Flexsteel Industries, one of the largest manufacturers of upholstered and wooden furniture, has reported fiscal second quarter 2020 results, showing a decrease in net sales of 13 percent.
Net sales were $102.9 million for the second quarter compared to net sales of $118.4 million in the prior year quarter.
The planned exit of the commercial office and custom-designed hospitality products accounted for $7.3 million or approximately 73 percent of the decline in contract and 47 percent of the overall decline. Net sales were $203 million for the six months ended Dec. 31, 2019, compared to net sales of $231.8 million in the previous year six-month period, a decrease of 12.3 percent.
The exit of commercial office and custom-designed hospitality products accounted for $11.6 million or about 73 percent of the decline in contract and 41 percent of the overall decline. For both the quarter and the six-month period compared to the prior year, the ongoing 25 percent tariff and related price increases to the market continued to pressure sales and resulted in lower volume.
However, in December, some price increases in key product groups, which have completed relocation to Vietnam, were rolled back and sales began to show positive signs of recovery. Following two quarters of solid sequential growth in ecommerce sales, the momentum continued with a breakout fiscal second quarter of ecommerce net sales topping 30 percent year-over-year growth due to robust holiday demand and strong execution.
“While the business environment remained challenging during the second quarter, our team continued to make progress on several fronts,” said Jerry Dittmer, president and CEO. “Our strategy to restore top-line growth by providing a better customer experience with the right products in the right channel at the right cost is producing results. Our ecommerce line grew 30 percent year-over-year, the third quarter of sequential growth and the first quarter of positive year-over-year comps since I joined the company one year ago. We believe this is a solid indication that we are back on track to growing this important and high-potential channel. In other product lines, we are making progress transitioning some manufacturing to Vietnam, which has allowed us to partially reverse some premium pricing imposed by the 25 percent tariff. Where we can get pricing back in line, we are seeing an immediate uptick in sales. We expect this benefit to evolve as we shift more work to Vietnam.”
Contract net sales were down $10 million in the quarter and $15.8 million for the six-month period ended Dec. 31.
Flexsteel incurred $11.3 million of restructuring expenses primarily for facility closures, professional fees and employee terminations costs as part of our previously announced comprehensive transformation program.
Additionally, Flexsteel completed the sale of its Riverside, Calif., property and recognized a net gain on sale of asset in the amount of $18.9 million.
