Flexsteel Industries (FLXS) reported a 7.5% adjusted operating margin in fiscal year 2026, up from roughly 1% in 2022, during a presentation at the 17th Annual Midwest IDEAS Conference on August 26, 2026. The company, which generates around $500 million in annual revenue, also posted diluted adjusted earnings per share of $4.94 for the year, while maintaining free cash flow exceeding $40 million annually over the past two years.
Chief Executive Officer Derek Schmidt and Chief Financial Officer Michael Ressler highlighted Flexsteel’s 11 consecutive quarters of year-over-year growth in a challenging furniture market. More than 50% of current sales now come from products launched within the last three years, with health and wellness products expected to account for about 12% of revenue, up from zero three years ago. Living room furniture remains the core segment, representing over 80% of sales.
The company’s operational structure relies on a dual sourcing model, with approximately 67% of products sourced from Asia—primarily Vietnam—and 33% manufactured in-house in Mexico. Flexsteel reported no manufacturing exposure to China. High-volume seating products from Asia are warehoused for delivery within two weeks, while custom-order products made in Mexico offer delivery in three to four weeks, supported by over 800 fabric options and multiple leg finishes.
Flexsteel’s supply chain faces headwinds from elevated tariffs, including a 25% Section 232 tariff on Vietnamese seating products, set to rise to 30% on January 1, 2027. Non-seating products from Vietnam face a 12.5% tariff. Additional pressures include weak consumer sentiment, high ocean freight rates, and ongoing geopolitical disruptions. The company noted that most expected tariff refunds have already been received and does not anticipate significant additional refunds.
Capital expenditures have remained below 1% of revenue, averaging $5 million or less annually, while working capital has been managed at or below 20% of sales. The company ended FY26 with over $16 million in cash, down from more than $40 million the prior year. Flexsteel has returned over $160 million to shareholders since 2020 through buybacks and dividends, including $60 million used to repurchase shares from a major shareholder.
For the first quarter, Flexsteel guided for sales growth of 1% to 4% and an operating margin between 6.5% and 7%. Longer-term targets include potential revenue of $750 million and operating margins of 8% or higher.
