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 net sales for the first half of the fiscal year reached $1.9 billion, up 4% year-over-year [13] - Second quarter 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 and a net debt-to-EBITDA ratio of 2.87x [15] Business Line Data and Key Metrics Changes - North America contract segment net sales were $509 million, down 3.1% year-over-year, while orders increased 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 [17][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 U.S. 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 a strong supply chain, 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 execution and accomplishments in the first half of the fiscal year, with encouraging signals for continued growth [11] - The return-to-office trend is positively impacting demand for commercial real estate and contract furniture [10] - Management noted that the impact of AI on workspace design is still minimal but is being considered for future planning [30] 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] - Management emphasized the importance of operational excellence and scaling innovation as part of their strategic priorities [66] Q&A Session Summary Question: Insights on second quarter performance and expectations - The gross margin exceeded expectations due to channel and product mix, along with effective tariff mitigation strategies [23] Question: Order trends during the quarter - Orders were consistent across all businesses, with organic growth of 4.5% [25] Question: Geographic and industry strength - Strong performance noted in the Bay Area, Southern California, and the Northeast Coast, with healthcare as a growth driver [27] Question: Expectations for the contract business in Q3 - Orders in North America contract were up about 5% on an organic basis, with a positive outlook for the second half of the year [35] Question: Retail growth dynamics - Brand awareness and assortment expansion contributed to strong retail performance, with average order value increasing year-on-year [47] Question: Capital allocation and leverage targets - The company aims to reduce its leverage ratio to the 2 to 2.5 range while maintaining dividends and share repurchases [62]