Flexsteel（FLXS）2027年度第1四半期決算説明会：売上高は3.2%増加

要点

• 2027年度第1四半期の売上高は前年同期比3.2%増の1億1,400万ドルとなり、Flexsteel Industriesとして12四半期連続での前年同期比増収を達成しました。
• 撤退したノックダウン（組み立て式）家具カテゴリー「Home Styles」を除くと、継続事業であるFlexsteelブランド事業の売上高は約5%増加しました。受注は約5%増加し、期末の受注残高は8.2%増の7,770万ドルとなりました。
• GAAP営業利益は690万ドル（営業利益率6.0%）となりました。為替換算の影響により、営業利益は約80万ドル（約70ベースポイント）押し下げられました。
• 粗利益率は前年同期の23.5%から22.0%に低下しました。これは為替の影響に加え、貨物輸送、陸上輸送、原材料、および仕入れ完成品におけるインフレを反映したものです。
• 経営陣は、2027年度第2四半期の売上高見通しを1億1,950万〜1億2,300万ドル（前年同期比1%〜4%増）、営業利益率を6.5%〜7.0%と示しました。
• Flexsteelは、生産性の向上、ポートフォリオの最適化、サプライチェーンにおけるコスト削減を推し進めつつ、平均で約2%〜3%の価格調整を計画しています。

主要財務データ

事業および業績の動向

主な売上成長の牽引役はソフトシーティングであり、Flexsteelが撤退を進めている「Home Styles」ノックダウン家具事業の減収により一部相殺されました。箱物家具（ケースグッズ）の売上高は前年同期比でほぼ横ばいでした。

経営陣は成長の要因として、新製品の投入、戦略顧客との取引拡大、ヘルス＆ウェルネス製品の好調を挙げました。また同社は、戦略顧客、特定のヘルス＆ウェルネス製品、および没入型サウンドシーティングソリューション全体で販売数量が増加したと報告しました。

Flexsteelは、特許取得済みの「Blue Steel」スプリング技術の第6世代である「SixFlex」を搭載した「6000シリーズ」と、「Comfort Choice」プログラムを導入しました。また同社は、「Embrace」、「Zen」、「RISE」コレクションを通じてウェルネス関連ポートフォリオを拡充しているほか、第2世代「Stratus」製品により没入型シーティングプラットフォーム「Pulse」の開発を進めています。

消費者調査、イノベーション、製品開発、マーケティング、需要創出への投資を実施したため、販売管理費は増加しました。経営陣は、これらの投資は市場シェアの拡大と長期的な成長を支えることを目的としていると説明しました。

業績見通し（ガイダンス）

2027年度第2四半期について、経営陣は以下を予想しています。

• 売上高：1億1,950万〜1億2,300万ドル（前年同期比1%〜4%増）
• 営業利益率：6.5%〜7.0%
• ソフトシーティングの継続的な成長。ただし、Home Stylesの売上減少により一部相殺。
• 数量効果、コスト削減、ポートフォリオ管理、緩やかな値上げにより、海上貨物、国内輸送、原材料におけるエネルギー関連の追加インフレの大半を相殺。

経営陣は、売上高見通しにおける最大の変動要因として消費者需要を挙げました。

リスクと注目点

海上運賃はこの6か月間でほぼ倍増しており、国内輸送費、原材料費、仕入れ製品コストも上昇しています。経営陣は、第1四半期におけるインフレによる追加コストを約150万〜200万ドルと推計しており、第2四半期も同程度の追加コストを見込んでいます。

経営陣によると、インフレとエネルギーコストの上昇が家計を圧迫しているため、消費者マインドは依然として弱い状況です。また、住宅の購買力低下や住宅ローン金利の上昇により住宅流通が抑制されており、これが家具需要の重要な推進要因であると同社は指摘しています。

Flexsteelはさらに、地政学的な不確実性と関税政策の変化も挙げました。張地付き家具に対する通商拡大法232条に基づく関税は、2027年1月1日に25%から30%へ引き上げられる予定です。経営陣は、この引き上げが実施された場合、さらなる価格改定が必要になる可能性があると述べました。

アナリストQ&Aの要点

経営陣によると、平均販売価格は前年比で約10%上昇しました。これには既存の張地付き家具に対する25%の関税が一部反映されています。値上げにもかかわらず、Flexsteelは複数の戦略的取り組みにおいて有意義な販売数量の増加を記録しました。

同社は、コストインフレに対処するため平均約2%〜3%の価格調整を検討しています。経営陣は、価格設定においてコスト削減、生産性向上、市場競合力の維持とのバランスを取ることを強調しました。

