8-K: Steelcase Reports Strong Q1 Fiscal 2026 Results Driven by Americas Growth, Announces Restructuring Amid Mixed Outlook

Steelcase Inc. reported a 7% increase in first quarter fiscal 2026 revenue and a 45% rise in operating income, primarily fueled by strong performance in the Americas, while also announcing restructuring actions and providing a mixed outlook for the second quarter.

Summary

• Steelcase Inc. reported first quarter fiscal 2026 revenue of $779.0 million, a 7% increase compared to $727.3 million in the prior year.
• Net income for Q1 FY26 was $13.6 million, or $0.11 per diluted share, up from $10.9 million, or $0.09 per diluted share, in Q1 FY25.
• Adjusted earnings per share increased to $0.20 in Q1 FY26 from $0.16 in the prior year.
• Gross margin improved by 170 basis points to 33.9% in Q1 FY26, driven by higher volume in the Americas, lower restructuring costs, and cost reduction initiatives.
• Operating income increased by 45% to $25.5 million in Q1 FY26, with adjusted operating income rising by $10.8 million to $39.0 million.
• The Americas segment saw 9% organic revenue growth, driven by large corporate, government, and healthcare customers, and a $14.3 million improvement in adjusted operating income.
• International segment experienced a 1% organic revenue decline, primarily due to weakness in Germany and France, leading to a $3.5 million decline in adjusted operating income.
• Overall orders declined modestly by 1% compared to the prior year, with growth from large corporate customers in the Americas offset by declines from government and education customers.
• The company initiated restructuring actions in the Americas, including salaried headcount reductions, targeting approximately $20 million of annualized spending.
• Procedures for further cost structure reductions were initiated in Europe in response to weak macroeconomic factors and lower demand in Germany and France.
• Total liquidity stood at $391.5 million at the end of Q1 FY26, an increase of $13.7 million compared to the prior year.
• The Board of Directors declared a quarterly cash dividend of $0.10 per share.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. Strong Q1 results, particularly in the Americas, and proactive restructuring efforts are positive. However, the overall order decline, continued weakness in the International segment (Germany and France), and a significantly lower projected EPS for Q2 FY26 compared to the prior year's Q2 temper the optimism.

Positives

• Revenue grew 7% overall and 7% on an organic basis in Q1 FY26, reaching $779.0 million.
• Americas segment achieved strong 9% organic revenue growth, driven by large corporate, government, and healthcare customers.
• Gross margin improved significantly by 170 basis points to 33.9% in Q1 FY26.
• Operating income increased by 45% to $25.5 million, and adjusted operating income rose by $10.8 million to $39.0 million.
• Net income increased to $13.6 million ($0.11 per share) from $10.9 million ($0.09 per share) in the prior year.
• Adjusted earnings per share improved to $0.20 from $0.16.
• Order growth from large corporate customers continued, indicating strong demand in this segment.
• Beginning backlog was 2% higher than the prior year, at approximately $801 million.
• Total liquidity increased by $13.7 million to $391.5 million.
• A quarterly cash dividend of $0.10 per share was declared, demonstrating commitment to shareholder returns.
• Restructuring actions initiated in the Americas are expected to yield approximately $20 million in annualized spending reductions, prioritizing strategic initiatives and growth areas.

Negatives

• Overall orders declined modestly by 1% in Q1 FY26 compared to the prior year.
• Orders in the Americas reflected declines from government and education customers.
• International segment experienced a 1% organic revenue decline, primarily driven by Germany and France.
• Adjusted operating income in the International segment declined by $3.5 million, primarily due to a lower mix of small-to-medium sized businesses in Germany and France.
• Operating expenses increased by $12.6 million, driven by higher employee costs ($7.2 million), higher variable compensation expense ($5.1 million), and unfavorable currency translation effects ($2 million).
• The company incurred approximately $7 million of higher tariff costs, net of pricing benefits, in the Americas.
• Other expense, net, was $3.3 million in Q1 FY26, a decrease of $3.6 million compared to other income, net, in the prior year, primarily due to foreign exchange losses.
• Net cash used in operating activities was $141.1 million in Q1 FY26, compared to $59.1 million in Q1 FY25.
• The projected earnings per share for Q2 FY26 ($0.27 to $0.31) is significantly lower than the $0.53 reported in Q2 FY25.

