On September 19, 2024, MillerKnoll Inc (MLKN, Financial) released its 8-K filing reporting the financial results for the first quarter of fiscal year 2025, which ended August 31, 2024. MillerKnoll Inc, formerly Herman Miller Inc, researches, designs, manufactures, sells, and distributes interior furnishings globally. The company operates through three segments: Americas Contract, International Contract & Specialty, and Global Retail.
Performance Overview
MillerKnoll Inc (MLKN, Financial) reported net sales of $861.5 million for the first quarter, a 6.1% decrease from the $917.7 million reported in the same period last year. Despite the decline in revenue, the company managed to maintain its gross margin at 39.0%, consistent with the previous year. Operating expenses increased slightly by 1.0% to $321.1 million from $317.8 million.
The company reported a diluted loss per share of $0.02, compared to diluted earnings per share of $0.22 in the same period last year. However, on an adjusted basis, diluted earnings per share were $0.36, slightly down from $0.37 last year but above the analyst estimate of $0.34.
Segment Performance
Americas Contract: Net sales for the Americas Contract segment were $454.6 million, down 7.3% from the previous year. However, new orders increased by 5.2% year-over-year, indicating a positive trend in demand. The operating margin for this segment was 3.8%, down from 8.4% last year, primarily due to lower sales volume.
International Contract & Specialty: This segment reported net sales of $213.5 million, a 6.5% decrease from the previous year. Orders increased by 2.7% year-over-year. The operating margin for this segment was 4.4%, down from 5.0% last year. However, on an adjusted basis, the operating margin improved to 7.9% from 6.5% last year.
Global Retail: The Global Retail segment reported net sales of $193.4 million, a 2.8% decrease from the previous year. Orders were down 4.7% year-over-year. Despite the decline in sales, the segment's gross margin improved by 160 basis points, and the operating margin increased to 2.3% from 1.1% last year.
Financial Achievements and Challenges
MillerKnoll Inc (MLKN, Financial) ended the first quarter with a backlog of $758.0 million, a 9.2% increase from last year. The company generated $21.1 million in cash flow from operations and repurchased approximately 1.5 million shares for $43.7 million. The net debt-to-EBITDA ratio stood at 2.84x.
However, the company faces challenges, including a tepid housing market affecting the Retail segment and lower sales volumes impacting operating margins. The effective tax rate for the quarter was significantly high at 66.2%, compared to 24.4% last year, which also contributed to the net loss.
Key Financial Metrics
| Metric | Q1 FY2025 | Q1 FY2024 | % Change |
|---|---|---|---|
| Net Sales | $861.5 million | $917.7 million | -6.1% |
| Gross Margin | 39.0% | 39.0% | N/A |
| Operating Expenses | $321.1 million | $317.8 million | 1.0% |
| Adjusted EPS | $0.36 | $0.37 | -2.7% |
Commentary
"MillerKnoll finished the first quarter with momentum and order growth. Demand is improving and our Contract business is seeing the return of larger projects in the Americas and Asia. Customers are also requesting shipment dates on new orders further into the future, on average, compared to previous years." - MillerKnoll Inc (MLKN, Financial) Management
Analysis
MillerKnoll Inc (MLKN) demonstrated resilience in maintaining its gross margin despite a decline in revenue. The increase in backlog and order growth in the Americas Contract segment are positive indicators for future performance. However, the company needs to address the challenges in the Retail segment and manage its operating expenses more effectively to improve profitability.
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Explore the complete 8-K earnings release (here) from MillerKnoll Inc for further details.
