Release Date: March 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Steelcase Inc (SCS, Financial) reported a full-year adjusted earnings per share of $1.12, exceeding the top end of their initial targets.
- The company achieved an adjusted operating margin of 5%, with a notable 7% in the Americas.
- Steelcase Inc (SCS) experienced its 11th consecutive quarter of year-over-year gross margin expansion, improving over 500 basis points since fiscal 2022.
- Order growth in the fourth quarter was 9%, led by a 12% increase in the Americas, marking the sixth consecutive quarter of year-over-year order growth in this region.
- The company reported strong demand from large corporate and government customers, with positive signals in corporate real estate and increased US office leasing activity.
Negative Points
- Despite strong order growth, adjusted earnings fell below the estimated range due to shortfalls in both the Americas and International segments.
- The international segment experienced a 10% revenue decline, driven by weaknesses in Germany, France, and India.
- Higher manufacturing costs and operating expenses, including a bad debt provision and severance costs, impacted the international segment's performance.
- Steelcase Inc (SCS) is facing new tariffs and global trade uncertainty, which may require pricing actions and supply chain adjustments.
- The company anticipates losses in the international segment in the first half of fiscal 2026, with profitability expected only in the second half.
Q & A Highlights
Q: Could you discuss the order pacing through the fourth quarter and what you're seeing in the early part of the May quarter?
A: Orders followed normal seasonal patterns, building as expected from January through last week. December was strong with double-digit growth, January might have been softer, but overall, the order patterns are following a normal seasonal flow. This week is expected to be strong due to the tariff recovery charge going into effect.
Q: What actions are being taken to achieve breakeven internationally, and what are the expectations for profitability in the second half?
A: We expect growth in the International business next year, driven by parts of the business that have been performing well. We are also reviewing our cost structure to address performance issues from the back half of fiscal 2025.
Q: Could you provide more guidance on the economic assumptions for fiscal 2026, given the current uncertainty?
A: We have moderated our expectations due to current uncertainties, such as negative sentiment in Canada and potential impacts from US government actions. However, our backlog and pre-sales activities are strong, and we are targeting growth consistent with our midterm expectations of 4% to 6%.
Q: Did you repurchase any shares in the quarter, and what is the sentiment for future buybacks?
A: We targeted buybacks to offset dilution in fiscal 2025, purchasing between 2 million and 3 million shares throughout the year. We plan to continue this approach in fiscal 2026.
Q: How is the demand on the West Coast, and how does it impact your outlook?
A: We have seen improvement in the West Coast, particularly in the tech sector. Our largest dealers in Northern California and Seattle are experiencing increased activity and expect growth next fiscal year, which we plan to participate in.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
