MillerKnoll Upholds Guidance Despite Mixed Q1 Performance

MillerKnoll, a prominent player in office furniture design and manufacturing, has shared a mixed performance report for the first quarter of fiscal year 2025. Consolidated orders increased by 2.4% year-over-year, reaching $936 million, primarily driven by solid results in the Americas Contract segment. However, net sales experienced a decline of 6.1%, falling to $862 million, largely due to extended order-to-shipment times.

These extended lead times have led to a growing backlog, which rose by 9.2% compared to last year, totaling $758 million. The company has retained its full-year adjusted earnings guidance of $2.20 per share, with expectations of improved economic conditions benefiting all business segments in the second half of the fiscal year.

Key Highlights:
– Orders increased to $936 million, a rise of 2.4% year-over-year, with the Americas Contract segment showing growth of 5.7% to nearly $513 million.
– Despite the order growth, net sales decreased by 6.1% to $862 million due to longer order-to-shipment times, contributing to a backlog of $758 million.
– Full-year adjusted earnings guidance remains at $2.20 per share.
– Projected net sales for Q2 fall between $950 million and $990 million, with adjusted earnings per share expected to be between $0.51 and $0.57.
– The retail segment’s operating margin improved to 2.3%, up from 1.1% a year prior, despite a 4.7% decrease in net sales.

Company Outlook:
Management is optimistic about improved demand in the latter half of fiscal 2025, bolstered by favorable trends in global contract demand and an increased backlog. There is hope for a rebound in consumer confidence following recent interest rate cuts, which could positively influence retail demand. Notable signs of increased activity in contract sectors such as financial services and healthcare have been reported, while gross margins have stabilized between 38.5% and 39.5% in recent quarters.

Despite potential challenges, including slower order delivery times and headwinds affecting the retail furnishing sector, there are notable positives as well, such as improved operating margins and a trend of larger projects that could signify strong revenue potential moving forward. Integration of the Knoll brand into the international dealer network is progressing, with 60% completion expected by the end of the fiscal year.

During the earnings call, executives discussed how back-to-work trends are shifting focus toward in-person collaboration in hybrid work environments. The company feels confident in its ability to adapt its product portfolio to meet evolving workplace needs.

Overall, MillerKnoll remains cautiously optimistic about future prospects, driven by strategic initiatives and market trends that are anticipated to enhance performance in upcoming quarters. The leadership team is committed to navigating the current economic landscape while focusing on growth and meeting customer demands.