Executive Summary
Steelcase reported a solid start to fiscal 2026 QQ1 with revenue of $779 million, up 7% year over year, and adjusted EPS of $0.20, up 25% from the prior year. The quarter featured a 170 basis point expansion in gross margin and a 5% adjusted operating margin, driven by stronger Americas performance and ongoing cost-reduction initiatives. Management highlighted healthy backlog growth and resilience in large corporate demand, particularly from technology customers, while education and certain government segments faced headwinds tied to policy changes and funding cycles. The company signaled ongoing tariff headwinds and inflation pressures but indicated pricing actions and productivity gains were offsetting a portion of these costs. Looking ahead, Steelcase maintains a mid-single-digit organic revenue growth target for the year and intends to expand adjusted operating margins, though international profitability remains a work in progress due to Europe-specific headwinds and restructuring efforts. The outcome will hinge on the evolution of tariffs, policy shifts in ESSER-like funding, and the pace of large-corporate space transformations as hybrid work solidifies.”,
Key Performance Indicators
QoQ: -50.72% | YoY:24.77%
QoQ: -50.00% | YoY:30.01%
Key Insights
Revenue (Q1): $779.0m (+7.1% YoY; -1.1% QoQ). Gross profit: $263.8m; gross margin 33.86%; EBITDA: $42.7m; Operating income: $25.5m; Operating margin: 3.27%; Net income: $13.6m; EPS (GAAP): $0.12; EPS (diluted): $0.11; YoY/LTM margin expansion: gross margin up 170 bps YoY; Backlog: up ~2% YoY; Organic revenue growth (LTM): +7% noted in commentary; Free cash flow (TTM): negative given seasonality; Cash from ops (Q1): -$141.1m; Total debt: $601.9m; Net debt: $418.0m; Liquidity including COLI: $392....
Financial Highlights
Revenue (Q1): $779.0m (+7.1% YoY; -1.1% QoQ). Gross profit: $263.8m; gross margin 33.86%; EBITDA: $42.7m; Operating income: $25.5m; Operating margin: 3.27%; Net income: $13.6m; EPS (GAAP): $0.12; EPS (diluted): $0.11; YoY/LTM margin expansion: gross margin up 170 bps YoY; Backlog: up ~2% YoY; Organic revenue growth (LTM): +7% noted in commentary; Free cash flow (TTM): negative given seasonality; Cash from ops (Q1): -$141.1m; Total debt: $601.9m; Net debt: $418.0m; Liquidity including COLI: $392.0m.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
779.00M |
7.11% |
-1.14% |
| Gross Profit |
263.80M |
9.28% |
4.97% |
| Operating Income |
25.50M |
6.69% |
168.42% |
| Net Income |
13.60M |
24.77% |
-50.72% |
| EPS |
0.12 |
30.01% |
-50.00% |
Management Commentary
Key management themes from the QQ1 call include: (1) Strategy execution and momentum in workplace transformation with strong large-corporate demand, particularly from technology clients, supporting revenue growth and strategic investments. (2) Margin expansion driven by volume growth and cost-reduction initiatives, offset by tariff costs and education/government headwinds. (3) Education policy headwinds (ESSER expiration) impacting K-12 budgets and project timing, with health care as a growth driver. (4) Tariff dynamics and pricing actions: tariff recovery charged implemented March 29 with limited pull-forward into Q2; price increases enacted in mid-June, with expectations that the impact remains contained to the intended quarters. (5) International restructuring in Europe to restore profitability, including union/work-council negotiations and cost-reduction measures; Asia (China/India) remains profitable with ongoing footprint optimization. (6) Outlook: mid-single-digit organic revenue growth target and margin expansion for the year, contingent on tariff evolution, Europe stabilization, and continued strength in large corporate bookings. Representative quotes: “We delivered 7% revenue growth, which drove strong earnings improvement… adjusted EPS of $0.20 was up 25% versus the prior year” (CEO Sara Armbruster); “We delivered our 12th consecutive quarter of year-over-year gross margin expansion” (CEO Sara Armbruster); “Our tariff recovery charge went into effect on March 29… pulled forward orders in advance of that tariff recovery charge” (CFO David C. Sylvester); “The price increase went into effect in mid-June… we don’t think that any orders from Q2 were pulled into Q1 related to that mid-June price increase” (CFO David C. Sylvester); “Asia actually was profitable for the quarter” and “India remains an incredibly strong market” (CFO David C. Sylvester); “we are still targeting mid-single-digit organic revenue growth, and we are still targeting to expand our adjusted operating margin for the year” (CFO David C. Sylvester).
"We delivered our 12th consecutive quarter of year-over-year gross margin expansion."
— Sara E. Armbruster
"Tariff recovery charge went into effect on March 29… we estimate that, that all settled within the quarter."
— David C. Sylvester
Forward Guidance
Outlook assessment: Management maintains a mid-single-digit organic revenue growth target for the full year 2026 and expects to expand adjusted operating margins versus the prior year. Q2 guidance contemplates revenue of $860–$890 million (organic growth up to ~3%), adjusted EPS of $0.36–$0.40, gross margin of 33.0%–33.5%, and operating expenses of $230–$235 million. Tariff/inflation headwinds are estimated at roughly $20 million gross of pricing benefits; pricing actions, productivity gains, and Americas' pricing offset a portion of inflation. Risks to the outlook include potential tariff changes around July 9, policy shifts affecting ESSER-like funding in education, ongoing European macro weakness (Germany/France), and currency effects. Key monitoring factors for investors: trajectory of large corporate orders (especially tech and financial services), progress of Europe restructuring and profitability in International, pace of Asia growth and cost-structure optimization, and the ability to sustain gross margin expansion through pricing and efficiency gains. Overall stance: Moderate downside/upside risk balanced by robust corporate-led demand and a clear path to margin improvement, albeit with international profitability still requiring further stabilization and efficiency gains.