コスト削減策には、工場ワークフローの再設計、労働生産性の向上、製品プラットフォームの共通化推進、物流スケールのより効果的な活用が含まれます。また、Flexsteelはより利益率の高い製品群へ需要を誘導しています。

経営陣は、第1四半期の営業キャッシュフローがマイナスとなったことについて、従業員の報酬支払い、年間のソフトウェアおよび保険費用による季節的な要因と説明しました。同社は今後の四半期でプラスのキャッシュ創出を見込んでおり、貸借対照表の柔軟性維持、生産性向上プロジェクトへの資金投入、魅力的なリターンが見込める分野への再投資、および責任ある株主還元という優先事項を改めて示しました。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to the Flexsteel Industries First Quarter Fiscal Year 2027 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mike Ressler, Chief Financial Officer for Flexsteel Industries. Please go ahead.

Michael Ressler

Thank you, and welcome to today's call to discuss Flexible Industries First Quarter Fiscal Year 2027 Financial Results. Our earnings release, which we issued after market close yesterday, Monday, October 26, and is available on the Investor Relations section of our website at www.flexsteel.com, under News & Events. I'm here today with Derek Schmidt, President and Chief Executive Officer. On today's call, we will provide prepared remarks, and then we will open the call to your questions.

Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements. Which can be identified using words such as estimate, anticipate, expect and similar phrases.

Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q and other SEC filings as applicable.

These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, we may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Press release available on the website contains the financial and other quantitative information to be discussed today.

And with that, I'll turn the call over to Derek Schmidt. Derek?

Derek Schmidt

Good morning, and thank you for joining us today. I'm pleased to share our first quarter fiscal year 2027 results. Despite a challenging macroeconomic environment, and significant inflationary pressures across our supply chain, our team continued to execute well, delivering solid sales growth and profitability while advancing the strategic initiatives that we believe will drive long-term shareholder value.

During the quarter, net sales increased 3.2% compared to the prior year toward the upper end of our guidance range and marked our 12th consecutive quarter of year-over-year growth. Excluding the impact of our exit from the Home Styles ready-to-assemble furniture category, Sales in our continuing Flexsteel branded business grew approximately 5%. Encouragingly, our growth momentum extends beyond reported sales. Orders increased approximately 5% during the quarter and our ending backlog grew 8.2% compared to the prior year. These trends, combined with the continued performance of our key growth initiatives reinforce our confidence in the underlying strength of our business.

Our growth continues to be driven by several complementary initiatives, including new product interactions, share gains with strategic accounts and expansion in our health and wellness category. These initiatives are performing well despite continued softness in the broader furniture market, providing further evidence that our investments in consumer insights, innovation, product development and customer experience are strengthening our competitive position. From a profitability standpoint, our results were solid. Although impacted by an unfavorable foreign currency translation loss late in the quarter. Reported GAAP operating margin was approximately 6%, below our guidance range of 6.5% to 7%. However, our results included approximately $800,000 of unfavorable foreign currency impact related to the strengthening U.S. dollar against the Mexican peso. Excluding the 70 basis point impact, operating margin was solid and in line with our expectations for the quarter.

Given the significant inflationary pressures we're experiencing, I am encouraged by our underlying operating performance and ability to largely offset these cost headwinds to maintain healthy margins. Ocean transportation rates have nearly doubled over the past 6 months, while domestic transportation costs have increased substantially with surging diesel fuel prices. These pressures, along with higher costs for materials and sourced products are creating difficult operating conditions for our industry. Our teams continue to respond to these challenges with urgency and discipline identifying cost savings opportunities, improving productivity, managing our product portfolio and implementing modest pricing actions to mitigate these pressures. While we've offset a portion of the inflationary impact, these cost pressures are expected to remain a meaningful near-term challenge.

Looking ahead, our outlook for the broader industry remains measured Consumer confidence continues to be weak and households are increasingly selective about discretionary purchases as inflation and higher energy cost consuming greater share of budgets. Holding affordability remains challenging and rising mortgage rates continue to constrain housing turnover, an important driver of furniture demand. Geopolitical uncertainty particularly the ongoing conflict in the Middle East continues to create volatility in energy and transportation markets.

In addition, tariff policy remains a significant source of uncertainty including the scheduled increase in Section 232 tariffs on upholstered furniture from 25% to 30% on January 1, 2027. These factors could continue to pressure both industry demand and profitability in the near term, and we recognize the importance of remaining agile as conditions evolve. However, what gives me the greatest confidence in Flexsteel future is not an expectation that the external environment will improve. It's the progress for making strengthening the capabilities that allow us to compete more effectively in any environment.

