Published in Manufacturing

Despite solid quarterly earnings, Herman Miller’s outlook sends stock tumbling

BY Tuesday, June 29, 2021 05:03pm

ZEELAND — Despite solid quarterly earnings for Herman Miller Inc., the contract furniture maker’s share price fell nearly 7 percent in trading Tuesday on the company’s lower-than-expected outlook for the current quarter. 

As the company awaits shareholder approval on its $1.8 billion deal to buy Pennsylvania-based competitor Knoll Inc., Herman Miller reported sales growth in its international contract segment and improved demand in North America for the fourth quarter of its 2021 fiscal year, which ended May 29. It also recorded a historic quarter for its retail business.


“We’ve navigated the challenges of the past year exceptionally well, accelerating our own transformation and further strengthening our leadership position across every segment of our business,” Herman Miller CEO Andi Owen said in a conference call with brokerage analysts. “We’re entering this new era in our industry in a position of incredible strength and we’re confident in our ability to continue to grow the business and create value for all our stakeholders.”

For the fourth quarter, Herman Miller recorded $621.5 million in sales, which was up 30.6 percent from the same period last year. Also, Herman Miller recorded quarterly net earnings of $9.3 million, or 12 cents per diluted share; the company reported a $178.3 million net loss in the fourth quarter a year ago. 

The results were buoyed by Herman Miller’s retail business, which had a banner year with sales skyrocketing 106.1 percent and orders soaring 81 percent compared to the same period a year ago. The company achieved its highest month of retail sales in May to help fuel its best quarterly performance in company history for the retail segment. Sales for home office and workplace related products increased 213 percent over last year. 

Executives said the company continues to invest in its digital sales channels, launching a new online store in May. For the quarter, sales completed through digital channels jumped by 158 percent compared to the same time last year. Herman Miller also reported that, as more states and countries emerge from COVID-19 restrictions, foot traffic at brick-and-mortar showrooms has nearly returned to pre-pandemic volumes.

In the contract furniture division, Herman Miller executives noted some encouraging signs after being battered by the pandemic. 

“(M)any of the largest markets in North America, from Boston, New York City, the Bay Area, Chicago, Toronto, are slower to open up than a number of other markets across North America that are already open,” John Michael, president of the North America contract business for Herman Miller, said in the call with analysts. “We’re encouraged to see the strength that we’re seeing already. And I think if some of these larger metro areas began to open up even more in late summer and fall, that should continue to have a positive impact.”

On the homefront, the company’s North American segment saw order levels rise by 21.2 percent, but sales were down 4.2 percent and orders remained flat. The company’s international segment grew sales by 58.2 percent as orders shot up by 55.2 percent compared to last year.

For the full fiscal year, which started on June 1, 2020, the company reported $2.47 billion in revenue, off about 1 percent compared to the prior year. Herman Miller recorded full-year net earnings of $178.8 million, or $2.94 per diluted share, which compares to a net loss of $14.4 million a year ago. 

In providing an outlook for the first quarter of its current 2022 fiscal year, Herman Miller said it expects to generate $640 million to $670 million in revenue, excluding any possible effects of the Knoll acquisition. The lower-than-expected outlook for growth in the 4.5-percent range for the quarter drove the company’s share price down more than 6.9 percent on Tuesday. 

In the call with analysts, CFO Jeff Stutz cited higher commodities and labor costs as cutting into Herman Miller’s first quarter earnings. 

“It’s no secret: We’re feeling the impact of inflationary pressures in the business,” Stutz said in the call, noting that the company instituted a “larger than normal price increase” at the beginning of this month to make up for the higher costs. 

“But as you know, it takes time for that to layer itself into the results of the contract business,” he said in response to an analyst question about the company’s outlook. “So, we’ll start to feel the benefits of that as we move through the first half of the fiscal year.”

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