Flexsteel Industries (NASDAQ:FLXS) reported fourth-quarter fiscal 2026 net sales of $115.4 million, up 0.7% from $114.6 million a year earlier, as growth in soft seating products offset declines in ready-to-assemble and case goods categories. Management said the furniture market remained difficult amid uneven consumer demand, inflation and geopolitical uncertainty.
For the full fiscal year, the company generated approximately $459 million in sales, a 4% increase from the prior year. President and Chief Executive Officer Derek Schmidt said Flexsteel expanded adjusted operating margin to about 7.5%, produced record adjusted diluted earnings per share of $4.94 and generated more than $47 million in free cash flow.
Fourth-Quarter Profitability Included Tariff Refund Benefit
Fourth-quarter GAAP operating income was $16.3 million, or 14.2% of sales, compared with $14 million, or 12.2% of sales, in the year-earlier period. The reported operating margin included a 780-basis-point benefit from refunds of previously paid IEEPA tariffs, which the company recorded as a reduction in cost of goods sold.
The quarter also included a 70-basis-point negative effect from Flexsteel’s exit from its Homestyles ready-to-assemble product category, including employee separation costs, inventory liquidations and write-downs. Excluding the tariff refunds and Homestyles exit costs, adjusted operating margin was 7.1%, compared with 9% in the prior-year quarter. The prior-year period benefited from a 160-basis-point favorable foreign-currency translation impact.
Chief Financial Officer Mike Ressler said the company’s product pricing was up approximately 10% to 11% on average from the prior year. Although unit volumes declined overall, he said they did not fall enough to outweigh pricing actions.
Ressler said volumes rose in several strategic growth initiatives, including Flexsteel’s health and wellness category, Zecliner products, new Zen chairs and certain strategic accounts. Made-to-order products and case goods were weaker, however.
Homestyles Exit and Portfolio Focus
During the quarter, Flexsteel decided to exit the Homestyles ready-to-assemble category, which management said had become increasingly competitive and was no longer generating attractive returns. The business contributed roughly $12 million in fiscal 2026 sales.
The company expects to monetize the remaining Homestyles inventory over the next three to six months and prepare its Huntingburg, Indiana, distribution center for sale. The facility currently serves the ready-to-assemble category and is not required for Flexsteel’s longer-term growth plans, Ressler said.
Homestyles had lower gross profitability than the company’s category average, according to management. While the exit will reduce sales, Ressler said it should provide a modest improvement in overall portfolio profitability.
Schmidt said fiscal 2026 sales growth would have been closer to 6.5% to 7% excluding the Homestyles drag, compared with the reported 4% increase.
Cash Flow, Buybacks and Dividend
Flexsteel ended the quarter with $16.7 million of cash, $94.6 million of working capital and no bank debt. Operating cash flow totaled $24.3 million in the quarter, supported by net income and working-capital management.
The company repurchased approximately 1.3 million shares for $62.6 million during the quarter and paid $1.1 million in cash dividends, or $0.20 per share. Management also noted that Flexsteel recently increased its dividend by 25%.
Ressler said capital-allocation priorities remain maintaining a strong balance sheet, funding investments in consumer insights, innovation, product development and marketing, and evaluating acquisition opportunities that can generate returns above the company’s cost of capital. If such opportunities are unavailable, the company expects to return excess capital through dividends and share repurchases.
Fiscal First-Quarter Outlook
For the first quarter of fiscal 2027, Flexsteel projected net sales of $111 million to $115 million, representing growth of 1% to 4% from the prior-year quarter. The company expects growth in soft seating to outweigh sales declines from the discontinued Homestyles category.
Flexsteel forecast operating margin of 6.5% to 7% for the quarter. Management cited inflation affecting raw materials, sourced finished goods, domestic transportation and inbound ocean freight since the beginning of the Middle East conflict. The company has implemented cost-saving measures and a modest price increase in an effort to offset those pressures.
“We anticipate our mitigation actions to mostly offset cost inflation,” Ressler said, while noting that gross and operating margins could face some pressure depending on the severity of supply-chain inflation and the effectiveness of mitigation efforts.
Management expects selling, general and administrative expense to be in the high-15% to low-16% range as a percentage of sales, while continuing to fund growth investments. Schmidt said Flexsteel is maintaining its strategy despite consumer caution and a fluid tariff environment, emphasizing product innovation, productivity, brand investment and disciplined cost management.
About Flexsteel Industries (NASDAQ:FLXS)
Flexsteel Industries, Inc (NASDAQ: FLXS) is a U.S.-based furniture manufacturer specializing in the design, production, and marketing of residential upholstered furniture and wood casegoods. The company operates through two primary segments: Upholstery, which encompasses seating products such as sofas, loveseats, chairs, recliners, and sectionals; and Casegoods, which includes accent and occasional tables, cabinets, bookcases, and other wood-based furnishings. Flexsteel sells its products through a network of independent retailers, furniture stores, and distributors across North America.
Flexsteel’s upholstery segment is distinguished by its patented Blue Steel Spring® technology, which offers enhanced longevity and comfort by replacing conventional webbing and springs with a welded steel seat suspension.
