Despite stronger sales, Flexsteel is impeded by foam, container shortage
April 28, 2021 | 11:02 am CDT
Flexsteel chair manufacturing

Furniture giant Flexsteel, number 28 on the FDMC 300, reported strong sales increases for the quarter ending March 31, 2021.

Net sales increased nearly 20 percent to $118.4 million compared to $98.8 million over the same period last year. Organic net sales, excluding its discontinued vehicle seating and hospitality lines, increased 32.9 percent. Gross margin increased to 19.5 percent over last year's 14.0 percent. Record backlog growth of 131 percent was also seen.

The company faces issues related to its supply chain, however:

"In the near term, our biggest obstacle to achieving our full sales growth potential, overcoming the global supply chain challenges which our entire industry is currently battling," said CEO Jerry Dittmer in an earnings call. "The biggest supply chain impediments which we face right now are material availability, namely foam and the ocean container availability and transit speed.

"Let me first start with the shortage of foam, which is having a crippling impact on the furniture industry, as well as in many other industries, including automotive. We've been fighting foam shortages since last fall due to the imbalance between strong consumer demand and available materials. Until recently, we've been effectively managing the foam allocation situation by leveraging multiple strategic suppliers, improving forecasting to suppliers and utilizing alternative specifications were acceptable.

"However, the recent harsh weather that caused a deep freeze in Louisiana and Texas, where most of the key chemical inputs for foam are produced, has significantly aggravated the material shortage. Unlike some furniture manufacturers who are forced to temporarily shut down operations in recent weeks due to the foam shortage, we have been able to keep our manufacturing plants running and stable, albeit at reduced levels, due to proactive planning. However, the worsening situation with foam has constrained our production and unfortunately for furniture consumers has extended lead times for manufactured product. Despite our longer lead time, we are still at advantage versus our competitive alternatives in the market. The second big supply chain challenge is availability of ocean containers which has been an issue for almost a year.

"The shipping industry is still trying to catch up with demand, but the mixture of low container inventories, congestion at U.S. ports and increasing consumer demand due to economic recoveries in the U.S. and Europe have extended the shortages which are expected to continue. As a reminder, roughly 65% to 70% of our sales are derived from products that are sourced globally.

Flexsteel undertook a major restructuring effort early 2020, opting to exit the hospitality and RV furniture markets, permanently close manufacturing plants in Dubuque, Iowa, and Starkville, Mississippi, and move production to Mexico and Asia. In 2019, it shut down a facility in Harrison, Arkansas and another in Riverside, California, laying off hundreds of employees.

It's all paid off, said Dittmer.

“The transformation plan is working,” he said. “With profitability restored and plans in place to sustain that profitability, we are now pivoting to the next phase in our transformation, to aggressively pursue new sources of profitable growth.”

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About the author
Robert Dalheim

Robert Dalheim is an editor at the Woodworking Network. Along with publishing online news articles, he writes feature stories for the FDMC print publication. He can be reached at robert.dalheim@woodworkingnetwork.com.