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Sunday, 11 October 2015 20:12

Office furniture manufacturers gain on North American performance

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Amid currency fluctuations and general uncertainty stemming from international markets, West Michigan office furniture manufacturers continue to experience steady growth on their home turf in North America.

Both Zeeland-based Herman Miller Inc. and Grand Rapids-based Steelcase Inc. cited a strong North American market as one of their primary growth drivers for their latest quarterly results, which both companies reported in late September.

“This was a remarkable quarter for the Americas in terms of profitability,” Steelcase President and CEO Jim Keane said during a recent conference call with brokerage analysts to discuss second quarter result in the company’s 2016 fiscal year.

Steelcase (NYSE: SCS) grew organic revenue in its Americas segment by 6 percent to $615.5 million in the quarter that ended Aug. 28, compared to $580.3 million in the prior year. That revenue growth resulted in a 15-percent operating margin for the company.

Steelcase reported overall revenue grew to $819 million, a 7-percent increase from $786.7 million over the same period in 2014, after taking into account approximately $29.6 million in negative currency translation effects.

Keane noted in the conference call that improvements in pricing, lower material freight and distribution costs, and other cost reductions were instrumental in the company’s performance in its Americas market.

“(T)he stars were a bit aligned, we had a lot of things moving in our favor,” he said.

Meanwhile, Herman Miller (Nasdaq: MLHR) posted organic revenue growth of 6.8 percent to $338.1 million in North America in the first quarter of its 2016 fiscal year that ended Aug. 29. The company grew total sales by 8.1 percent when adjusting for negative currency translations and residual costs resulting from the Design Within Reach acquisition in 2014.

“The North American market … from everything I can see and any data we can read that the industry collects, the cycle looks pretty robust still and looks like it’s got legs,” said President and CEO Brian Walker in a conference call with analysts.

A favorable product mix in the beginning of its first quarter coupled with the strategic restructuring of its sales organization and a focus on improving its relationships with dealers and customers drove some of Herman Miller’s success in North America, Walker said.

Beyond their organizational improvements, both companies’ strong performance in the Americas was driven by a combination of national job growth and increasing orders from small- and mid-sized organizations, said Mike Dunlap, principal at Holland-based Michael A. Dunlap & Associates LLC.

“Companies are hiring people, they’re expanding their facilities, adding on and creating new campuses,” Dunlap said. “The Googles get all the press, but there are tens of thousands of small and medium-sized companies that are adding employees on a regular basis.”

For Steelcase, the second quarter increases in sales and orders in its Americas market “continue to reflect an elevated mix of project business and small to mid-size orders, (which) grew at a higher rate than larger business again this quarter,” Senior Vice President and CFO Dave Sylvester said during the call with analysts.

The office furniture industry as a whole is expected to close out the year with $10.2 billion in shipments, an increase of 4 percent from the previous year, according to updated projections from Grand Rapids-based Business and Institutional Furniture Manufacturers Association (BIFMA).

The organization recently tempered its projections for 2016 shipments, which it expects to grow just more than 2 percent. The reason for that slower growth: IHS Global Insight’s model shows an influx of imports from foreign office furniture manufacturers should hit the market next year.

However, Dunlap predicts that the office furniture industry will outpace that modest growth next year, particularly in niche markets such as education, hospitality and health care.

“As long as employment is up and we’re not looking at any softening in the economy, I think commercial furniture is going to do well,” Dunlap said.

Read 3088 times Last modified on Monday, 12 October 2015 12:38

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