Herman Miller's Embody and Dealer Network

Disclosure: I own MLHR

Herman Miller (MLHR, a Ten Grand Chicago pick) has been making some news lately with its latest super chair called the, "Embody". Judging from the comments about this new skeleton like vertebrae, there will be die-hard fans shelling out $1,600 for this thing.

The company has also struck a deal to sell a few of its older chairs through Costco, with the hopes of extending sales life. In doing so, the company has to strike a clean balance between Costco, brand perception, and the remainder of its dealer network which pushes the high end stuff like the Embody. This move may come at the right time where discount retailers like Costco are demonstrating earnings strength as the economy slides into the doldrums.

Lacking from the news, are Herman Miller's dealers themselves. As much as the analysts were pinging the company during the Q1 earnings call about gross margins, SG&A, and their recent partnership with POSH (Office furniture dealer in Hong Kong covering the mainland China market), they seemed to have forgot to ask about the company's dealer network. 70% of the company's sales comes through it's dealers. Some of these companies may not be around in a few quarters if the overall credit conditions continue to worsen. Herman Miller may strike up better arrangements with their dealers if troubles do arise. This is definitely something to keep an eye on in the coming quarters. I do not have an accurate pulse on the company's dealer network, and there wasn't much mention about the state of their network during the last earnings call. Maybe I am overreacting. Let's just hope that their dealers have good liquidity and cash positions to ride this out.