Over the past several years, we've invested deliberately in becoming a more consumer-driven and innovation-led organization. And what I'm particularly encouraged by today is how these investments are beginning to work together as an integrated system. We're lifting more closely to consumers translating those insights into meaningful innovation, sharpening our product platforms and bringing differentiated products to market with stronger marketing and customer support.

Our recent fall High Point furniture market provided several compelling examples of that progress. First, we're strengthening our core made-to-order seating business through consumer-led innovation. Our research continues to reinforce that comfort quality and durability are among the most important factors influencing furniture purchases. Consumers value personalization, but they also want the shopping experience to be simple and intuitive. These insights directly inform the introduction of our new 6000 series featuring SixFlex, the sixth generation of our patented Blue Steel spring technology and our new Comfort Choice program.

SixFlex advances the comfort and performance of our signature seating technology, while Comfort Choice allows consumers to select from 3 distinct comfort levels without adding unnecessary complexity to the buying experience. What excites me about this launch is that we're taking 1 of Flexsteel's most enduring competitive advantages, comfort and quality, and they can get even more relevant to today's consumer. It's a strong example of how consumer insights and innovation can reinforce the core of our business. The response from our retail partners has been overwhelmingly positive to this new introduction which provides us optimism about accelerated growth in this important category.

Second, we're significantly expanding our opportunity in health and wellness. Our consumer research has identified attractive opportunities across 4 distinct wellness needs, sleep, care, restore and assist. Building on the success of Z Kleiner and sleep, we're expanding into care, specifically nurse reseating through our new Embrace brand. We're also expanding in a restorative wellness through our Zen collection, and we're expanding our assist or mobility and independent solutions through our new RISE collection. Together, these 4 wellness platforms broaden our opportunity to serve consumers across different life stages, from young families to aging adults with products designed around meaningful need in the home.

We believe our consumer-led approach positions Flexsteel to participate in attractive new categories while building on our long-standing strengths in comfort, ergonomics and durability. Third, we're introducing differentiated innovation that creates new reasons for consumers to choose Flexsteel. Our Pulse immersive seating platform is a strong example. With the introduction of Stratus, our second generation of immersive seating. We're elevating the home entertainment experience to a whole new level. By leveraging new innovation in advanced sound and sensor technology, we're delivering the first fully Dolby Atmos certified solution that spans both the sound bar and the sound system integrated into furniture and in the process setting a new bar for a truly amazing immersive seating experience.

We're also expanding our partnership with nationally recognized broadcaster, Dan Patrick, to build awareness and consumer demand for pulse following our work together supporting Zer. This combination of meaningful product innovation and targeted marketing is an important part of how we're working to strengthen our brand and drive consumer traffic to our retail partners.

Finally, we're continuing to strengthen our position in case goods. Our statements collection is benefiting from deeper consumer insights into how people shop for bedroom, dining and occasional furniture. We're focused on quality coordinated designs and functional features that simplify purchasing decisions while helping retailers present compelling whole home solutions. So in summary, while these 4 initiatives span different product categories, they share a common foundation, understanding consumer needs, developing differentiated solutions and executing effectively with our retail partners.

And that's the larger strategic point I want to emphasize. Flex Steel is becoming a more consumer-driven and innovation-led company, supported by increasingly disciplined execution. These capabilities are not operating independently. They are reinforcing 1 another. Creating a stronger foundation for sustainable growth and market share gains. We recognize that the external environment may remain challenging. Consumer demand could continue to be uneven and inflationary and tariff-related pressures may create additional volatility in our financial performance. But even in challenging markets, companies are rewarded that are focused differentiated and disciplined. They reward companies that understand their consumers, support their customers and consistently bring compelling products to market. And that's exactly what we're working to do at Flex Steel.

We're not standing still in a difficult environment. We're strengthening the core capabilities that have made it Flexsteel a trusted brand for generations while creating new reasons for consumers and retailers to choose us. Combined with our strong balance sheet, disciplined operating model and continued strategic investments, these capabilities give me confidence in our ability to no gate near-term challenges and drive long-term profitable growth and shareholder value.

With that, I'll turn the call over to Mike, who will provide additional details on our first quarter financial performance and outlook. Mike?

