GRAND RAPIDS, Mich. – A decline in incoming orders and lower than expected return-to-offìce trends in the Americas, has led Steelcase Inc. to implement a further reduction of planned spending including a reduction of approximately $20 million of annualized spending and the elimination of up to 180 salaried positions across America's core business and corporate functions.
"In response to inflation and supply chain challenges throughout this year, we have been pulling back on our planned level of incremental spending while staying invested in our most critical strategic initiatives,” said Dave Sylvester, senior vice president and CFO, of Steelcase.
The announcement came during the release of the second quarter financial results. The company reported revenue growth of 19% driven by a strong backlog, including significant pricing benefits. Gross margin improved 60 basis points compared to the prior year despite continued significant inflationary pressure. Its third-quarter outlook reflects continued revenue and earnings growth expectations driven by backlog and gross margin improvement.
The company announces additional reductions in planned spending and lower quarterly dividends due to an uncertain demand environment.
The organic revenue growth in all segments was driven by a strong beginning backlog and included significant pricing benefits. Order growth in the Americas and EMEA was driven by pricing benefits, partially offset by a decline in volume in the Americas. The order decline in the Other category was driven by the Asia Pacific market with broad-based volume declines in all markets except India, which continued its strong recovery from COVID-related restrictions in the prior year.
"Our sales and dealer teams have delivered significantly higher order growth than our industry in the Americas over the past year and done an outstanding job implementing our necessary pricing actions," said Sara Armbruster, president and CEO. "I want to thank all of our employees for delivering better than expected earnings this quarter by remaining diligent in combating supply chain challenges and controlling operating expenses."
The decline in EMEA was primarily due to higher inflation, net pricing benefits, and labor inefficiencies. The improvement in the Other category was primarily due to higher volume and higher pricing benefits, net of inflation, partially offset by an unfavorable inventory adjustment.
"Inflation continues to be significant and has aggregated to approximately $270 million over the last six quarters, but for the first time since fiscal 2021, our year-over-year pricing benefits exceeded inflation this quarter," said Sylvester. "Over the coming quarters, although inflationary pressure is expected to remain, we anticipate the benefits from our pricing actions will continue to accumulate and more fully offset the cumulative inflationary costs we’ve incurred."
Have something to say? Share your thoughts with us in the comments below.