Factory Orders Up - Office Furniture Mfgs Up

New factory orders increased 0.7% in November, reversing an identical 0.7% drop in October. Not coincidentally all of the "major" office furniture manufacturers reported sales increases for their most recently reported quarters:

• Steelcase: + 9% year over year revenue growth for Q311
• Herman Miller: +19.9% year over year revenue growth for Q211
• Knoll: + 12% year over year growth for Q311
• HNI (parent of Allsteel): Forecast + 10-12% for Q410

Look for pricing to begin returning to normal (read that as prices will go up), as factory capacity starts to fill, and the cut-throat discounting that has been present for the past two years starts to recede.

Q2 Mixed Results for Office Furniture Manufacturers

Some mixed Q2 results for two of the key office furniture manufacturers.

 Going Up: - HNI Corporation (parent company of Allsteel Inc. & HON Company) posted a 6.3% increase in Q2 2010 revenues, reporting sales of $398.2M. HNI CEO Stan Askren stated, "I am encouraged by the strengthened demand across our businesses..." Asken went onto say that "office furniture demand improved across the board..."

Going Down: - Knoll Inc. posted a 4.9% decrease in Q2 2010 revenues, reporting sales of $192.3M. Knoll reported that the decrease in sales was experienced across the majority of product lines, with Systems continuing to decline at the largest rate when compared with prior year.

In my personal experience, Knoll has been discounting extremely aggressively over the past 4-5 months, which makes sense in light of their slowing sales. As sales slow, manufacturers increase their "discounting" off list price. This effectively lowers the cost of product to the dealers, who are then pushed to drop their prices to the end-users in the hopes of increasing sales.

The Office Furniture Breath Holding Competition Continues...

The past week has provided further evidence of what a brutal year it has been for the office furniture industry:

• Steelcase: The world's largest office furniture manufacturer, closed out their fiscal Q4 with a loss of $65.7 million, and closed out fiscal 2010 with a loss of $13.6 million on total revenue of $2.3 billion. This number came in lower than the companies estimates, primarily due to increases in tax valuation, lower than expected revenues, and additional restructuring activities.
• Knoll: Announced last week that they are closing their Kentwood MI. plant, cutting approximately 100 unionized employees.
• Herman Miller: Announced Q3 2010 results with sales declining 7%, however net quarterly earnings were $8.3 million...
• HNI (Parent company of Allsteel): Had an "unofficial" furlough week for a number of employees in Muscatine IA. (their longtime home city). As reported by the Muscatine Journal, employees "could take the week off as a paid vacation if that's how and when they wanted to use their vacation days..."

The actions of the major manufacturers listed above, reflect the brutal reality that the last quarter of 2009 and first quarter of 2010 have been particularly sloooow, with very little project activity. How long can you hold your breath???

At Last Someone Likes Office Furniture...

The Associated Press reported today that a leading office furniture industry analyst raised his ratings on three of the four top office furniture manufacturers.

Proclaiming that "signs are beginning to emerge that suggest there may be some light at the end of the tunnel", Budd Bugatch, Director of Furnishings Research for Raymond James, raised his ratings on Knoll Inc (KNL) to "Strong Buy", Steelcase Inc (SCS) to "Strong Buy", and HNI Corporation (parent company of Allsteel) to "Outperform". Bugatch cited moderating job losses and better corporate profits driven mostly by cost cuts as the primary reasons for his optimism.

Nice to get some sunny good news, because its been long dark winter...

Fortune's Most Admired Companies - Office Furniture Edition

Fortune Magazine has released their list of the World's Most Admired Companies, and three of the top 5 office furniture manufacturers have made the list.

Rated under the category of Home Equipment, Furnishings; Herman Miller, Steelcase, and HNI (parent company of Allsteel), all made the top 10. Herman Miller came in (again) at #1, Steelcase slipped four spots to #6, and HNI slipped five spots to end up at #9.

Office Furniture Industry down 30% vs 2008 -

Full year 2009 results for the furniture industry are starting to trickle in, and boy are they ugly. Knoll announced a Q42009 sales decline of 33.4%, and full year sales of $780 Million, representing a decline of 30.4%. It was reported in industry trade journals that Haworth (which is a privately held company), announced sales of $1.1 Billion, representing a decline of 32%.

The Business and Institutional Furniture Manufacturers Association (BIFMA) released their December 2009 market statistics, estimating an overall decline in orders and shipments of 30% (compared against slight decreases in 2008, and slight increases in 2007).

To reset the "hierarchy" of office furniture manufacturers (based on previous 4 quarters revenue):

1. Steelcase: $2.4 Billion (-30% vs. 2008)
2. HNI (parent company of Allsteel and HON): $1.56 Billion ( -25% vs. 2008)
3. Herman Miller: $1.34 Billion (-32% vs. 2008)
4. Haworth: $1.11 Billion (-32% vs. 2008)
5. Knoll: $780 Million (-30% vs. 2008)

I predict that HNI will rebound the strongest in 2010. My reason for this prediction is that HNI's largest operating company, HON, serves the small business niche. With the current focus of Washington on small business, HNI is well positioned to take advantage of any government aided small business expansion.

(Full disclosure, my dealership is aligned with Allsteel, also one of the HNI operating companies).

Allsteel's 2nd Quarter Results... No Joy In Mudville

Allsteel's parent company, HNI Corporation, announced 2nd quarter 2009 results down 37%, with a net loss of $1.4 million for the quarter. Allsteel's results are pretty consistent with the overall industry (Knoll reported a quarterly sales drop of 30% last week).

HNI CEO Stan Askren actually had some glimmers of hope for the 3rd quarter; "Market conditions remain difficult, but we are seeing signs of stabilization, particularly in our office furniture businesses. We expect our historical seasonal demand patterns to hold and drive third quarter revenue above second quarter levels" Askren said.

On a more positive local note, Allsteel and one of our esteemed local Allsteel competitors won a LARGE project for a LARGE tech company in the South Bay. I don't have any specifics, other than it is rumored that the project will be in excess of $6 to $7 Million dollars over the next couple of years.