Flexsteel's Q2 Earnings and Sales Beat Estimates, Stock Up

Core Insights - Flexsteel Industries, Inc. reported strong second-quarter fiscal 2025 results, with earnings and net sales exceeding expectations and showing year-over-year growth [1][4] Financial Performance - Adjusted earnings per share (EPS) reached 95 cents, surpassing the Zacks Consensus Estimate of 74 cents, and increased from 57 cents in the prior-year quarter [4] - Net sales amounted to $108.5 million, exceeding the consensus estimate of $105 million by 3.7% and reflecting an 8.4% increase from the previous year [4] - Home furnishings sales through retail stores rose by 10.3% year-over-year, contributing to the overall sales growth [4] Operational Highlights - Flexsteel achieved its fifth consecutive quarter of positive sales growth, driven by strong performance in core markets and new initiatives [2] - The company expanded its operating margin by 150 basis points year-over-year to 6.1% [7] - Gross margin contracted by 90 basis points to 21% due to higher ocean freight costs, although selling, general, and administrative expenses as a percentage of net sales decreased by 240 basis points to 14.9% [6] Cash Flow and Debt Management - The company generated positive free cash flow, allowing it to pay off remaining bank debt and accumulate cash, with cash and cash equivalents increasing to $11.8 million from $4.8 million at the end of fiscal 2024 [2][8] Future Guidance - For the third quarter of fiscal 2025, Flexsteel expects net sales between $110 million and $115 million, indicating a growth of 3% to 7% compared to the prior year [9] - The company raised its fiscal 2025 net sales guidance to a range of $435 million to $445 million, up from the previous expectation of $427 million to $440 million, reflecting a projected growth of 5.5% to 8% year-over-year [9] Market Reaction - Following the positive earnings report, shares of Flexsteel increased by 6.9% in after-hours trading, driven by favorable investor sentiment [3]