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Business Review Western MI
Business Review Western MI
Office Furniture Update
(2007-09-26)
(wgvu) -
Steelcase, Herman Miller offer varying views

Sept. 27, 2007
By Mark Sanchez
marks@mbusinessreview.com

As they examine the same economic data, executives at Steelcase Inc.
and Herman Miller Inc. offer distinctly differing views on the coming
months.

While Steelcase President and CEO James Hackett touted a 4.5 percent
quarterly sales increase and gave an optimistic outlook, his counterpart
at Herman Miller, Brian Walker, was sounding a cautious tone.

Holland-based Herman Miller [Nasdaq: MLHR], even as it reported a 9.3
percent quarterly sales increase, is weighing cost-cutting moves as
business slows. Taking the conservative posture with lingering memories
of the industry depression early this decade, Walker told brokerage
analysts the company wants to realign our business with anticipated
market conditions.

A recently downgraded industry forecast and the general state of
the U.S. economy may suggest a cyclical softening of the North
American market, he said.

In the just completed first quarter of the 2008 fiscal year, Herman
Miller posted declines in orders rates and backlogged orders. North
American sales grew nine percent from a year ago, though orders declined
five percent.

The office furniture industry as a whole always seems to get stuck
behind the economic curve, Walker said, a position Herman Miller wants
to avoid this time should business weaken further.

We're just trying to be prudent and ahead of the curve, Walker
said during a conference call to discuss quarterly results. I
wouldn't describe it as pessimistic at this point. I think what
we're trying to do is be realistic with a bunch of data that points
in different directions.

If the company's concerns don't pan out and the economy holds up,
Herman Miller has the ability to ramp up manufacturing quickly and sales
might be stronger than we are predicting today, he said.

In the present second quarter of FY 2008, Herman Miller expects flat
sales of $475 million to $500 million and earnings of 51 cents to 57
cents per share.

Herman Miller last week reported sales of $491.7 million for the first
quarter that ended Sept. 1 and a 17.5 percent increase in net income, to
$33.5 million, or 54 cents per share.

Walker and Hackett both acknowledged mixed signals and mixed
sentiment about the economy, with industry indicators remaining
favorable but the housing market, tightening credit and wavering
consumer confidence causing concern.

Hackett was decidedly much more upbeat is his assessment.
Our business is vibrant and on course, Hackett said. We're
optimistic that the fundamentals that drive our business toward better
performance are still there.

Steelcase [NYSE: SCS] anticipates sales growth for the present third
quarter of FY 2008 of three to seven percent over the $802 million of a
year ago and earnings of 27 cents to 32 cents per share.

Steelcase doubts housing and financial problems will effect the broader
economy or dampen business investment and hiring in North America, where
sales dipped 0.8 percent for the most recent quarter.

We feel quite good about our year-to-date results as well as our
near-term outlook, Chief Financial Officer Dave Sylvester said.
Steelcase reported sales of $825.2 million and net income of $37.7
million, or 26 cents per share, for the second quarter that ended Aug.
24.

Year-to-date sales grew 7.6 percent to $1.63 billion and net income
increased 59 percent, to $71.3 million, or 50 cents per share.
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