HNI CORP Q3 FY27 Results

Volume growth returned in both segments in the third quarter. In addition to the benefits of operating leverage from higher volume, cost and expense management and the net benefits of price-cost and productivity drove third quarter results that significantly exceeded our expectations. Our members continue to demonstrate focus and diligence. Encouragingly, our internal leading indicators — pre-order activity, orders, and backlog — continue to provide reasons to be optimistic. The positive momentum of our strategies — both revenue- and cost-focused, the benefits of our diversified revenue streams, the merits of our customer-first business model, and the integration of Steelcase continue to deliver strong shareholder value. In the legacy Workplace Furnishings businesses, our profit transformation efforts are working, and revenue is growing. Workplace Furnishings segment GAAP operating margin was 15 percent, an improvement of 250 basis points year-over-year. Non-GAAP operating margin, excluding Steelcase, expanded 390 basis points year-over-year, reaching a third quarter record of 16 percent; and when including Steelcase, non-GAAP operating income was more than double the prior-year level. Excluding Steelcase, third quarter net sales were up nearly six percent year-over-year. Growth was fueled in large part by our businesses focused on contract customers, and we remain bullish about the industry backdrop. Looking ahead, we expect year-over-year revenue to grow in the fourth quarter in our legacy Workplace Furnishings businesses. At Steelcase, our integration efforts are on track, with synergy capture ahead of plan, and net sales and orders improved on a year-over-year basis. We now expect total synergies to reach at least $130 million when fully mature, with the original $120 million target now expected to be achieved by the end of year four. In the near term, the synergy upside will be partially offset by temporary price-cost pressure from accelerating inflation. We expect our pricing actions will bring a return of price-cost neutrality in 2027. In addition, in Steelcase's international markets, the benefits of ongoing cost actions and profit improvement plans are being partially offset by geopolitical turmoil, slowing the rate of earnings improvement in 2026. We will continue to aggressively manage the cost structure and profitability in these markets. “In Residential Building Products, our organizational realignment and growth initiatives are working and fueled five percent net sales growth in the quarter — strong results given the challenging housing backdrop. Our top line performance was driven by revenue from the remodel-retrofit business, which increased double-digits year-over-year and more than offset modest market-driven weakness in our new construction channel. The top-line strength and our lean operating model drove operating margin and profit upside, with 180 basis points of margin expansion and 16 percent profit growth, on a year-over-year basis. We remain encouraged about the opportunities tied to our growth initiatives, despite expectations of ongoing housing market headwinds. We continue to invest to grow our unique operating model and diversified revenue streams, including go-to-market changes to organize around our customers. The strength of our growth strategies and ability to stay focused on our profit levers, despite ongoing macroeconomic uncertainty, was evident in our third quarter results. We expect strong profit growth again in the fourth quarter, driven by the Steelcase acquisition, operational productivity gains and organic revenue growth,” stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.