FGI Industries (NASDAQ:FGI) reported higher second-quarter revenue, expanded gross margin and a return to profitability, helped by trade-related recoveries and lower operating expenses. Management maintained its full-year outlook but indicated that current market conditions could push results toward the lower end of its guidance ranges.
Second-quarter revenue rose 2.9% from a year earlier to $31.9 million. Chief Executive Officer Dave Bruce said the company’s sanitaryware and shower systems businesses were the strongest contributors to growth, while bath furniture and other product categories continued to face mixed market conditions.
Margins Improve as Expenses Decline
Gross profit increased 22.5% year over year to $10.7 million, while gross margin rose to 33.4% from 28.1% in the prior-year period. Chief Financial Officer Jae Chung said the increase was driven by trade-related recoveries recorded during the quarter.
Operating expenses declined to $9.3 million from $9.5 million a year earlier, primarily due to lower selling and distribution expenses and efforts to optimize warehouse operations. The company said those initiatives are part of a broader effort to diversify its supply chain and reduce freight costs.
FGI reported a GAAP operating gain of $1.4 million, compared with an operating loss of $0.8 million in the prior-year quarter. GAAP net income attributable to shareholders was $1.3 million, compared with a loss of $1.2 million a year earlier. Adjusted net income was $1.2 million, compared with an adjusted net loss of $1.2 million in the prior-year period.
Chung said FGI ended the quarter with $7.9 million in total liquidity.
Tariff Recoveries Viewed as One-Time Offset
During the question-and-answer session, Chung said the company expected to disclose specific information on tariff refunds in its upcoming quarterly filing. He said FGI believes it has received all or the vast majority of recoveries associated with APA.
Bruce characterized the recoveries as a partial offset to costs the company has absorbed since last year. He said FGI continues to face trade-related expenses, including tariffs, other duties and VAT tax drawbacks affecting some suppliers.
“We expect, quite frankly, some additional tariff levies to be impacted at the beginning of next year,” Bruce said. “It’s an ongoing saga with the tariffs.”
The company has also worked with customers on promotional opportunities, including larger sanitaryware promotions during the quarter. Bruce said the repair-and-remodeling market remains relatively flat, making promotions a tool for driving incremental business and market-share gains.
Warehouse Expansion Supports Branded Growth Strategy
FGI expects to begin operating a new warehouse in Texas to support distribution across the Southern United States. Bruce said the Houston distribution center is expected to open by the end of 2026 and will help the company expand wholesale territories for its Contract brand.
The company continues to pursue what management calls its BPC growth strategy, which includes investing in brands, products and channels while continuing to serve larger proprietary and private-label customers. Bruce said FGI has seen particular success with branded shower systems products, including doors, spaces and walls.
Management also expects Covered Bridge Cabinetry to return to growth in the second half of the year. Shower systems are expected to maintain momentum as newly introduced products and customer programs continue to expand.
Guidance Maintained, Though Management Cites Soft Demand
FGI reaffirmed its 2026 guidance, which excludes trade-related recoveries:
- Revenue of $134 million to $141 million.
- Adjusted operating income of $0.7 million to $2.5 million.
- Adjusted net income ranging from a loss of $0.3 million to a gain of $1.1 million.
Chung said the market remains relatively soft, with customers maintaining a cautious approach toward building inventory. Order placements and shipping cadence have been consistent, he said, but management expects results to trend more toward the lower end of the company’s guidance ranges.
“We want to keep the guide where it’s at, but we would probably venture to say we’re going to look towards more the lower side, just based on the cautionary tone right now in the marketplace and some of the pressures that exist,” Chung said.
Geographically, Bruce said Canadian sales have experienced the most pressure, particularly in retail, where competitive and pricing pressures have been pronounced. U.S. conditions have been broadly flat outside of new programs where FGI has gained share, he said. In Europe, management cited consistent order cadence and progress expanding in the wholesale channel despite continued market pressure.
About FGI Industries (NASDAQ:FGI)
FGI Industries ltd. supplies kitchen and bath products in the United States, Canada, Europe, and internationally. The company sells sanitaryware products, such as toilets, sinks, pedestals, and toilet seats; wood and wood-substitute furniture for bathrooms, including vanities, mirrors, laundry, medicine cabinets, and other storage systems; shower systems; and customer kitchen cabinetry and other accessory items under the Foremost, avenue, contrac, Jetcoat, rosenberg, and Covered Bridge Cabinetry brand names.
