MillerKnoll, Inc. (MLKN) Q1 2026 Earnings Call Transcript
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Overview
The company's strong financial performance, including a 10.9% increase in net sales and a 25% rise in EPS, is a positive indicator. Despite some challenges like tariffs and new store costs, management's effective pricing actions and optimistic guidance for reduced impacts in the future are promising. The absence of increased discounting and stable demand further supports a positive sentiment. Although the lack of full-year guidance introduces some uncertainty, the overall outlook, including market expansion and strategic growth initiatives, suggests a positive stock price movement in the near term.
Key Financial Performance
Consolidated Net Sales $956 million, up 10.9% year-over-year on a reported basis and up 10% organically, driven by strength in all segments of the business.
Adjusted Earnings Per Share (EPS) $0.45, up 25% year-over-year, driven by better-than-expected sales and strong gross margin performance.
North America Contract Segment Net Sales $534 million, up 12% year-over-year, driven by higher sales volumes.
North America Contract Segment Operating Margin 10.7%, up from 3.4% in the prior year. Adjusted operating margin improved by 200 basis points to 11.4%, benefiting from fixed expense leverage from higher sales volumes.
International Contract Segment Net Sales $168 million, up 14.4% year-over-year on a reported basis and up 11.3% organically, driven by higher sales in Europe and the U.K.
International Contract Segment Operating Margin 8.1%, up from 6.5% in the prior year. Adjusted operating margin was 8.5%, down 60 basis points due to regional and product mix of sales.
Global Retail Segment Net Sales $254 million, up 6.4% year-over-year on a reported basis and up 4.9% organically, driven by new store openings and product assortment expansion.
Global Retail Segment Operating Margin 0.6%, down from 2.2% in the prior year. Adjusted operating margin was 1.2%, down 190 basis points due to new store opening costs, increased freight expense, and higher net tariff-related impact.
Consolidated Gross Margin 38.5%, including approximately $8 million in net tariff-related impacts.
New Orders $885 million, down 5.4% year-over-year on a reported basis and 6.2% organically, impacted by $55 million to $60 million in pull-forward activity in the prior quarter due to tariff surcharge and price increase.
Consolidated Backlog $691 million, decreased by $67 million due to the pull-forward activity in the prior quarter.
Cash Flow from Operations $9 million, with liquidity of $481 million at the end of the quarter.
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Operating Highlights
Electrostatic Discharge Aeron Chair: Launched a new version of the Aeron chair designed for data center clean room environments, showing strong global interest.
Healthcare and Workspace Solutions: Introduced healthcare solutions from Herman Miller, private office solutions from Geiger and DatesWeiser, and new workspace solutions from Knoll.
Retail Product Expansion: Launching 50% more new products compared to fiscal 2025, with new product orders growing over 20% in the quarter.
North America Retail Growth: Net sales in North America retail were up 7%, with orders increasing over 5% and web traffic up 17%.
Store Expansion: Opened four new stores in Q1 and plans to open 12-15 new stores in the U.S. during fiscal 2026.
International Contract Growth: Net sales in the International Contract segment grew 14.4% year-over-year, with strong performance in Europe and the U.K.
Revenue and Profitability: Consolidated net sales grew 10.9% to $956 million, and adjusted EPS increased 25%.
Gross Margin: Achieved a gross margin of 38.5%, despite $8 million in net tariff-related impacts.
Cost Management: Focused on prudent cost management and leveraging fixed expenses for higher sales volumes.
Leadership Changes: Jeff Stutz promoted to Chief Operating Officer, and Kevin Veltman appointed as Interim CFO.
Geographic and Channel Expansion: Implemented plans to expand geographically and across channels, leveraging the combined strengths of Herman Miller and Knoll.
Long-term Strategy: Focused on accelerated product creation, consistent execution, and investing for profitable growth.
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Risk or Challenges
Tariff-related impacts: Margins are negatively impacted by tariffs currently in place, with an estimated $2 million to $4 million reduction in gross margin in Q2. This is expected to persist through the first half of the fiscal year.
Order pull-forward dynamics: Lower orders in Q1 due to $55 million to $60 million in pull-forward activity in Q4 of fiscal '25, impacting consolidated backlog and new orders.
New store opening costs: Incremental operating expenses tied to new store openings are expected to continue, with $4 million to $5 million in additional costs in Q2 and similar expenses in subsequent quarters.
Regional and product mix challenges: Operating margin in the International segment was negatively impacted by regional and product mix of sales, particularly in APMEA and Latin America.
Freight and operational costs: Higher freight expenses and operational costs, including those related to new store openings, are pressuring margins in the Global Retail segment.
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Guidance & Outlook
Accelerated product creation and innovation: The company is focusing on accelerated product creation and innovation as part of its strategic initiatives for fiscal 2026.
Geographic and channel expansion plans: The company is implementing geographic and channel expansion plans to capitalize on market opportunities.
Retail assortment expansion: The company is launching 50% more new products compared to fiscal 2025, with new product order growth of over 20% in the quarter.
Store openings: The company plans to open 12 to 15 new stores in the U.S. during fiscal 2026, including four additional stores in the second quarter.
