Steelcase Reports Third Quarter Fiscal 2020 Results

  • Operating margin increased 290 basis points to 7.9%; EPS improved 48% to $0.46
  • Revenue grew 6% to $955 million, driven by strong organic growth in the Americas
  • EMEA delivers $7 million improvement in operating income and is profitable for the fiscal year to date
  • Company projects fiscal year 2020 revenue of $3.7 billion and EPS of $1.41 to $1.45

Steelcase Inc. (NYSE: SCS) today reported third quarter revenue of $955.2 million and net income of $54.9 million, or diluted earnings of $0.46 per share.  In the prior year, Steelcase reported $901.0 million of revenue and net income of $37.3 million, or diluted earnings of $0.31 per share and adjusted earnings of $0.36 per share.

Revenue increased 6 percent in the third quarter compared to the prior year, reflecting strong growth in the Americas and the Other category.  The growth in the Americas benefited from favorable timing of shipments compared to recent trends and the prior year, in part due to the timing of the U.S. Thanksgiving holiday.  Orders (adjusted for currency translation effects, acquisitions and divestitures) grew 4 percent compared to orders in the third quarter of fiscal 2019, which grew 10 percent compared to the previous year.

“We’re proud to deliver another quarter of outstanding results, including a 28% improvement in adjusted earnings and terrific year-over-year increases in operating margins in the Americas and EMEA,” said Jim Keane, president and CEO.  “Our teams continue to execute against our strategies for growth and profit improvement.  We continue to capitalize on the investments we’ve made in new product development and drive initiatives for improving our cost structure.”

Third quarter operating income of $75.1 million (or 7.9 percent of revenue) increased by $29.7 million or 65.4 percent compared to operating income of $45.4 million (or 5.0 percent of revenue) in the prior year.  The prior year included an $11.2 million pension charge, which had the effect of reducing operating income by $7.5 million after consideration of the related variable compensation expense.  The Americas reported operating income of $74.7 million compared to $52.0 million in the prior year.  Adjusted for the $8.4 million net impact of the pension charge in the prior year, operating income in the Americas increased by $14.3 million, driven primarily by the $52.3 million increase in revenue, which included higher realization of list price adjustments.  EMEA reported operating income of $6.3 million compared to an operating loss of $0.7 million in the prior year, driven by gross margin improvement initiatives and cost reduction efforts.  The Other category reported operating income of $3.3 million compared to $4.2 million in the prior year.

“Our $7 million year-over-year profit improvement in EMEA this quarter is reflective of our teams executing against our strategies as we sustained a high level of revenue while driving improvements in gross margin and operating expenses,” said Dave Sylvester, senior vice president and CFO.  “Our year-to-date profitability demonstrates our ability to drive continued improvement in our business, despite an overall economic environment that continues to be challenging, and puts us in a great position to achieve our near-term target of being profitable in EMEA for fiscal 2020.”

Gross margin of 33.1 percent in the third quarter represented an increase of 220 basis points compared to the prior year, with a 210 basis point improvement in the Americas (including 160 basis points attributable to the pension charge in the prior year) and a 350 basis point improvement in EMEA.  On a consolidated basis, the improvement was driven by pricing benefits, lower commodity costs, and higher absorption of fixed costs, partially offset by unfavorable business mix.

Operating expenses of $241.0 million in the third quarter represented an increase of $8.1 million, but an improvement of 70 basis points as a percentage of revenue, compared to the prior year.  The increase in expense was primarily driven by higher spending to drive growth and higher variable compensation expense, partially offset by $1.8 million of favorable currency translation effects.

Interest expense of $6.7 million in the third quarter represented an increase of $2.0 million compared to $4.7 million in the prior year due to a higher level of outstanding debt.

Income tax expense of $18.9 million in the third quarter reflected an effective tax rate of 25.6 percent.  In the prior year, income tax expense was $7.9 million and reflected an effective tax rate of 17.5 percent, which included a $3.6 million favorable adjustment.

Total liquidity, comprised of cash, cash equivalents and the cash surrender value of company-owned life insurance, aggregated to $527.6 million and total debt was $484.1 million at the end of the third quarter.

“Our strong cash position was further strengthened this quarter as we generated $176 million of cash flow from operations due to strong earnings, a seasonal reduction of working capital, lower estimated tax payments and other favorable timing,” said Dave Sylvester.

The Board of Directors has declared a quarterly cash dividend of $0.145 per share, to be paid on or before January 13, 2020, to shareholders of record as of December 27, 2019.


The company expects fiscal 2020 revenue to approximate $3.7 billion, with revenue in the fourth quarter expected to be in the range of $905 to $930 million.  The company reported revenue of $3.4 billion in fiscal 2019, with $912.4 million in the fourth quarter.  Adjusted for the impact of an additional week in fiscal 2020 and unfavorable currency translation effects, the projected revenue range for the fourth quarter translates to an expected organic decline of 2 to 5 percent compared to the fourth quarter of fiscal 2019, which reflected revenue growth of 18 percent and organic revenue growth of 15 percent compared to the previous year.

“Our fourth quarter estimate is impacted by the favorable shipment timing we experienced in the third quarter, which included benefits from the timing of Thanksgiving which fell in Q3 of the prior year compared to Q4 of the current year,” said Dave Sylvester.  “We estimate that the fourth quarter will be negatively impacted by $20 million or more compared to the prior year as a result of that timing.  We’re pleased our revenue outlook for the full fiscal year is consistent with the targets we established at the beginning of the year as our industry has remained resilient, even as corporate capital spending has been under pressure, and our growth strategies have driven gains in our market share.”

Steelcase expects to report diluted earnings per share between $1.41 to $1.45 for fiscal 2020, including an estimate for the fourth quarter of $0.30 to $0.34.  Steelcase reported diluted earnings per share of $1.05 and adjusted earnings of $1.20 per share in fiscal 2019, with earnings per share of $0.19 and adjusted earnings of $0.29 per share in the fourth quarter.

“Our expectation for earnings per share for the full fiscal year would put us well above the $1.20 to $1.35 range we established at the start of the year,” said Jim Keane.  “As we look out beyond the end of this fiscal year, we believe we will continue to grow faster than the industry and deliver strong earnings growth as we drive value from our acquisitions, continue to improve our profitability in EMEA and continue to invest in new product development and other growth initiatives.”

The full text of Steelcase’s 3Q20 earnings release, including all tables, may be accessed at

A replay of the company’s Dec. 18 conference call webcast, including presentation slides, may be accessed at

About Steelcase Inc.

For over 107 years, Steelcase Inc. has helped create great experiences for the world’s leading organizations, across industries.  We demonstrate this through our family of brands – including Steelcase®, Coalesse®, Designtex®, PolyVision®, Turnstone®, Smith System®, Orangebox® and AMQ®.  Together, they offer a comprehensive portfolio of architecture, furniture and technology products and services designed to unlock human promise and support social, economic and environmental sustainability.  We are globally accessible through a network of channels, including over 800 Steelcase dealer locations.  Steelcase is a global, industry-leading and publicly traded company with fiscal 2019 revenue of $3.4 billion.