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.

Top Office Furniture Vendors to the Federal Government

From the pages of the Monday Morning Quarterback, the office furniture industry's trade publication, comes the top suppliers of office furniture to the federal government (based on 2009 sales).

(all figures in millions)
1. Knoll $121.5
2. Federal Prison Industries $103.4
3. Herman Miller $94.4
4. KI $91.3
5. HNI (Allsteel, HON, Gunlocke) $71.7
6. Haworth $70.1
7. Steelcase $63.1
8. Kimball $44.2
9. Misc. Foreign contractors $27.2
10. Teknion $25.1

In addition to the list, the article also pointed out that the annual purchases by the federal market had nearly tripled over the past decade. Growing from $515 Million in 2000 to $1.3 Billion in 2009.

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???

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.

Herman Miller Downgrade Watch...

Times are tough for everyone these days as office furniture royalty, Herman Miller, found out this week. Best known for their "modern classic" furniture pieces, Herman Miller found themselves on the "downgrade watch" after Standards & Poor's Credit Rating Services said the company's "operating conditions remained difficult and credit metrics had deteriorated."

Herman Miller's corporate credit rating is BBB, two steps above the "junk" level.

Is your furniture certified green?

The Business and Institutional Furniture Manufacturer's Association (BIFMA), has been implementing its "level" sustainability standards program since mid-2009, and has now certified over 200 office furniture products, according to a recent article on greenerbuildings.com.

As defined on their website, the level program is "a multi-attribute, sustainability standard and third-party certification program for the furniture industry. It has been created to deliver the most open and transparent means of evaluating and communicating the environmental and social impacts of furniture products in the built environment." In plain English, level was developed to implement an industry standard by which to measure and verify manufacturer's claims of product and practice sustainability. This will also go a long way to cleaning up the "green-washing" or misleading claims regarding the "green" story of certain products and manufacturers.

Industry leaders such as Allsteel, Gunlocke, Herman Miller and Steelcase, have already had a full range of products certified. If you are a specifier, or purchaser of office furniture, make sure to ask if the products you are looking at have been level certified.

For a list of products that have received certification, click (HERE), and to view the level website, click (HERE).

Ouch.... The last quarter takes a pound of flesh from the Big 4

The recession may be technically over, but you wouldn't know it by reviewing the most recently reported quarterly results from the largest domestic office furniture manufacturers:

• HNI (Parent company of Allsteel): quarterly sales down 31.5%
• Herman Miller: "Consolidated" (read slashed) another 150 jobs in October, and announced their quarterly sales down 32.4% 
• Steelcase quarterly sales down 35.9%
• Knoll quarterly sales down 36.1%

What does this all mean? Continued deep discounting on large (and not so large) projects, and a feeding frenzy over any project on the street.

Case in point, there was an estimated 40 people representing 29 different office furniture dealers and/or manufacturers at a mandatory project walk-through this past Monday.  For the time being, I don't think I'm going too far out on a limb to say it remains a "buyer's market" for office furniture.

Industry Pain Continues

Quarterly results from some of the major Office Furniture manufacturers signifies the "pain" the office furniture industry continues to go through.

Steelcase the largest North American office furniture company reported that sales fell 33.1% for the latest quarter, and that they intend to layoff an additional 200 white collar workers (link).

Herman Miller reported a sales drop of 38.4% for the latest quarter (link). In a separate release, Herman Miller reported the purchase of Health Care manufacturer Nemschoff , which will further strengthen Herman Miller's product offering for the Health Care industry (link).

Allsteel's response to the current industry slowdown has been to "ask" their workforce (excluding manufacturing and customer service) to take a "week's vacation" immediately prior to the 4th of July. Essentially a nice way of furloughing their workforce for a week to reduce costs.