Herman Miller Inc.: Sofa, So Good

July 10, 2008
Furniture maker says strategy to diversify into new and emerging markets is gaining traction.

Thomas Edison once said that success is 10% inspiration and 90% perspiration. Few can argue the fact, but for manufacturers today that 10% is still pretty important. For Herman Miller, one of IndustryWeek's 50 Best Manufacturers for 2008, supporting innovation throughout the company has long been a key to its success.

On June 30, the company's CEO Brian Walker appeared on CNBC's "The Business of Innovation" to discuss the company's focus on internal networking to drive collaboration amongst its manufacturing, distribution and R&D segments to determine what trends are important and what problems they want to try and solve.

"What we try to do is reach out to a broader creative network of designers, get them to bring the ideas to us," Walker told CNBC's Maria Bartiromo. "And our team really surrounds them to actually help bring their idea to life."

A quick look at Herman Miller's last earnings report shows that the strategy seems to be paying off. The company reported a 7% increase in sales for its fourth-quarter and a 4.9% increase in sales for the fiscal year ended May 31, 2008, driving revenues above the $2 billion mark. In the report, Walker addressed the company's push to diversify into new and emerging markets, both domestically and internationally, which he said is "gaining traction."

"This is evident both in terms of our top-line growth and the breadth of innovative solutions that we are launching in each of our business segments," said Walker. "We're confident that our focus on performance innovation will enable us to continue to solve our customers' problems and create value and growth for our shareholders and employee-owners."

Fourth-quarter non-North American sales were up 22.8% year-over-year, while the North American market experienced solid growth of 6.3% compared to the prior year period. Commodity prices increased through the quarter but were offset with increased leverage of costs on higher sales volume, a benefit from reduced inventory levels that generated a favorable LIFO inventory adjustment, as well as the realization of service revenue associated with a large project completion.

According to CFO Curt Pullen, Herman Miller's broad distribution footprint has been its most valuable asset in driving growth in the companys non-North American business during the fourth quarter. "From this growing platform we are able to serve both our multi-national customers and a rapidly increasing base of indigenous companies who recognize that a great work environment is essential to attracting and retaining the best talent," Pullen said.

Herman Miller Inc.
At A Glance

Herman Miller Inc.
Zeeland, Mich.
Primary Industry: Furniture & Fixtures
Number of Employees: 6,574
2007 In Review
Revenue: $1.92 billion
Profit Margin: 6.73%
Sales Turnover: 2.88
Inventory Turnover: 24.69
Revenue Growth: 10.46%
Return On Assets: 19.33%
Return On Equity: 93.28%

Looking forward, sales for the first-quarter of fiscal 2009 are expected to be in the $470 million to $495 million range. And while Walker noted that the past year marks "one of the most successful years in Herman Miller's history," the company's estimates reflect both a challenging U.S. demand picture and continuously rising commodity costs.

"Changing economic conditions required us to closely examine how and where we invest our resources to optimize our growth and minimize the impact of ongoing challenges in the U.S. market," Walker said. "As a result, we are well positioned for what we expect will continue to be a difficult near-term environment."

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