Is Furniture Industry Recovering

June 18, 2004
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GRAND RAPIDS — The coming week will offer a partial view of how well the office furniture industry is rebounding.

Amid an improving economy, both Steelcase Inc. and Herman Miller Inc. this week report sales and income for their most recent quarters.

With industry-wide orders and shipments trending upward after a devastating three-year downturn, industry analyst Mike Dunlap hopes both companies report sales gains commensurate with a sustained recovery.

“I really hope to see we’ve turned the corner,” Dunlap said. “The numbers in this quarter will really help tell whether we have.”

Industry data show that through the end of April, business is moving upward.

Weighing in the industry’s favor are recent economic reports showing U.S. employment growing strongly and improved corporate profitability — two key indicators affecting office furniture manufacturers.

Industrywide orders through the first four months of 2004 were up 6.4 percent, to $2.76 billion, over the $2.59 billion pace during the same period last year, according to the Business and Institutional Furniture Manufacturers Association (BIFMA).

BIFMA also indicated that shipments through April of this year increased 3.1 percent over the first four months of 2003, from $2.54 billion to $2.62 billion.

April was the strongest month to date in 2004, as shipments and orders rates accelerated from the first three months of the year. Going into April, year-to-date orders though the first quarter stood at $2.0 billion and shipments were at $1.9 billion, according to BIFMA.

For the year, the industry trade association forecasts a 3.5 percent gain in shipments, to $8.8 billion.

While BIFMA anticipated an increase in business this year, data so far for 2004 show that orders and shipments are increasing sooner than expected and at higher rates, BIFMA Executive Director Tom Reardon said.

“For the last couple of months, I’m very optimistic and encouraged,” Reardon said.

The upward trend gives heightened interest to the upcoming sales and earnings reports from Steelcase and Herman Miller.

Hopes were raised in late April when Iowa-based HNI Corp. (formerly HON Inc.) reported an 18.6 percent quarterly year-to-year increase in office furniture sales, from $294.9 million to $349.7 million. Minus a recent acquisition, furniture revenues for HNI Inc. were up 10 percent for the quarter.

Steelcase in March reported fourth quarter revenues of $563.4 million, a 9.7 percent decrease from the $623.8 million it reported for the same period a year ago that included an additional week.

Excluding the impact of that added week, sales still were down by 2.7 percent for the quarter from the preceding year.

The company’s quarterly net loss was $18.4 million, or 13 cents per share, including a $2.9 million after-tax net gain. The net loss — which the company attributed to pricing pressures and inefficiencies related to plant consolidations — compares with net income of $17.6 million, or 12 cents per share, during the same period a year ago.

Steelcase executives said at the time that for the present first quarter of fiscal year 2005, they expected slightly higher revenues over the fourth quarter and over the $571.9 million of the first quarter a year ago. That would represent the first quarterly sales increase in three years. Executives expected a quarterly after-tax loss of 9 cents to 14 cents per share.

Brokerage analysts polled by First Call/Thomson Financial expect Steelcase to report a lower-than-expected loss of 7 cents per share. Steelcase reports its quarterly results on Tuesday.

Analysts anticipate Herman Miller will report net income of 17 cents per share. The company reports sales and earnings on Wednesday afternoon.

Herman Miller in March reported that third quarter sales grew 6.2 percent over the same period a year earlier, from $310.4 million to $329.6 million.

Quarterly net income last quarter totaled $7.8 million, or 11 cents per share, a 160 percent increase over the $3 million, or 4 cents per share, a year earlier. Net income included a $1.1 million charge related to the closing of Herman Miller’s plant in Canton, Ga., and moving the work to the company’s Spring Lake campus.

Herman Miller executives in March told analysts they anticipated recording another gain in the fourth quarter that ended May 31.

They expected sales of $335 million to $355 million for the period, a 4 percent to 10 percent increase from year-ago levels. That would mean net income of 10 cents to 15 cents per share, which would include a 2 cent-per-share restructuring charge.

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