MillerKnoll, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Store Openings and Design Initiatives: Opened new flagship locations in London, New York, and Chicago; introduced over 30 new products at Design Days 2025 with 11% Y/Y booked appointments.
• Product Innovation: Invested in R&D, e.g., Knoll Dividends Skyline and Herman Miller's Gemma Healthcare Seating Family.
• Market Outlook: Cautiously optimistic in contract markets with order growth returning post-tariffs; retail business plans to open 10-15 new stores in fiscal 2026 and expand product assortment.

Segment Performance

• North America Contract: Q4 net sales were $496 million, up ~13% from the same quarter a year ago. New orders in the period were $568 million, reflecting growth of almost 16% over last year. Fourth quarter operating margin was 7.7% compared to breakeven in the prior year.
• International Contract: Q4 net sales improved to $186 million, up 6.9% on a reported basis and 5.5% on an organic basis year-over-year. New orders during the quarter were $190 million, an increase of 3.6% on a reported basis and a 2.1% organic increase compared to the prior year. Reported operating margin was 11.7% compared to 10.9% in the prior year.
• Global Retail: Q4 net sales were $280 million, up 2.2% on a reported basis and 1.4% organically. New orders in the quarter improved to $280 million, up 7.5% to last year on a reported basis and up 6.7% on an organic basis compared to the prior year. Operating margin was 5.3% in the quarter compared to 6% last year.

Guidance

• Fiscal 2026 Q1 net sales expected to range between $899 million and $939 million, up 6.7% versus prior year at midpoint.
• Gross margin expected to range from 37.1% to 38.1%.
• Adjusted operating expenses expected to range from $290 million to $300 million.
• Adjusted diluted earnings per share expected to range between $0.32 and $0.38.
• Tariffs expected to reduce Q1 earnings by between $9 million and $11 million before tax or between $0.09 and $0.11 per share after tax.

Risks

• Tariff-related impacts on cost of goods sold and margins.
• Macro-economic uncertainty affecting consumer spending and market demand.
• Initial margin pressure from retail store openings and associated pre-opening expenses.

Question and Answer

Q: Greg Burns asked about order pull-forward and retail expansion A: Jeff Stutz said 3 weeks into current quarter, order entry down mid-single digits Y/Y due to Q4 pull-forward; Andrea Owen and Debbie Propst discussed confidence in retail expansion due to under-stored market and stores becoming profitable within first year Q: Reuben Garner inquired about tariffs and profitability A: Andrea Owen said tariff impact is typically 2-quarter dynamic; Jeff Stutz explained backlog from pre-pricing affects sales book in Q1-Q2 Q: Brian Gordon asked about North American Contract and retail demand A: John Michael said most North American Contract growth was project-oriented; Debbie Propst said retail saw growth with pricing offsetting discounting, no significant pull-forward outside Holly Hunt