MillerKnoll Inc (MLKN) Reports Strong Margin Growth Amid Sales Decline in Q2 Fiscal 2024
Adjusted Earnings Guidance: MillerKnoll Inc (NASDAQ:MLKN) increases its full-year adjusted earnings guidance to $2.00 - $2.16 per share.
Gross Margin Expansion: Consolidated gross margin improved by 470 basis points over the prior year across all segments.
Profit Growth: US GAAP and Adjusted EPS grew by 114.3% and 28.3% respectively year-over-year.
Net Sales: Reported a decrease of 11.0% in net sales to $949.5 million for the quarter.
Operating Expenses: Operating expenses decreased by 5.3% to $311.6 million.
Debt Reduction: Reduced total outstanding debt by $18.9 million and repurchased approximately 1.4 million shares.
Strategic Achievements: Achieved $147 million in run-rate cost synergies from the acquisition of Knoll, Inc.
On December 20, 2023, MillerKnoll Inc (NASDAQ:MLKN) released its 8-K filing, announcing the financial results for the second quarter of fiscal year 2024, which concluded on December 2, 2023. The company, a global leader in the design and manufacturing of interior furnishings, reported a notable increase in adjusted earnings per share (EPS) by 28.3% year-over-year, despite a decline in net sales. This performance underscores the company's strategic focus on margin improvement and cost management.
Financial Performance and Challenges
MillerKnoll Inc (NASDAQ:MLKN) faced a challenging quarter with net sales falling to $949.5 million, an 11.0% decrease from the previous year. This decline was attributed to lower beginning backlog, partially offset by faster fulfillment patterns. Despite the sales downturn, the company achieved a gross margin of 39.2%, a significant improvement from the previous year, mainly due to strategic inventory management, moderating input costs, and the realization of price optimization strategies.
Operating expenses were reduced to $311.6 million, a 5.3% decrease from the prior year, reflecting the company's diligent cost optimization efforts. Adjusted operating expenses also saw a reduction, highlighting the company's ability to manage costs effectively in a challenging economic environment.
"Our teams achieved these results by focusing on what they can control, including the ongoing improvement in gross margins, which exceeded last years levels across all three segments of our business," said Andi Owen, President and Chief Executive Officer of MillerKnoll Inc.
Segment Performance
The Americas Contract segment reported net sales of $476.1 million, a 10.1% decrease year-over-year, while the International Contract and Specialty segment saw net sales of $241.2 million, an 8.9% decrease. The Global Retail segment experienced a 14.7% decline in net sales to $232.2 million. Despite these decreases, the company's adjusted operating margins improved in the Americas Contract and Global Retail segments, reflecting the effectiveness of strategic pricing and cost management initiatives.
Outlook and Strategic Focus
Looking ahead, MillerKnoll Inc (NASDAQ:MLKN) remains optimistic, driven by margin improvements across business segments and early signs of demand stabilization in North America. The company has increased its full-year fiscal 2024 adjusted diluted earnings guidance to a range of $2.00 to $2.16 per share. For the third quarter of fiscal 2024, net sales are expected to range between $890 million to $930 million, with adjusted diluted earnings projected to be between $0.40 to $0.48 per share.
The company continues to focus on diversification, international expansion, technological investments, and delivering innovative solutions. With $147 million in run-rate cost synergies achieved from the Knoll acquisition and a target of $160 million per year by July 2024, MillerKnoll Inc (NASDAQ:MLKN) is strategically positioned to navigate the current economic landscape and capitalize on future growth opportunities.
For more detailed information on MillerKnoll Inc's financial performance, please visit the company's investor relations website or join the webcast and conference call scheduled for December 20, 2023, at 5:00 PM ET.
Explore the complete 8-K earnings release (here) from MillerKnoll Inc for further details.
This article first appeared on GuruFocus.
