Margin Outlook
Q: Why are margins expected to be softer in Q2?
A: Management explained that while they expect improvements in labor and overhead efficiency due to increased order activity, their gross margins are being offset by a shift in business and product mix. " They're rotating out of higher-margin retail sales and some specialty brands as they move into Q2. " Additionally, marketing spend is front-loaded due to cyber promotional timing, but the associated revenue won't be realized until later, which impacts operating margins in the second quarter. "

Retail Demand Outlook
Q: Is retail demand expected to pick up in coming quarters?
A: Management is optimistic about the retail outlook, anticipating improved demand trends. " They believe the recent 0.5 point interest rate cut will stimulate consumer confidence. " With marketing spend increasing in a more seasonally suitable time, they plan to reintroduce traditional awareness campaigns to capitalize on cyber timing. " They expect the housing market to loosen up and consumer confidence to rebound, which should benefit retail sales. "

Order Delays and Revenue Impact
Q: Are longer customer delivery requests affecting revenue?
A: Customers are requesting deliveries further out from the order date due to larger and more complex projects, with projects over $5 million up over 40% for the quarter. " This naturally extends lead times. " Clients are also placing orders earlier to ensure delivery times amidst longer construction schedules. " This trend causes revenue to lag order growth but is not new; backlogs have settled into a 10 to 12-week range, up from 7 to 8 weeks pre-COVID. "

Industry Demand Trends
Q: Which industry sectors are driving order growth?
A: There's increased activity across several sectors, including financial services, banking, pharma, public sector, and healthcare. " Notably, the technology sector has shown an uptick, with Northern California being one of the strongest-performing regions. " Internationally, they're seeing large project opportunities in legal and business services in Europe, technology in India, and healthcare in the Middle East. "

Long-Term Margin Expectations
Q: Where can gross margins go longer term?
A: Management believes that as economic conditions improve, they have opportunities to leverage overhead costs across their manufacturing footprint and retail SG&A expenses. " While pricing benefits will be incremental due to normalized annual increases, the next margin improvements will come from operational leverage. " Over time, growth in the higher-margin retail business should also contribute to margin expansion. "

Full-Year Guidance and Macro Factors
Q: Does full-year guidance assume an improving macro backdrop?
A: Yes, their guidance anticipates improvements across all business segments. " The recent certainty provided by the Federal Reserve's actions boosts their confidence. " Indicators they've monitored for several quarters are materializing, with consistent orders above last year. " They expect the housing market's recovery and increased consumer confidence to benefit the entire business. "

Knoll Integration Progress
Q: What's the status of integrating Knoll into the dealer network?
A: As of the end of Q1, they have integrated the MillerKnoll combined dealer network across about 60% of the international network. " Their goal is to complete the integration by the end of the fiscal year. " They're making good progress and starting to see real opportunities with the Knoll brand through the combined network. "

Return-to-Office Trends
Q: What are customers saying about return-to-office and hybrid work?
A: Customers are focusing less on the return-to-office dilemma and more on being together, even supporting limited hybrid arrangements. " There's a push towards frequent in-office presence, with companies recognizing the benefits of connection and culture. " Management feels confident about their product portfolio, which is well-suited to meet the evolving needs of the post-COVID workplace. "