- Consolidated Net Sales: $970 million, a 2.2% increase year-over-year.
- Consolidated Orders: $922 million, down 2.3% year-over-year.
- Gross Margin: 38.8%, slightly down from last year.
- Cash Flow from Operations: $55 million.
- Share Repurchase: Approximately 1 million shares for $23 million.
- Net Debt-to-EBITDA Ratio: 2.94 turns.
- Americas Contract Net Sales: $504 million, up 6.2% organically.
- Americas Contract Operating Margin: 9.4%, adjusted to 10.2%.
- International Contract and Specialty Net Sales: $246 million, up 2.1% reported.
- International Contract and Specialty Operating Margin: 9.7%, adjusted to 10.5%.
- Retail Segment Net Sales: $220 million, down 5.3% reported.
- Retail Segment Operating Margin: 4%, adjusted to 4.2%.
- Full Year Adjusted EPS Guidance: $2.11 to $2.17.
- Q3 Net Sales Guidance: $903 million to $943 million.
- Q3 Adjusted EPS Guidance: $0.41 to $0.47 per share.
- Warning! GuruFocus has detected 6 Warning Signs with MLKN.
Release Date: December 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MillerKnoll Inc (NASDAQ:MLKN) reported a 2.2% increase in consolidated net sales year-over-year, indicating growth despite challenging market conditions.
- The Americas Contract segment saw a 6.2% organic increase in net sales, marking the third consecutive quarter of order growth.
- The company experienced strong order growth in the Middle East and parts of Asia, reflecting international expansion success.
- Retail segment orders increased during the Black Friday holiday period, showing effective promotional strategies.
- MillerKnoll Inc (NASDAQ:MLKN) is making strides in sustainability, eliminating added PFAS from its North American product portfolio by May 2025.
Negative Points
- Consolidated orders were down 2.3% year-over-year, indicating a slower recovery in demand than anticipated.
- The International Contract and Specialty segment experienced a 6.5% decrease in orders, with softness in textiles and luxury clients.
- Retail segment net sales decreased by 5.3% year-over-year, reflecting ongoing challenges in the retail market.
- Operating margin in the retail segment dropped to 4% from 6.3% a year ago, due to reduced leverage on seasonal marketing spend.
- Order recovery has been slower than expected, impacting the company's guidance for the remainder of the fiscal year.
Q & A Highlights
Q: Can you provide more details on the potential impact of tariffs on your business and profitability? A: Jeffrey Stutz, Chief Financial Officer, explained that the company has a playbook from previous tariff rounds, including identifying alternative supply sources, advance purchasing, and potential pricing actions. The main exposure areas are China and Canada, with minimal exposure to Mexico. Andrea Owen, CEO, added that the company has rationalized its manufacturing and supply chain to reduce exposure, particularly to China.
Q: Could you elaborate on the slower order development in the Americas and whether longer sales cycles are still a factor? A: Andrea Owen, CEO, noted that the slower order development was partly due to a pre-election slowdown, but activity picked up post-election. John Michael, President of Americas Contract, added that the order-to-ship cycle has remained consistent, with customers planning further in advance.
Q: How are international orders performing, and what is the impact of Knoll's integration and dealer network growth? A: Andrea Owen, CEO, stated that international business is more project-based and thus "lumpier" than the Americas Contract business. Despite macroeconomic and political uncertainties in Europe, demand remains strong, and the company continues to expand its dealer distribution.
Q: What feedback have you received from customers regarding work-from-home or hybrid policies, and how might this affect your business? A: John Michael, President of Americas Contract, mentioned that companies are focusing on attracting employees back to the office for activities that are less effective virtually. Andrea Owen, CEO, added that the conversation has shifted to when and how quickly people return to the office, with an increase in large projects indicating a revitalization of work environments.
Q: Retail orders were up during the Thanksgiving period. Is this a sign of a turnaround for the retail segment? A: Debbie Propst, President of Global Retail, attributed the success to a well-executed promotional strategy and ongoing initiatives like new product launches and improved marketing capabilities. The company expects continued momentum and growth beyond macroeconomic trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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