DUBUQUE, Iowa - Flexsteel Industries announced it will exit its remaining Hospitality and RV businesses and permanently close manufacturing plants in Dubuque, Iowa, and Starkville, Mississippi.
In an April 28 conference call to discuss its quarterly earnings, the company stated, "Based on rapidly declining demand and changing market conditions driven by the coronavirus pandemic, it was determined that these businesses are no longer a strategic fit and will not provide an attractive return on investment for shareholders. These actions will enable the company to increase its focus on profitably growing three business platforms where it is advantaged and can create value: (1) home furnishings, (2) e-commerce, and (3) workspace solutions."
Headquartered in Dubuque, Iowa, Flexsteel is one of the largest manufacturers, importers and online marketers of furniture products in the United States. The company is ranked 26 on the latest FDMC 300 list of North America's largest wood products producers. The two plant closures are the latest for the company, which shut down a facility in Harrison, Arkansas and another in Riverside, California, last year as part of a restructuring effort.
On Tuesday, Flexsteel reported a third-quarter net loss of $5.3 million in the period ending March 31. The furniture manufacturer and importer reported fiscal 2020 third-quarter sales of $98.8 million, an 11.4% drop from the same period a year ago. Flexsteel attributed the decline to the China tariffs’ and, to a lesser extent, furniture store closures related to COVID-19 restrictions. Residential net sales dropped by $5.4 million in the third quarter, to $88.5 million. The company's contract net sales fell by $7.4 million, to $10.3 million for the quarter; Flexsteel said $5.5 million of the loss was related to the company's planned exit of the commercial office and custom-designed hospitality product lines. The remaining decline in contract net sales was due to lower demand for healthcare and vehicle products, including the plant closures of several major RV customers due to the coronavirus.
“Third-quarter net sales and profits fell short of our expectations as the impact of the 25% tariff continued to dampen demand and COVID-19 regulations closed the retail stores of many customers beginning in mid-March,” said Jerry Dittmer, president and CEO of Flexsteel Industries. “While no one can anticipate the ultimate severity and length of the pandemic, we took immediate precautions as outlined by the CDC to protect our employees and customers. We also took swift action to mitigate our operational and financial risk by reducing costs commensurate with current demand.”
Total net sales for the nine months fiscal were $302.1 million, with residential contributing $271.2 million and the contract segment at $30.9 million.
Dittmer added, “Regardless of the disruption across our industry and nation, we have reason to look ahead optimistically. Rather than hunkering down during the crisis, we are planning to accelerate our business transformation by pushing out the boundaries of opportunity while streamlining our operations and footprint. By exiting the Recreational Vehicle and Hospitality businesses, we will sharpen our organizational focus on growing those business platforms that strategically fit with our core competencies and have the greatest potential for long-term profitable growth. Within home furnishings and workspace, we are tailoring our product assortment to become more relevant to the market while simplifying our operations and improving our customers’ experience. In our e-commerce business there is significant potential to expand, and we are seeing great sequential growth and strong demand for our ready-to-assemble furniture sold primarily on-line. We have recently added to our talented team with the appointment of Derek Schmidt to Chief Financial and Chief Operating Officer. Together we are committed to coming out of this health and economic crisis more nimble, more flexible and more competitive.”
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