MillerKnoll, Inc. (MLKN) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Adjusted Earnings Per Share (EPS) $0.43, exceeded expectations due to stronger-than-expected sales and gross margin.
Consolidated Net Sales $955 million, down 1.6% year-over-year on a reported basis and 2.5% lower organically. The decline was expected due to $55 million to $60 million in pull-ahead activity in North America contract that shifted sales into the first quarter.
First Half Consolidated Net Sales $1.9 billion, up 4% year-over-year, demonstrating the strength of the business.
Orders for the Quarter $973 million, up 5.5% as reported and 4.5% higher on an organic basis, reflecting improving demand and effective growth strategy execution.
Consolidated Gross Margin 39%, includes approximately $1 million in net tariff-related costs. Proactive mitigation actions are expected to offset tariff costs in the second half of the fiscal year.
Operating Cash Flow $65 million, contributing to a liquidity position of $548 million.
Net Debt-to-EBITDA Ratio 2.87x, comfortably below lending covenant limits, reflecting disciplined capital allocation and financial flexibility.
North America Contract Segment Net Sales $509 million, down 3.1% year-over-year due to the prior quarter's tariff-related pull forward. First half segment sales were up 4.1%.
North America Contract Segment Orders $507 million, up 4.8% from the prior year.
North America Contract Segment Adjusted Operating Margin 9.7%, down 50 basis points year-over-year, primarily due to deleverage on lower sales.
International Contract Segment Net Sales $171 million, down 6.3% on a reported basis and 9.2% organically year-over-year.
International Contract Segment Orders $162 million, up 6.6% year-over-year on a reported basis and 3.4% organically, driven by strength in Europe, the U.K., China, and India, partially offset by lower orders in Korea and the Middle East.
International Contract Segment Adjusted Operating Margin 9.7%, down 280 basis points year-over-year, primarily due to deleverage on lower sales and regional and product mix.
Global Retail Segment Net Sales $276 million, up 4.7% on a reported basis and 3.4% organically.
Global Retail Segment Orders $304 million, up 6% year-over-year on a reported basis and 4.5% organically.
Global Retail Segment Adjusted Operating Margin 2.1%, down 170 basis points year-over-year, primarily due to costs related to new stores, net tariff costs, and foreign currency impact.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Knoll Dividends Skyline launch: Met with strong enthusiasm from customers in the A&D community, resulting in several large project awards ahead of the official order entry date in January 2026.
Global Retail Segment Expansion: Second quarter orders increased 6% year-over-year, with sales up 5% and comparable sales growth of 3.5%. Opened 4 new locations in Q2 and relocated 2 stores. Anticipates opening 14 to 16 new stores in the U.S. for the fiscal year.
International Market Growth: Introduced the MillerKnoll showroom in Shanghai to engage A&D, global accounts, and key partners in Mainland China. Observed growth opportunities in Europe, the U.K., China, and India.
Supply Chain Strength: Approximately 70% of North America retail cost of goods sourced from the U.S., reducing tariff risk exposure.
Facility Consolidation: Consolidation of the Mesquegan, Michigan facility with production transitioning to other plants, expected to deliver $10 million in annual run rate savings by fiscal 2028.
Retail Growth Strategy: Focused on new store openings, expanded product assortment, e-commerce acceleration, and increased brand awareness to double DWR and Herman Miller store footprint over the next several years.
Healthcare Sector Focus: Winning projects globally in healthcare, with total healthcare orders up 5% year-to-date.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Tariff-related costs: The company incurred approximately $1 million in net tariff-related costs in Q2. While proactive mitigation actions are expected to offset these costs in the second half of the fiscal year, tariffs remain a potential risk to gross margin and earnings resilience.
Lower sales in North America Contract segment: Net sales in the North America Contract segment were down 3.1% year-over-year, primarily due to the pull-forward of sales into the first quarter. This decline impacted operating margins, which were down 50 basis points year-over-year.
International Contract segment sales decline: Net sales in the International Contract segment were down 6.3% on a reported basis and 9.2% organically year-over-year. This decline was attributed to deleverage on lower sales and unfavorable regional and product mix.
Costs related to new store openings: The company incurred higher costs related to new store openings in the Global Retail segment, which contributed to a 170 basis point decline in adjusted operating margin year-over-year.
Foreign currency impact: Foreign currency fluctuations negatively impacted the Global Retail segment's operating margin.
