Chicago, IL, June 18--Hit hard by the U.S. economic recession, Steelcase Inc., (SCS), the world's largest provider of office furniture, office design and related services, is on the road to recovery.
In a recent interview at NeoCon, the annual international business-furniture trade show here, Jim Hackett, president and chief executive, said he's optimistic that growth in U.S. employment levels and the GDP will convince Steelcase customers, mainly the largest 1,000 U.S. companies, that it's time to spend some money on updating employee work spaces. In particular, he's watching the manufacturing sector for signs of increased capital spending.
But Hackett said he's not giving financial guidance for the Grand Rapids, Mich., company, because it's too hard to predict the pace of the economic recovery.
Steelcase also has suffered this year from rising commodity prices. High prices on steel and other metals caused the company to impose a surcharge of 1% on its list prices.
Hackett said the surcharge, which has been adopted across the contract furniture, or business furniture, industry, has been difficult for customers to understand. "They thought we could just save money somewhere else." But, he said commodity prices for metals and wood shot up too quickly to be compensated in other ways. Hackett said the 1% surcharge will save the company about $6 million per quarter.
Analysts, on average, expect the company to post a loss of 3 cents in fiscal 2005, which ends in February, following an 11-cent loss in fiscal 2004, according to Thomson First Call. The Street expects Steelcase to report revenue of $2.4 billion this year, up slightly from fiscal 2004.
The company expects to report results for its recently ended fiscal first quarter on Tuesday.
Since 1912, Steelcase has moved from making desks and chairs to providing office architecture and fully integrated workspace technology, with wiring for computers and other devices. The company went public in 1998.
Even during the recession, when the office furniture industry saw sales cut in half, some companies turned to Steelcase to help them downsize, Hackett said. He said a trend toward lean manufacturing has caused some customers to rethink the physical setup for their employees.
One example is Boeing Co. (BA), where finding a more efficient way of assembling its 737 aircraft included building offices for engineers that overlook the mammoth aircraft assembly line in Renton, Wash.
Important customers for Steelcase include companies in the financial services and insurance industries, Hackett said. In financial services, consolidation has led to office changes. Both industries have changed work areas as they added a broader range of financial services for their customers.
Pharmaceutical and biotech firms are also good customers, Hackett said. "Laboratories today use so many computers, they're more like offices than the old wet labs."
In the longer term, Hackett said, he expects Steelcase to benefit from a paradigm shift in the way big companies design their office spaces. In the past 10 years, the use of computers has led to networking among co-workers and equipment they use, creating a need for more common-work spaces, and with much less space needed for individual offices. Technology is bringing about permanent sociological changes in the way people work, Hackett said.
Workers are increasingly mobile, he added, taking telephones and laptop computers with them to different work stations around the office as they share information on various projects. Steelcase sees a growing need for a variety of gathering places within an office. Some spaces have food available, so it's almost like sitting around the kitchen table at home, he said.
