MillerKnoll, Inc. (NASDAQ: MLKN), based in Zeeland, Michigan, is a leading global designer and manufacturer of interior furnishings for office, healthcare, educational, and residential environments. Established in 1905 as Star Furniture and later rebranded to Herman Miller in 1923, the company became MillerKnoll following its 2021 acquisition of Knoll. The merger aimed to unlock significant cost synergies, reinforcing the company’s position in the luxury furnishings market.
MillerKnoll operates through three segments: Americas Contract, International Contract & Specialty, and Global Retail. These divisions cover a wide range of products sold through furniture dealers, retail outlets, and its ecommerce platform. For fiscal year 2023, the company posted notable growth in the Americas and International segments, driven by improved pricing and operational synergies, though its Global Retail segment faced challenges with declining sales and rising costs.
Q1 MillerKnoll Order Growth and Strategic Initiatives
MillerKnoll’s first-quarter order growth was primarily driven by its Americas Contract segment, where orders gained strength throughout the quarter. The company noted an uptick in large customer orders, supported by promising indicators like project funnel additions, mock-up requests, and new contract activations—all up year-over-year. This trend signals a recovering demand environment. Growth in the International and Specialty segment was also noteworthy, particularly in Asia, where large orders came from both global and local technology clients.
However, despite encouraging order growth, customers have extended the time between placing orders and requesting shipments, pushing some revenue into future quarters. In response, MillerKnoll is carefully managing operating expenses to align with current sales levels.
Across the business, MillerKnoll launched initiatives to enhance its contract segment and meet evolving client needs. This includes research from its Design Within Impact platform, focusing on relationship-based workspaces. Additionally, the company introduced new flagship locations in London and New York, featuring contract showrooms, retail stores, and workspace environments, further supporting its long-term growth objectives as demand trends improve globally.
Q2 MillerKnoll Margin Outlook and Retail Demand Trends
MillerKnoll’s (NASDAQ: MLKN) second-quarter guidance indicates a slight decline in operating margins compared to the previous year, despite revenue expectations surpassing consensus. This trend can be attributed to shifts in order pacing, pushing some revenue into future periods. Gross margin improvements are expected due to increased efficiency in labor and overhead from higher order volumes in the contract business. However, these gains are being tempered by a shift in the company’s business and product mix. Specifically, the company is transitioning from higher-margin retail and specialty brand sales, which is constraining gross margin performance.
Operating expenses (OpEx) are also impacted by a shift in cyber promotional timing, with marketing spend being front-loaded for the quarter, while the associated revenue will be recognized later. This timing mismatch is a key factor behind the softer margin outlook.
On the retail side, MillerKnoll remains optimistic about future demand. The recent 0.5-point cut in interest rates is expected to boost consumer confidence, which, combined with seasonal marketing efforts, is likely to drive improved order trends. With indicators suggesting a potential rebound in the housing market, the company anticipates stronger retail performance in the coming quarters.
Progress on Integration and Hybrid Workplace Trends
MillerKnoll’s (NASDAQ: MLKN) integration of Knoll into its international dealer network continues to advance. As of the first quarter’s end, the company successfully integrated about 60% of its combined dealer network globally. The goal is to complete the integration across the entire network by the end of the fiscal year. This progress is creating valuable opportunities for the Knoll brand, as the expanded network is enhancing its market reach and brand presence.
On the topic of workplace trends, MillerKnoll is observing a shift in the conversation from the return-to-office debate to a more unified approach where companies and employees increasingly value being together in the office. While hybrid work models persist in some cases, there is a clear movement toward more frequent in-person collaboration. High-profile decisions, such as Amazon’s recent push for more office time, are reinforcing this trend.
Regarding its product portfolio, MillerKnoll stands well-positioned to address the evolving needs of workplaces post-COVID. The company’s diverse range of brands and its commitment to research and innovation have enabled it to adapt effectively. Insights gathered during the pandemic have played a crucial role in shaping new products designed to support hybrid work and collaboration.