Revenue expectations for Q2 FY26: Net sales are expected to range between $926 million to $966 million, down 2.5% versus prior year at the midpoint of $946 million.
Gross margin outlook for Q2 FY26: Gross margin is expected to range between 37.6% and 38.6%.
Adjusted operating expense for Q2 FY26: Adjusted operating expense is expected to range from $300 million to $310 million.
Adjusted diluted earnings per share for Q2 FY26: Adjusted diluted earnings are expected to range between $0.38 and $0.44 per share.
Tariff-related impacts: Net tariff-related impacts are expected to reduce gross margin in Q2 FY26 by $2 million to $4 million before tax, or $0.02 to $0.04 per share after tax. Mitigation actions are expected to offset these costs in the second half of the fiscal year.
New store opening costs: Incremental operating expenses tied to new store openings are estimated to be $4 million to $5 million in Q2 FY26, with similar expenses expected in each quarter of fiscal 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:In the Americas, has the company been consistently growing in the low to mid-single digits for both revenue and orders over the last three or four quarters?
A:Yes, the company has been growing at an average of 3.3% over the last two quarters. Volume was a key driver, and demand indicators such as funnel additions and mockups are positive. Orders were up 6% in the first three weeks of the quarter.
Q:Has there been any increased discounting necessary to win projects?
A:No, discounting has been stable, and the company feels good about this trend holding steady.
Q:What are the near-term pressures on retail profitability, and how will they play out through the year?
A:The main pressures are new store expenses, tariffs, and freight costs. New store expenses will impact margins in Q1, Q2, and Q3 but are expected to become accretive by Q4. Tariff expenses were unplanned and based on customer mix, while freight costs also contributed to margin degradation.
Q:Are the new store impacts affecting both gross margin and operating margin?
A:The new store costs are impacting operating margins, while other factors like product mix and FX impact are affecting gross margins.
Q:Does recent industry consolidation change the competitive outlook, and is M&A on the table?
A:The company views industry consolidation as positive and sees opportunities for differentiation. M&A and acquisitions are always considered opportunistically.
Q:What is the outlook for international markets compared to North America?
A:International markets, primarily wholesale, are slower to recover from over-inventory during COVID but are starting to rebound. Growth is expected to be slower compared to North America, with some progress in DTC channels and specific brands like HAY and Muuto.
Q:How have tariffs impacted the business, and what mitigation efforts are in place?
A:Tariffs had an $8 million net impact in Q1, but pricing actions like surcharges and price increases are mitigating these costs. The impact is expected to reduce to $2-4 million in Q2 and be offset in the back half of the year.
Q:Should we expect improvements in adjusted operating profit margins for the year?
A:The company is not providing full-year guidance due to macroeconomic uncertainty but is guiding on a quarter-to-quarter basis.
Q:Review of Unclear Management Responses
A:Management avoided providing full-year guidance for adjusted operating profit margins, citing macroeconomic uncertainty. This response lacked clarity and specific details about the company's long-term financial outlook.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Aeron chair
America order
America region
America retail
America store
CFO role
Chair dedication
Chair role
Chair succession
Chicago Philadelphia
Chief Officer
Creek California
DWR Salt
DWR location
DatesWeiser workspace
Days discharge
Europe brand
Fast Workplace
Global Retail
Great Place
Knoll
North America
Veltman Interim
acquisition
assortment expansion
contract
customer
leasing activity
plan
progress
solution
store DWR
year Chief
MLKN Transcript
MillerKnoll, Inc. (MLKN) Q4 2026 Earnings Call Transcript
Neutral6-24
MillerKnoll, Inc. (MLKN) Q3 2026 Earnings Call Transcript
Unknown3-25
The earnings call presents a mixed picture: strong retail orders and international growth are offset by declining margins and challenges in North America. The Q&A highlights concerns about cost pressures and market volatility, but also resilience in the premium consumer base. While guidance remains stable, the lack of clarity on cost impacts and AI's role introduces uncertainty. Given the company's market cap, the stock is likely to see a neutral reaction, with minor fluctuations as investors weigh positive growth against operational challenges.
MillerKnoll, Inc. (MLKN) Q2 2026 Earnings Call Transcript
Unknown12-17
The earnings call presents mixed signals: while there are positive developments like order growth and retail expansion, challenges such as declining margins, revenue expectations, and tariff impacts offset these gains. The Q&A reveals cautious optimism but lacks concrete guidance, especially regarding AI's impact. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction, with minor fluctuations expected as investors weigh the positive growth strategies against financial uncertainties and mixed performance across segments.
MillerKnoll, Inc. (MLKN) Q1 2026 Earnings Call Transcript
Positive9-23
The company's strong financial performance, including a 10.9% increase in net sales and a 25% rise in EPS, is a positive indicator. Despite some challenges like tariffs and new store costs, management's effective pricing actions and optimistic guidance for reduced impacts in the future are promising. The absence of increased discounting and stable demand further supports a positive sentiment. Although the lack of full-year guidance introduces some uncertainty, the overall outlook, including market expansion and strategic growth initiatives, suggests a positive stock price movement in the near term.
MLKN Slides
MLKN Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
