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Herman Miller readies ‘ambitious’ portfolio of new products

Thursday 4 April 2013

Research and development investments from the last few years will culminate this spring with Herman Miller Inc.’s plans to begin rolling out a wave of new products, including what President and CEO Brian Walker calls the largest “rethinking” of office design in 45 years.
Walker teased investors during Herman Miller’s recent quarterly conference call about a major office system the company has coming, as well as other product introductions.
At NeoCon, the office furniture industry’s North American trade show in June, Herman Miller will unveil “our most ambitious rethinking of the office” since the 1968 introduction of Action Office, an open-plan system that gave the world modular office panels that became the building blocks for cubicles.
In an industry where true innovation doesn’t come around too often, Herman Miller’s new system will come out in an era where teamwork, collaboration and the needs of a highly mobile workforce now drive the design of offices today.
Amid those client demands, Herman Miller is “committed to sustaining and building on our legacy of pioneering design for the larger workplace,” Walker told investors.
“Working with leading design firms and backed by intensive global research, we will demonstrate how the needs of individuals and their work can better intersect with a collaborative and group need (and) can bring new life to the office through furnishings technology and space design,” Walker said. “In short, we are creating the office people will want to work in and (where) organizations can achieve optimal real estate performance.”
Herman Miller’s R&D spending in recent years reflects a product pipeline that spokesman Mark Schurman says is “by far and away” the fullest in his 20 years with the company.
Herman Miller spent $41.0 million on product research and development during the 2012 fiscal year that ended last May, according to an annual regulatory filing with the U.S. Securities and Exchange Commission. That compares with $35.4 million in FY 2011 and $33.2 million in FY 2010.
“It’s a very large and very aggressive product development queue that we’ve been working toward the last couple of years,” said Schurman, Herman Miller’s director of corporate communications.
At this month’s Milan Furniture Fair in Italy, Herman Miller will debut what Walker described as a “complementary global furniture platform, serving open plan to executive offices and specifically designed for international markets.” Also coming are two new office designs for the Herman Miller Collection of classic product lines that are intended to “address today’s blending of work and lifestyle.”
The company will follow up with a “major refinement” of an existing seating line that will come out before June, Schurman said. Then comes NeoCon in Chicago from June 10-13 and the introduction of what Schurman describes as “not one system” but “multiple platforms” for office designs.
The new products coming in 2013 will become “the first in a series of new designs and technologies that we plan to commercialize over the next couple of years,” Schurman said.
In building its R&D pipeline, Herman Miller is seeking to come out with new products that generate higher margins. Walker anticipates the new products coming out this spring will start generating revenues during the latter part of FY 2014.
“I would suspect we won’t see a lot in volume from those products until we get into probably (the) tail end of (the) next fiscal year. … They won’t probably have a big impact until we get into fiscal ’15 in terms of actual revenue,” he said.
Walker touted the coming product debuts as he discussed results for the most recent quarter in a conference call with analysts.
For the third quarter of FY 2013 that ended March 3, Herman Miller reported sales of $423.5 million, up 5.9 percent from $399.8 million a year earlier. Brokerage analysts, in a consensus estimate, had projected quarterly sales of $436.3 million and Herman Miller in December offered sales guidance of $430 million to $450 million for the quarter.
The company’s North American furniture sales grew just 1.8 percent to $285.4 million, while non-North American furniture sales increased 16.7 percent to $90.8 million. The Specialty and Consumer division grew sales by 13.1 percent to $47.3 million.
Orders for the quarter grew 6.0 percent to $382.2 million and backlogged orders increased 9.4 percent to $266.6 million.
Quarterly net income totaled $16.5 million, or 28 cents per share, which compares with $14.9 million, or 26 cents per share, in the third quarter of FY 2012.
Nine-month net income declined 29 percent to $44.8 million, or 76 cents per share, from a year earlier, and sales for the first three quarters of FY 2013 increased by just 0.9 percent to $1.31 billion.
Herman Miller expects sales of $430 million to $450 million for the fourth quarter of its 2013 fiscal year, a 2-percent to 7-percent increase from the same period a year ago. The company projects net income of 30 cents to 34 cents per share for the quarter.
A recently updated forecast projects the office furniture industry to grow North American shipments by 2.1 percent in 2013 to $9.5 billion. As economic growth picks up, North American shipments may then grow 9.0 percent in 2014 to $10.3 billion, according to the quarterly outlook from the Business and Institutional Furniture Manufacturers Association.

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