Investopedia: Are Companies Replanting Their Cube Farms?

For employees stuck in uninspiring cube farms, the office equipment sector may have all the appeal of thumbscrews. For investors, though, there are definite signs of life after several years of recession-induced doldrums. Even though companies are not yet hiring workers in large numbers, it looks as though an equipment refresh cycle has begun, and that could mean better days for shares in companies like Steelcase (NYSE:SCS) and Herman Miller (Nasdaq:MLHR).


A Surprisingly Strong May Quarter
While Steelcase and Herman Miller operate on different fiscal calendars, their quarters nevertheless coincide. What also coincides is surprisingly strong performance, order growth and revenue results well in excess of analyst expectations.

For the quarter Steelcase reported organic revenue growth of 23% and order growth of 25%. To keep this in perspective, though, investors should realize that the revenue for the comparable quarter in 2008 was 29% higher still, so the company has a while to go before regaining prior peak levels. Although Steelcase has seen higher input costs, gross margin was flat and the company reported a major improvement in adjusted operating income.


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