Flexsteel Industries, Inc. Announces Strong Fiscal Q2 2025 Results
Flexsteel Industries, one of the largest manufacturers, importers, and marketers of residential furniture products in the United States, has reported robust financial results for the second quarter of fiscal 2025, ended December 31, 2024.
Key Highlights for Q2 2025
- Net Sales: Increased to $108.5 million, an 8.4% rise from $100.1 million in the prior-year quarter, marking the fifth consecutive quarter of year-over-year sales growth.
- Pre-tax Gain: Recorded a $5.0 million gain from the sale of a former manufacturing facility in Dublin, GA.
- GAAP Operating Income: Reached $11.7 million, or 10.7% of net sales, up from $4.6 million (4.6% of net sales) in the previous year.
- Adjusted Operating Income: Stood at $6.7 million, or 6.1% of net sales, compared to $4.6 million (4.6%) in Q2 2024.
- GAAP Net Income per Diluted Share: Reported at $1.62, a significant increase from $0.57 in the prior-year quarter.
- Adjusted Net Income per Diluted Share: Grew to $0.95 from $0.57 in Q2 2024.
- Cash Flow and Debt Management: Generated $6.7 million in cash from operations and fully repaid outstanding borrowings on its line of credit.
Management Commentary
Derek Schmidt, President and CEO of Flexsteel Industries, expressed confidence in the Company’s trajectory, stating, “We are performing well and gaining market share despite a challenging business environment. Our growth continues to be broad-based, with significant expansion in core markets and new market initiatives. Additionally, our strong operating margin and free cash flow have enabled us to pay off remaining bank debt and accumulate cash reserves.”
Schmidt noted positive trends in consumer behavior, particularly improved traffic and sales close rates during the holiday season, signaling potential industry recovery in 2025. “Although overall demand remains soft, our ability to generate profitable growth even in uncertain conditions demonstrates the strength of our strategy and execution.”
However, Schmidt acknowledged uncertainty due to newly announced 25% tariffs on imports from Mexico and Canada. “These tariffs introduce significant risks that could materially impact our business. We are actively developing strategies to mitigate these risks and optimize our supply chain should structural changes in global trade policies occur.” He assured stakeholders that the Company remains focused on long-term, profitable growth while navigating external challenges.
Operating Results for Q2 2025
- Net Sales: Increased by $8.4 million (8.4%) year-over-year, primarily driven by a $9.2 million (10.3%) growth in retail furniture sales. However, e-commerce sales declined by $0.8 million (7.1%) due to weaker consumer demand.
- Gross Margin: Decreased slightly to 21.0% from 21.9% in Q2 2024, mainly due to increased ocean freight costs.
- Selling, General & Administrative (SG&A) Expenses: Declined to 14.9% of net sales from 17.3% in Q2 2024, reflecting cost efficiencies and leverage from higher sales.
- Facility Sale: The sale of the Dublin, GA manufacturing facility contributed a $5.0 million pre-tax gain.
- Income Tax Expense: Stood at $2.6 million, with an effective tax rate of 22.4%, compared to $1.0 million (25.5%) in the prior year.
- Net Income: Surged to $9.1 million ($1.62 per diluted share) from $3.1 million ($0.57 per diluted share) in Q2 2024.
- Adjusted Net Income: Increased to $5.3 million ($0.95 per diluted share) compared to $3.1 million ($0.57 per diluted share) in the prior-year quarter.
Liquidity and Capital Expenditures
Flexsteel ended the quarter with a solid financial position:
- Cash Balance: $11.8 million.
- Working Capital: $98.2 million.
- Available Credit: Approximately $60.8 million under its secured line of credit.
- Capital Expenditures: $1.3 million for the six months ended December 31, 2024.
Financial Outlook for Fiscal Year 2025
- Sales Growth Forecast: Increased from 3.5% – 6.5% to 5.5% – 8.0%.
- GAAP Operating Margin: Expected to rise from 5.8% – 6.5% to 7.3% – 7.7%.
- Adjusted Operating Margin: Projected at 6.2% – 6.6%.
- Free Cash Flow: Estimated between $25 million and $30 million.
- Key Risk Factors: Tariffs, consumer demand fluctuations, competitive pricing, and ocean freight costs could influence results.
Upcoming Q3 2025 Guidance
| Metric | Q3 2025 Forecast | FY 2025 Forecast |
|---|---|---|
| Sales | $110M – $115M | $435M – $445M |
| Sales Growth | 3% – 7% | 5.5% – 8% |
| GAAP Operating Margin | 6.0% – 7.0% | 7.3% – 7.7% |
| Adjusted Operating Margin | 6.0% – 7.0% | 6.2% – 6.6% |
| Free Cash Flow | $4M – $7M | $25M – $30M |
| Line of Credit Borrowings | $0 | $0 |
Earnings Conference Call Details
Flexsteel will hold a conference call and webcast on Tuesday, February 4, 2025, at 8:00 a.m. Central Time to discuss results and take questions.
- Live Call: 833-816-1123 (U.S.) | 412-317-0710 (International)
- Replay (available until February 11, 2025): 877-344-7529 (U.S.) | 412-317-0088 (International) | Access Code: 8540664
- Webcast: ir.flexsteel.com
- Pre-registration: Investors can register at this link to receive a personalized call-in number and PIN.
Flexsteel Industries, Inc. continues to demonstrate resilience and strategic agility, achieving its fifth consecutive quarter of growth despite industry headwinds. The Company remains focused on operational efficiency, market expansion, and financial discipline, while proactively addressing uncertainties posed by tariffs and macroeconomic fluctuations. Looking ahead, Flexsteel is well-positioned to sustain its growth trajectory and enhance shareholder value.
