Makers of Office Furniture Pine for More Government BureaucratsBy
Those drab federal government buildings are filled with some pretty nice office furniture.
Herman Miller, Steelcase, and Knoll, the makers of $800 ergonomic chairs and $500 desks, have furnished many government offices, generally with items purchased at steep discounts. But as federal employment shrinks and office managers deal with fallout from the sequester and the looming possibility of a government shutdown, these furniture companies are faced with the need to replace a very large and dependable customer.
In fiscal 2012, federal spending on furniture and equipment dropped below $1.3 billion, down about 22 percent from the previous year, according to the U.S. General Services Administration. Federal spending on desks, chairs, conference tables, and other furnishings in the current fiscal year, which ends this month, has so far amounted to just $613.5 million—off by about $1 billion from the 2011 total.
Steelcase, for its part, blames the decline on sequestration, overall challenges to the federal operating budget, and the selling of federal properties, says spokeswoman Katie Hasse. Steelcase’s sales to the feds have declined year-on-year for the last eight quarters, the company’s chief financial officer noted on an earnings call in June, and a closer look at rival furniture makers shows little hope for improvement soon.
At Knoll, the largest office furniture supplier to the federal government, total government sales dropped 40 percent in the second quarter. The government now accounts for only 10 percent of the company’s revenue, Chief Executive Officer Andrew Cogan said on an earnings call in July. Back in 2009, in the middle of the recession, sales to government offices drove 30 percent of the company’s revenue. Knoll now expects government business to shrink a further 20 percent through next year. HNI, meanwhile, reported a 27 percent decline in sales to the federal government during the first three months of the year.
Even Herman Miller has said that while health-care agencies are buying more furniture, it’s not enough to compensate for the decline from other government departments. “The magnitude of this multiyear decline in government furniture purchase is dramatic and has been felt across our industry,” Herman Miller CEO Brian Walker told investors on a recent earnings call.
The companies are now focusing on other customers. Knoll’s Cogan said his sales force is pressing sales to commercial projects in the health-care, education, and energy industries.
If the government doesn’t shut down next week, the legion of federal cubicle dwellers might want to consider sitting lightly—that office chair is going to have to last a good, long while.