3 April 2008
Will there be a furniture downturn in this ‘cautious environment?’
Posted by Roger under: Industry Trends .
Outlook expects furniture downturn in ‘cautious environment’
Posted by MARK SANCHEZ | Business Review Western Michigan March 05, 2008 16:25PM
Amid a new outlook that sees a two-year downturn for the industry, upcoming sales and earnings reports from Steelcase Inc. and Herman Miller Inc. should provide further indications on where business is headed.
Both companies ended their latest quarters last week and will report results by month’s end.
Wall Street analysts expect Steelcase [NYSE: SCS] to report net income of 25 cents per share and Herman Miller [Nasdaq: MLHR] to report 58 cents, according to consensus estimates.
Steelcase, in its previous quarterly report in December, provided earnings guidance of 23 to 28 cents per share on sales growth of 10 to 14 percent, or to $856 million to $887 million, over the same period a year earlier.
Herman Miller, in less-optimistic guidance, forecast net income of 55 to 62 cents per share and sales of $475 million to $500 million, a two to three percent increase over a year earlier.
But since both companies provided the guidance, the national economy has slowed, and concerns about a recession have grown.
Industry analyst Michael Dunlap of Michael A. Dunlap & Associates in West Olive expects the upcoming quarterly reports to reflect softening business.
“I think it may be difficult to hit those numbers,” Dunlap said. “It’s a very cautious sales environment.”
The national economic prospects drove an updated quarterly outlook by the Grand Rapids-based Business and Institutional Furniture Manufacturers Association that for the first time foresees the industry experiencing a downturn to close out the decade.
Following a previously predicted and slight 0.6 percent decline for 2008, industry production could fall off another 2.6 percent in 2009, to $11.1 billion, according to the updated outlook.
The outlook, prepared quarterly by Global Insight for the current and following year, is predicated on the national economy experiencing a mild recession in 2008, BIFMA Executive Director Tom Reardon said.
“Given the nature of the macro-economic picture, it’s not too surprising,” Reardon said.
The BIFMA outlook first forecast a slight downturn for 2008 when it was updated in November. The newest update added 2009 and the potential for a subsequent, larger decline.
The possibility of an extended downturn comes after the industry had put up four straight years of solid growth. That followed a devastating period earlier this decade that saw production fall 36 percent, from a peak of $13.28 billion in 2000 to $8.50 billion in 2003.
The industry in 2007 grew 4.4 percent, continuing its rebound, to $11.42 billion.
http://blog.mlive.com/wmbr/2008/03/outlook_expects_furniture_down.html
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