Limited
production, shrinking office vacancy and growing construction bodes well for
Knoll Inc. Exposure to luxury residential markets will boost the margin of the
company. Recent results are indicative of market share gain, which can lead to
further earnings beat going forward. However, competition, rising interest
environment, difficult comps and a rich valuation diminishes the attractiveness
of the company’s stock. With Knoll trading at a life time high, we believe that
the stock is a hold for now.
Trends
in office and home furnishing markets are positive; consumption will be ahead
of production and office vacancy rates are expected to shrink, see the past issue
on SCS. Regarding home furnishings, vacancy rates decreased from 4.2% to 4.1%
during Q1 2015 indicating furnishing growth. Going forward, increase in
construction is expected to boost the sales of furnishing players. According to
Barrons,
the American Institute of Architects forecasts 10.2% growth in commercial and
industrial construction next year, up from 5.7% in 2012. Office-building
construction is poised to expand 8.7%, versus 4.7% this year. A research report
forecasts
better results in home furnishing during the next five years amid continued
economic growth and consumer spending habits. All in all, these positive trends
will benefit Knoll and its peers.
While
most of the trends in the industry are positive, there are some negative ones too.
Apartment vacancy rates are expected to rise in 2016, according to Statista.
National vacancy rate in the U.S. is projected to rise 0.7% to 0.8% during
2015. Further, as a part of cost cutting measures, corporations are shrinking
offices space affecting furnishing players in the process. Overall, these
trends neutralize the positive industry trends to a certain extent.
Stellar
2014 and Q1 2015 create difficult comp for KNL. It will be challenging for the
company to meet the recent double digit growth in upcoming quarters. In a
rising interest environment, spending habits of consumers and corporations will
remain under check making it even more difficult for KNL to beat the past
performance.
Complete Story
About Knoll
Knoll, Inc. is a furnishing company that designs and manufactures furniture, accessories, textiles and leathers for work and home. The company’s operations are spread across North America, Canada and Europe. Knoll expanded into residential furnishings through acquisition of Holly Hunt Enterprises during 2014. Reportable segments of the company include Office, Studio and Coverings. Knoll primarily offers office furniture including systems, seating, storage, tables and desks etc. Studio segment’s portfolio contains lounge seating, indoor and outdoor furniture, lighting, textiles and leathers etc. Coverings segment include Knoll textile and branded leather products. The company sells its products through direct sales force, showrooms and network of dealers. Knoll held ~10.7% of the U.S. office furniture market during 2014.
About Knoll
Knoll, Inc. is a furnishing company that designs and manufactures furniture, accessories, textiles and leathers for work and home. The company’s operations are spread across North America, Canada and Europe. Knoll expanded into residential furnishings through acquisition of Holly Hunt Enterprises during 2014. Reportable segments of the company include Office, Studio and Coverings. Knoll primarily offers office furniture including systems, seating, storage, tables and desks etc. Studio segment’s portfolio contains lounge seating, indoor and outdoor furniture, lighting, textiles and leathers etc. Coverings segment include Knoll textile and branded leather products. The company sells its products through direct sales force, showrooms and network of dealers. Knoll held ~10.7% of the U.S. office furniture market during 2014.
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