Furniture producer Flexsteel Industries, Inc. is stepping away from the RV industry, the company announced this week.
The company announced that sudden drops in demand due to the coronavirus pandemic contributed to the strategic decision to close that sector of its business along with its hospitality division. Flexsteel manufacturing facilities in Dubuque, IA and Starkville, MS also closed as part of the transition.
Jerry Dittmer, Flexsteel President & CEO, told KCRG News in Cedar Rapids that the company recently opted for the more long-term solution to its current financial situation.
“It has become clear that what was thought to be a short-term hit to these two already challenged businesses will now extend well into the future and will likely not return to pre-pandemic levels for some time,” Dittmer said. “These decisions were extremely difficult and in no way reflect the dedication or performance of our employees at the Dubuque and Starkville manufacturing facilities. This pandemic has been unforgiving to many companies including ours, and we find ourselves with heavy hearts in making these hard decisions as we attempt to navigate these uncharted business conditions.”
Read more from the company’s official announcement below:
Business Transformation Actions
Consistent with the previously announced comprehensive restructuring plan designed to increase shareholder value and pursue strategies that drive long-term profitable growth, the Company has decided to exit its Recreational Vehicle and remaining Hospitality businesses.
The specific timing of these exits and the associated financial impact will be determined in the fourth quarter and subsequently communicated once known. 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.
Management Commentary
“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.”
“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,” Dittmer added. “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.”
