Steelcase (SCS 18.80, +2.65, +16.41%) is trading higher today after reporting Q2 (Aug)
earnings results last night. Steelcase makes
office furniture, including furniture systems, storage, fixed and
height-adjustable desks, benches and tables, and complementary products such as
worktools. Its chairs include task chairs which are highly ergonomic, seating
that can be used in collaborative or casual settings and specialty seating for
specific markets such as healthcare and education. Brands include Steelcase,
Coalesse, Designtex, PolyVision, Turnstone, Smith System, Orangebox, and AMQ.
Turning to the Q2 (Aug) results, non-GAAP EPS came in at $0.36, if you back out a property gain and other items. Revenue rose 12.9% year/year to $875.8 mln. Both results were better than expected, especially on the EPS line. The revenue upside was more muted. What really stands out is the guidance. For Q3 (Nov), SCS sees EPS of $0.28-0.33 and revenue of $885-915 mln. Both are a good bit ahead of market expectations.
Breaking it down by geography, the Americas posted 15% revenue growth, or 9% on an organic basis, driven by strong project business from both large and small customers. EMEA posted revenue growth of 13% or 11% on an organic basis, driven by strong project business in Germany, the UK, and France, while revenue in the Other category was approximately flat.
SCS has been active on the M&A front. In addition to earnings yesterday, Steelcase also announced it acquired Orangebox Group, a UK-based manufacturer of furniture for the changing workplace, for US$79 mln. Not a huge purchase, but SCS “likes how Orangebox has approached the changing landscape at work and their early recognition that more people want alternatives to the traditional desk, and to work in a range of postures. SCS sees the opportunity to more than double the size of Orangebox's business within five years by leveraging Steelcase's global scale and distribution.”
SCS also recently acquired Smith System and has a new partnership with West Elm. SCS also broadened its partnership with Bolia. These expansions of offerings help support its customers' needs in a changing workplace.
Looking ahead, the NovQ guidance reflects an expectation that pricing benefits will offset inflation. Taking into consideration recent industry trends, SCS' improved win rates, its recent pricing actions and the positive outlook for EMEA and Asia Pacific, the company expects strong revenue growth in both the third and fourth quarters. On a final note, SCS will be hosting an Investor Day on October 3 if you want to learn more about the company.
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