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Sunday, 22 June 2014 22:00

Upward Trend: After slow start to year, office furniture sales strengthen in second quarter

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Industry professionals talk with Steelcase representatives about new fabrics at the 2014 NeoCon trade show in Chicago earlier this month. Industry professionals talk with Steelcase representatives about new fabrics at the 2014 NeoCon trade show in Chicago earlier this month. PHOTO: JOHN WIEGAND

As the office furniture sector heads toward midyear, executives say sales have begun to trend upward as an updated industry outlook still forecasts stronger growth ahead in 2015.

Sources say the year started out slowly for furniture makers before picking up toward spring, putting the industry on a path for moderate to solid growth in 2014.

That’s been the case for Spring Lake-based Izzy+, which saw sales accelerate from the first quarter to the second quarter, particularly in the higher education market, said President and CEO Kevin Kuske. Some of that growth stems from traditional seasonal ordering patterns, although this year “there’s more than that” occurring, he said.

“We continue to see what I would say are a lot of signs of strengthening and building, and (we) are continuing to see new firms hiring and getting busy with projects,” Kuske said. “It’s surprisingly broad.”

The sales increases so far in 2014 at the privately-owned Izzy+, a division of Grand Haven-based JSJ Corp., have been spread across economic sectors and geographic markets in the U.S.

“It’s all over the place,” Kuske said during an interview with MiBiz at NeoCon. “I’m always cautiously optimistic that the balance of the year remains the same way.”

Likewise, Comstock Park-based NuCraft Furniture Co. experienced a good pickup in business in the second quarter, and Product Development Manager Bob Surman expects volumes to continue that way as “companies are getting ready to spend some of their extra cash” and upgrade their offices.

The office furniture industry began 2014 with a slight decrease in shipments, although incoming orders from clients grew, according to new data from the Business and Institutional Furniture Manufacturers Association (BIFMA).

Shipments for the January-to-March period dipped 1 percent from a year earlier to $2.18 billion. Orders for the first quarter increased 3.3 percent to $2.17 billion.

BIFMA’s latest quarterly outlook, prepared by IHS Global Insight, projects industry-wide sales to grow moderately in 2014 and then pick up in 2015.

The outlook forecasts shipments of $9.6 billion this year, an increase of 4.8 percent over 2013, then subsequent growth next year of 8.8 percent to $10.6 billion, according to BIFMA.

“I’m cautiously optimistic that — for at least the next four or five quarters — things look pretty good,” said Tom Reardon, executive director of BIFMA.

Ramping up

Upcoming sales and earnings reports by both Steelcase Inc. and Herman Miller Inc. will provide further data on the industry’s direction. Both companies report their latest quarterly results this week.

Analysts expect the Grand Rapids-based Steelcase (NYSE: SCS) to report sales of $728.7 million for the first quarter of its 2015 fiscal year, according to a consensus estimate. That would represent an increase of 9.2 percent over the same period a year ago. Analysts estimate that quarterly net income should total 16 cents per share for the company.

For Zeeland-based Herman Miller (Nasdaq: MLHR), analysts expect sales of $496.5 million for the fourth quarter of FY 2014, a 8 percent increase from a year earlier, and a 6.5 percent increase in full-year sales to $1.89 billion. Analysts expect the company to repeat that performance and grow sales 6.5 percent for the 2015 fiscal year that started June 1.

Herman Miller is expected to report quarterly net income of 46 cents per share, according to a consensus estimate from analysts.

Federal securities regulations prevented President and CEO Brian Walker from publicly discussing how the business is faring as Herman Miller approached its quarterly report. In an interview at NeoCon, Walker did say the company is prepared to handle the increased volumes BIFMA is forecasting.

“We have a really great ability to flex capacity, so if there is going to be an issue, I think we are a long way away,” Walker said. “Getting good, skilled factory folks is not easy in Michigan or any part of the country. On the other hand, we think we are a pretty attractive place to work and we can generally get folks when we need them.

“Our system has always been based around a high degree of flexibility. I’m not overly concerned about (meeting volume projections). That would be a good problem to have.”

The same goes for Herman Miller’s supply chain, Walker said.

