s third and newest manufacturing plant in Juarez, Mexico, reduced lead time to three to five weeks shorter than many of the firm’s competitors.

“Our new distribution center in Greencastle, Pa., will improve customer service and build supply chain resiliency,” he said.

Dittmer said waning consumer demand will continue to drag on the firm’s sales in the short term.

“Slowing demand is further exacerbated by retail inventory that remains stubbornly high,” he said.

Orders for Flexsteel products will remain sluggish until retailers reduce their inventories, company officials said.

“Business conditions for the furniture industry are challenging at the moment, and market conditions will remain rough in the near term,” said Flexsteel Chief Operating Officer Derek Schmidt. “In times of disruption, there is opportunity to gain (market) share from competitors, and we have a set of ambitious initiatives for fiscal year 2023.”

Schmidt said the company plans to introduce a lower-priced brand that should start shipping to retailers in the second quarter of fiscal year 2023.

“We’re selling it to traditional furniture retailers,” Schmidt said. “We’re having discussions with club stores and with large online marketplaces like Wayfair.”

Schmidt said the new brand shouldn’t negatively impact Flexsteel’s existing sales.

“This is new incremental business for us,” he said.

Flexsteel also aims to develop new product categories, including sleep-oriented living room furniture and modular furniture.