Furniture-maker Steelcase Inc. has announced a 21.9% year-over-year fall in quarterly revenue for their second fiscal quarter, The Wall Street Journal reports, as well as a decline in new orders for the coming quarters. During the Sept. 23 earnings call, CEO James Keane noted a recovery in the company's supply chain functionality, stating it "had to ramp up the entire supply chain quickly to work through the large backlog of orders at the start of the quarter, while continuing to control costs." Steelcase has faced a variety of trade policy uncertainty, including potential tariffs in international markets, as discussed by Panjiva's research of Jan. 29.

Panjiva's data shows that this operational success might have an inverse impact on the business as shipment volume associated with Steelcase increased 53.5% year over in the three months to Aug. 31. This indicates that Steelcase may have a pending inventory problem, given its inventory days increased to 38.9 days from 33.2 to 38.9 days in the fiscal 2021 second quarter from 33.2 days a year earlier.

Steelcase's supply chain success includes a focus on sourcing outside of China that started in late 2019, possibly due to uncertainties around the trade war. U.S. seaborne imports linked to the firm from Asia excluding China increased 136.5% year over year in the three months to Aug. 31, with the majority of sourcing from Malaysia and Vietnam.

This contrasts with imports from China, which increased a more modest 17.2% year over year. China accounted for 22.2% of shipments linked to Steelcase in the past three months from 29.4% a year earlier.

Panjiva's data for other companies that import furniture parts as defined by HS code 9401 and 9403 — Steelcase's main import categories — show that other manufacturers' imports may not have rebounded as quickly.

Imports linked to Ikea in those categories increased 5.8% year over year in the three months to Aug. 31. Furniture importers Raymours Furniture Co. Inc. and COA Inc., meanwhile, saw imports in the same period fall 24.3% and 26.3% year over year, respectively. By increasing operations faster than its rivals, Steelcase is likely in a strong position to increase sales if demand returns, but may have to shoulder the additional costs of inventory if the recovery proves fleeting.

Eric Oak is a researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.