DUBUQUE, Iowa — Flexsteel Industries Inc. reported its sixth consecutive quarter of year-over-year sales growth with a strong third quarter fiscal 2025. Still, the current economic environment and the potential impact of President Trump's tariff policies is casting some uncertainty over the future.

Key results for the third quarter ended March 31, 2025, included net sales for the quarter reaching $114.0 million compared to $107.2 million in the prior year quarter, an increase of 6.3% and the sixth consecutive quarter of year-over-year sales growth.
GAAP operating loss of ($5.1) million or (4.4%) of net sales, due to a $14.1 pre-tax impairment charge related to our leased facility in Mexicali, Mexico, compared to GAAP operating income of $3.0 million or 2.8% of net sales in the prior year quarter.
Adjusted operating income of $8.3 million or 7.3% of net sales for the third quarter compared to $5.6 million or 5.2% of net sales in the prior year quarter.

“We enter our fourth quarter under a very tough economic backdrop with substantial uncertainty following the release of the proposed U.S. reciprocal tariffs on April 2," said Derek Schmidt, company president, in an earnings call with industry analysts.

Tariff risks
Flexsteel is facing tariff risks from Vietnam and Mexico, which support 55% and 40% of its revenue, respectively, said Schmidt. Flexsteel has completely moved out of China for finished good product sourcing, and its primary tariff exposures now reside in Vietnam and Mexico.

"Currently," he said, "Vietnam production supports roughly 55% of our revenue, and our Mexican operations support almost 40% of sales. While we have seemingly avoided tariffs on Mexico for now, our product source from Vietnam are impacted by the 10% tariffs, which took effect on April 5 and remain in effect as the two sites negotiate a new trade agreement.

"Should the initial 46% reciprocal tariff rate that was announced on April 2, but subsequently delayed 90 days, ultimately go into effect on Vietnam goods, it will have wide-reaching implications both on Flexsteel business and the overall US furniture industry."

Schmidt says the company has taken steps to identify alternative sources in other countries beyond Vietnam, the other major furniture exporters like Cambodia, Thailand, Indonesia, and Malaysia, have similarly large proposed reciprocal tariffs, leaving the overall industry heavily exposed to tariff risks.

"Our current belief is that long term, 46% tariff on Vietnam is untenable for both countries and that the parties will negotiate a lower rate, although the timing of such a deal is difficult to predict. Exports make up a large percentage of Vietnam's GDP and the US accounts for roughly 30% of their total exports. So Vietnam has significant incentive to negotiate. They have already expressed a strong desire to make a deal with the US and took preemptive actions to cut tariffs on US goods and increased commitments to purchase more US goods and services. While we await clarity on a potential US-Vietnam deal, we have taken several steps to minimize our short-term tariff exposure."

Most notably, Flexsteel has implemented "modest" tariff surcharges on new orders for some parts of our business effective April 9, although these surcharges do not completely offset the 10% tariff on Vietnam imports. Furthermore, he said the company will continue to look for cost efficiencies and other savings to partially offset the impact of tariffs.

"If Vietnam tariffs are implemented at significantly higher rates than the current 10% for an extended duration, we will take the necessary steps to realign our sourcing. While reconfiguring our global supply chain would not be easy or fast and tariffs could have an adverse impact to margins in the short term, I do feel confident that we are prepared to swiftly optimize our network if required."

New products
Schmidt also pointed to new product introductions that he says will help offset the tariff problem. For instance, at the April High Point Market, the company released an "exciting lineup of new products to showcase." Twenty-five new groups spanning all areas of our business were launched including expanding its Zecliner lineup with additional SKUs, adding new bedroom, dining, and occasional groups to its case goods offering, and adding a "plethora of sleek, stylish products" with improved functionality to our stationary and motion soft seating portfolio.

"New product has been an underpinning to our growth story over the past several years," Schmidt added, "and we remain aggressive in continually bringing fresh looks with improved value to our retail partners."