Office Furniture Industry Rebounds

June 25, 2004
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WEST MICHIGAN — The latest sales and earnings reports have executives at Steelcase Inc. and Herman Miller Inc. looking at significantly better days ahead, as the office industry’s recovery from a three-year sales plunge takes further hold.

Both companies reported sales gains for their respective quarters and expect further growth in the present period as the economy and employment improves.

“I truly believe we are on the other side of the industry downturn,” Herman Miller Chairman and CEO Mike Volkema said during a June 24 conference call with brokerage analysts to discuss financial results for the first quarter that ended May 29.

“It is a new beginning for all of us. The future looks bright,” said Volkema, who will give up CEO duties July 26 to focus more time on his duties as chairman and to work with Herman Miller’s Creative Office, a unit that develops products for new markets.

Succeeding Volkema is Brian Walker, the present chief operating officer who’s been with the company since 1989 in a series of senior management positions.

Herman Miller announced the leadership transition last week as it reported sales of $353.8 million for the fourth quarter that ended May 29, up 9.9 percent from the $321.9 million for the same period a year earlier.

The weekly order rate for the quarter is the best the company has experienced in 11 quarters, Chief Financial Officer Beth Nickels said.

Herman Miller reported net income of $19.3 million, or 27 cents per share. That compares to a net loss of $1.3 million, or 2 cents per share, in the same period a year earlier.

For the 2004 fiscal year, sales totaled $1.33 billion, or equal to the revenues recorded in the prior fiscal year.

Looking ahead, Herman Miller executives expect revenues for the current first quarter of FY 2005 to grow 9 percent to 16 percent from the $324.5 million of last year, to $355 million to $375 million, and earnings of 16 cents to 21 cents per share.

Herman Miller’s results came a day after industry leader Steelcase reported a positive quarter and the first year-to-year sales gain in more than three years.

Steelcase recorded revenues of $597.7 million for the first quarter that ended May 28, up 7.6 percent from the $555.6 million in the same quarter a year earlier and up 6.1 percent sequentially from the previous fourth quarter. Minus revenues from dealership consolidations and taking into account favorable foreign currency translations, sales were up 3 percent.

The sales growth represents the first quarterly increase from prior-year results in 13 quarters.

“This shift is a signal that our phase of the economy is improving,” Steelcase President and CEO Jim Hackett told analysts during a June 22 conference call.

At the company’s annual meeting two days later, Hackett told shareholders that helping to drive sales growth is a return of projects from large employers that have begin hiring again.

“We’ve got the wind in our boat sails because those large companies are now beginning to buy,” he said.

On the bottom line, Steelcase reported a net loss of $5.7 million, or 4 cents per share, which includes net, after-tax restructuring charges of $3.6 million.

Steelcase’s quarterly performance was better than the net loss of 9 cents to 14 cents per share the company provided brokerage analysts in earlier guidance, and compares with a net loss of $13.4 million, or 9 cents per share, in the same quarter a year ago.

In the present second quarter of the 2005 fiscal year, Steelcase expects stronger order patterns and believes the industry in North America is strengthening. The company expects sales to grow 5 percent to 8 percent from the $612.1 million in the second quarter a year ago and to break even or lose 5 cents per share, which will include a $3 million to $7 million restructuring charge. 

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