Categories Analysis, Retail

Will Herman Miller (MLHR) benefit from consumer retail this year?

The management withheld financial guidance for the current quarter citing the uncertainty surrounding the pandemic

The shelter-in-place orders influenced businesses in unexpected ways last year, with some industries cashing in on new trends like remote work and others struggling to stay afloat. Meanwhile, the virus crisis is having a mixed impact on companies like Herman Miller, Inc. (NASDAQ: MLHR), causing fluctuations in financial performance. Overall, the office furniture giant is feeling the pinch of the disruption caused by the pandemic.

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The Zeeland, Michigan-based company has been making inroads into consumer retail for quite some time, taking a cue from the changing work culture, which came in handy during the pandemic as far as meeting demand is concerned. The management’s growth initiatives, including acquisitions, have been focused on the retail push, lately. But the growth in the consumer-centric business might not be enough to offset the weakness in the commercial segment that accounts for a sizable portion of revenues.


The moderation in valuation towards the end of last week offers a buying opportunity, though it comes with a certain amount of risk. That is mainly linked to the continuing slump in economic activity and disruption the corporate world is facing. With the low demand from commercial customers affecting sales, the company withheld guidance for the current quarter citing lack of clarity as to how the pandemic situation emerges. Herman Miller operates in a highly competitive market, which often puts it at a disadvantage in terms of pricing.

Meanwhile, the strong fundamentals and stable cash flow show the company has the potential to get back on track once normalcy returns to markets, which looks imminent going by the encouraging developments on the COVID-vaccine front. Going forward, margins should also benefit from the management’s cost-cutting initiatives, as they did in the first half of the fiscal year.

Mixed Q2

Retail orders jumped 41% year-over-year, led by the home office category that grew more than two-fold, thanks to the increase in traffic to the e-commerce site. Total sales decreased by about 7% from last year to $626.3 million, resulting in a 34% fall in earnings to $0.87 per share. Earnings, adjusted for one-off items, remained broadly unchanged at $0.89 per share. The performance of the international segment was encouraging, marked by a 42% annual growth.

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During his interaction with market watchers at the post-earnings conference call, Herman Miller’s chief financial officer Jeffrey Stutz said, “Well, our order growth for the quarter was 41% ahead of last year for the retail segment and we specifically feel really good about the shift in growth from October into November. November, December, January is three months that we typically haven’t been aggressive from a marketing campaign perspective in the past. So what we’re seeing as we build from September and October into that nice November growth is some of our new initiatives activating across marketing, some builds in digital, and also executing some of our new tax season campaigning and go-to-market strategies.”

What Future Holds

There is speculation that the new work culture brought about by the pandemic is here to stay. So, Herman Miller executives are currently working on innovations that would prepare the business for the future. The concept stores, mainly featuring the home office furniture collection, is one of them.

Read management/analysts’ comments on MLHR’s Q2 earnings

Herman Miller’s latest earnings report didn’t go well with investors and the stock suffered severely in the following sessions, despite the numbers surpassing the forecast. Maintaining the downtrend, the stock traded lower during Monday’s regular session. The downturn reversed the effect of the recent recovery from the pandemic-linked sell-off nearly a year ago. The shares continue to languish below the pre-pandemic levels.

Looking for more insights?

Read the full conference call transcript here. It’s free!

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