MillerKnoll Cuts Fiscal 2027 Sales Outlook After Demand Reversal
First-quarter sales were $923.4 million, down 3.4%, and full-year net sales guidance was trimmed to $3.88 billion to $4.03 billion.
MillerKnoll Inc. (MLKN), a growth-oriented small-cap value company in the industrial and consumer sectors, reported first-quarter fiscal 2027 net sales of $923.4 million, down 3.4% as reported and 3.3% organically from a year earlier, reversing the sequential sales increase recorded in the prior quarter. Interim Chief Executive Officer Jeff Stutz said demand patterns were softer than expected, and the company lowered full-year net sales guidance to $3.88 billion to $4.03 billion from $3.93 billion to $4.13 billion. Adjusted diluted earnings guidance was unchanged at $1.85 to $2.15 a share.
Orders were $913.9 million, up 3.2% as reported and 3.5% organically. Consolidated backlog was $669.2 million. Stutz said the company remains confident in its earnings outlook for the second quarter and full fiscal year, and that results reflected the early impact of focused priority setting, disciplined cost management, and balance-sheet work.
Gross margin rose to 41.7% from 38.5% a year earlier, a 320-basis-point increase, primarily from tariff refunds and price realization, partially offset by inflationary cost pressure. Adjusted gross margin rose 330 basis points. The company recognized an approximate $10 million net increase in operating income from refunds of previously paid IEEPA tariffs, equal to $0.11 a share and 110 basis points of operating-margin improvement. Operating margin held at 5.6%. Adjusted operating margin was 7.1%, including the tariff-refund benefit. Diluted earnings were $0.38 a share, compared with $0.29 a year earlier. Adjusted diluted earnings were $0.53 a share, including the $0.11 tariff-refund benefit.
Operating expenses were $333.5 million and adjusted operating expenses were $320.1 million, driven primarily by higher compensation, including variable incentive pay, and higher new-store expense, partially offset by improved cost management. Special charges were $13.4 million: $6.0 million of restructuring for targeted workforce reductions and facility consolidations, $5.7 million of purchase-accounting amortization, and $1.7 million of CEO transition costs.
North America Contract, the largest reportable segment, posted net sales of $505.6 million, down 5.3% as reported and 5.2% organically. Orders were $483.7 million, down 1.7% as reported and 1.6% organically. Operating margin was 9.4%. Adjusted operating margin was 10.7%, down 70 basis points, primarily from deleverage on lower sales and inflationary cost pressure, partially offset by pricing and tariff refunds.
International Contract net sales were $156.8 million, down 6.4% as reported and 6.2% organically. Orders were $181.2 million, up 17.3% as reported and 17.9% organically. Operating margin was 2.4%. Adjusted operating margin was 4.6%, down 390 basis points, primarily from deleverage on lower sales, showroom investments, timing of sales events, and higher incentive compensation.
Global Retail net sales were $261.0 million, up 2.6% as reported and 2.8% organically. Orders were $249.0 million, up 4.3% as reported and 4.7% organically, with North America retail orders up 7.5%. Operating margin was 6.1%. Adjusted operating margin was 7.0%, up 580 basis points, primarily from a 410-basis-point net tariff-refund benefit, pricing realization, and cost savings, partially offset by new-store openings. The company opened a DWR store in Raleigh, N.C., and Herman Miller stores in Columbus, Ohio, St. Louis, Missouri, and San Antonio, Texas. Global Retail store count rose to 97 locations from 93 at the end of the prior quarter, with four openings and no closings.
Cash flow from operations was $49.1 million, compared with $9.4 million a year earlier. Liquidity was $580.4 million. Net debt-to-EBITDA was 2.75 times. The board declared a quarterly cash dividend of $0.1875 a share, payable October 15, 2026.
For the second quarter of fiscal 2027, the company expects net sales of $972 million to $1.012 billion, gross margin of 38.3% to 39.3%, adjusted operating expenses of $321 million to $331 million, and adjusted diluted earnings of $0.43 to $0.49 a share, excluding $5.7 million of Knoll intangible amortization. The full-year outlook includes an estimated $0.07 a share unfavorable impact from Canada-related tariff costs over the next three quarters, the $0.11 a share net benefit from first-quarter tariff refunds, 14 to 18 new retail store openings, including 5 to 7 in the second quarter, and capital expenditures of approximately $125 million to $135 million.