Office Furniture Orders Rising

March 5, 2004
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GRAND RAPIDS — Providing a little more hope that the turnaround is about to gain steam, the office furniture industry posted a solid increase in orders to start 2004.

As industrywide shipments fell 3 percent from previous-year levels, orders grew nearly 7 percent in January, offering a positive beginning to 2004 for office furniture manufacturers that have been mired in a steep decline that began more than three years ago.

Tom Reardon, executive director of the industry trade group Business and Institutional Furniture Manufacturers Association in Grand Rapids, views the increase in the order rate with caution. Industry orders in January 2003 were “pretty weak, so it’s easy to post an improved number” from one year to the next, he said.

Still, Reardon said, the rise in the order rate is welcome news.

“We’ll see how the quarter turns out before we get too excited, but it is a positive development,” Reardon said. “I hope it’s the beginning of a trend.”

The office furniture industry finished 2003 with shipments of $8.47 billion, according to preliminary BIFMA figures. That’s down 4.7 percent from the $8.89 billion of 2002 and off 36.2 percent, or $4.81 billion, from the peak of $13.28 billion in 2000.

Business did show signs of finally picking up toward the end of the year. After experiencing flat rates in October and November, the industry reported a 5.5 percent increase in shipments in December, for a quarterly growth rate of 1.6 percent, according to BIFMA. It represented the first quarterly increase in shipments in several quarters, Reardon said.

BIFMA forecasts a 5.5 percent increase in industrywide shipments for 2004, to $8.95 billion — a sales volume the industry first surpassed nearly a decade ago.

In light of the positive signs, share prices at industry leaders Steelase Inc., Herman Miller Inc. and HON Industries Inc. have trended upward of late. One brokerage analyst who follows the industry, Margaret Whelan of UBS Warburg, upgraded both Herman Miller and HON Industries’ shares in the last few weeks from “neutral” to “buy.”

Further insight on industry conditions will come this month when Steelcase and Herman Miller release financial results for their most recent quarters.

Brokerage analysts polled by First Call/Thomson Financial expect Steelcase to report a loss of 5 cents per share when the company releases quarterly financial results on March 30.

Steelcase executives in December said the company, now in the midst of implementing a major North American restructuring, anticipated posting another loss for the fourth quarter of fiscal year 2004 that ended on Feb. 28, before returning to profitability sometime during the 2005 fiscal year as business picks up with the economic recovery and further costs are driven out of the business.

Executives at the time expected fourth-quarter revenues to fall 3 percent to 5 percent sequentially from the third quarter’s $614.5 million and a loss of 6 cents to 11 cents per share, including after-tax charges of $3 million to $8 million. They projected revenues growing 5 percent in the 2005 fiscal year that began March 1 and estimated earnings of 5 cents to 10 cents per share.

Brokerage analysts expect Herman Miller to report net income of 11 cents per share, according to First Call/Thomson Financial. The company reports its latest quarterly results on March 17, after the market closes.

Herman Miller executives in December told investors they expected third-quarter sales of $320 million to $335 million and net income of 5 cents to 11 cents per share with a 3-cent-per-share restructuring charge. They also reported solid increases at the time in the order rate, backlog and customer visits.    

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