Sales continue to solidify

When the first predictions for strong growth in 2015 came out in March, some suppliers voiced concern about their ability to ramp up capacity to meet the higher demand. However, Walker does not see that as a concern.

“I think our supply base is used to knowing that we have to respond to customers and we can figure it out. We haven’t had to go do anything specific with our supply base. It sounds like a big number, but we are still not back to the peak of where we were in 2000, so I’m not worried about capacity at this point,” he said. “I don’t think most people are running two or three shifts right now, so there is a lot of room for capacity.”

At Haworth Inc., sales have been on the upswing as well through the first part of 2014.
Haworth in 2013 posted global sales of $1.41 billion, up 7.3 percent from the prior year. The Holland-based manufacturer for 2014 aims to outpace growth in the industry as a whole, surpass the growth rate of its five largest competitors, and eclipse the BIFMA industry projections, said Chairman Matthew Haworth.

“We’re having a good, solid year sales-wise around the world. We’re getting stronger in each of the regions we participate in,” Haworth said. “I would say it continues to solidify. I wouldn’t mind a nice rocket increase, but it’s been a nice pace of increase.”

It was a similar story for Holland-based Trendway Corp., which began 2014 with soft sales that President Bill Bundy attributes, in part, to the severe winter. Business at Trendway has picked up in the second quarter and “our sales team is pretty optimistic about the second half,” Bundy said.

Economy pushes growth

As the industry goes through the rest of this year, it will receive a push from steadily improving economic conditions.

Economists at the University of Michigan in May forecast continued job growth for 2014 and 2015 and a declining unemployment rate. They also predicted GDP growth of 2.4 percent in 2014 and 3.3 percent in 2015.

Whatever the industry does for the remainder of 2014 and into 2015, Kuske of Izzy+ believes that growth will not necessarily come from better U.S. economic conditions or additional white collar jobs. He sees the key sales driver as the changing nature of work and mobile technologies that allow people to work from virtually anywhere.

Companies will begin spending to upgrade and adapt their offices to the kinds of spaces better suited for collaboration and teamwork, as well as for a younger generation of highly mobile office workers, Kuske said. The change in the workplace has been an important design driver for the industry for a few years now and will drives sales for the foreseeable future, he said.

Employers “are trying to change with the evolution of the workforce and technology,” Kuske said.

“The Millennials provoked us to finally change. They aren’t the cause of the change, but they had enough boldness to say, ‘I’m changing,’” he said. “We’re at that point where, finally, behavior is starting to change. You’re just finally seeing mobility.

“We have … all these mobile devices, yet nobody got mobile. It’s finally starting to happen.”

MiBiz Staff Writer Nick Manes contributed to this report.

 

Sidebar: Top Product Designs Honored

A number of West Michigan-based companies won honors in the 2014 Best of NeoCon design competition. Haworth Inc. won the show’s top award, Best of Competition, for The Openest Collection. Here’s a look at who won what:

BOLD Furniture

  • Gold Award, Training & Work Tables category, for BOLD One Collection

Camira Fabrics

  • Innovation Award, Textiles: Upholstery category, for The Nettle Collection

Haworth Inc.

  • Best of Competition for The Openest Collection
  • Silver Award, Architectural Products category, for Trivati
  • Gold Award in the Case Goods category for Suite
  • Gold Award, Collaborative Collections category, for The Openest Collection

Herman Miller Inc.

  • Silver Award by Nemschoff/Herman Miller Healthcare, Healthcare Guest/Lounge Seating category, for the Palisade Collection
  • Best Showroom

NuCraft Furniture Co.

  • Silver Award, Collaborative Collections category, for Tesano
  • Gold Award, Conference Room Furniture category, for Kai

Steelcase Inc.

  • Silver Award, Office Accessories category, for SOTI II Worktools
  • Silver Award for Coalesse, Guest Seating category, for <5_MY
  • Editor’s Choice Award for Susan Cain Quiet Spaces by Steelcase
  • Editor’s Choice Award for Designtex + Wallace Sewell Collection textiles

— Compiled by Mark Sanchez

Read 4781 times Last modified on Sunday, 22 June 2014 09:44

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