8-K: MillerKnoll Exceeds Q4 Expectations with Strong Sales and Order Growth, Navigates Tariff Headwinds

MillerKnoll, Inc. reported fourth quarter and full fiscal year 2025 financial results, significantly exceeding expectations with strong sales and order growth, despite facing tariff-related cost increases.

Summary

• For the fourth quarter of fiscal 2025, MillerKnoll reported net sales of $961.8 million, an increase of 8.2% as reported and 7.8% organically year-over-year.
• Orders for the fourth quarter reached $1,036.8 million, up 11.1% as reported and 10.7% organically year-over-year.
• Gross margin for Q4 decreased by 40 basis points to 39.2%, primarily due to approximately $7.0 million in tariff-related cost increases.
• The company reported a diluted net loss per share of $(0.84) for Q4 and $(0.54) for the full fiscal year 2025.
• Adjusted diluted earnings per share for Q4 were $0.60, a decrease of 10.4% year-over-year, and $1.95 for the full fiscal year, down 6.3%.
• Consolidated operating expenses decreased to $321.9 million in Q4, while adjusted operating expenses increased to $305.0 million, driven by higher variable incentive compensation and selling expenses.
• Special charges in Q4 amounted to $16.9 million, including $10.6 million for restructuring (primarily workforce reductions) and $6.3 million for purchase accounting amortization.
• For the full fiscal year 2025, net sales were $3.7 billion, up 1.1% as reported and 1.6% organically.
• Liquidity as of May 31, 2025, stood at $575.9 million, comprising cash on hand and Revolving Credit Facility availability.
• Total outstanding debt was reduced by $4.8 million, with a net debt-to-EBITDA ratio of 2.88x.
• The North America Contract segment saw Q4 net sales increase by 12.5% and orders by 15.8%, with adjusted operating margin improving by 190 basis points to 10.0%.
• The International Contract segment reported Q4 net sales up 6.9% and orders up 3.6%, but adjusted operating margin decreased by 230 basis points to 12.9%.
• Global Retail segment's Q4 net sales increased by 2.2% and orders by 7.5%, but adjusted operating margin declined by 210 basis points to 6.5%, and the full year saw an operating loss margin of 6.3%.

Sentiment

Score: 7

Explanation: The company reported strong top-line growth and order intake, exceeding expectations, and highlighted operational and balance sheet strength. However, profitability metrics like adjusted EPS declined, and the company incurred a net loss, partly due to special charges and tariff impacts. The future outlook is positive but acknowledges ongoing tariff costs.

Positives

• Fourth quarter net sales increased by 8.2% as reported and 7.8% organically year-over-year, indicating strong top-line growth.
• Fourth quarter orders grew by 11.1% as reported and 10.7% organically year-over-year, suggesting positive future revenue trends.
• The company significantly exceeded the expectations set forth to the Street for the fourth quarter, as stated by the CEO.
• Operating margin improved to 5.7% in Q4 FY2025, up from 2.7% in the prior year.
• The North America Contract segment demonstrated robust performance with Q4 net sales up 12.5% and orders up 15.8%, alongside a 190 basis point improvement in adjusted operating margin to 10.0%.
• Total outstanding debt was reduced by $4.8 million, and the Revolving Credit Facility and Term Loan A maturity date was extended to April 2030, enhancing financial flexibility.
• The company maintains strong liquidity of $575.9 million as of May 31, 2025.

Negatives

• Gross margin decreased by 40 basis points in Q4 to 39.2%, primarily due to approximately $7.0 million in tariff-related cost increases.
• Adjusted operating margin declined to 7.5% in Q4 from 8.3% in the prior year.
• The company reported a net loss per share of $(0.84) in Q4 and $(0.54) for the full fiscal year 2025.
• Adjusted diluted earnings per share decreased by 10.4% in Q4 to $0.60 and by 6.3% for the full fiscal year to $1.95.
• Fiscal 2025 gross margin decreased by 30 basis points, and operating margin decreased to 1.4% from 4.6% in the prior year.
• Adjusted operating expenses increased by 9.4% in Q4 to $305.0 million, driven by higher variable incentive compensation and selling expenses.
• The International Contract segment's adjusted operating margin decreased by 230 basis points year-over-year in Q4 to 12.9%.
• The Global Retail segment's adjusted operating margin declined by 210 basis points year-over-year in Q4 to 6.5%, and the full year saw a significant operating loss margin of 6.3%.
• Special charges of $16.9 million were incurred in Q4, including $10.6 million for restructuring, primarily related to workforce reductions.

