Investing.com -- Shares in Steelcase Inc (N:SCS) plummeted more than 20% in after-hours trading after the office furniture company manufacturer failed to meet analysts' forecasts with its revenue and forward outlook for the quarter.
During Steelcase's third quarter of fiscal year 2016, which ended in late-October, the Grand Rapid, Michigan-based company report sales of $787.6 million, down 1.6% on a year-over-year basis. For the quarter, Steelcase reported organic growth of 1% while adjusting for the unfavorable impacts of foreign exchange translation, a minor acquisition and strong headwinds in its Europe, Middle East and Africa (OMEA) division. While the company's Americas segment increased organic growth by 3% on the three-month period, the OMEA division suffered sharp declines of 8% over the quarter.
As a result, Steelcase reported net profit of $35.6 million on earnings of 0.28 per share. The company anticipated to finish with earnings of 0.31 to 0.35 per share on revenues of $800 to $820 million.
"The Americas improved profitability in the third quarter despite slowing top line growth, and that helped to offset deeper losses than we expected in EMEA, as we continue to work through our major restructuring actions," said Jim Keane, president and CEO. "EMEA orders grew 20 percent organically in the quarter, driven by improved economies in Western Europe and strong demand for some of our new products. Asia Pacific posted record profitability for the quarter compared to a loss in the prior year."
At the same time, Steelcase said it incurred operating expenses of $197.8 million for the quarter, representing an increase of $2.9 million in comparison with the same quarter over the prior year. It came amid higher variable compensation expenses, which were partially offset by favorable currency translation effects of $6 million.
"The adjusted operating loss in EMEA was significantly higher than anticipated and was driven by three factors," said Dave Sylvester, senior vice president and CFO.
"First, as we worked through the manufacturing and distribution issues in EMEA and reimbursed our dealers for any related impacts and provided incentives to sustain their loyalty, we incurred approximately $4 million of additional costs. Second, we estimate unfavorable shifts in business mix reduced gross margins by more than 200 basis points of revenue, or approximately $3 million, compared to our forecast. Third, operating expenses included approximately $3 million related to unforecasted severance costs and other items."
After revising its fourth quarter outlook, Steelcase now expects to finish with revenue of $720 to $745 million for the period. By comparison, the company posted sales of $749.9 million over the same quarter last year.
Shares in Steelcase plunged 3.78 or 20.02% to 15.10 in after-hours trading.