Flexsteel Industries Inc (NASDAQ:FLXS) stock rallies 15.49% (As on August 19, 11:17:15 AM UTC-4, Source: Google Finance) after the company reported fourth quarter earnings that significantly exceeded analyst expectations, driven by strong margin expansion and sales growth. Flexsteel’s adjusted operating margin expanded dramatically to 9.0% in the quarter, up 340 basis points from 5.6% in the same period last year. Management highlighted tariffs as a major risk in the new fiscal year, particularly the 20% tariff on imports from Vietnam, and outlined plans to mitigate these challenges through supply chain adjustments, cost savings initiatives, and limited pricing actions. Gross margin for the quarter ended June 30, 2025, was 23.9%, compared to 21.3% for the prior-year quarter, an increase of 260 basis points (“bps”). The 260-bps increase was primarily due to a 300-bps benefit from foreign currency translation of our peso denominated assets in Mexico. The benefit is the result of the peso significantly strengthening versus the dollar in the quarter. This was partially offset by the net impact of tariffs of 40-bps. The Company ended the quarter with a cash balance of $40.0 million, working capital of $110.4 million, and availability of approximately $54.1 million under its secured line of credit.

Meanwhile, during the quarter, the Company completed the sale of an ancillary building, formerly part of its Huntingburg, IN distribution center complex which was previously listed as held for sale. The Company recorded a pre-tax gain of $3.7 million related to the sale.

FLXS in the fourth quarter of FY25 has reported the adjusted earnings per share of 84 cents, beating the analysts’ estimates for the adjusted earnings per share of 75 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 3.4 percent to $114.61 million in the fourth quarter of FY25, beating the analysts’ estimates for revenue by 2.50%. The increase was driven by higher unit volume from soft seating products, partially offset by decreases in the homestyles branded ready-to-assemble products.

For the full fiscal year 2025, Flexsteel reported net sales of $441.1 million, up 6.9% from $412.8 million in the prior year. Adjusted earnings per share for the year reached $4.17 compared to $2.11 in the prior year.

Looking ahead, Flexsteel provided first quarter fiscal 2026 guidance with expected sales of $105-110 million, above the analyst consensus of $104.1 million, representing growth of 1% to 6% YoY. The company anticipates operating margins between 5.5% and 7% for the quarter.