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01/10 18:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals financial risks with a reported loss per share, declining margins, and significant operational challenges, particularly in the Retail segment. Despite slight sales growth and a share repurchase program, the overall financial health is concerning. The Q&A session highlighted management's cautious outlook, global uncertainties, and lack of clear guidance, which may further unsettle investors. Given these factors and the company's small-cap status, a negative stock price reaction is likely.
Consolidated Net Sales $876 million, an increase of 1.8% organically year-over-year, driven by strong performance in global retail.
Consolidated Orders $853 million, up 2.7% as reported and 4.1% higher on an organic basis year-over-year.
Consolidated Backlog $686 million, which is up 7.4% from a year ago.
Consolidated Gross Margin 37.9%, down 70 basis points year-over-year, primarily from unfavorable channel and product mix as well as lower fixed cost leverage.
Loss per Share $0.19, compared to diluted earnings per share of $0.30 in the prior year, due to special charges related to intangible amortization impairment and restructuring totaling $140 million.
Adjusted Earnings per Share $0.44, compared to $0.45 in the same period a year ago.
Cash Flow from Operations $62 million generated in the third quarter.
Share Repurchase Approximately 786,000 shares repurchased for $18 million.
Long-term Debt Reduction Reduced by $61 million.
Net Debt to EBITDA Ratio 2.93 times at quarter end.
Available Liquidity $468 million at quarter end.
North America Contract Net Sales $468 million, up 1.4% on a reported basis and 1.7% organically year-over-year.
North America Contract New Orders $434 million, reflecting a 1.8% reported decrease and a 1.5% organic decrease versus last year.
North America Contract Operating Margin 3.6%, compared to 5.5% last year.
International Contract Net Sales $146 million, 5% lower on a reported basis and 1.5% lower organically year-over-year.
International Contract New Orders $159 million, a 1.6% decline on a reported basis but a 1.4% increase organically year-over-year.
International Contract Operating Margin 6.8%, compared to 11.4% last year.
Retail Segment Net Sales $263 million, up 1.9% on a reported basis and up 3.9% organically.
Retail Segment New Orders $260 million, which is up 14.7% to last year on a reported basis and up almost 17% organically.
Retail Segment Operating Margin Negative 36%, compared to positive 4.7% last year, primarily due to asset impairments.
Adjusted Retail Segment Operating Margin 6.2%, which is 80 basis points higher than the same quarter last year.
New Product Launches: New product launches in spring summer 2025 are up over 65% compared to spring summer 2024.
Product Assortment Growth: We are continuing to grow overall product assortment and we're approaching new product development with an eye towards unique author design and an appreciation for style, quality and livability.
Market Expansion: We opened a new design with Image Studio in Palm Springs, California and a new Herman Miller store in Fairfax, Virginia. We plan to open two more stores in the fourth quarter and are working on over 15 new locations in North America.
Retail Demand Growth: Reported orders in Global Retail were up nearly 15%, organic orders were up 17%, and cyber adjusted orders were up 14% in North America.
Cost Control Measures: Proactive cost containment measures helped maintain earnings despite tariff and policy uncertainty.
Price Increase Announcement: A 4.5% list price increase will become effective on June 2nd to offset tariff-related costs.
Segment Reporting Change: The company has re-segmented its operations into North America Contract, International Contract, and Global Retail to better align with long-term strategies.
Focus on Growth: With the integration of Knoll largely behind, the company is pivoting towards driving growth and expanding its international market presence.
Macroeconomic Conditions: The company is facing unpredictable and dynamic macroeconomic conditions that have led to sluggish demand in many geographies, particularly within the Contract Segments.
Tariff Uncertainty: Recent tariff announcements have created uncertainty in the industry, impacting sales and order pacing. The company plans to implement a 4.5% price increase to mitigate these costs.
Competitive Pressures: There is caution in the current environment affecting North American Contract orders, indicating competitive pressures and market uncertainty.
Supply Chain Challenges: The company is navigating supply chain challenges due to tariffs and is leveraging its manufacturing and supply chain footprint to manage costs.
Financial Performance Risks: The company reported a loss per share of $0.19 due to special charges related to goodwill impairment and restructuring, indicating financial performance risks.
Operational Margin Decline: The operating margins in both the North America and International Contract segments have declined significantly, reflecting challenges in managing costs amid lower revenue.
Retail Segment Losses: The Retail segment reported a negative operating margin of 36%, primarily due to asset impairments, highlighting operational risks.
Segment Reporting Structure Change: MillerKnoll has re-segmented its operations into three business reporting segments: North America Contract, International Contract, and Global Retail to better align with long-term strategies.
New Product Development: The company is focusing on growing its product assortment with a 65% increase in new product launches for spring/summer 2025 compared to the previous year.
Store Expansion: MillerKnoll plans to open 10 to 15 new locations in fiscal 2026, with two new stores expected to open in the fourth quarter of fiscal 2025.
Supply Chain Management: The company is adapting its supply chain strategies to manage tariff impacts, including a 4.5% price increase effective June 2nd.
Q4 2025 Net Sales Guidance: Expected net sales for Q4 2025 are projected to range between $910 million and $950 million, with a midpoint of $930 million.
Q4 2025 Gross Margin Guidance: Gross margin for Q4 2025 is expected to range from 37.5% to 38.5%.
Q4 2025 EPS Guidance: Adjusted diluted earnings per share for Q4 2025 are expected to range between $0.46 and $0.52.
Tariff Impact on Q4 2025: Estimated tariff-related costs for Q4 2025 are between $5 million and $7 million before tax, impacting net earnings per share by $0.05 to $0.07.
Share Repurchase: In the third quarter, MillerKnoll repurchased approximately 786,000 shares for $18 million.
The earnings call presents mixed signals: while there are positive developments like order growth and retail expansion, challenges such as declining margins, revenue expectations, and tariff impacts offset these gains. The Q&A reveals cautious optimism but lacks concrete guidance, especially regarding AI's impact. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction, with minor fluctuations expected as investors weigh the positive growth strategies against financial uncertainties and mixed performance across segments.
The company's strong financial performance, including a 10.9% increase in net sales and a 25% rise in EPS, is a positive indicator. Despite some challenges like tariffs and new store costs, management's effective pricing actions and optimistic guidance for reduced impacts in the future are promising. The absence of increased discounting and stable demand further supports a positive sentiment. Although the lack of full-year guidance introduces some uncertainty, the overall outlook, including market expansion and strategic growth initiatives, suggests a positive stock price movement in the near term.
The earnings call reflects a negative sentiment due to a reported loss per share, significant operational margin declines, and a negative operating margin in the Retail segment. Despite some positive aspects like increased sales and share repurchases, the Q&A revealed management's cautious outlook and avoidance of direct answers regarding future earnings and tariff impacts. The company's financial performance risks and operational challenges, combined with a cautious revenue guidance, suggest a negative stock price movement in the short term.
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