American office furniture giant HNI started a profit transformation plan, and its profits soared fourfold!

A new paradigm in the home

2024-05-24 16:00Published in Guangdong

On May 20, local time, American office furniture giant HNI announced that it would close its manufacturing plant in Hickory, North Carolina in the first half of 2025 and integrate production into other North American factories. About 200 production and operation personnel in Hikori will be affected. The company said it expects to save $11 million annually by 2026.

This may be directly related to the competition from Chinese office furniture companies and the profit transformation plan launched by HNI.

After the profit transformation plan, Q1 operating profit soared fourfold

Less than a month ago, HNI announced its financial results for the first quarter of 2024. In the quarter, HNI's revenue was $588 million, up 22.7% from the year-ago quarter. However, the main reason for this increase is that HNI acquired rival commercial furniture giant Kimball in 2023. Excluding the impact of the acquisition of Kimball, revenue was down 8.1%.

Among them, the office furniture business revenue increased by 46.8%, the operating margin increased by 6%, and the order book increased by 2%.

The net profit growth is a bright figure for HNI that has continued from last year to this year. Net income for the first quarter increased to $17.7 million from $1.6 million in the same quarter last year. The company's operating profit was $29.7 million, up nearly four times from $6.4 million in the same period last year.

Jeff Lorenger, Group Chief Executive Officer and President, said: "Our strong performance continued to be driven by our Office Furniture Margin Transformation Program and the addition of Kimball, which combined to deliver our Office Furniture business margin in the first quarter to its highest level since 2016. ”

Moving back in time, the new paradigm of home furnishing found that HNI's revenue in fiscal year 2023 was $2.43 billion, an increase of 3.1% from $2.361 billion in the previous year; Net profit for the full year was $49.2 million, compared to $120 million in the previous year.

The decline in profitability in FY2023 has caused concern for HNI. Judging from the profitability improvement in 2024Q1, HNI's profit transformation plan is beginning to bear fruit.

In the face of competition from Chinese companies, the U.S. office furniture market has grown steadily

The U.S. home market, where HNI is located, has seen an increase in the number of people working from home/remotely in recent years driving the demand for the home office furniture category from various retailers and manufacturers. Ergonomic furniture with a variety of functions and designs that blends perfectly with the interior decoration are some of the trends in the market. Desks with technological innovations such as adjustable sit-stand functions, wirelessly charging tables and chairs, and shelving units are the main selling points.

According to Mordor Intelligence, the U.S. home office furniture market size is expected to be $6.15 billion in 2024 and is expected to reach $7.6 billion by 2029, growing at a CAGR of 4.35% during the forecast period (2024-2029).

In the entire North American region, including the United States, according to research, the total sales of the North American home office furniture industry market in 2020 was 3676.68 million US dollars, and it is expected to be 4791.32 million US dollars by 2025. The home office furniture industry market is growing at a CAGR of 4.97% from 2019 to 2025.

The market is growing predictably, and there are naturally many competitors.

从市场份额来看，目前Herman Miller、Steelcase、IKEA、Haworth、Knoll、Ashley Home Stores、HNI Corporation、Kimball International、Krueger International、Teknion Corporation等一些主要参与者占据市场主导地位。

However, with technological advancements and product innovations, small and medium-sized companies are expanding their market share by securing new contracts and opening up new markets, forming strong competition with the leading players.

At the same time, the development of cross-border enterprises and e-commerce channels from China and other countries has made HNI feel the crisis. The new paradigm of home furnishing is known to be a good office furniture company exported to the U.S. market, including Henglin Home Furnishing, Lamex Furniture, Sunon Technology, Aurora Furniture, Guanmei Furniture, Jianwei Kinwai, etc.

These office furniture producers from China include Dachong, Lecong, Dalingshan and Longjiang in the Pearl River Delta, Anji Chair Industry and Likou in the Yangtze River Delta, Ningjin Tables and Chairs, Shengfang Metal and Glass Furniture, Xianghe and Yuhuan European Classical Furniture in the Bohai Economic Circle, Chengdu Wuhou District in the west, and Zhuanghe solid wood in the northeast.

Fighting for management profits has become the consensus of Chinese and American home furnishing enterprises

Clearly, the challenges of the global market, as well as the trends of the general environment, are driving office furniture giants, including HNI, to make trade-offs. Shutting factories and consolidating resources and personnel may be just the beginning. It's all about better profits and more efficiency.

On the same day on May 20, Li Lianzhu, chairman of Shangpin Home Delivery, said that to give up narcissism, home furnishing companies need to fight to manage profits. Zhang Qizhi, financial director of Shangpin Home Delivery, also said, "In recent years, the company has continued to optimize its directly-operated stores and convert its directly-operated stores to franchise stores, reduce rigid expenses through structural adjustment and optimization, and increase profits by continuously strengthening the company's various sales expenses and management expenses. ”

Fighting for profits and management effectiveness is becoming the consensus and direction of efforts of Chinese and American home furnishing giants.

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