MillerKnoll Inc. and Steelcase Inc. both expect flat to lower sales for the present quarter going into 2023 amid softer order rates.
The Zeeland-based MillerKnoll (Nasdaq: MLKN) expects organic sales for the second quarter of the 2023 fiscal year to decrease 0.7 percent to 2.9 percent from the same period a year ago, to $980 million to $1.02 billion.
MillerKnoll on Wednesday reported $1.06 billion in sales for the quarter that ended Dec. 6, a 4-percent increase from a year earlier. The corporation recorded $16 million in net income, or 21 cents per diluted share.
Orders during the quarter declined 12.5 percent over the prior year, and MillerKnoll’s backlog declined 15.7 percent, as “uncertain macroeconomic conditions pressured order levels for the quarter and we saw customers take longer to make decisions and also take on smaller return-to-office projects,” President and CEO Andi Owen told investors during a conference call to discuss quarterly results.
“Despite uneasiness in the current macroeconomic environment, I remain confident in our ability to reach customers in a variety of channels and markets, and to deliver further results in our innovative products, personal customer service and dedicated associates and dealers,” Owen said.
MillerKnoll executives’ guidance for the present quarter “contemplates the relative seasonal slowdown in factory production that we normally experience around the holiday period and in the month of January,” CFO Jeff Stutz said.
As well, reduced order rates were “partially due to the current economic uncertainty in our end markets” and a “difficult prior-year comparison due to pandemic-driven pent-up demand last year at this time,” Stutz said.
At Grand Rapids-based Steelcase (NYSE: SCS), executives said this week that orders for the first three weeks of the present fourth quarter of FY 2023 declined about 6 percent compared to the prior year. Steelcase expects quarterly sales of $740 million to $765 million, or a 1.7-percent decline to a slight 1.5-percent increase from a year ago, with net income of 5 cents to 9 cents per share.
During the quarter that ended Nov. 25, corporate clients for office furniture “slowed investment in office space as they face a potential recession and economic uncertainty in many parts of the world, and this has caused our demand levels to soften,” Steelcase President and CEO Sara Armbruster said in a Tuesday conference call with analysts. “We started to see our order pattern slow down at the end of Q2, and this continued throughout our third quarter.”
Steelcase’s global orders during the quarter declined 17 percent, including 16 percent in the key Americas division.
“There’s no disputing that our core market, traditionally driven by large corporate customers with offices typically in big cities, is under pressure, especially in the Americas. We believe demand will improve from current levels as recessionary concerns weighing on CEO confidence abate and more customers decide to invest in their offices to support hybrid work strategies,” Armbruster said. “Because it’s clear that a more flexible model of work is here to stay, it’s wise for us to imagine a contract office furniture market in which customers may invest less in office space and invest in that space differently than prior to the pandemic. And it’s essential that we continue to evolve our company to meet customer needs and to compete successfully in that environment.”
Steelcase this week reported sales for the most recent quarter of $826.9 million, a 12-percent increase from the same period in the prior year that was driven by a strong backlog and included what the company called “significant pricing benefits” of $85 million.
“We are targeting to more fully realize the pricing benefits from the actions we’ve taken to offset the extraordinary inflation over the last seven quarters, which we estimate totals approximately $340 million on a cumulative basis,” CFO Dave Sylvester said.