Q1 2025 Flexsteel Industries Inc Earnings Call

In This Article:

Participants

Mike Ressler; CFO; Flexsteel Industries Inc

Derek P. Schmidt; President and Chief Executive Officer; Flexsteel Industries Inc

Presentation

Operator

Good day and welcome to the Flex Steel industries first quarter, fiscal year, 2025 earnings results. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then one on your touchtone phone to withdraw your question. Please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Ressler CFO. Please go ahead.

Mike Ressler

Thank you and welcome to today's call to the Flex Steel industries first quarter fiscal year 2025 financial results, our earnings release which we issued after market close yesterday. Monday, October 21st is available on the investor relations section of our website at www.flexsteel.com under news and events.
I am here today with Derek P. Schmidt, President and Chief Executive Officer on today's call. We will provide prepared remarks and we will then open the call to your questions before we begin. I would like to remind you that the comments on today's call will include forward-looking statements which can be identified using words such as estimate, anticipate expect and similar phrases.
Forward-looking statements by their nature involve estimates, projections, goals forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on form 10 K as updated by our subsequent quarterly reports on form 10 Q and other sec filings as applicable.
These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events.
Additionally, we may refer to Non GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures.
The press release available on our website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non GAAP Measures.
And with that, I'll turn the call over to Derek P. Schmidt, Derek.

Derek P. Schmidt

Good morning and thank you for joining us today. I am pleased to share with you our first quarter results.
We continue to execute well and delivered strong sales growth sizable year over year profit improvement and continued positive free cash flow in the quarter.
While industry demand remains lackluster due to challenging macroeconomic conditions, we continue to build growth momentum and delivered roughly 10% sales growth in the quarter, which represents our fourth consecutive quarter of mid, single to low double digit year over year growth.
Encouragingly, the sources of our growth are numerous which gives me increased confidence that our growth momentum is sustainable.
Most important, we continue to drive growth both through share gains in our core markets, in new growth in expanded markets and largely attribute our growth success to the investments we've made in new product development, innovation, customer experience and marketing.
Given the attractive returns from these investments, we will continue to aggressively pursue new investment opportunities that both unleash incremental growth in our core markets and accelerate penetration in expanded markets with long term profit potential.
While I'm thrilled with the success of our consistent top line growth over the past '12 months, particularly considering industry headwinds. I'm also especially pleased with our progress. Driving meaningful year over year profitability improvement, operating margin was 5.8% in the quarter up compared to 2% in the prior year quarter and represents our fifth consecutive quarter of year over year adjusted operating margin improvement.
The levers driving our consistent profit improvement are unchanged and working effectively and include sales growth, leverage, strong operational execution and productivity and product portfolio management.
As we look forward to the remainder of our fiscal year 2025 our outlook for the industry and broader economy remains largely unchanged from what I shared last quarter.
Well, there are certainly some bright spots to highlight namely the start of the fed's interest rate reductions progress, taming inflation and continued strength in the labor markets. We expect that weak consumer demand will continue to be a headwind for the industry in the near term. Given the cumulative toll of inflation on consumer spending, the absence of a meaningful housing recovery and ongoing uncertainty over the US Presidential election and consequences on potential policy changes impacting the economy.
Despite challenging industry conditions, we remain optimistic about our ability to continue growing profitably in a difficult environment and remain committed to our strategies and investments to pursue new growth.
The high point furniture market kicks off this week and we will be showcasing another impressive round of new product introductions.
In total. We're introducing '27 new product groups and '10 line extensions comprising 237 unique skews this magnitude of introductions combined with a very successful new product launch this past spring at April market will make calendar 2024 a record year for new product activations for Flexsteel and will be a key driver of continued growth both in fiscal year 2025 and beyond.
We continue to pursue products with unique innovations informed by validated consumer insights. This approach is ensuring that we bring differentiated relevant products to market.
Notably, with great collaboration between our marketing product and sourcing teams. We've developed a comprehensive new recliner program that offers consumers a very simple personalized shopping experience that fits within 100 square feet of retail space branded. Perfect match. This program consists of five unique tiers of recliners with a logical progressive feature set and pricing strategy.
All the new recliners also feature our new soft close mechanism. A notable value addition for consumers, the program is turnkey for retailers and includes powerful consumer oriented messaging and marketing through point of sale materials, digital landing pages and website content.
We expect 90% of our retailers to place this program by the end of the calendar year and for the program to be a key part of our continued core market growth in the second half of the fiscal year.
October highpoint market will also feature expansions to our charisma brand decliner lineup and case good collections. All of which are important drivers in our expanded markets growth strategy.
Another important growth element where we are making notable strides is expansion with our largest most strategic customers in the core independent retail channel with individual account plans tuned and tailored for each of these accounts. We believe we have a formula that significantly enhances our value proposition to these large growing retailers.
What's leading to an increased placement in store and online with these customers is a powerful combination of exclusive new product development, fabric and cover collections that elevate each retailer's unique merchandizing strategy, coinvestment in demand generation initiatives, prioritize production scheduling and a differentiated customer experience.
In turn key marketing content, demonstrated success with several existing customers is paving the way to expanded distribution with new customers, especially in attractive growing and underpenetrated geographical markets.
At the same time, we are growing our independent furniture retail distribution. We also continue to make good progress in expanding our brand's reach into the big box and e-commerce channels.
I am proud of our team's strong start to fiscal year 2025 and encouraged by our trajectory and prospects for continued profitable growth. I'll be back momentarily to share my thoughts on our outlook with that. I'll turn the call over to Mike who will give you some additional details on the financial performance for the first quarter and the financial outlook for the second quarter and full year fiscal 2025