MillerKnoll(MLKN) - 2026 Q2 - Quarterly Results

Financial Performance - Net sales for Q2 FY2026 were $955.2 million, a decrease of 1.6% year-over-year, while net sales for the first half increased by 4.3% to $1,910.9 million[4]. - Orders for Q2 FY2026 reached $972.5 million, up 5.5% year-over-year, with growth in every segment, including record performance in the Global Retail business during the Black Friday/Cyber Monday period[6]. - Gross margin for Q2 FY2026 was 39.0%, an increase of 20 basis points compared to the prior year[4]. - The operating margin for Q2 FY2026 was 5.1%, down from 6.4% in the prior year, while the adjusted operating margin was 5.9%, compared to 7.1% previously[4]. - Earnings per share (diluted) for Q2 FY2026 were $0.35, a decrease of 28.6% year-over-year, while adjusted earnings per share were $0.43, down 21.8%[4]. - Adjusted operating earnings for the three months ended November 29, 2025, were $56.0 million, representing an adjusted operating margin of 5.9% compared to 7.1% in the prior year[32]. - The diluted earnings per share for the three months ended November 29, 2025, was $0.35, down from $0.49 in the same period last year[34]. - Adjusted earnings per share for the three months ended November 29, 2025, was $0.43, compared to $0.55 for the same period in 2024[34]. Operating Expenses - Operating expenses for Q2 FY2026 increased to $323.7 million, with adjusted operating expenses rising to $316.3 million, primarily due to higher compensation and new store costs[4]. - Operating expenses for the three months ended November 29, 2025, were $323.7 million, or 33.9% of sales, up from $314.5 million and 32.4% in the prior year[36]. - Adjusted operating expenses for the three months ended November 29, 2025, were $316.3 million, or 33.1% of sales, compared to $308.1 million and 31.7% in the prior year[36]. Cash Flow and Liquidity - Cash flow from operations for Q2 FY2026 was $64.6 million, an increase from $55.3 million in the same quarter last year[9]. - As of November 29, 2025, liquidity was $548.3 million, reflecting cash on hand and available credit[9]. Sales and Segment Performance - The North America Contract segment reported net sales of $508.5 million, with an operating earnings margin of 8.7% for the three months ended November 29, 2025[32]. - The International Contract segment's net sales were $170.9 million, with an operating earnings margin of 9.3% for the same period[32]. - The Global Retail segment achieved net sales of $275.8 million, with an operating earnings margin of 1.5% for the three months ended November 29, 2025[32]. - Organic sales growth for North America Contract segment was reported at a decrease of 3.1% year-over-year, while Global Retail segment saw an increase of 4.7%[38]. - The consolidated backlog for MillerKnoll as of Q2 FY2026 was $708.3 million, slightly down from $709.4 million in Q2 FY2025[42]. Store Openings and Count - New retail store openings included a DWR in Salt Lake City, UT, and three Herman Miller stores in Nashville, TN, El Segundo, CA, and Walnut Creek, CA[14]. - The total store count increased to 86 in Q2 FY2026, with 6 new openings and 2 closures compared to the previous year[43]. Future Outlook - The company expects Q3 FY2026 net sales to range between $923 million and $963 million, with an adjusted effective tax rate of 20.5% to 22.5%[12]. Risks and Challenges - MillerKnoll's growth strategy faces challenges and may be based on inaccurate assumptions[48]. - Consumer spending levels significantly impact demand for products within the Global Retail segment[48]. - The company is exposed to risks from heightened inflation and uncertainty regarding future interest rates[48]. - Increased debt from the acquisition of Knoll may lead to higher interest expenses and compliance risks[48]. - Availability and pricing of raw materials are critical factors affecting production costs[48]. - Cybersecurity threats pose risks to the company's operations[48]. - Public health crises, such as pandemics, can disrupt business and economic stability[48]. - The financial strength of dealers and customers is essential for maintaining sales[48]. - Government procurement pace and levels can influence overall demand for products[48]. - Ongoing litigation or governmental audits may impact the company's operations and financial health[48].