Herman Miller's Sleek Success

There's always something disturbing to me about going to an office with furniture that looks about as empty as a blank canvas. However, I would use the words "cool," "sleek," and "dynamic" to describe the office furniture of Herman Miller (Nasdaq: MLHR  ) , which has a substantial base in the U.S. and is making tremendous strides internationally.

Herman Miller's sales were up 10% in the first quarter of fiscal 2005, primarily as a result of 40% sales growth and a 53% increase in orders from international markets. Orders for the quarter were up 18%, and the company's backlog increased 24% and included about $10 million in orders that are scheduled out past the second quarter (compared with $8 million last year). Herman Miller earned $0.20 per share in the quarter, which was in line with analysts' estimates and significantly ahead of last year's $0.08 per share.

Management expects sales growth for the second quarter to be in the range of 9% to 15%, which translates into $360 million to $380 million ($368.3 million is the current analyst expectation). However, the company said its earnings forecast of $0.19 to $0.24 a share, which is below the $0.25-per-share consensus estimate, "reflects the continued impact of raw material cost increases combined with slightly higher operating expenses to fund continued growth."

The office furniture industry, which includes companies such as HNI Corp. (NYSE: HNI  ) and Steelcase (NYSE: SCS  ) , has been hurt by various macroeconomic factors. Herman Miller intends to grow sales and earnings faster than the market through innovation and market expansion. The company also ended the quarter with nearly $156 million of cash, which it intends to use to repurchase shares and invest in its business.

It's good to see a company taking a more progressive approach to an age-old business model. With its cutting-edge designs and functional furniture, Herman Miller is making great strides in many international business markets. The shares, which are trading at 20 times the fiscal 2006 earnings estimate of $1.22 per share, are attractive relative to the company's expected 36% earnings growth combined with the 1.18% dividend yield.

Get comfortable in your ergonomic office chair, and click on these related takes:

• When Your Competition Is in Prison
• Herman Miller Escapes the Hot Seat
• Plan for Tomorrow

Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.