Knoll Inc. (KNL) stock jumped on Tuesday, July 31, after the company that designs and manufactures furnishings and textiles for the workplace and residential homes reported earnings and revenue that topped Wall Street's estimates, driven largely by the office segment.
Knoll posted reported adjusted earnings of 42 cents per share on revenue of $323.4 million, which surpassed expectations of earnings of 38 cents per share on revenue of $307.7 million, according to FactSet.
The growth this quarter is a result of two factors, according to Chief Executive Officer Andrew Cogan.
"First, organically, the core office business has been very strong, I think stronger than people expected," Cogan told TheStreet. "What's happening in the office place -- you've got corporate profitability, service sector employment -- all those are positive backdrops to increasing office furniture demand."
"Number two, companies are changing the way they are working -- less space for individuals, more space for group and collaborative -- and [research and development] efforts and our acquisition efforts have really been focused on what we call that ancillary part of the office -- the group areas -- and we've really strengthened our offerings."
The East Greenville, Penn.-based company makes 60% of its revenue from the office segment, which earned $190.7 million for the second quarter.
While collaborative workspaces are on the rise, individual workspaces are becoming more high performing, said Cogan.
"Our fastest-growing category is sit-stand desks and height adjustability, so while you're getting less space, you're getting a more high performing space, and that aligns well with Knoll's capability, which is high design differentiated products."
The company also saw an acceleration with its residential homes unit called Lifestyle, and Cogan is not at all worried about a slowing housing market.
"We actually play more in the upper end of the residential market, and in that segment we're seeing strong demographics," said Cogan. "The consumer there is doing well -- tax cuts, stock market, wealth creation -- that tends to drive our consumer in the upper end of the market."
Furthermore, Cogan said tariffs won't significantly affect the business but noted that Knoll expects about $10 million to $12 million of incremental costs this year, which the company plans to offset through price increases.
"The bulk of our products are manufactured in North America and Europe, so while we do bring components in from China and we would be impacted by a threatened tariff, it's a few million dollars for us, it's not a significant number," Cogan said.
Shares of Knoll rose 6.5% to $22.54 on Tuesday.