MillerKnoll(MLKN) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported consolidated net sales of $956 million for Q1, representing a growth of 10.9% year-over-year and 10% on an organic basis [12][13] - Adjusted EPS for the quarter was $0.45, a 25% increase compared to the previous year [12] - Consolidated gross margin was 38.5%, impacted by approximately $8 million in net tariff-related costs [14][15] Business Line Data and Key Metrics Changes - In the North America contract segment, net sales were $534 million, up 12% year-over-year, while new orders decreased by 8% [15][16] - The international contract segment saw net sales of $168 million, a 14.4% increase, but new orders were down 6.5% [16][17] - The global retail segment reported net sales of $254 million, up 6.4% year-over-year, with new orders increasing by 1.7% [17][18] Market Data and Key Metrics Changes - Office leasing activity for Class A space remains robust, with Manhattan leasing activity in August exceeding the 10-year monthly average [7] - North America retail web traffic increased by 17% compared to last year, indicating strong consumer interest [9] Company Strategy and Development Direction - The company is focusing on accelerated product creation, consistent execution, and prudent cost management while investing for profitable growth [6] - Plans include opening 12 to 15 new stores in the U.S. for the fiscal year, aiming to double the store footprint over the next several years [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth momentum in the contract business, driven by increased office leasing activity and improving market conditions [7] - The company anticipates that tariff-related impacts will be mitigated in the second half of the fiscal year, with pricing actions expected to offset costs [19][20] Other Important Information - The company has a strong liquidity position with $481 million available and a net debt to EBITDA ratio of 2.92 times [15] - Management highlighted the importance of their workforce, noting recognition as a top workplace for innovators [11] Q&A Session Summary Question: Normalization of growth in the Americas - Management confirmed that growth has averaged 3.3% over the trailing two-quarter basis, with volume being a key driver [25][28] Question: Impact of discounting on projects - Management stated that discounting has remained stable and has not increased [33] Question: Breakdown of retail margin pressures - New store expenses were identified as the primary factor impacting retail margins, with expectations of revenue growth from new stores in the future [34][35] Question: Industry consolidation and competitive outlook - Management views industry consolidation positively, seeing it as an opportunity for growth and differentiation [44] Question: Tariff impacts and mitigation efforts - Management indicated that the net tariff-related impact was $8 million in Q1, with expectations for reduced impact in Q2 as pricing actions take effect [50]