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MI

MILLERKNOLL, INC. (MLKN)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered broad-based top-line strength: net sales $961.8M (+8.2% YoY; +7.8% organic) and adjusted diluted EPS $0.60, significantly above prior guidance midpoint; gross margin 39.2% rose 130 bps sequentially despite ~$7M tariff headwind .
  • Against S&P Global consensus, MLKN posted a clear beat: revenue $961.8M vs $913.8M consensus*, adjusted EPS $0.60 vs $0.44 consensus*; Q2 was a beat and Q3 saw a revenue miss but EPS in line* .
  • Segment performance: North America Contract led with sales $496.1M (+12.5% YoY) and adjusted operating margin 10.0% (+190 bps YoY); International Contract grew sales to $185.7M with 12.9% adjusted margin; Global Retail sales reached $280.0M with 6.5% adjusted margin .
  • Q1 FY2026 guidance introduced: net sales $899–$939M, gross margin 37.1–38.1%, adjusted EPS $0.32–$0.38; management highlighted tariff drag ($9–$11M pre-tax, $0.09–$0.11 after-tax) and pre-opening store costs ($4–$7M), with mitigation and pricing actions expected to offset by 2H FY26 .
  • Strategic catalysts: elevated backlog $761.3M (+$78M QoQ), pricing actions (surcharge Apr 21; list increase Jun 2), new flagship openings (Chicago Fulton Market) and accelerated retail build-out (10–15 U.S. stores in FY26) support medium-term growth narrative .

What Went Well and What Went Wrong

What Went Well

  • Strong operational execution drove top- and bottom-line beats vs expectations; adjusted EPS $0.60 and sales $961.8M exceeded prior guidance midpoint, with CEO citing “value-creating execution” across businesses .
  • North America Contract momentum: orders $567.6M (+15.8% YoY) and adjusted operating margin 10.0% (+190 bps YoY), aided by fixed expense leverage and favorable mix .
  • Sequential margin improvement: consolidated gross margin 39.2% (+130 bps QoQ), despite ~$7M tariff-related COGS drag; pricing actions expected to offset tariff impact over time .

What Went Wrong

  • Tariffs pressured margins and created timing distortions; ~$7M COGS headwind in Q4 and expected $9–$11M pre-tax impact in Q1 FY2026, with customers pulling orders forward ahead of surcharges/list price increases .
  • Adjusted operating margin compressed YoY to 7.5% (from 8.3%), reflecting higher variable incentive comp and tariffs; GAAP EPS was a loss of ($0.84) due to tax-related items, despite strong adjusted performance .
  • Global Retail adjusted margin stepped down YoY to 6.5% (–210 bps), driven by new store opening costs, lower international sales, and mix; management guides near-term retail margins “around ~5%” before improving in years 2–3 .

Financial Results

MetricQ2 FY2025Q3 FY2025Q4 FY2025
Revenue ($USD Millions)$970.4 $876.2 $961.8
Gross Margin %38.8% 37.9% 39.2%
Operating Margin % (GAAP)6.4% (9.4)% 5.7%
Diluted EPS (GAAP)$0.49 ($0.19) ($0.84)
Adjusted Diluted EPS$0.55 $0.44 $0.60

Actual vs S&P Global Consensus

MetricQ2 FY2025Q3 FY2025Q4 FY2025
Revenue – Actual ($USD Millions)$970.4 $876.2 $961.8
Revenue – Consensus* ($USD Millions)$959.7*$918.9*$913.8*
EPS – Actual ($)$0.55 (Adjusted) $0.44 (Adjusted) $0.60 (Adjusted)
EPS – Consensus* ($)$0.53*$0.435*$0.437*

Values with asterisk were retrieved from S&P Global.

Segment Breakdown – Q4 FY2025

SegmentNet Sales ($USD Millions)Orders ($USD Millions)Operating Margin %Adjusted Operating Margin %
North America Contract$496.1 $567.6 7.7% 10.0%
International Contract$185.7 $189.5 11.7% 12.9%
Global Retail$280.0 $279.7 5.3% 6.5%

