MILLERKNOLL, INC. Q3 FY2025 earnings call

• Re-segmented operations into North America Contract, International Contract, and Global Retail, aligning textile businesses and repositioning Holly Hunt. - Opened new stores, including in Palm Springs, Fairfax, and plans for more in Q4 and fiscal 2026. - Opened a MillerKnoll Archives in Holland, Michigan. - Addressed supply chain and tariffs, announcing a 4.5% list price increase effective June 2nd and plans to offset cost impacts through various measures.

North America Contract: Net sales for the quarter were $468 million, up 1.4% on a reported basis and up 1.7% organically from the same quarter a year ago. New orders were $434 million, reflecting a 1.8% reported decrease and a 1.5% organic decrease. Operating margin was 3.6% compared to 5.5% last year; adjusted operating margin was 9.1%. International Contract: Net sales in the third quarter were $146 million, 5% lower on a reported basis and 1.5% lower organically year over year. New orders were $159 million, a 1.6% decline on a reported basis but a 1.4% increase organically. Reported operating margin was 6.8% compared to 11.4% last year; adjusted operating margin was 9.3%. Global Retail: Net sales in the quarter were $263 million, up 1.9% on a reported basis and up 3.9% organically. New orders were $260 million, up 14.7% on a reported basis and almost 17% organically. Reported operating margin was -36% compared to positive 4.7% last year; adjusted operating margin was 6.2%.

• Fourth quarter net sales expected to range between $910 million and $950 million (midpoint $930M), up 4.6% vs last year. - Gross margin expected to range from 37.5% to 38.5%. - Adjusted diluted earnings expected to range between $0.46 and $0.52 per share. - Tariff-related costs in Q4 expected to be between $5 million and $7 million before tax and between $0.05 and $0.07 of net earnings per share.

• Tariff uncertainty impacting cost structure and customer confidence. - Macro-economic factors causing sluggish demand in many geographies. - Retail segment performance lagging due to asset impairments and initial challenges in alignment with new segments.

Q: About impairment charges in global retail and how to square with North America's performance.

A: Jeff Stutz explained that quarterly evaluation under US GAAP identified triggers due to lagging segment profitability and re-segmentation, leading to full review and impairment charges.

Q: On new store locations for ten to fifteen new locations in fiscal 2026.

A: Debbie Propst said they'll be hit fairly evenly quarter by quarter, with two additional locations in Q4.

Q: Regarding tariffs and full offset in future quarters.

A: Jeff Stutz stated tariff situation is fluid, but belief is through pricing and mitigation efforts, they can offset, though April's potential changes complicate estimation.

Q: On revenue guidance and changes since last update.

A: Jeff Stutz mentioned prudence in Q4 guidance due to trade policy uncertainty and consumer/CEO confidence impacts.

Q: On price increase vs surcharge tactic for tariffs.

A: Jeff Stutz said base price increase was appropriate due to input cost pressures like steel, with surcharges ready if needed.

Q: On restructuring goals and cost reductions.

A: Jeff Stutz said $4 million in restructuring charges were for workforce reduction, expecting annualized savings of $4-$4.5 million, enabling prudent outlook and investment in growth strategies.