MUSCATINE, Iowa – HNI Corporation announced net sales of $623.7 million and net income of $36 million for the second quarter while forecasting elevated earnings growth visibility beyond 2024.
In its earnings release on Thursday, July 25, the Muscatine-based manufacturer said the strong results in the second quarter, ended June 29, were fueled by growth in its Workplace Furnishings segment, strong accretion from its Kimball International acquisition, and actions taken in its Residential Building Products segment.
“Our members again demonstrated the organization’s ability to drive strong profit growth. We delivered non-GAAP EPS that was 44 percent higher than the prior-year period, reaching a record level for the second quarter,” HNI Corp. Chairman, President and CEO Jeff Lorenger said in the release.
The office furniture maker reported second quarter GAAP earnings of 75 cents per share as well as non-GAAP EPS of 79 cents, which was a new record for the quarter.
The earnings report sent HNI’s stock up in trading Thursday on the NYSE. As of 3 p.m., it was up $4.82 to $53.73, an increase of 9.85%.
Looking ahead, HNI said it expects revenue growth to return in both segments with year-over-year trends expected to improve from the third to the fourth quarter. HNI also anticipates EPS for 2024 to reach an all-time high and mark a third consecutive year of non-GAAP EPS growth.
“The combination of our profit transformation initiatives and the Kimball International acquisition continue to deliver strong earnings growth in the Workplace Furnishings segment,” Mr. Lorenger added. “These efforts drove segment operating profit margin to a multi-decade high for the second quarter. Notably, these results have been achieved without support from the economic cycle.”
Of the Residential Building Products segment, he said “profit dollars and margin were up year-over-year despite ongoing housing market weakness. Longer-term, we remain bullish about the prospects of the housing market, broadly, and our market-leading position, specifically.”
HNI, which acquired the Jasper, Indiana-based Kimball International, a commercial furnishings company, in a $485 million deal in 2023, indicated that elevated earnings growth visibility now extends beyond 2024. Citing the synergies with Kimball including savings associated with the recently announced manufacturing network optimization initiative, and the ramp of the Corporation’s new facility in Mexico, HNI said it expects to yield total net savings of $70 million to $75 million, of which, about $45 million to $50 million of the benefit will impact 2025 and 2026.
“Overall, our strategies, our dedicated member-owners, the strength of our customer-first business model, and our proven ability to manage through all parts of the economic cycle are delivering excellent results,” Mr. Lorenger said.
Here are some of the quarter’s summary comments shared by HNI:
- Consolidated net sales increased 10.7% from prior year quarter to $623.7 million. The Kimball acquisition increased year-over-year net sales by $80.5 million. The divestiture of Kimball’s Poppin business in 2023 decreased year-over-year sales by $3.4 million.
- Gross profit margin expanded 360 basis points compared to the same period last year.
- Selling and administrative expenses as a percent of sales decreased 440 basis points compared to the prior-year quarter. The decrease was driven by $31.3 million of non-repeating fees and expenses related to the Kimball acquisition and improved freight and distribution productivity.
- Workplace Furnishings net sales increased 16.3% from a year ago to $480.2 million. Its operating margin of 11.3% improved 750 basis points vs. prior-year quarter.
- Residential Building Products net sales decreased 4.6% to $143.5 million from the prior-year quarter due to weakness in the housing market and remodel/retrofit sales declining at a higher rate than new construction. Operating profit margin of 13.8% increased 350 basis points year-over-year.
Mr. Lorenger said HNI’s strategies and its teams “delivered excellent results in the first half of 2024.”
“Adding to our momentum, workplace demand is beginning to turn. We expected revenue growth in the second half of the year, which, when combined with our transformation efforts, will drive continued year-over-year profit growth and margin improvement,” he said in the release.
“Our core strategies are unchanged. We will continue to deliver margin expansion in Workplace Furnishings and drive long-term revenue growth in Residential Building Products,” Mr. Lorenger concluded.
