On December 18, 2024, Steelcase Inc (SCS, Financial) released its 8-K filing detailing its third-quarter fiscal 2025 results. Steelcase Inc, a prominent U.S.-based furniture company, offers a diverse range of furniture and architectural products through brands like Steelcase, AMQ, and Coalesse. The company primarily serves businesses and organizations via a dealer network and also reaches consumers globally through online and retail channels. The company's operations are divided into two main segments: the Americas and International, with the Americas being the primary revenue generator.
Performance Overview and Challenges
Steelcase Inc reported a revenue of $794.9 million for the third quarter, which is slightly below the analyst estimate of $800.58 million. However, the company achieved a net income of $19.1 million, translating to earnings per share (EPS) of $0.16, which is below the estimated EPS of $0.19. Notably, the adjusted EPS was $0.30, surpassing the analyst estimate, indicating effective cost management and operational efficiency.
The company's revenue grew by 2% compared to the previous year, driven by a 5% increase in the Americas segment. However, the International segment faced a 6% decline, primarily due to challenges in the Asia Pacific markets, excluding India, and France. This mixed performance highlights the importance of regional diversification and the potential risks associated with international market volatility.
Financial Achievements and Industry Implications
Steelcase Inc's gross margin improved by 100 basis points to 33.4%, reflecting successful cost reduction initiatives and restructuring actions. This improvement is crucial for the furnishings industry, where margin pressures are common due to fluctuating raw material costs and competitive pricing strategies.
The company's total liquidity increased by $152 million, reaching $576.6 million, which strengthens its financial position and provides flexibility for future investments or debt reduction. Total debt stood at $446.9 million, and the trailing four-quarter adjusted EBITDA was $283.6 million, marking a 9% increase from the prior year.
Key Financial Metrics and Commentary
Operating income for the third quarter was $41.0 million, a decrease from $43.8 million in the previous year. The decline was partly due to the absence of a $9.5 million benefit from a decrease in the valuation of an acquisition earnout liability and $5.4 million in gains from asset sales in the prior year. Adjusted operating income also saw a slight decrease to $47.3 million from $49.3 million.
Our Americas business posted 7% organic revenue growth this quarter driven by growth across many of our customer segments, and we delivered higher than expected adjusted earnings per share," said Sara Armbruster, president and CEO.
Operating expenses increased by $17.3 million to $223.8 million, influenced by higher employee costs and the absence of prior year gains. The company also recorded a $15.2 million non-cash charge related to pension plan annuitization.
Analysis and Outlook
Steelcase Inc's performance in the third quarter reflects resilience in the Americas segment, offset by challenges in international markets. The company's focus on cost management and operational efficiency has resulted in improved margins and liquidity, positioning it well for future growth. However, the decline in international revenue underscores the need for strategic adjustments to mitigate regional risks.
Looking ahead, Steelcase Inc anticipates fourth-quarter revenue to range between $770 million and $795 million, with projected EPS between $0.17 and $0.21. The company remains committed to evolving its solutions to meet changing work patterns and customer needs, aiming to sustain profitability and growth in the coming quarters.
Explore the complete 8-K earnings release (here) from Steelcase Inc for further details.
