2Q22 Earnings Update; Sales & Earnings Miss Cost/Price/Supply Chain Pressures Persist Incoming Orders Up 24%, Exceeding Expectations

  • After the market close on Wednesday, September 22, 2022, Steelcase reported results for its 2Q22 fiscal quarter. It issued its outlook for 3Q22. It will host its earnings call on Thursday at 8:30 am Eastern.
  • Consolidated sales of $724.8 MM, were down 11.5% y/y and missing our $758.5 MM by $33.7 MM. Sales also disappointed versus management guidance ($750 MM - $ 780 MM; implying an organic decline of 8%-11%). Organically (adjusting for acquisitions and currency), sales were down by 13.9%. By our math, the sales miss dragged diluted EPS by $0.01 versus our estimate. Our analysis of 2Q22 sales and earnings results versus 2Q21 and our estimate follow.
  • Management noted that disruptions across its supply chain (supplier delays, container shortages) during 2Q22 negatively impacted sales in its Americas segment by “at least $40 MM.” They contend that virtually all of these orders will be shipped in 3Q22.
  • Significantly, incoming orders in 2Q22 grew by 24% y/y and by 11% organically (adjusting for acquisitions and currency) versus 1Q22. CEO Keane noted that the order growth exceeded management expectations with some parts of its business approaching fiscal 2020 order levels. Importantly, he commented that despite the delays in shipping, the company has not experienced any significant order cancellations.
  • Notably, gross profit was down by $69.7 MM y/y and gross margin % fell by 524 bp to 23.9%. Versus our estimate, gross profit missed our guess by ~146 bp. Inflation persisted across multiple factors of production including steel, logistics, and many other commodities. Inflation was more significant than expected and will impact 3Q22 and 4Q22 results more than previously thought. Last week, Steelcase initiated its third price increase of the year. All told, we peg the total price increase impact for the three increases to-date at ~15% to list prices. If these play out as usual, ~50% of the increase list prices will be realized and it will take until mid 2023 for the pricing benefit to offset the cost inflation already experienced. Versus our estimate, we estimate the lower-than-forecast gross margin accounted ~$0.06 miss.


  • Expenses to calculate operating income, as reported, fell by $8.1 MM. Management booked a $15 MM gain of sale of land in its Americas segment operating expenses (we accounted for the estimated gain in other income, making the analysis versus our estimate less useful). That said, versus our pre-tax income estimate, results missed by $0.08. A lower-than-forecast tax rate (aided by a discrete item) added $0.03 to EPS versus our estimate.
  • Management reported 2Q22 diluted EPS of $0.21, missing our $0.26 estimate by $0.05. It also missed its EPS guidance, which was $0.25-$0.30.


  • In its outlook, management guided to 3Q22 consolidated revenues of $755 million to $785 million, thereby equating to an organic growth of ~20%-25% and a reported y/y growth of 22%-27%. The company pointed to a $715 million backlog. ~22% above the prior year and ~15% higher than the backlog at the end of 1Q22.
  • The company outlook for 3Q22 EPS of $0.07-$0.11. Impacting 3Q22 EPS, management noted (1) an expected $28 million cost/price deficiency; (2) continued supply chain disruptions, (3) operating expenses of $195 million to $200 million, (4) interest expense, net of $5 million, and (5) an effective tax rate of 28%.
  • For 4Q22, management continues to target double digit growth. We will publish new estimates after the call.

After the market close on Wednesday, September 22, 2022, Steelcase reported results for its 2Q22 fiscal quarter. It issued its outlook for 3Q22. It will host its earnings call on Thursday at 8:30 am Eastern.


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