SCS - Steelcase trims dividend announces layoffs in planned spending cuts

Steelcase Inc. ( NYSE: SCS ) shares marked a modest decline in after hours trading following a mixed earnings report for its fiscal second quarter and slated significant spending cuts moving forward.

For the fiscal second quarter, the Michigan-based furniture company posted $0.21 in adjusted earnings per share alongside $863.3M in revenue. Analysts had anticipated $0.13 and $882.7M, respectively. Gross margin expanded 60 basis points in the quarter, benefiting from pricing improvements.

"Inflation continues to be significant and has aggregated to approximately $270M over the last six quarters, but for the first time since fiscal 2021, our year-over-year pricing benefits exceeded inflation this quarter," CFO Dave Sylvester said. "Over the coming quarters, although inflationary pressure is expected to remain, we anticipate the benefits from our pricing actions will continue to accumulate and more fully offset the cumulative inflationary costs we’ve incurred."

Still, management forecast both revenue and EPS short of expectations for the third quarter, expecting EPS and revenue ranges of  $0.17 to $0.21 and $825M to $850M against expectations of $0.22 and $862M. Amid the lingering headwinds,Sylvester signaled significant actions to be taken by the company into the close of the year.

"In response to inflation and supply chain challenges throughout this year, we have been pulling back on our planned level of incremental spending while staying invested in our most critical strategic initiatives,” he said.  “Due to the recent volume decline in our incoming orders and lower than expected return-to-office trends in the Americas, we are planning to implement additional actions in the third quarter which target further reduction of our planned level of spending.   These actions target approximately $20M of annualized spending and are expected to include the elimination of up to 180 salaried positions across the Americas core business and Corporate functions."

The Board of Directors also approved a reduction in the quarterly dividend to $0.10 per share.

"Based on the recent order and return-to-office trends, we adjusted our dividend this quarter to strengthen our liquidity profile and support a higher allocation of capital to reinvestment in the business and pursuit of our longer-term strategy," Sylvester explained.

Shares of Steelcase ( SCS ) slid over 10% immediately after the earnings announcement, subsequently rebounding to a far more modest loss in Wednesday’s extended session.

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