Furniture maker Herman Miller Inc. isn’t sure when its corporate customers will reopen offices or when they would place orders for new furniture and other office equipment needed for a workspace reconfigured in keeping with coronavirus guidelines.
That is a challenge for its Chief Financial Officer Jeffrey Stutz. Mr. Stutz is preparing for a rush of orders from offices looking to redo layouts in line with social distancing rules, but is also juggling the need for investments in new products while business is weak.
Herman Miller saw a sharp drop in corporate sales, an important source of its revenue, when many offices shut down in keeping with local pandemic rules. The purveyor of office and home furniture saw a pick up in corporate orders in August and September. But Mr. Stutz says it isn’t going to be enough to offset declines from earlier months.
“While Herman Miller has received many inquiries from customers seeking input around how their office spaces should change in response to the virus, many are yet to place orders,” Mr. Stutz said.
Herman Miller is expecting companies to ramp up orders later this year into next year.
Only half of the business executives surveyed plan to return mostly or entirely to onsite operations in the coming 12 months, according to the Association of International Certified Professional Accountants, a professional organization. Twenty-two percent said their company’s operations would primarily be remote, while 9% intend to work completely virtually.
So far, U.S. office spaces remain mostly empty, with unlocks at offices—when someone uses their company identification to enter—down over 50% in late August compared with February.
Some large employers, including banks, have asked their employees to return to the office, while others, such as Facebook Inc., have said they can work remotely on a regular basis.
“Companies are still trying to figure out what the office will look like in the future,” said Gregory Burns, a senior research analyst at Sidoti & Co., a research firm. “Once they make that decision, that will be the trigger for them to make adjustments to their office space,” Mr. Burns said.
Herman Miller’s net sales declined to $626.8 million in the quarter ended Aug. 29, down 6.6% compared with the prior-year period. The North American business serving corporate customers saw orders plummet by 40%, while retail furniture orders for use in the home office went up by nearly 300% compared with the prior-year period. That, however, didn’t compensate for lower orders in the corporate-customer business.
“The dollar volume of content going into a home office is not the same as for what goes into a regular office,” Mr. Burns said. Other furniture companies also have seen declines, he added.
Herman Miller, early into the pandemic, cut roughly 400 jobs to save $39 million in annual labor costs. It also rolled back some employee benefits and eliminated its dividend. The company has since reinstated some of these benefits and is hiring again, but slowly.
Mr. Stutz is trying to hold on to these savings while freeing up funds for developing new furnishings. “I need to determine how much new hiring we could allow and to capture efficiencies with a smaller workforce,” he said. Herman Miller currently has about 7,500 employees globally.
The company, which takes about four to six weeks to ship orders to its corporate customers, also is working on new products for postpandemic offices. Some of the expected changes include fewer conference rooms, wider spacing between desks and a shift away from open-plan offices.
“Companies will look to create experiences that you cannot have elsewhere,” said Ryan Anderson, a workplace strategist at Herman Miller.
Write to Nina Trentmann at [email protected]
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