Businesses and shoppers who for the last two years pulled back on outfitting their homes and offices are back to buying chairs, couches and desks, which may be a boon for furniture maker MillerKnoll.
The global design company, which sells everything from Eames chairs to desks, rugs and lamps under the brands Herman Miller, Knoll and Design Within Reach, for the first time in a couple of years saw organic order growth in the three month-period ended June 1. For differing reasons, two of MillerKnoll’s major customer groups slowed their furniture-buying in recent years. Businesses cut plans to order office equipment when workplaces emptied during the pandemic, a drop-off that lingered in the face of hybrid work. Meanwhile, consumers who bought furniture with abandon in the early days of Covid pulled back as the economy and a frozen housing market in the U.S. put a damper on home-improvement purchases.
MillerKnoll executives have been working to spur orders. While revenue was down 7% in the latest quarter from the previous year, organic orders—a measure that strips out the effects of currency fluctuations, acquisitions and disposals, and an extra week in fiscal 2023—rose. And it’s starting in two important areas: corporate clients in the Americas, which make up about 50% of MillerKnoll’s revenue, and global retail customers. “We’re reaching a point of inflection,” said Chief Financial Officer Jeff Stutz.
“Growth in this industry is never a convenient straight line—there tends to be some fits and starts at the early part of a recovery—but we’ll take it,” he said. “And we have to keep that moving forward.”
To do that, the company is adapting to new needs from customers and expanding its offerings.
In its fiscal quarter ended March 2, MillerKnoll signaled that the order environment might finally be turning. Internal signals, such as winning more projects and an uptick in interest to initiate them, reflected as much, “but we hadn’t yet turned the page to order growth,” Stutz said.
That came in the following quarter: Companies in the Americas saw organic order growth of around 5%. The upturn wasn’t limited to a few large projects, and was across industries, according to Stutz. And it stretched beyond desks, filing cabinets and office chairs to items for healthcare facilities, such as lobby and in-room patient seating, the CFO said. The company also managed to eke out an $11 million profit, an increase of 1.2% over the year-ago quarter.
Hybrid-specific furnishings are also now a big focus of the business, Stutz said. Nearly 70% of U.S. businesses offer work location flexibility as of the three-month period ended in June, up from 58% in the year-ago period, according to the Scoop’s Flex Index report on more than 9,000 companies.
“Hybrid working practices are likely here to stay,” Stutz said. “But that doesn’t necessarily mean that there isn’t a great opportunity for companies like ours.”
As companies rethink workspaces, nontraditional office furnishings such as sofas, coffee tables, outdoor furniture and lounge chairs are increasingly in favor, according to Stutz. The $1.8 billion acquisition in 2021 of Knoll, known for its trendy office furniture, was an important part of meeting those needs, he said. The deal gave MillerKnoll broader reach and more products as businesses refocused on collaborative workspaces and enticing workers back to offices.
Retail shoppers, too, are coming back, buying more upholstered furniture, dining tables and chairs and bedroom furnishings, the CFO said. MillerKnoll saw organic order growth of nearly 1% in the global retail segment for the quarter ended in June compared with a year earlier. To keep customers’ interest, the company is investing in design services and increasing both the number of stores and products, possibly adding more dining tables, rugs and outdoor furnishings, Stutz said, declining to say how much MillerKnoll is investing in these efforts.
Even with organic orders flat on the company’s international business, a rebound in the Americas business and retail segment brought overall organic order growth of nearly 3%. Stutz is optimistic the rise will continue. “Our sense is that there is still some pent-up demand that we will see realized in the form of real demand improvement once the economic skies clear,” he said. “We think we’re getting close to that point.”
Difficulties have plagued home and office furnishing companies for years, analysts said, with executives at furniture companies including RH, Wayfair and workspace furniture manufacturer Steelcase having trouble spurring demand. For some that is changing, with Steelcase seeing order growth in the last three quarters.
Analysts say that despite the drop in MillerKnoll’s revenue, if orders keep rising, revenue will follow.
“It’s obviously been a really tumultuous couple of years coming out of Covid,” said Alex Fuhrman, a senior research analyst at Craig-Hallum Capital Group. But the order growth seen in MillerKnoll’s last quarter, he noted, was crucial to backing up the company’s earlier signals, he said.
“It was an important quarter for the company’s credibility to really show that those signs they were seeing, that orders were turning around, really did come to fruition,” said Fuhrman.
Write to Jennifer Williams at jennifer.williams@wsj.com