HNI Q3 Deep Dive: Mixed Revenue Growth, Margin Focus, and Integration of Steelcase Acquisition

Workplace furnishings manufacturer HNI Corporation (NYSE:HNI) missed Wall Street’s revenue expectations in Q3 CY2025 as sales only rose 1.7% year on year to $683.8 million. Its non-GAAP profit of $1.10 per share was 3% above analysts’ consensus estimates.

Is now the time to buy HNI? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

HNI’s third quarter results reflected a muted market response as revenue growth came in below Wall Street’s expectations, but non-GAAP profit modestly exceeded consensus. Management pointed to ongoing tariff-driven volatility and macroeconomic uncertainty as key factors impacting performance. CEO Jeffrey Lorenger credited third quarter margin expansion to “profit transformation efforts, recognition of KII synergies and modest volume growth” across its Workplace Furnishings segment. In Residential Building Products, the company managed stable revenue despite a challenging housing market, benefiting from internal growth initiatives and operational agility.

Looking forward, HNI’s guidance is anchored by expectations for continued margin gains and double-digit non-GAAP earnings growth, supported by ongoing investments and anticipated synergies from the pending Steelcase acquisition. Management highlighted improvement in office space demand and return-to-office trends, noting “calendar year 2025 is expected to see the highest net absorption of office space since 2019.” CFO Vincent Berger emphasized that pricing actions, new product introductions, and expanded builder relationships are expected to drive growth in both core business segments, even as housing and macro headwinds persist.

Key Insights from Management’s Remarks

Management attributed Q3 performance to margin improvements in Workplace Furnishings, stable results in Residential Building Products, and strategic cost controls amid tariff and macroeconomic pressures.

• Workplace Furnishings margin expansion: Profitability in Workplace Furnishings improved through ongoing cost transformation, KII integration synergies, and modest unit volume growth, with non-GAAP segment margin exceeding 12%. This was achieved even as order growth was described as “low single digits.”
• Residential Building Products resilience: Despite continued headwinds from a soft new construction housing market, the Residential segment generated stable revenue. Management cited modest growth in remodel/retrofit sales and highlighted that its vertically integrated business model and broad price point coverage enabled outperformance versus market trends.
• Tariff-driven volatility: The company noted significant order and demand fluctuations in its hospitality vertical, specifically attributing recent volatility to tariffs. Management excluded hospitality from order growth and backlog commentary due to this unpredictability.
• Return-to-office and office space absorption: Management pointed to improving office utilization rates and net absorption metrics in major U.S. markets as a leading indicator for future demand in its Workplace Furnishings segment. CEO Lorenger referenced third-party data showing “Class A buildings in the top 10 markets approaching 98% peak day occupancy.”
• Steelcase acquisition progress: HNI expects the pending Steelcase deal to bring $120 million in cost synergies and ultimately add $1.20 per share in accretion. Management described the two companies as “highly complementary,” with integration plans focused on maintaining brand and dealer continuity while seeking cost savings.

Drivers of Future Performance

Management’s outlook for the coming quarters is shaped by expectations of margin expansion, improving office demand, and execution on strategic initiatives, despite persistent macro and tariff-related headwinds.

• Office market rebound: Management anticipates that improving fundamentals in the office sector, including higher return-to-office rates and increased office space absorption, will disproportionately benefit the contract furnishings business. CEO Lorenger cited recent industry data pointing to significant leasing activity and falling vacancy rates in top U.S. markets.
• Synergies and investments: Continued realization of KII integration synergies and the operational ramp-up of the Mexico facility are expected to deliver substantial cost savings, contributing up to $0.80 in EPS over 2025-2026. The Steelcase acquisition is projected to provide an additional $1.20 per share in accretion when fully integrated.
• Residential growth initiatives: Management expects new product launches, expanded builder relationships, and marketing programs—especially in the gas insert and stove categories—to support outperformance in Residential Building Products, even if the broader housing market remains subdued. However, leadership cautioned that macro-driven revenue recovery in housing could take time and noted ongoing uncertainty around consumer confidence and interest rates.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will closely watch (1) integration milestones and synergy realization from the Steelcase acquisition, (2) the pace of office demand recovery and associated impacts on Workplace Furnishings orders, and (3) evidence of sustained growth in Residential Building Products from new products and expanded builder programs. Progress on macro and tariff-related risks will also be critical to future performance.

HNI currently trades at $44.70, in line with $44.95 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.