MillerKnoll(US:MLKN)2025-12-17 23:02Financial Data and Key Metrics Changes - Adjusted earnings per share for the second quarter were $0.43, exceeding expectations, reflecting stronger-than-expected sales and gross margin performance [13] - Consolidated net sales for the quarter were $955 million, down 1.6% year over year on a reported basis and 2.5% lower organically [13] - Consolidated gross margin was 39%, including approximately $1 million in net tariff-related costs [14] - Operating cash flow generated was $65 million, with liquidity at $548 million [14] Business Line Data and Key Metrics Changes - North America contract segment net sales were $509 million, down 3.1% year over year, with orders increasing to $507 million, up 4.8% from the prior year [16] - International contract segment net sales were $171 million, down 6.3% on a reported basis, with orders rising to $162 million, up 6.6% [17] - Global retail segment net sales were $276 million, up 4.7% on a reported basis, with orders improving to $304 million, up 6% year over year [18] Market Data and Key Metrics Changes - Orders in North America retail increased 8%, with comparable sales growth also up 8% [6] - During the holiday cyber promotional period, orders rose 12% compared to the same period last year [7] - Total healthcare orders were up 5% year to date, indicating strong demand in resilient sectors [10] Company Strategy and Development Direction - The company is focused on expanding its retail footprint, delivering innovative products, and deepening customer engagement globally [5] - Plans to open 14-16 new stores in the US for the full fiscal year, aiming to double the DWR and Herman Miller store footprint over the next several years [8] - The strategy includes leveraging supply chain strength, with approximately 70% of North America retail's cost of goods sourced from the U.S. [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism based on solid order growth across all segments and encouraging signals in the market [11] - The return-to-office trend is positively impacting demand for commercial real estate and contract furniture [10] - Management highlighted the importance of innovation and partnerships in driving future growth [11] Other Important Information - The company announced the consolidation of its Muskegon, Michigan facility, expected to deliver $10 million in annual run rate savings by fiscal 2028 [15] - The company is focused on maintaining a strong balance sheet while balancing investments and growth [15] Q&A Session Summary Question: Insights on second quarter performance and expectations - Management noted that gross margin exceeded expectations due to channel and product mix, along with effective pricing realization [22][23] Question: Order trends and pipeline insights - Orders were consistent across all businesses, with mid-single-digit growth observed in the first weeks of the new quarter [24][25] Question: Geographic and industry strength - Strong demand was noted in the Bay Area, Southern California, and the Northeast Coast, with energy and professional services industries being particularly active [27] Question: Impact of AI on demand - Management indicated that while the impact of AI on workspaces is still minimal, future productivity gains are anticipated [29] Question: Expectations for the contract business in Q3 - Orders in North America contract were up about 5% on an organic basis, with expectations of continued mid-single-digit growth [34] Question: Retail growth drivers - Brand awareness and store openings were highlighted as key factors driving retail growth, with marketing spend remaining consistent year over year [39][40] Question: Roadmap for doubling store count - Plans to open 14-16 stores annually were confirmed, with expectations of improved operating income from new store investments in the upcoming fiscal year [49][50]