Published in Manufacturing

Office furniture manufacturers report stagnant earnings in latest quarters

BY Sunday, April 02, 2017 12:54pm

West Michigan-based contract furniture companies have muddled through the recent period of political uncertainty and mixed international demand. 

Softness in the specialty and international business segment drove sales down 2 percent for Zeeland-based Herman Miller Inc. in its most recent quarter. The company generated sales of $524.9 million in the third quarter of its 2017 fiscal year, which ended March 4. That’s a decrease of $11.6 million compared to the prior year.  

At the same time, Herman Miller (Nasdaq: MLHR) reported net earnings of $22.5 million, or 37 cents per diluted share, a 19-percent decrease from $27.9 million, or 46 cents per diluted share, a year ago. However, Herman Miller executives note earnings would have been 39 cents per share for the quarter after being adjusted for a series of restructuring charges and a gain derived for a dealer divestiture. 

Despite the slight decline in sales, Herman Miller President and CEO Brian Walker expects the company’s order growth to accelerate in the upcoming quarters as uncertainty over the political atmosphere fades. 

“Industry data for sales and orders remains choppy but macro indicators including service sector employment, architectural billings and non-residential construction activity continue to be generally supportive, and sentiment measures have moved positively since the U.S. election,” Walker said in a quarterly conference call with brokerage analysts. “The new administration’s plan for lower taxes, cash repatriation and capital investment incentives have potential to drive employment and related investment spending over the longer term.”

Meanwhile, sales for Grand Rapids-based Steelcase Inc. were up nearly 3 percent in the fourth quarter of its 2016 fiscal year, which ended Feb. 24. The company generated sales of $769 million for the quarter, which compares to $748 million in the same period a year ago. 

Net earnings for Steelcase declined 66 percent in the quarter to $25.8 million, or 21 cents per share, compared to the $77.5 million, or 62 cents per share, the company reported during the previous year. The company attributed the dip, in part, to an $8 million charge related to a change in the corporate tax rate in France, plus other factors, which combined amounted to an impact of 41 cents per share in the quarter. 

Despite a rocky performance in the first half of the year, Steelcase managed to close its 2017 fiscal year with sales  nearly on par with the previous year’s results. The company generated $3.03 billion in revenue during the year, a modest decline compared to the $3.06 billion it reported during the previous fiscal year. However, reported earnings for the year fell nearly 27 percent to $124.6 million, or $1.03 per diluted share, from $170.3 million, or $1.36 per diluted share, in the previous fiscal year. 

“It’s a tale of two halves,” Senior Vice President and CFO David Sylvester told MiBiz. “The first half of the year is when we suffered our declines in revenue and in the back half of the year, we grew revenue. That’s the function of a lot of the investments that we’ve been talking about for well over a year, new products that we’ve introduced. … All I think contributed to that turnaround to that stronger second half.”

Both companies issued optimistic guidance for their current quarters. 

Herman Miller expects sales in its present fourth quarter to reach between $575 million and $595 million. By comparison, the company reported $582 million in sales during the fourth quarter of its 2016 fiscal year. 

For the first quarter of its 2018 fiscal year, Steelcase plans to generate revenues between $725 million and $750 million, up from $719 million in the first quarter of its 2017 fiscal year.

“I think it’s more of what you’re seeing in the fourth quarter — the success of our new product introductions, which has been significant,” Sylvester said of the outlook. “We’re feeling some momentum.” 

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