KPIs and Balance Sheet

KPIQ2 FY2025Q3 FY2025Q4 FY2025
Orders ($USD Millions)$921.9 $853.1 $1,036.8
Backlog ($USD Millions)$709.4 $686.4 $761.3
Cash from Operations ($USD Millions)$55.3 $62.1 $70.9
Liquidity ($USD Millions)$470.4 $468.2 $575.9
Net Debt / EBITDA (turns)2.94x 2.93x 2.88x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)Q4 FY2025$910–$950 Actual: $961.8 Beat vs guidance
Gross Margin %Q4 FY202537.5–38.5 Actual: 39.2 Beat vs guidance
Adjusted Diluted EPS ($)Q4 FY2025$0.46–$0.52 Actual: $0.60 Beat vs guidance
Net Sales ($USD Millions)Q1 FY2026N/A$899–$939 New
Gross Margin %Q1 FY2026N/A37.1–38.1 New
Adjusted Operating Expenses ($USD Millions)Q1 FY2026N/A$290–$300 New
Interest & Other ($USD Millions)Q1 FY2026N/A$17.6–$18.6 New
Adjusted Effective Tax Rate %Q1 FY2026N/A21.5–23.5 New
Adjusted Diluted EPS ($)Q1 FY2026N/A$0.32–$0.38 New
Tariff ImpactQ1 FY2026N/A$9–$11 pre-tax; $0.09–$0.11 EPS New
Store Opening CostsQ1 FY2026N/A$4–$7 opex New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Tariffs & PricingAnnounced 4.5% list price increase effective Jun 2; ready to use surcharges; estimated Q4 tariff impact $5–$7M pre-tax ~$7M COGS drag in Q4; surcharge April 21 and list increase June 2 drove ~$55–$60M pull-forward; Q1 EPS impact $0.09–$0.11; mitigation/pricing offsets expected by 2H FY26 Elevated near-term headwind; mitigation layering through FY26
Demand & BacklogQ2: Americas orders up mid-single digits; Q3: backlog $686M; mixed contract demand; retail orders +15% reported Orders +11.1% reported; backlog rose $78M to $761M; NA contract pull-forward but underlying mid-single digit growth ex pull-ahead Strengthening; cadence lumpy due to pricing timing
Segment MixQ2: Americas margin expansion; International mixed; Retail soft due to timing NA: adj OM 10%; International: adj OM 12.9%; Retail: adj OM 6.5% with new store drag NA leading; Retail investing for growth
Retail ExpansionQ2: expanding assortment and openings; Q3: plan 10–15 new U.S. stores in FY26 Opened Paramus DWR and Coral Gables HM in Q4; reiterated 10–15 FY26; near-term margins ~5% before ramp; flagship Chicago expansion Accelerating footprint; near-term opex drag
Regional TrendsQ3: strength in Europe, Middle East, India, Japan, LatAm pockets Q4: International sales/orders growth; particular strength in Europe; LatAm strong Improving internationally

Management Commentary

  • CEO: “We are extremely proud of our results in the fourth quarter, significantly exceeding the expectations we set forth to the Street last quarter…we are encouraged by the positive underlying trends and solid order growth…we have the operational and balance sheet strength to…continue investing in our exciting growth opportunities ahead.” .
  • CFO: “Consolidated net sales…well above the midpoint…gross margin included a drag of approximately $7 million from tariff-related impacts…we expect margins to be negatively impacted in the near term…remain confident our pricing actions will offset these later in fiscal 2026.” .
  • North America Contract: “We estimate new orders…benefited from between $55–$60M in demand pull-forward…created a sense of urgency…internal demand indicators reflected this customer activity.” .
  • Retail strategy and margin trajectory: “Long-term goal is mid-teens operating income…near term, hold around ~5% until stores mature; years 2–3 should begin to ‘pump up’.” .

Q&A Highlights

  • Order pull-forward magnitude and timing: ~$55–$60M consolidated pull-ahead in Q4; majority of backlog pre-pricing; expect largest margin impact in Q1, lessening in Q2, with pricing coverage in Q3–Q4 .
  • Near-term demand cadence: First three weeks of Q1 showed mid-single digit YoY order decline due to pull-forward; expectation to resume growth as quarter progresses .
  • Retail expansion confidence: Under-stored vs competitors; assortment growth and new stores drive halo effects; typical time from possession to opening 2–6 months, profitability within first year (faster in HM) .
  • Free cash flow and leverage priorities: Shift focus from opportunistic buybacks to higher CapEx (store build-outs) and debt paydown; maintaining prudent leverage management .

Estimates Context

  • Q4 FY2025 vs consensus: revenue $961.8M vs $913.8M consensus* (beat), adjusted EPS $0.60 vs $0.44 consensus* (beat). Q3 FY2025: revenue miss ($876.2M vs $918.9M*), EPS in line ($0.44 vs $0.435*). Q2 FY2025: revenue and EPS beats ($970.4M vs $959.7M*; $0.55 vs $0.53*) .
  • Implications: Near-term models likely to reflect tariff EPS drag in Q1 and pricing-lag dynamics, with potential upward adjustments to FY26 margin trajectory as mitigation/pricing layer in and backlog supports volume; retail margin assumptions should account for store pre-opening costs through FY26 .
    Values with asterisk were retrieved from S&P Global.

Key Takeaways for Investors

  • Clear Q4 beat vs both guidance and consensus, with sequential margin improvement despite tariffs—a constructive datapoint for margin resilience .
  • Backlog up $78M QoQ to $761M and orders +11% YoY point to demand support; normalize for pull-ahead and NA still showed mid-single digit order growth .
  • Expect Q1 tariff/pricing timing to pressure margins and EPS ($0.32–$0.38 guided), then improve as pricing surcharges and list increases flow through by 2H FY26 .
  • Retail near-term margin ~5% given accelerated openings; multi-year path to mid-teens segment margins via footprint growth, assortment expansion, and DTC strength .
  • Balance sheet/liquidity robust ($576M) with revolver/Term Loan A extended to 2030; net leverage 2.88x supports investment and debt paydown .
  • Segment leadership in NA Contract (adj OM 10%) and strengthening International positions MLKN to benefit from improving office utilization and leasing trends .
  • Watch tariff policy developments, backlog conversion cadence, and retail store ramp as key narrative drivers for the stock over the next two quarters .