DUBUQUE, Iowa – Full-line furniture manufacturer and importer Flexsteel Inds. reported fiscal 2021 first-quarter net sales of $105.2 million, a 4.9% increase compared with the same prior-year period. Excluding the discontinued vehicle seating and hospitality product lines, revenue rose 17.9%, driven by huge demand for home furnishings in the past three months.
Net income for the three months ended Sept. 30 was $3.9 million, off 59.4% from 2020’s fiscal first quarter. First-quarter 2021 net income was impacted by a $1.4 million pre-tax restructuring expense primarily for facility closures and employee termination costs, a pre-tax gain of $700,000 due to the sale of one of the company’s Harrison, Ark., facilities, and an additional $2.1 million tax expense due to the re-measurement of deferred tax assets and valuation allowance.
Net income adjusted for those items came to $6.3 million, compared with break-even adjusted net income in fiscal 2020’s first quarter.
Flexsteel attributed first-quarter sales growth to strong performance across channels. Sales through retail stores rose 14.8% compared with last fiscal year’s first quarter, while sales of its Homestyles e-commerce line increased almost 40%. The increases in retail and e-commerce channels were partially offset by a decline of $11.1 million vs. the prior year quarter, due to Flexsteel’s elimination of its vehicle seating and hospitality product lines completed in fiscal 2020’s fourth quarter.
In an earnings release, President and CEO Jerry Dittmer attributed Flexsteel’s solid performance to consumers spending more time at home and a spending shift from travel and entertainment to home products.
“The strategic decisions made last quarter to accelerate our transformation and heighten focus on our core retail and e-commerce furniture businesses have made us stronger and more agile to meet surging demand with a more efficient network,” Dittmer said. “The company is financially strong with more than $36 million of cash and no debt. We invested in increased inventories in the first quarter to support our customers and are expecting to receive a record number of inbound shipments in our second quarter to meet continued strong demand.”
He noted that Flexsteel recently expanded capacity with the addition of new production lines in both of its North American plants, and that fiscal 2021’s first quarter saw the business return to operating margins near historical peaks “which we are committed to sustaining going forward.”
“With profitability stabilized and sales momentum strong, we are now pivoting towards strategic investments to drive long-term profitable growth and improve our customers’ experience,” Dittmer said. “While market conditions remain dynamic and could quickly change based on a multitude of factors, our team is competing well, and we are cautiously optimistic in our ability to continue profitably growing the business in 2021.”
Flexsteel also gave an update on its restructuring program and COVID-19 moving forward. The company saw its biggest restructuring impact in the first quarter – $1.4 million – and expects another $1.1 million in related charges for the remainder of fiscal 2021.
Flexsteel continued its reduced quarterly dividend of 5 cents per share during the quarter. A temporary 25% reduction in the salaries of the CEO and CFO/COO and a 50% cash compensation reduction for the board of directors ceased as of Oct. 1. The company has seen improvement in business conditions as retailers have reopened, but noted the industry faces supply chain challenges from labor shortages in Asia, limited availability of ocean containers, and inflationary pressures in key materials. The company continues to evaluate the impact of COVID-19 and will take necessary actions to reduce spend and preserve cash.
Following Flexsteel’s first-quarter 2021 repurchase of $9 million shares of the company’s commons stock, the board of directors on Oct. 22 authorized Flexsteel to purchase up to an aggregate of $30 million of its common stock over the next three years. As of Oct. 26, the company has repurchased 749,257 shares of its common stock at a total cost of $13.7 million during the 2020 calendar year.
Click here for the full Flexsteel first-quarter earnings release.