MillerKnoll (MLKN, Financial) has been underperforming since its Q2 earnings report, which, alongside weak results from Steelcase (SCS, Financial), has dampened hopes for a quick recovery in the office furniture sector. Despite efforts to bring employees back to the office, the outlook remains uncertain.
- MillerKnoll reported better-than-expected Q2 revenue, increasing 2.2% year-over-year to $970.4 million. However, the company provided a significant downside in adjusted EPS guidance for Q3, although revenue projections were in line. The FY25 adjusted EPS guidance was lowered to $2.11-2.17. Orders are improving compared to last year but at a slower pace than anticipated.
- New product launches are exceeding expectations, and promotions are receiving positive feedback. The Americas Contract segment remains a growth driver, with Q2 sales up 6.2% year-over-year to $504 million. Although new orders of $457 million fell short of expectations, they grew 4.9% organically. Order growth trends improved as the quarter progressed.
- In the International and Specialty segment, sales increased by 2.1% to $246 million, with strong order growth in the Middle East and parts of Asia. MillerKnoll is building brand excitement internationally, with new openings in London and Belgium. However, the Retail segment saw a sales decline of 5.3% and 4% organically to $220 million.
- MillerKnoll is closely monitoring tariff proposals and is prepared to mitigate impacts through alternative supply sources, advanced purchasing options, and potential price adjustments. The extension of the 2017 tax cuts, particularly the reinstatement of bonus depreciation, could positively affect the company.
Q2 marked the second consecutive quarter of stock decline following earnings announcements. Although macroeconomic improvements are slower than expected, MillerKnoll is optimistic about trends and aims to build momentum for the second half of FY25. Rising interest rates could pose challenges as the industry seeks recovery heading into 2025.
Comments