Michael Ressler

Thanks, Derek. For the first quarter, net sales were $114.0 million, or growth of 3.2% compared to net sales of $110.4 million in the prior year quarter. As Derek mentioned, this marks our 12th consecutive quarter of sales growth compared to prior year periods and near the upper end of our guidance range of 1% to 4% growth. The increase was primarily driven by soft seating products partially offset by lower sales of our Homestyle branded ready-to-assemble category, which we are exiting. Sales of case goods were relatively flat versus the prior year quarter. Sales of our backlog at the end of the period was $77.7 million, which was up roughly 8% versus the prior year ending backlog.

From a profit perspective, the company delivered GAAP operating income of $6.9 million or 6.0% of sales in the first quarter. The GAAP operating income included a $0.8 million or 70 basis point unfavorable impact from foreign currency translation of our peso-denominated Mexico assets resulting from the significant strengthening of the U.S. dollar in the quarter. Excluding the impact of the foreign currency translation loss, results were in line with expectations for the quarter.

Gross profit margin for the quarter was 22.0% and compared to 23.5% in the prior year quarter. The decrease was primarily driven by a 130 basis point negative impact from foreign currency translation as the current quarter included a translation loss of $0.8 million, while the prior year quarter included a translation gain of $0.7 million. Inflation in ocean freight, domestic transportation, raw materials, and source finished goods driven by higher energy prices was mostly offset by cost savings, product portfolio management and modest price increases in the quarter.

SG&A expenses for the quarter were $18.2 million or 16.0% of sales versus $17.0 million or 15.4% of sales in the prior year quarter. The increase was driven by investments in consumer insights, innovation, new product and marketing and demand generation to execute our growth strategy and strengthen our operating model.

Moving to the balance sheet and statement of cash flows. The company ended the quarter with a cash balance of $4.4 million, working capital of $80.5 million and no bank debt. Moving to the outlook. We project sales of $119.5 million to $123.0 million in the quarter or growth of 1% to 4% led by continued growth in soft seating products, partially offset by a decline in home styles branded ready-to-assemble products. The key determinant to our top line forecast with the largest variability will be consumer demand. From a profit perspective, we project operating margin in the range of 6.5% to 7.0% in the quarter.

Relative to the first quarter, we expect volume leverage, cost savings initiatives product portfolio management and modest price increases to largely offset incremental energy-driven inflation we are experiencing within ocean freight, domestic transportation and materials.

With that, I'll turn the call back over to Derek to share his closing perspective.

Derek Schmidt

Thanks, Mike. As we look ahead, we recognize that the external environment remains challenging. Consumer confidence continues to be pressured by inflation and economic uncertainty while elevated transportation and material costs, geopolitical developments and evolving tariff policies create additional risk for our industry. While we can control these external forces, we can control how we respond. And I believe our first quarter results demonstrate that we're responding effectively.

We delivered another quarter of sales growth, strengthened our order backlog and continued to gain traction across our key growth initiatives. All while navigating significant cost pressures. These results reinforce my confidence in both our strategy and the capabilities we've built to execute it. What excites me most is the progress we're making towards becoming a more consumer-driven and innovation-led company.

Our investments in consumer insights, product development, innovation and marketing are increasingly working together to create differentiated products, strengthen our customer partnerships and generate new opportunities for growth. We're not relying on a recovery in industry demand to drive our success. We're focused on creating our own opportunities through better execution, stronger innovation and continued market share gains. And while we'll remain financially disciplined and agile in managing near-term challenges, we're equally committed to investing in the capabilities that will strengthen our competitive position and create sustainable long-term value.

We believe our strong balance sheet, resilient operating model and increasingly differentiated growth strategy position Flexsteel well to navigate the uncertainties ahead while continuing to build a stronger business for our customers and shareholders.

With that, we'll open the call to your questions. Operator?

Operator

[Operator Instructions] And our first question comes from Anthony Lebiedzinski from Sidoti.

質疑応答

Anthony Lebiedzinski

Certainly nice to see another quarter of revenue growth here in your first fiscal quarter. So just curious for your core FlexSteel branded products, can you just talk about overall pricing versus unit volumes, what you saw in 1Q? .

Michael Ressler

Anthony. Yes, I would say when you look at pricing kind of on average versus the prior year, I would say it's up about 10%. Clearly, there's been a lot of changes with 25% tariff on upholstered furniture. So 10% increase overall on average. What's encouraging though is we did actually have meaningful unit volume growth within several of our key growth initiatives, including penetration and growth with strategic accounts. we've seen unit volume growth across several new health and wellness category items and then also we're seeing nice unit volume with our new immersive sound solutions we've introduced.