Seasonal softness in contract businesses: The company anticipates typical seasonal softness in its contract businesses as the calendar year ends, which could impact Q3 performance.
Economic uncertainties in specific regions: Lower orders were reported in Korea and the Middle East, indicating potential economic or market challenges in these regions.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Retail Store Expansion: The company plans to open 14 to 16 new stores in the U.S. during the full fiscal year, advancing its strategy to double the DWR and Herman Miller store footprint over the next several years.
Q3 Financial Guidance: Net sales are expected to range between $923 million and $963 million, representing a 7.6% increase versus prior year at the midpoint. Gross margin is projected between 37.9% and 38.9%. Adjusted diluted earnings are expected to range between $0.42 and $0.48 per share.
Tariff Mitigation: Proactive pricing and tariff mitigation actions are expected to fully offset tariff impacts to gross margin and EPS in the second half of the fiscal year.
Healthcare Sector Growth: The company anticipates continued growth in the healthcare sector, with total healthcare orders up 5% year-to-date.
International Market Expansion: The company is enhancing its global showroom footprint, including the recent introduction of the MillerKnoll showroom in Shanghai, to capture growth opportunities in international markets such as China, Europe, the U.K., and India.
Operational Efficiency: The consolidation of the Mesquegan, Michigan facility is expected to deliver $10 million in annual run rate savings by fiscal 2028.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What drove the better-than-expected gross margin in the second quarter?
A:The better-than-expected gross margin was driven by a combination of channel mix, product mix, good pricing realization, and efforts in tariff mitigation through price increases and surcharges.
Q:How did orders perform in the Americas during the second quarter, and what trends were observed?
A:Orders were up organically by 4.5% in the quarter, showing consistency across all three months. Sequential improvements were observed due to reduced tariff uncertainty, with mid-single-digit growth continuing into the new quarter.
Q:Which geographies and industries showed strength or weakness in the Americas contract business?
A:Geographies like the Bay Area, Southern California, and the Northeast Coast showed strength. Industries such as energy, professional services, and legal were active, while public sector, pharma, and banking were slightly down.
Q:What are the company’s thoughts on the impact of AI on demand and office spaces?
A:The company believes AI will bring productivity gains and changes in how people work together, but the current impact on workspaces is minimal. Conversations with customers about AI are broad and ongoing.
Q:What are the expectations for the contract business in the third quarter?
A:The contract business is expected to maintain mid-single-digit growth, with orders clear of prior pull-forward activity. External indicators like bullish commercial real estate brokers and busy premium architectural firms support continued demand.
Q:What drove the growth in retail during the peak holiday week?
A:Growth was driven by brand awareness, new store openings, consistent promotional levels, and an expanded assortment (up 22% year-on-year). Marketing spend remained equivalent to the previous year.
Q:What dynamics are being observed in the retail customer segment?
A:Average order value is up year-on-year, driven by assortment expansion and design services. New store openings are attracting new customers, and demand from new customers is higher than historically observed.
Q:What is the roadmap for doubling the store count, and how will it impact margins?
A:The company plans to open 14-16 stores annually, with leases signed through the next fiscal year. Margins are expected to improve as new stores contribute revenue, with accretive operating income anticipated by the beginning of the next fiscal year.
Q:What macro trends are driving the company’s performance?
A:Key trends include the return to office, increased decision-making speed, and emphasis on Class A office spaces. International growth potential and a resilient retail consumer base are also contributing factors.
Q:How is the company responding to industry consolidation?
A:The company views consolidation as beneficial in the long term but acknowledges the challenges and distractions it brings. They plan to stay proactive and focused on growth opportunities.
Q:What is the company’s approach to capital allocation?
A:The company prioritizes funding growth investments, paying down debt (targeting a leverage ratio of 2x to 2.5x), maintaining dividends, and periodic share repurchases to offset dilution.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the impact of AI on demand and office spaces, using vague language about future productivity gains and broad customer conversations without concrete examples or data.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD account
AD community
America organization
America retail
Berkeley California
California store
China conversation
DWR store
Friday Thanksgiving
Giving Tuesday
Global Retail
Houston location
Knoll launch
Mainland China
MillerKnoll expectation
MillerKnoll showroom
Momentum North
Officer Veltman
Relations harbor
Shanghai AD
Thanksgiving Giving
Tuesday order
Veltman Chief
acceleration brand
commitment
design
engagement
healthcare
order sale
potential
product portfolio
store DWR
visit
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?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
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.
