Leading contract furniture players MillerKnoll and Steelcase both reported mixed results this week, but said there are green shoots as we head into 2025.
Common denominators in their results were growth in the US—although slower than expected—and continued challenges in Europe. Order rates in Europe are trending down in the high single digits, and Steelcase called out further restructuring and cost-reduction measures during the most recent quarter at its international segment.
There is consensus that demand patterns will pick up in North America; the companies referred to internal and external indicators that are pointing to improved market conditions. A tailwind would be accelerating return-to-office trends and there is a degree of optimism this will occur in 2025.
On MillerKnoll’s earnings call, CEO Andi Owen said customer conversations had shifted from “if” staff go back to the office to “when and how quickly.”
Steelcase CFO Dave Sylvester provided some more detail. “During the current year, demand from the financial services sector improved significantly and we believe there was a correlation with the stance many of those companies took about increased employee presence in their offices,” he stated during the Steelcase call.
He added: “We are seeing a similar shift in expectations regarding the number of days in the office across several large customers in the technology sector, where pre-sales activity and demand expectations are also beginning to improve.”
Sylvester said he would “fully support” efforts by the incoming Trump administration to get federal workers in the US back to the office. This, he believes, will be a driver of higher activity levels for Steelcase, although there could be negative consequences of workforce reductions if they are implemented.
Both sets of execs were quizzed by analysts on the potential impact of new or higher tariffs on goods coming into the US, with MillerKnoll actually addressing this issue in its prepared remarks.
“We’ve managed through similar tariff policy changes in the past and are looking at a number of options to mitigate if needed,” Owen noted, adding: “These could include identifying alternative sources of supply, options for advanced purchasing of imported goods and materials, and possible future price adjustments in response to tariff-driven cost increases.”
She continued: “We know from experience that our global manufacturing footprint and supply chain agility is an advantage. We will determine which combination of these responses is appropriate as more details [emerge].”
Steelcase would appear to have more exposure to potential tariff hikes. It is already buying additional inventory and is looking at ways of reducing exposure to China and Taiwan.
One area of concern would be duties on products coming into the US from Mexico, where Steelcase operates several manufacturing facilities. However, Sylvester isn’t convinced this will play out as threatened because of the “significant inflation” across the US this would cause.
“That (inflation) seems to be something the [incoming] administration wants to avoid,” he suggested.
MillerKnoll CFO Jeff Stutz revealed his firm does not have a lot of exposure to Mexico, but is watching what happens with China and Canada very carefully. The manufacturer inherited a facility in Toronto from its Knoll acquisition which makes wood casegoods.
Owen commented: “Based on our last round of experience with tariffs, we spent a lot of time and effort making sure we rationalize our manufacturing and our supply chain. We are a lot less exposed to places like China than we were in the past, but we have a playbook ready depending on what those tariffs end up being.”
This story was originally published as premium content by our sister publication OPI.
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