Office Furniture Exits Own Recession
WEST MICHIGAN — After three down years like nobody had ever seen before, the office furniture industry began to get back on its feet in 2004.
While the industry still faces a challenging business environment — including weak office construction and high vacancy rates in some domestic markets — business is definitely on the upswing. Finally.
As the year progressed and sales moved upward during 2004 over previous-year volumes, the industry found itself en route to the first positive year since 2000. Toward the end of the year, publicly held Steelcase Inc. and Herman Miller Inc. both reported solid sales and earnings gains and were forecasting further improvements.
“We have a much greater sense of optimism than we did a year ago at this time,” Herman Miller’s CEO, Brian Walker, told brokerage analysts in a Dec. 16 conference call to discuss his company’s latest quarterly results that included an 11.5 percent sales gain.
In the quarter, Herman Miller reported an 11.5 percent increase in sales, to $368.4 million, for the period that ended Nov. 27. Sales at the mid-way point of the company’s 2005 fiscal year were up 10.8 percent, to $725.7 million.
Looking ahead, Herman Miller predicted an 8 percent to 14 percent increase in sales for the present quarter, to $335 million to $375 million. That’s a volume that, if achieved, would represent the fifth straight period of year-to-year sales gains.
At Steelcase, sales grew 9.7 percent, to $674.1 million, for the third quarter that ended Nov. 26. Nine-month, fiscal-year sales were up 7.9 percent to $1.92 billion.
Steelcase also saw significant improvements in earnings and margins.
The firm’s president and CEO, Jim Hackett, told investors, “The momentum of the recovery continues to build. I have to admit optimism given what I am seeing.”
That optimism from Hackett, Walker and others comes after a three-year period when the industry was hit harder than most during the national recession and subsequent recovery that until recently generated little job growth.
After peaking in 2000 at $13.28 billion, industrywide sales fell a staggering 36 percent in a three-year period.
Plummeting sales forced furniture makers in West Michigan and elsewhere to undertake massive corporate restructuring, closing production facilities and idling thousands of workers.
Now, with the U.S. economic recovery creating jobs again, the office furniture industry is expected to finish 2004 with about $8.91 billion in sales, a modest 4.8 percent increase from 2003 and the first positive year in four years.
The Business and Institutional Furniture Manufacturers Association is forecasting an even better 2005: a solid 8 percent increase in sales.
While the projected growth rate for 2004 and 2005 are far from the boom times the industry enjoyed from the mid- to late 1990s, any growth is certainly welcome.
“We’re still a long ways away from any sustained double-digit growth for the industry, but we’re in a solid mode,” said industry analyst Mike Dunlap of Dunlap & Associates in West Olive. “Things are getting better.”
Industry executives in October showed plenty of optimism about the future. Dunlap’s quarterly survey of manufacturers and suppliers generated an index of 56.15. The index rates optimism of industry executives on a scale of zero at the bottom and 100 at the top.
The survey’s results overall showed the office furniture industry “in pretty good shape,” Dunlap said.