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U.S. office furniture makers to report dismal quarter

Tuesday 3 February 2009

Office furniture makers in the United States are expected to report their worst-ever quarter of 2008, even as they enter onto shakier ground in 2009.

Weak demand, rising office vacancies and aggressive corporate downsizing over the last months have hurt these companies that sell everything from desks and chairs to cubicles and cabinets.

This quarter in particular is going to be hit severely as the last few months of 2008 saw office furniture orders and shipments fall dramatically, reflecting some of the worst figures in years.

\"Industry data for the month of November was very miserable,\" said Longbow Research analyst Mark Rupe.

In November, orders dropped 21 percent and shipments fell 9 percent, according to the Business and Institutional Furniture Manufacturers Association.

Orders had dropped 6 percent in October and 2 percent in September, while they rose 1 percent in August.

\"It is definitely the worst quarter of 2008,\" said Rupe.

There appears to be no breather for office furniture makers even as they wrap up the dismal calendar year.

\"There will be quarters in 2009 that will be worse than the fourth quarter,\" said Rupe.

The manufacturers\' group expects 2009 orders and shipments to fall 13.1 percent and 11.6 percent, respectively.

\"I would expect that business would get worse before it gets better,\" Rupe said.

HNI Corp (HNI.N), the leading office furniture maker in the United States, is expected to post its steepest drop in quarterly profit this year. Revenue is expected to fall 5 percent.

HNI, which also makes hearth products, has seen its profit excluding special items fall for at least three straight quarters now, while revenue has been declining since fiscal 2007.

For East Greenville, Pennsylvania-based Knoll Inc (KNL.N), which will be the first of the lot to report, the Street expects a sales drop for the first time this fiscal year.

\"Demand continues to be weak and pricing expectations seem to be weakening,\" BB&T Capital Markets analyst Matthew McCall wrote in a preview note.

October and November shipments, which represent two of the three months in Knoll\'s and HNI\'s fourth quarter, were down 3.9 percent, said McCall.

\"In addition, Q4 orders to date are 13 percent below the prior-year period, offering little optimism for Knoll\'s Q1 and Q2, from a top-line perspective,\" McCall said.


Herman Miller (MLHR.O) and Steelcase (SCS.N), which operate on a different calendar, have already reported a quarter that included \"the ugly\" November.

Herman Miller reported a 6 percent fall in sales and a 26 percent drop in orders for the quarter ended November.

Steelcase, the world\'s largest office furniture maker, guided toward a fourth-quarter loss.

\"I think it is getting progressively getting worse,\" analyst Rupe said.

Herman Miller is expected to post the smallest quarterly profit of its current fiscal year when it reports its third-quarter results in mid-March.

Steelcase is expected to post a 25 percent drop in sales and its first loss in at least 11 quarters.

The companies have been forced to take number of- cost reduction measures.

Herman Miller said it would reduce its workforce by 1,000 jobs and refused to provide guidance, citing lack of visibility.

Steelcase cut its dividend by nearly half to 8 cents and said it would cut jobs and consolidate facilities.

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