Anthony Lebiedzinski

Got it. That sounds pretty good. Okay. And then -- so I know you touched on this a little bit here, but obviously, with the higher ocean freight costs and domestic transportation costs on the rise, you also talked about material costs as well. It sounds like you're looking to do some price increases. Can you perhaps share more details as to the extent of those price increases? And then -- you touched on the Section 232 tariffs. Will there be another price increase in January if that goes through as expected? .

Michael Ressler

Yes, Anthony, let me hit those points real quick. So yes, there's certainly been meaningful cost pressures on the business starting back to kind of before the conflict in the Middle East, we've seen ocean freight rates nearly double what they were 6 months ago. Certainly, everyone pays attention to what's going on with diesel and a lot of that's trickling through the supply chain into a lot of the raw material costs, et cetera. .

Obviously, we take a balanced approach in terms of what we can do to mitigate that. Certainly, pricing is 1 of the levers, and we do that, but we're also mindful of the sensitivity around pricing and wanting to be competitive in the market. And we also are hyper-focused on delivering cost savings and productivity improvement initiative to get to kind of what we think is the right amount. And you could expect somewhere in the range of probably a 2% to 3% kind of price adjustment that we're looking at taking here on average .

As it relates to tariffs going -- Go ahead.

Anthony Lebiedzinski

No, go ahead, sorry. .

Michael Ressler

Yes. And as it relates to your question on Section 232 tariffs, which are scheduled to go from 25% to 30% here January 1. Obviously, we we've been planning around multiple scenarios there. And certainly, we'll approach it like we've done other cost pressures we have in terms of driving productivity and cost savings. But obviously, we'll need to look at pricing as a lever as well, which we would expect it to be kind of an industry-wide event if that was to -- if it was -- if the rates were to go up to 30%.

Anthony Lebiedzinski

Understood. Okay. And then in terms of the cost savings initiatives and productivity improvements. Is it possible if you could provide some more details as to what you're looking to do? And what impact on margins this could have as you do some of these things? .

Michael Ressler

Yes. I guess the way we look at it, Anthony, is we look at cost savings and productivity improvements across the entire supply chain. And we also focus on optimization of our product portfolio and driving demand to more profitable products. What I would tell you is we're looking at using it to largely offset a significant amount of cost headwinds -- just to give you an example, the inflation that we incurred incremental inflation in this quarter was probably somewhere in the $1.5 million to $2 million range, and we would expect it to be that level of kind of incremental increase in Q2. .

Derek Schmidt

Maybe, Anthony, just to add on a little bit of color to Mike's point. I mean if you're looking for specific examples of cost savings, I mean, we've got a phenomenal team down in our Waras operations. They continue to redesign the flow in our plants, drive labor productivity. I think we've talked to you several times about all of our efforts around platforming majority of our are certainly our domestic manufactured products now that we're coming up with are all platformed. So again, less parts, more commonization -- so we're seeing productivity and a better margin profile for those. And then we continue to align ourselves from a logistical standpoint with the best partners possible driving economies of scale and scope. So I think those 3 areas would probably be the most meaningful in terms of where we're driving our cost savings here in fiscal year .

Anthony Lebiedzinski

And then lastly for me, I guess, so looking at just the cash flow statement. So cash from operations was slightly negative in the quarter. Was this mostly timing issues with some of the items there? And do you think this will reverse somewhat in the next quarter -- and just I guess, second part to that question would be if you have any updated thoughts on capital allocation after you did the big share buyback in April? .

Michael Ressler

Anthony, so Q1 is a typical quarter where we have heavy outflows. We have employee compensation payouts. We also have some of our larger software agreements and insurance contracts it paid out in Q1. So it's pretty normal seasonal type of activity, and we would expect positive cash flow generation here on moving forward in the future quarters.

As far as capital allocation goes, our strategy is consistent with what we've communicated in the past. we want to maintain a strong balance sheet, maintain financial flexibility to operate in a challenging environment. We'll certainly fund capital projects that drive productivity. Evaluate opportunities to reinvest in the business where there's attractive returns. And then certainly, as we've demonstrated, we'll return capital to shareholders in a responsible manner.

Anthony Lebiedzinski

Understood. Thank you very much, and best of luck. .

Operator

[Operator Instructions] There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Derek Schmidt for any closing remarks.

Derek Schmidt

Thank you. In closing, I want to thank all of our Flexsteel employees for their continued hard work, dedication and commitment to excellence. Our first quarter results reflect the strength of our team and the progress we're making in executing our strategy, even in a challenging operating environment. I want to thank all of you for joining us today and for your continued interest in Flexsteel, and we look forward to updating you on our progress next quarter. Thanks again.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.