Flexsteel Industries Announces Robust First Quarter Fiscal 2026 Performance

10/20/2025 – 07:00 PM

DUBUQUE, Iowa – Flexsteel Industries, Inc. (NASDAQ: FLXS), a major player in the U.S. residential furniture market, has announced its first quarter fiscal 2026 results, highlighting strong performance amid a challenging economic landscape. The company’s report, released today, underscores its continued growth momentum and strategic initiatives.

First Quarter Fiscal 2026 Key Highlights (ended September 30, 2025):

• Net sales reached $110.4 million, a 6.2% increase compared to $104.0 million in the same quarter last year. This growth reflects Flexsteel’s ability to capture market share and capitalize on evolving consumer preferences.
• GAAP operating income stood at $9.0 million, representing 8.1% of net sales. This is a significant improvement compared to the prior year’s $6.0 million, or 5.8% of net sales, indicating enhanced operational efficiency and profitability.
• GAAP net income per diluted share was $1.31, a substantial increase from $0.74 per diluted share in the previous year’s quarter. This signifies improved bottom-line performance and shareholder value.

A reconciliation of GAAP to non-GAAP measures is included at the end of this release.

Management Perspective: Navigating Headwinds, Capitalizing on Opportunities

“We delivered strong results this quarter, reflecting continued growth and margin expansion,” stated Derek Schmidt, CEO of Flexsteel Industries, Inc. “Despite lingering economic uncertainty, our robust product offerings and strategic investments are fueling consistent growth.” Schmidt emphasized that the multi-pronged growth strategy is proving effective, driving growth from both core market initiatives centered around new product offerings, and expanded market penetration in casegoods and health & wellness product categories. Revenue growth, combined with effective product portfolio management and operational cost efficiencies, has enabled Flexsteel to achieve an operating margin of 8.1% for the quarter, marking its tenth consecutive quarter of year-over-year improvement.

Schmidt acknowledged ongoing challenges, including uneven consumer demand and macroeconomic headwinds. He pointed out that many retail partners experienced fluctuations in consumer traffic and sales, reflecting fragile consumer confidence amid inflation and employment concerns. Furthermore, tariffs continue to pose a significant risk to both demand and margins.

Specifically, Schmidt noted the implementation of Section 232 tariffs on imported timber, lumber, and derivative products, including upholstered furniture, effective October 14th, with subsequent increases slated for January 1, 2026. This development is anticipated to cause broad price increases and disrupt consumer demand in the near term. Despite these concerns, Schmidt expressed confidence in Flexsteel’s agility and preparedness to adapt to shifts in market dynamics, supported by a steadfast commitment to growth strategies and key investments.

“While tariff changes are projected to materially impact our sales and profitability short-term, our company is financially strong and well-positioned to navigate these near-term challenges while continuing to strengthen our competitiveness and drive long-term profitable growth and shareholder value.” Schmidt concluded.

Detailed Fiscal First Quarter 2026 Performance:

• Net Sales: Increased 6.2% year-over-year to $110.4 million, primarily driven by robust performance in sourced soft seating products. This was partially offset by reduced unit volume in made-to-order soft seating and the homestyles ready-to-assemble category. The data suggests a strategic emphasis shift toward higher-margin, efficiently sourced product lines to respond to consumer price sensitivities and operational demands.
• Gross Margin: Improved to 23.5% from 21.5% in the prior year, a 200 basis point increase. Key drivers included sales leverage and favorable foreign currency translation effects from peso-denominated assets in Mexico. These fluctuations in foreign exchange rates can substantially impact gross margins, requiring strategic financial hedging to mitigate associated risks going forward.
• SG&A Expenses: Decreased as a percentage of net sales, falling to 15.4% in fiscal 2026 from 15.7% the previous year. This primarily stems from leveraging higher sales figures, which partially counteracted investments in growth initiatives, thus underscoring the efficiencies gained through increased operational scale.
• Operating Income: Increased from $6.0 million to $9.0 million year-over-year, indicating enhanced operational efficiency and profitability driven by improved gross margins and effective cost management.
• Income Taxes: The effective tax rate was 21.9% for the first quarter, compared to 31.0% in the prior year. This change significantly influenced net income, providing an additional boost to Flexsteel’s bottom line and indicating better tax planning and management strategies.
• Net Income: Rose to $7.3 million, or $1.31 per diluted share, compared to $4.1 million, or $0.74 per diluted share, in the prior year, underscoring a significant enhancement in profitability.

Liquidity Position:

Flexsteel ended the quarter with a robust financial position, including:

• A cash balance of $38.6 million.
• Working capital of $116.9 million.
• Availability of approximately $54.1 million under its secured line of credit.
• Capital expenditures of $1.4 million for the quarter.

These figures underscore Flexsteel’s financial resilience and capacity to support ongoing operations, strategic investments, and potential market adjustments. The liquidity provides the company with flexibility to navigate challenges and capitalize on new opportunities.

Conference Call and Webcast

The Company will host a conference call and audio webcast with analysts and investors on Tuesday, October 21, 2025, at 8:00 a.m. Central Time to discuss the results and answer questions.

• Live conference call: 833-816-1123 (domestic) or 412-317-0710 (international)
• Conference call replay available through October 28, 2025: 877-344-7529 (domestic) or 412-317-0088 (international)
• Replay access code: 5986682
• Live and archived webcast: ir.flexsteel.com

About Flexsteel

Flexsteel Industries, Inc., is one of the largest manufacturers, importers, and marketers of residential furniture products in the United States. Product offerings include a wide variety of furniture such as sofas, loveseats, chairs, reclining rocking chairs, swivel rockers, sofa beds, convertible bedding units, occasional tables, desks, dining tables and chairs, kitchen storage, bedroom furniture, and outdoor furniture. A featured component in most of the upholstered furniture is a unique steel drop-in seat spring from which the name “Flexsteel” is derived. The Company distributes its products throughout the United States through its e-commerce channel and direct sales force.

Forward-Looking Statements

Statements, including those in this release, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause our results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risk and uncertainty. Some of the factors that could affect results are the cyclical nature of the furniture industry, supply chain disruptions, litigation, the effectiveness of new product introductions and distribution channels, the product mix of sales, pricing pressures, the cost of raw materials and fuel, changes in foreign currency values, retention and recruitment of key employees, actions by governments including laws, regulations, taxes and tariffs, the amount of sales generated and the profit margins thereon, competition (both U.S. and foreign), credit exposure with customers, participation in multi-employer pension plans, disruptions or security breaches to business information systems, the impact of any future pandemic, and general economic conditions. For further information regarding these risks and uncertainties, see the “Risk Factors” section in Item 1A of our most recent Annual Report on Form 10-K.