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Miller CEO Sees Signs Of Recovery
In the short term, Herman Miller remains “cautiously optimistic” about sales prospects, since not all economic indicators look positive and “none of them would indicate a dramatic comeback in volume during the near term,” Chairman and Chief Executive Officer Mike Volkema said.
Yet after scoring a quarterly sales increase for the first time in three years, Herman Miller executives are now talking optimistically about future growth prospects, rather than how they’re coping with the effects of the office furniture industry’s sales slide. Even through the downturn, Herman Miller continued to make “significant investments” in new product development, Volkema said.
The company, he said, will continue to invest heavily in new products to grow market share, penetrate new markets and establish “a framework for our long-term continued success” after the massive restructurings of the past few years made in wake of the industry downturn.
“Our confidence in the long-term capability of the company has never been greater,” Volkema said during a March 18 conference call with brokerage analysts to discuss quarterly financial results.
“I’ve always said that the key to our long-term sustained success is in redefining the marketplace through innovation. That’s what has driven our past success and what I believe will define our future success,” he said. “We’re really encouraged that we do have a product development queue that is robust and, I think, will be timely in relationship to the uptick in the market.”
Among the coming products are a new system platform that Herman Miller will introduce at NeoCon this June and “spectacular” systems and seating offerings by 2005, Volkema said.
After posting the first quarterly sales increase in three years, Herman Miller anticipates recording another gain in the present fourth quarter. Executives expect sales of $335 million to $355 million for the period that ends May 31, a 4 percent to 10 percent increase from year-ago levels, and net income of 10 cents to 15 cents per share, which will include a 2-cent-per-share restructuring charge and is lower than Wall Street’s expectations.
Brokerage analysts have been predicting earnings of 20 cents per share for the fourth quarter, according to Thomson Financial/First Call. The company’s earnings guidance anticipates traditionally higher operating costs for the quarter because of capital expenses for new product introductions.
While Herman Miller can’t provide guidance beyond the present quarter because “we feel there’s still a lot of uncertainty in the market,” Chief Financial Officer Beth Nickels said, “we are very optimistic about our future revenue potential.”
Sales for Herman Miller’s third quarter that ended Feb. 28 grew 6.2 percent over the same period a year ago, from $310.4 million to $329.6 million. The quarter saw orders for large projects begin to return and growth in dollar volume per order, particularly in international sales that grew 15.2 percent from a year ago, Nickels said.
Quarterly net income totaled $7.8 million, or 11 cents per share, a 160 percent increase over the $3 million, or 4 cents per share, of a year ago. Net income includes 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 also reported a 9.9 percent increase in orders from the same period in fiscal year 2003 and an 18 percent increase in backlogged orders.
The quarterly financial report provided further indication that business for the office furniture industry, which has lost 40 percent of sales volume since 2000, is beginning to see business pick up. The industry trade association BIFMA International recently reported a 7 percent increase in industrywide orders in January.
For the year, 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. The growth would reverse a three-year industry decline.
Year-to-date, Herman Miller’s sales are off 3 percent, from $1.01 billion to $984.4 million. Net income for the first nine months of the fiscal year was $23 million, or 32 cents per share, which compares with $24.6 million, or 33 cents per share, a year ago.
3Q FY2003: $310.4 million*
YTD 2004: $984.4 million
YTD 2003: $1.01 billion
* includes a $1.1 million charge
3Q FY2004: $7.8 million, 11 cents EPS
3Q FY2003: $3.0 million, 4 cents EPS
YTD 2004: $23.0 million, 31 cents EPS
YTD 2003: $24.6 million, 33 cents EPS