Herman Miller FY4Q15 Earnings Call Notes

Initiatives to reignite North American growth are progressing

” the initiatives we outlined last quarter reignite the growth of our North American segment are progressing at an impressive pace and while it is unlikely these actions impacted our fourth quarter sales in a significant manner, we are pleased by the positive feedback from our dealers and among our sales teams.’

Purchased design within reach

“Today, Design Within Reach has a total of 35 studies and outlets, more fewer than we began with, but has increased its retail square footage by 11%.

Going forward, we’ll be aggressive at our studio conversion plans with six additional locations anticipated for fiscal 2016. The second value driver we outlined was our intent to increase Design Within Reach has made some exclusive product designs including Herman Miller brand products.”

$169m in FCF

“We generated $169 million in cash flow from operations and achieved a return on invested capital of 20% for the full year. We also made significant progress paying down the debt we incurred to fund the Design Within Reach acquisition. ”

Expect continued currency headwinds in FY 16

“Considering current exchange rate forecast, we expect these year-on-year headwinds to continue with the most significant impacts expected in the first half of the fiscal year and extending into the earlier part of Q3. We estimate that full year impact on sales will range between $25 million and $30 million with a corresponding impact on EPS of between $0.10 and $0.12 per share relative to the fiscal 2015 comparison.”

See aggressive competition

“while our gross margins over the past several quarters reflect a generally stable discounting environment, we continue to see aggressive competitive pricing within key markets and certain product categories and project sizes. While pricing is only one aspect of our overall value proposition, this is an area we are watching closely as we move forward.’

We think Restoration Hardware’s modern entry helps people see the market that we’re the leader in

“we think it’s probably, it’s nothing else but the validation of our strategy and the belief that modern as a category within residential is growing. And one that we say, more folks validating that in fact and talking more about modernism and the attraction to it, we think does nothing but actually, probably expands the consumers’ knowledge of that segment and as they expand the knowledge teams, we believe we are world’s leader in authentic modern, we believe that that move simply helps us – they’ll help us see the market that we believe we are the leader in.”

We don’t need to respond directly to RH

we don’t believe we have any need to do any direct response to them other than the things that we already have planned for Design Within Reach in terms of expanding our offer, expanding the number of studios that we have, implementing the large studio model which enables people to envision better their places. Those things that we have planned will continue to be on our agenda regardless of what Restoration Hardware or anyone else does.”

Pricing pressures are greatest in areas of the business where it’s difficult to differentiate

“he greatest pressures are in those areas of the business where we start before, where it’s getting increasingly difficult to differentiate. So you’ve got ongoing pressure around some of the benching type applications. Case goods remains an area where it’s highly competitive and other areas like, even just simple product categories like tables, so those are been the ones I’d point to”