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Despite price increases, Steelcase records $11.4M quarterly loss amid high inflation, fuel costs COURTESY PHOTO

Despite price increases, Steelcase records $11.4M quarterly loss amid high inflation, fuel costs

BY Thursday, June 23, 2022 12:27pm

GRAND RAPIDS — High inflation led Steelcase Inc. to record a loss in the most recent quarter despite strong double-digit sales growth and multiple price increases.

The Grand Rapids-based Steelcase (NYSE: SCS) recorded a $11.4 million net loss, or 10 cents per share, for the first quarter of its 2023 fiscal year on $740.7 million in global sales, which grew more than 32 percent from the same three-month a year earlier and beat expectations.

The net loss, which was lower than expected, came as the producer price index in the U.S. grew at 10.8 percent as of May and despite Steelcase implementing four price increases that contributed to about a quarter of the revenue growth. Another price increase — the fifth in 16 months — is coming in July. 

Steelcase also is implementing a surcharge “in response to rapidly increasing costs of petroleum-based products, freight and delivery,” according to Chief Financial Officer Dave Sylvester.

Even with the prior price increases, inflation cost Steelcase $15 million in the three-month period that ended May 27. The quarterly results also included $4 million in restructuring costs in the Americas division.

In a conference call this morning with brokerage analysts, President and CEO Sara Armbruster said the “hard but necessary work” to implement price increases was in response to “extraordinary inflation levels” that include “skyrocketing fuel and logistics costs.”

Steelcase expects $875 million to $900 million in sales for the second quarter, a 20 to 24-percent increase from a year earlier, with 6 cents to 10 cents per share in net income. Steelcase entered the quarter with a $927 million order backlog.

“Regarding inflation, we are currently projecting an increase of at least $85 million compared to our initial estimates for fiscal 2023, driven by significant changes in the external projections of steel prices, higher energy costs and rapidly increasing cost of petroleum-based products, freight and delivery,” Sylvester said.

Price increases should offset $50 million to “maybe” $60 million of the higher costs from inflation, Sylvester said.

Inflation that’s been running at a 40-year high during 2022 has been hitting both consumers and businesses.

In his June report on a monthly survey with industrial purchasing managers in Grand Rapids and Kalamazoo, Grand Valley State University Economist Brian Long noted that “higher prices, rapidly rising transportation costs, and logistics bottlenecks are cutting into profitability for many firms.”

Perrigo Co. plc in May projected that inflation will cost the company $125 million in 2022. That’s up from an earlier $80 million in expected higher costs.

Perrigo CEO Murray Kessler told an investor conference last week that Perrigo — a producer of store-brand, over-the-counter medications — has been able to work with clients such as WalMart, Target and others on price adjustments in existing contracts to offset higher costs.

“They have worked with us, they are understanding, they are brutally tough, and that’s no different than it has always been with them, but contractually when it’s true cost, they work with us,” Kessler said.

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