Risks

• General economic and geopolitical conditions, including the impact of supply chain challenges, tariffs, and recessionary pressures.
• The impact of government policies and actions, including those relating to public health, government spending, and trade relations.
• The impact of public health crises, such as pandemics and epidemics.
• Risks related to the additional debt incurred in connection with the Knoll acquisition.
• MillerKnoll's ability to comply with its debt covenants and obligations.
• The risk that the anticipated benefits of the Knoll acquisition will be more costly to realize than expected.
• The effect of the Knoll acquisition on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with customers, suppliers, and others with whom MillerKnoll does business, or on MillerKnoll's operating results and business generally.
• The ability of MillerKnoll to implement its plans, forecasts, and other expectations with respect to MillerKnoll's business after the completion of the Knoll acquisition and realize expected synergies.
• Business disruption following the Knoll acquisition.
• The availability and pricing of raw materials.
• The financial strength of the company's dealers and customers.
• The success of newly-introduced products.
• The pace and level of government procurement.
• Foreign currency exchange fluctuations.
• The outcome of pending litigation or governmental audits or investigations.

Future Outlook

For the first quarter of fiscal 2026, MillerKnoll expects net sales to range from $899 million to $939 million. Gross margin is projected to be between 37.1% and 38.1%, with adjusted operating expenses anticipated to be between $290 million and $300 million. Adjusted diluted earnings per share are forecasted to be between $0.32 and $0.38. This guidance includes estimated incremental costs related to tariffs, ranging from $9 million to $11 million before tax (impacting EPS by $0.09 to $0.11), and costs associated with three new store openings.

Management Comments

• "We are extremely proud of our results in the fourth quarter, significantly exceeding the expectations we set forth to the Street last quarter, and driven by outstanding, value-creating execution in all of our businesses and by our associates around the world." Andi Owen, President and Chief Executive Officer.
• "As we look ahead, we are encouraged by the positive underlying trends and solid order growth we are seeing across our businesses and geographies." Andi Owen, President and Chief Executive Officer.
• "While macroeconomic conditions continue to be incredibly dynamic, we have the operational and balance sheet strength to both navigate these conditions and continue investing in our exciting growth opportunities ahead." Andi Owen, President and Chief Executive Officer.

Industry Context

MillerKnoll operates in the industrial and consumer sectors, specializing in modern design furnishings and accessories for both contract (office, healthcare, education) and retail markets globally. The company identifies itself as a 'growth-oriented small-cap value company.' The reported results indicate resilience and strong performance in the North America Contract segment, suggesting a healthy demand for commercial interiors in that region. However, the impact of tariffs on gross margin and challenges in the Global Retail segment, including new store opening costs and lower international sales, reflect broader macroeconomic pressures and regional variations in consumer spending. Despite these headwinds, the CEO's comments emphasize the company's operational and balance sheet strength to navigate dynamic conditions and invest in growth, positioning MillerKnoll to potentially outperform in its niche within the broader industrial and consumer landscape.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results for direct industry benchmarking.
• MillerKnoll describes itself as a 'growth-oriented small-cap value company in the industrial and consumer sectors.' Its strong organic sales and order growth in Q4 (7.8% and 10.7% respectively) suggest robust top-line performance, which could be competitive within its specific market segments, particularly in North America.
• The significant improvement in North America Contract's adjusted operating margin (up 190 basis points to 10.0%) indicates strong operational leverage and efficiency in that key segment, potentially outperforming peers facing similar cost pressures.
• However, the overall decline in adjusted EPS and the reported net loss, coupled with the negative impact of tariffs on gross margin and the operating loss margin in Global Retail, suggest that profitability and certain segment performances may lag behind more established or diversified industry leaders, or those less exposed to specific trade policies.

Legal Proceedings

• The company lists 'the outcome of pending litigation or governmental audits or investigations' as a risk factor that could cause actual results to differ materially from forward-looking statements, but no specific proceedings are detailed in the filing.

Stakeholder Impact

• Shareholders: Positive impact from exceeding expectations, strong sales and order growth, and debt reduction. Negative impact from net loss and decline in adjusted EPS.
• Employees: Impacted by workforce reductions, as indicated by $10.6 million in restructuring charges in Q4.
• Customers: Potential benefit from new store openings (four in FY2025, three planned for Q1 FY2026) and continued investment in growth opportunities.
• Creditors: Positive impact from debt reduction and the extension of the Revolving Credit Facility and Term Loan A maturity date to April 2030, indicating improved financial stability.
• Suppliers: Potential impact from supply chain challenges, which are listed as a risk factor.

Next Steps

• MillerKnoll will host a conference call and webcast on Wednesday, June 25, 2025, at 5:00 PM ET to discuss the fourth quarter and fiscal 2025 results.
• The company plans to open three new retail stores in the first quarter of fiscal 2026.

Key Dates

Recommendation

Keywords

MillerKnoll, MLKN, financial results, Q4 2025, fiscal year 2025, earnings report, net sales, orders, gross margin, operating expenses, EPS, debt, liquidity, North America Contract, International Contract, Global Retail, tariffs, restructuring, corporate furniture, design, office solutions, retail furnishings, commercial interiors