- Adjusted Diluted Earnings: $0.67 per share for Q4.
- Net Sales: $889 million for Q4, representing an organic decrease of 5.2% year-over-year.
- New Orders: $933 million for Q4, reflecting organic growth of approximately 3% year-over-year.
- Gross Margin: 39.6% for Q4, improved by 250 basis points year-over-year and 100 basis points sequentially.
- Adjusted Operating Margin: 8.3% for Q4, up 240 basis points year-over-year.
- Cash Flow from Operations: $78 million for Q4.
- Net Debt to EBITDA Ratio: 2.63 times at the end of Q4.
- Americas Contract Segment Sales: $417 million for Q4, down 12.2% year-over-year.
- Americas Contract Segment Orders: $480 million for Q4, up 5.7% year-over-year.
- International Contract and Specialty Segment Sales: $245 million for Q4, up 3.8% organically year-over-year.
- Global Retail Segment Sales: $227 million for Q4, down 7.2% year-over-year.
- Global Retail Segment Orders: $214 million for Q4, down 6% year-over-year.
- Full Fiscal Year Net Sales: $3.6 billion.
- Full Fiscal Year Adjusted Earnings: $2.08 per share.
- Cost Synergies: Achieved annualized run rate savings of $160 million.
- Fiscal 2025 Net Sales Outlook: Expected to be above fiscal year 2024.
- Fiscal 2025 Adjusted Earnings Per Share Outlook: Expected to be in the range of $2.10 to $2.30 per share.
- Q1 Fiscal 2025 Net Sales Outlook: Expected to be between $872 million and $912 million.
- Q1 Fiscal 2025 Adjusted Earnings Per Share Outlook: Expected to be between $0.38 and $0.44.
Release Date: June 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MillerKnoll Inc (MLKN, Financial) reported significant earnings per share and margin growth in the fourth quarter.
- The company achieved consolidated organic order growth of 2.9% for the quarter.
- Gross margin improved to 39.6%, up 250 basis points year-over-year.
- The international contract business is expanding, with 19 dealers transitioned in 17 countries this quarter.
- Retail segment saw a 1% organic order growth year-over-year despite tough macroeconomic conditions.
Negative Points
- Net sales in the fourth quarter decreased by 5.2% organically from the same quarter a year ago.
- Americas contract segment saw a 12.2% decline in net sales on a reported basis.
- Global retail segment experienced a 7.2% decline in net sales year-over-year on a reported basis.
- The company faces ongoing challenges from the North American housing market slowdown and reduced spending on discretionary goods.
- Adjusted operating margin in the Americas segment decreased by 280 basis points year-over-year due to lower sales volume.
Q & A Highlights
Q: Andi, you referenced investments on the commercial side. Can you elaborate on where exactly those investments are going and what are targeted for growth in this coming year?
A: Andrea Owen (CEO): We're focused on investing in digital platforms and tools to help our dealers, expanding our international contract business, and enhancing our MillerKnoll showrooms. Additionally, we are investing in new stores for Design Within Reach (DWR) and Herman Miller, and expanding our product assortment.
Q: Jeff, you mentioned strong gross margin performance. Can you talk about the factors contributing to this and what you expect for the upcoming year?
A: Jeffrey Stutz (CFO): We expect continued net pricing benefits and improved labor and overhead absorption from increased production levels. Seasonal retail demand will impact margins, but overall, we anticipate margin expansion driven by volume pickup and operational efficiencies.
Q: Retail margins were very strong despite a tough environment. Was there anything unusual contributing to this strength?
A: Andrea Owen (CEO): Our focus on operational efficiency, last-mile delivery, and inventory management has contributed to healthy margins. Additionally, our selling tools and increased shipping revenue have driven higher margins.
A: Debbie Propst (President, Global Retail): Our investments in selling tools like design services have driven more mix into higher-margin categories, and increased shipping revenue has offset inbound costs.
Q: Can you provide an update on the integration of the domestic dealer network and its current performance?
A: John Michael (President, Americas Contract): The network is stable and well-aligned, with dealers making significant investments in learning and displaying our products. We see continued momentum as they become more comfortable with the products and tools.
Q: Have you seen any evidence that return to work has plateaued or is reaching equilibrium?
A: Andrea Owen (CEO): We believe the trend is still climbing, with more decisive project needs from customers. Hybrid work is evolving favorably for our industry, with many businesses increasing in-office days.
A: John Michael (President, Americas Contract): Clients are focused on attracting employees back to the office and balancing heads-down and collaborative spaces. We see a fair amount of space being maintained to accommodate hybrid work schedules.
Q: How does the pipeline of projects in your sales funnel look today? Are leads progressing as expected?
A: John Michael (President, Americas Contract): The activity in our sales funnel continues to grow, with project marked "won but not yet ordered" increasing 7% sequentially. We are starting to see this activity flow through to orders, as evidenced by our Q4 growth.
Q: What are your expectations for consumer demand in the retail segment this year, especially with the holiday season approaching?
A: Debbie Propst (President, Global Retail): Despite a soft home furnishings market, we are driving growth with higher average order values and operational efficiencies. We are optimistic about capitalizing on market improvements in the back half of the year.
Q: Have you provided any guidance on the long-term percentage of the retail network that will be Design Within Reach versus Herman Miller stores?
A: Jeffrey Stutz (CFO): We have not provided specific guidance on this.
A: Andrea Owen (CEO): Both brands are performing well, and we are still exploring their potential. There is significant whitespace for growth in North America.
Q: How do Design Within Reach and Herman Miller stores perform when located side-by-side?
A: Debbie Propst (President, Global Retail): When located side-by-side, the stores target different customers and are almost 100% additive. Design Within Reach serves as a marketplace for our collective brands and third-party modern design brands, while Herman Miller stores offer a pure brand experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
