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What's Behind Herman Miller's Splendid 4th-Quarter Results?

Demand was strong in North America as more people begin to return to offices, while retail and overseas sales also showed robust growth trajectory

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Jun 29, 2021
Summary
  • The company’s Inside Access program gained traction during the quarter
  • Herman Miller set to acquire Knoll in a cash-and-stock deal with board of directors of both the companies giving the green light
  • The furniture maker has provided optimistic guidance for first quarter of fiscal 2022
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Herman Miller Inc. (

MLHR, Financial) released its fourth-quarter fiscal 2021 results after the closing bell on June 28. Due to the waning effect of the pandemic and companies beginning to return to offices, the furniture maker’s business operations were positively impacted in North America, while retail and international segments were on the recovery path thanks to strong demand.

Earnings highlights

The Zeeland, Michigan-based company recorded adjusted earnings per share of $0.56. That compares with adjusted EPS of 11 cents reported in the year-ago quarter. Revenue of $621.5 million surged 30.6% on a year-over-year basis. Barring the impact of acquisitions and foreign currency translations, net sales grew 27.9%.

For full-year fiscal 2021, revenue amounted to $2.47 billion compared to $2.49 billion in fiscal 2020. GAAP earnings were $173.1 million, translating to $2.92 per diluted share. That compares with a net loss of $9.1 million, or $0.15 per share, recorded in 2020.

In North America, revenue amounted to $264 million, down from $275.6 million reported last year. The segment, however, saw sequential improvement. Sales rose to $176 million (up 106.1% year-over-year) in the retail segment, while the international segment's revenue increased to $181.5 million.

New orders jumped 28.8% to $689.4 million. The backlog amounted to $446.9 million, which was down 5.1% as compared to the year-ago quarter.

Covid-19 response

Due to the pandemic, the company struggled to generate revenue in the past few quarters, although retail and international segments were recovering strongly. As a result, the company had to take few steps to offset the effect of lower demand. Herman Miller temporarily reduced salaries and lowered retirement contributions.

Harman Miller claims to have adequate liquidity and is confident that it will be able to navigate through the foreseeable future until the prevailing circumstances improve and recover. At quarter-end, the company had total liquidity (cash and debt) of $661.6 million. Cash generated from operations for the quarter came in at $72.2 million. To further strengthen its liquidity, the company suspended its share repurchase program.

Herman Miller’s Inside Access program

Even as more of the country gets vaccinated, more people are still working from home, which led to strong demand for home office furnishings and supplies during the quarter. Going forward, the company is likely to face solid competition from the current as well as new players in the global home office equipment market. To beat the competition, the company would need to increase its research spending and identify the habits and preferences of the modern residential worker.

To help employees work from home efficiently, the company is expanding its Inside Access program. The program aims to provide home office products to the employees who are working away from offices at a remote place.

The impending acquisition of Knoll

In April, Herman Miller entered into a contract to acquire Knoll, an American design firm that manufactures office systems, seating, files and storage, using a combination of cash and stock worth $1.8 billion.

The proposed transaction has received the go-ahead from the board of directors of both the companies and is expected to close within seven days of the shareholder special meetings, which will take place on July 13. As per the earnings report:

“This combination brings together two pioneering and iconic brands to create the preeminent leader in modern design, transforming our industry during a period of unprecedented disruption. With a broader portfolio, global footprint, and advanced digital capabilities, our combined company will be poised to meet our customers everywhere life happens.”

Guidance

The company has provided guidance figures for its first quarter of fiscal 2022. The furniture maker predicts revenue to be around $640 million to $670 million. Adjusted EPS is anticipated to be between 52 cents and 58 cents.

Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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