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US Office furniture companies expect modest growth.

Monday 30 September 2013

Steelcase Inc. and Herman Miller Inc. both anticipate modest sales growth for the present quarter. In reporting quarterly sales and earnings this month, Grand Rapids-based Steelcase projected sales of $755m to $780m, growth of 4% to 7%, for the present third quarter of its 2014 fiscal year. Steelcase expects higher net income of 23 cents to 27 cents per share.
In a conference call with brokerage analysts, Steelcase President and CEO Jim Hackett said he couldn’t look beyond the present period to what 2014 may hold until later this year. He said it’s too early to offer comment on next year, although the need for employers to modernize offices will remain a key driver for the industry.
“I would tell you that our thesis remains unchanged, that we think the world is largely installed on an outdated model and it needs to modernize,” said Hackett, who earlier this year announced he would retire as CEO on Feb. 28, 2014. “And as long as the economies continue to stay reasonably OK, we think companies are going to continue to invest to update their spaces.”
For the second quarter of FY 2014, Steelcase reported sales of $757.6m, up 1.7% compared to the same period last year. The company also reported lower net income of $27.6m, or 22 cents per diluted share, for the quarter. A year ago, Steelcase had net income of $29.5m, or 23 cents per diluted share.
Quarterly revenue from Steelcase’s Americas division grew 3.5% to $558.7m, while the Europe-Middle East-Asia division (EMEA) recorded a sales decline of 5.4% to $134.4m.
Six-month sales for Steelcase were flat at $1.42 billion and net income declined to $40.8m from $42.7m.
A recently issued quarterly outlook from the Business and Institutional Furniture Manufacturers Association (BIFMA) in Grand Rapids projects North American shipments to grow 4.1% this year to $9.6 billion. It expects shipments to increase 6.1% to $10.2 billion in 2014.
Herman Miller President and CEO Brian Walker said the updated BIFMA outlook “seems to make sense when you get underneath it,” although the most difficult issue in predicting future business prospects is determining if we are “going to see some shock” to the economy.
Walker cites as potential economic disrupters a budget showdown between Congress and President Obama and possible U.S. involvement in Syria.
“We keep having these kind of crazy things … that (go) on. It seems to always sort of upset the apple cart. Every time you get good momentum, you get a pullback from other factors,” Walker said.
If the issue with the federal budget gets resolved quickly and “we get better economic activity in the general economy” in 2014 and 2015, “we should be set up for those being pretty decent years for the industry,” Walker said.
Industry-wide, North American shipments in the second quarter this year grew 5% from the same period a year earlier to $2.32 billion. Orders increased 4% to $2.47 billion. The second quarter growth reversed a small year-to-year decline in shipments of 1.6% in the first quarter to $2.10 billion.
The Zeeland-based Herman Miller reported sales of $468.1m for the first quarter of its 2014 fiscal year, a 4.1% increase from a year earlier. Net income for the quarter that ended Aug. 31 totalled $22.5m, or 38 cents per share, up 12.5% from the same period a year earlier.
Herman Miller expects sales in the present second quarter to grow 4% to 8% from a year ago to $460m to $475m. It expects net income of 38 cents to 42 cents per share, minus the $173m cost of terminating its pension plan during the quarter, plus a $50m contribution to the pension fund.

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