8-K: MillerKnoll Q2 FY26: Orders Rise, Sales & EPS Decline

MillerKnoll reported mixed second quarter fiscal 2026 results with consolidated orders up 5.5% but net sales down 1.6% and diluted EPS falling 28.6%.

Summary

• Net sales for Q2 FY2026 were $955.2 million, a 1.6% decrease year-over-year (2.5% organically).
• Consolidated orders increased by 5.5% to $972.5 million (4.5% organically), with growth across all segments.
• Gross margin improved by 20 basis points to 39.0%.
• Diluted earnings per share (EPS) decreased by 28.6% to $0.35, while adjusted diluted EPS fell 21.8% to $0.43.
• Operating earnings declined by 20.3% to 5.1%, and adjusted operating earnings decreased by 16.9% to 5.9%.
• Cash flow from operations significantly improved to $64.6 million, up from $55.3 million in the prior year quarter.
• Liquidity stood at $548.3 million as of November 29, 2025, with a net debt-to-EBITDA ratio of 2.87x.

Sentiment

Score: 6

Explanation: While net sales and EPS declined year-over-year, the significant increase in consolidated orders across all segments, particularly the record performance in Global Retail, indicates strong underlying demand and potential for future revenue growth. Management also stated that sales and EPS "exceeded expectations," suggesting a beat against internal or analyst forecasts. The improved cash flow from operations is also a positive. However, declining operating margins across segments and increased operating expenses are areas of concern.

Positives

• Consolidated orders grew 5.5% as reported and 4.5% organically year-over-year, indicating future revenue potential.
• Orders showed strength in every segment, including a record performance from the Global Retail business during the Black Friday / Cyber Monday period, with orders up 12% during the promotional period.
• Gross margin increased by 20 basis points to 39.0%.
• Cash flow from operations improved to $64.6 million from $55.3 million in the prior year quarter.
• Global Retail segment net sales increased by 4.7% as reported and 3.4% organically.
• The company delivered sales and earnings per share that "exceeded expectations" according to the CEO.

Negatives

• Net sales decreased by 1.6% as reported and 2.5% organically to $955.2 million.
• Diluted earnings per share (EPS) decreased by 28.6% to $0.35.
• Adjusted diluted EPS decreased by 21.8% to $0.43.
• Operating earnings percentage declined by 20.3% to 5.1%.
• Adjusted operating earnings percentage declined by 16.9% to 5.9%.
• Operating expenses increased by 2.9% to $323.7 million, driven primarily by higher compensation expense and higher costs related to new stores.
• North America Contract net sales decreased by 3.1% both as reported and organically.
• International Contract net sales decreased by 6.3% as reported and 9.2% organically.
• Adjusted operating margins declined across all segments: North America Contract (down 50 bps to 9.7%), International Contract (down 280 bps to 9.7%), and Global Retail (down 170 bps to 2.1%).

Risks

• Changes to U.S. and international trade policies, including new or increased tariffs and changing import/export regulations, which impact both the cost and availability of materials and components used to manufacture products as well as demand for products.
• Challenges in implementing growth strategy and the possibility that the assumptions on which that strategy was built prove inaccurate.
• Consumer spending levels, which have a significant impact on demand for products within the Global Retail segment.
• Global and national economic conditions such as heightened inflation, uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential governmental responses to these events.
• Cybersecurity threats and risks.
• Public health crises, such as pandemics and epidemics, and governmental policies and actions to protect the health and safety of individuals or to maintain the functioning of national or global economies.
• Risks related to the additional debt incurred in connection with the acquisition of Knoll, including increased interest expense, ability to comply with debt covenants and obligations, and limitations on certain business activities imposed by the credit agreement.
• Availability and pricing of raw materials.
• Financial strength of dealers and customers.
• Pace and level of government procurement.
• Outcome of pending litigation or governmental audits or investigations.

Future Outlook

For the third quarter of fiscal 2026, MillerKnoll expects net sales between $923 million and $963 million, gross margin between 37.9% and 38.9%, adjusted operating expenses between $300 million and $310 million, and adjusted diluted earnings per share between $0.42 and $0.48. This guidance includes an estimated $5 million to $6 million in costs for new store investments and two to three new store openings in Q3, while tariff costs are expected to be offset by pricing actions. The outlook also accounts for typical seasonal softness in Contract businesses and the timing of the Chinese New Year holiday.

Management Comments

• "Our second quarter results reflect the disciplined execution of our strategic priorities and the strength of MillerKnoll's brand collective."
• "We delivered sales and earnings per share that exceeded expectations."
• "Consolidated orders grew 5.5% with strength in every segment, including record performance from our Global Retail business during the Black Friday / Cyber Monday period."
• "As industry trends continue to improve, we are well positioned to build on this momentum and drive long-term value for our customers and shareholders through ongoing innovation and operational excellence."

Industry Context

The company's performance reflects a mixed environment, with strong order growth suggesting improving demand trends in the industrial and consumer sectors, particularly in retail. However, the decline in net sales and EPS indicates ongoing challenges in converting orders to revenue and managing costs, especially in the contract segments. The mention of 'industry trends continue to improve' suggests a broader positive shift, but MillerKnoll's contract businesses are still experiencing seasonal softness and deleverage on lower sales, contrasting with the robust retail performance.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess MillerKnoll's performance against global benchmarks. Therefore, a direct comparison to industry standards is not possible based solely on the provided information.

Stakeholder Impact

• Shareholders: Mixed impact. While sales and EPS declined, strong order growth and management's statement of exceeding expectations could provide some confidence. The improved cash flow is also positive. However, declining operating margins and increased expenses could be a concern.
• Employees: Restructuring charges related to a facility consolidation ($1.4 million) suggest potential impact on employees through workforce reductions or relocations. Higher compensation expense is mentioned as a driver for increased operating expenses.
• Customers: Strong order growth across segments, particularly in Global Retail, indicates continued customer demand and satisfaction. New store openings aim to enhance customer access and experience.
• Suppliers: Availability and pricing of raw materials are identified as a risk, which could impact supplier relationships and costs.
• Creditors: The net debt-to-EBITDA ratio of 2.87x and scheduled debt maturities are relevant for creditors. The company's liquidity of $548.3 million and improved cash flow from operations are positive for debt servicing.

Next Steps

• Host a conference call and webcast on December 17, 2025, at 5:00 PM ET to discuss Q2 FY2026 results.
• Continue with new store investments, with an estimated $5 million to $6 million in costs in Q3 FY2026.
• Open two to three new retail stores in Q3 FY2026.
• Implement pricing actions to offset incremental tariff costs in Q3 FY2026.

Key Dates

Recommendation

MillerKnoll's Q2 FY2026 results present a mixed picture. While the company reported a decline in net sales and diluted EPS year-over-year, the significant 5.5% increase in consolidated orders across all segments, coupled with management's assertion of exceeding expectations, suggests underlying demand strength and potential for future revenue conversion. The Global Retail segment's record Black Friday/Cyber Monday performance is a notable positive. However, the decline in operating margins across all segments and increased operating expenses warrant caution. The improved cash flow from operations is a positive for liquidity and debt management. Given the strong order book indicating future potential, but current revenue and profitability pressures, a 'hold' recommendation is appropriate. Investors should monitor the conversion of orders to sales and the effectiveness of cost management initiatives in the coming quarters.

Keywords

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