MillerKnoll(US:MLKN)2025-03-27 03:33Financial Data and Key Metrics Changes - Consolidated net sales for the third quarter were $876 million, an increase from the previous year, with a slight organic growth of 1.8% [34] - Consolidated orders were $853 million, up 2.7% as reported and 4.1% organically [34] - Consolidated gross margin was 37.9%, down 70 basis points from the previous year [35] - Reported loss per share was $0.19, compared to diluted earnings per share of $0.30 in the prior year [35] - Adjusted earnings per share were $0.44, consistent with the midpoint of guidance [33][37] Business Line Data and Key Metrics Changes - North America Contract segment net sales were $468 million, up 1.4% reported and 1.7% organically [42] - New orders in North America Contract were $434 million, reflecting a 1.8% reported decrease [42] - International Contract segment net sales were $146 million, down 5% reported and 1.5% organically [44] - Retail segment net sales were $263 million, up 1.9% reported and 3.9% organically, with new orders up 14.7% reported and almost 17% organically [46] Market Data and Key Metrics Changes - Retail demand in North America saw a significant increase, with cyber-adjusted orders up 14% [17] - Orders in the first three weeks of March were up 10% year-over-year in the retail segment [47] - International Contract orders in the first three weeks of March trended up 2% compared to last year [45] Company Strategy and Development Direction - The company has re-segmented its operations into North America Contract, International Contract, and Global Retail to align better with long-term strategies [12][15] - The focus is on expanding the product assortment and increasing store footprint, with plans to open 10 to 15 new locations in fiscal 2026 [23][24] - A 4.5% list price increase is planned to mitigate tariff-related costs and other inflationary pressures [28][108] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the demand in the retail segment despite macroeconomic uncertainties [10][30] - The company is focused on maintaining cost control while investing in growth opportunities [30][31] - Management acknowledged the impact of tariffs and macroeconomic factors on sales and order pacing, emphasizing a prudent outlook for the fourth quarter [50][98] Other Important Information - The company reported a consolidated backlog of $686 million, up 7.4% from a year ago [34] - Special charges related to intangible amortization, impairment, and restructuring totaled $140 million, impacting the reported loss [36] Q&A Session Summary Question: About the impairment charges in global retail - Management explained that impairment charges were due to lagging profitability relative to internal expectations and the need for a full review following the re-segmentation of the business [59] Question: On new store locations and their distribution - Management confirmed that new store openings would be evenly distributed throughout the fiscal year [62] Question: Regarding tariffs and future offsetting strategies - Management indicated that while the tariff situation is fluid, they believe they can offset costs through pricing and other mitigation efforts [66] Question: On revenue guidance and backlog - Management acknowledged the cautious revenue guidance due to macroeconomic uncertainties, despite a positive backlog and order growth [72][98] Question: On pipeline activity metrics in North America - Management reported that leading indicators remain strong, with a year-over-year increase in awarded projects and contract activations [81] Question: Demand from consumers in the direct-to-consumer business - Management noted strong demand in the direct-to-consumer segment, with new product assortments contributing positively [88] Question: On restructuring goals and cost reductions - Management clarified that restructuring actions were aimed at aligning the cost structure with current demand, expecting annualized savings of approximately $4 million [115]