Risks

• Competitive and general economic conditions domestically and internationally.
• Acts of terrorism, war, governmental action, natural disasters, pandemics, and other Force Majeure events.
• Cyberattacks.
• Changes in the legal and regulatory environment.
• Changes in raw material, commodity, and other input costs.
• Currency fluctuations.
• Changes in customer demand.
• Other risks and contingencies detailed in the company's most recent Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission.

Future Outlook

For the second quarter of fiscal 2026, Steelcase expects revenue to be in the range of $860 million to $890 million, representing approximately flat to 4% growth (or flat to 3% organic growth) compared to the prior year's $855.8 million. The company projects earnings per share between $0.27 and $0.31, and adjusted earnings per share between $0.36 and $0.40. This outlook includes an estimated gross margin of 33.0% to 33.5%, projected operating expenses of $230 million to $235 million, net interest expense of approximately $3 million, and an effective tax rate of approximately 27%. The projected EPS range is notably lower than the $0.53 reported in Q2 FY25.

Management Comments

• Sara Armbruster, President and CEO: "Our first quarter results were a great start to the year. We delivered strong revenue growth, led by our large corporate customers who are investing to reimagine their workplaces. As organizations bring people together in new ways, they are turning to Steelcase to create spaces that support connection, creativity and performance. While external factors are impacting a few parts of our business, the majority of our businesses and geographies are performing well. We remain confident in our strategy and focused on delivering value to our customers."
• Dave Sylvester, Senior Vice President and CFO: "During the first quarter, we initiated restructuring actions in the Americas (including salaried headcount reductions and the elimination of open job requisitions targeting approximately $20 million of annualized spending). Our fiscal 2026 targets that we shared in March reflected the expected benefits of these actions, which were taken to prioritize investments in our strategic initiatives and growth areas. In addition, we have initiated procedures with applicable unions and works councils in Europe as part of actions which are targeted to further reduce our cost structure in response to weak macroeconomic factors and lower demand in Germany and France. These actions are in support of our broader goal to improve profitability in our International segment."
• Sara Armbruster, President and CEO: "I am proud of our teams around the world for their strong execution and continuing the momentum we built in fiscal 2025. Our customer conversations remain very active, including at the recent Design Days and Neocon events in Chicago, where many arrived prepared to move forward with final design decisions for their projects. These interactions reinforce the trust our customers place in us and the relevance of our solutions in a changing world of work."

Industry Context

Steelcase's strong performance in the Americas, particularly with large corporate customers, aligns with the broader industry trend of companies investing in reimagining their workplaces to support new ways of working, such as hybrid models. The emphasis on creating spaces for connection, creativity, and performance reflects the evolving demands of modern office environments. The challenges faced in Germany and France, however, suggest that macroeconomic factors and demand variations can still impact regional markets within the global office solutions industry.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results to assess Steelcase's performance against global industry benchmarks.

Stakeholder Impact

• Shareholders: Positive impact from improved Q1 financial performance and declared dividend, but potential concern regarding the lower projected Q2 EPS compared to prior year.
• Employees: Negative impact for some employees due to salaried headcount reductions in the Americas and initiated procedures for further cost reductions in Europe.
• Customers: Positive impact for large corporate customers as Steelcase continues to provide solutions for reimagining workplaces and supporting new ways of working.
• Suppliers: Potential impact from cost reduction initiatives and changes in demand, particularly in regions experiencing declines.

Next Steps

• The company will host a webcast conference call on June 26, 2025, at 8:30 a.m. Eastern time to discuss Q1 results and business outlook.
• A replay of the webcast will be accessible through the company's website.
• The declared quarterly cash dividend of $0.10 per share is to be paid on or before July 21, 2025, to shareholders of record as of July 7, 2025.
• The company will continue to implement restructuring actions in the Americas, targeting approximately $20 million of annualized spending reductions.
• Procedures with applicable unions and works councils in Europe have been initiated for further cost structure reductions in response to weak macroeconomic factors and lower demand in Germany and France, aiming to improve profitability in the International segment.

Key Dates

Recommendation

Keywords

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