Office furniture orders fall 6 pct in Oct

(Reuters) - Office furniture orders fell 6 percent in October to $945 million compared with a year ago, its largest decline since May 2003, a trade group said on Wednesday.

The Business and Institutional Furniture Manufacturers Association (BIFMA) said October shipments rose about 2 percent to $975 million year-over-year.

Also, the trade group said it expects full-year orders and shipments to fall by 1.1 percent and 1.8 percent.

In 2009, it expects orders and shipments to drop 13.1 percent and 11.6 percent, respectively.

BIFMA compiled its October report from 38 companies that account for about 75 percent of the industry's volume.

So far this year, orders and shipments are essentially flat, though the trend continues to weaken, said Raymond James analyst Budd Bugatch in a note to clients.

Weak macroeconomic conditions are translating into continued deterioration in industry demand, thereby pressuring sales and earnings, he added.

"Business confidence and service-sector employment are at recessionary levels and office vacancy rates have begun to tick higher," Bugatch said, remaining cautious on the outlook for office furniture companies.

The analyst reaffirmed his "outperform" ratings on Herman Miller Inc (MLHR.O) and Knoll Inc (KNL.N) and his "market perform" ratings on Steelcase Inc (SCS.N) and HNI Corp (HNI.N).

He said most of these companies have reduced their reliance on the office furniture market through expansion into new geographies and have improved their cost structures through various savings and efficiency initiatives.

However, Bugatch added that industry conditions would remain challenging for the foreseeable future and would almost certainly worsen before they improve.

(Reporting by Biswarup Gooptu in Bangalore; Editing by Anil D'Silva)