MillerKnoll Earnings Call: Orders Rise as Margins Tighten

MillerKnoll, Inc. ((MLKN)) has held its Q2 earnings call. Read on for the main highlights of the call.

MillerKnoll Signals Confidence as Orders Rise Despite Sales Dip

MillerKnoll’s latest earnings call carried a notably upbeat tone, with management emphasizing robust retail order growth, successful tariff mitigation strategies, and strengthening demand trends across key segments. While consolidated net sales slipped modestly and some international and margin headwinds persisted, the company highlighted strong order momentum, record performance in parts of its retail business, and active expansion plans as reasons for confidence in its future growth trajectory.

Retail Engine Powers Growth with Strong Order Trends

A key highlight of the quarter was the strong performance of MillerKnoll’s Global Retail segment. Retail orders increased 6% year over year, with North America retail orders up 8%, signaling healthy consumer demand despite a mixed macroeconomic backdrop. The company’s holiday cyber promotional period was particularly strong, delivering a 12% increase in orders versus the prior year. Management underscored that this growth came even as promotional activity and marketing spend were held flat, suggesting improved brand traction and effective merchandising rather than simply deeper discounting.

Record Sales Milestones and Accelerated Store Expansion

MillerKnoll’s retail strategy continues to lean into physical presence, with the company posting multiple records in its North America retail business, including the highest orders in the history of its DWR (Design Within Reach) brand. The quarter saw the opening of four new stores, and management plans to open 14 to 16 locations over the full fiscal year. This expansion signals confidence in long-term consumer demand for high-end design and furniture, and reflects a strategy to deepen customer engagement and capture more omnichannel sales by complementing digital growth with flagship and showroom-style spaces.

Tariff Mitigation Supports Margins and Earnings Resilience

Tariff-related pressures have been a recurring issue for global manufacturers, but MillerKnoll reported that proactive mitigation steps are expected to fully offset tariff costs in the second half of the fiscal year. These actions should help sustain gross margin levels and protect earnings per share, even as the company continues to invest in store growth and brand initiatives. Management framed this as a key lever in maintaining financial resilience in a still-volatile trade and cost environment.

Order Growth Signals Improving Demand Environment

Overall demand indicators turned positive, with total orders for the quarter reaching $973 million, up 5.5%. The company noted positive momentum across all segments, interpreting this as evidence of an improving demand environment following a period of macro uncertainty. The uptick in orders is particularly important for investors, as it tends to lead future revenue and offers a more forward-looking view of business activity than the quarter’s sales figure alone.

Healthcare Segment Shows Resilience

The healthcare market emerged as a solid growth driver, with total healthcare orders up 5% year to date. Management highlighted healthcare as one of the more resilient end markets, providing a counterbalance to more cyclical categories. As institutions continue to invest in healthcare infrastructure and patient-centered environments, MillerKnoll’s exposure to this sector offers a stable demand base that could help smooth earnings through macro cycles.

Sales Decline Contrasts with Strong Order Intake

Despite strong order growth, consolidated net sales for the quarter came in at $955 million, down 1.6% year over year on a reported basis and 2.5% lower organically. The gap between orders and current-period sales reflects timing effects and some regional and mix-related challenges. For equity investors, the modest sales decline is an important watchpoint, but management effectively argued that rising orders and a solid pipeline should support future revenue recovery as those orders convert.

International Contract Segment Faces Headwinds

The International Contract segment remained a soft spot. Net sales declined 6.3% on a reported basis and 9.2% organically compared with the prior year, pressured by weaker sales and less favorable regional and product mix. While the company also cited strength in areas such as Europe, the UK, China, and India on the order side, the sales decline in this segment underscores ongoing disparities in regional demand and the impact of mix on reported performance. Investors will likely watch for signs that improving international orders can translate into more consistent top-line growth.

Operating Margins Squeezed by Costs and Growth Investments

Profitability came under pressure in several areas. Adjusted operating margin in the North America Contract segment declined by 50 basis points year over year, while the Global Retail segment saw a sharper 170 basis point decline. Management attributed the margin compression primarily to costs related to new store openings, net tariff costs, and foreign currency impacts. While some of these factors are external, others reflect deliberate investment in growth initiatives, suggesting margin pressure may be the trade-off for building future scale and market share.

Seasonal and Macro Headwinds Temper Near-Term Outlook

The company acknowledged that its third-quarter guidance incorporates typical seasonal softness, particularly post-holiday, along with broader macroeconomic uncertainties that could affect demand. This candid framing serves as a reminder that even with strong order momentum, the business is not immune to cyclical slowdowns or shifts in consumer and commercial spending. Management’s tone suggested cautious optimism: constructive on demand trends but realistic about near-term variability.

Guidance Points to Solid Earnings and Margin Performance

Looking ahead, MillerKnoll issued guidance that reflects both its recent momentum and the seasonal and macro headwinds it faces. For the third quarter, the company expects net sales between $923 million and $963 million, a range that brackets current-quarter revenue. Gross margin is projected to land between 37.9% and 38.9%, supported in part by its tariff mitigation efforts and ongoing supply chain efficiencies. Adjusted diluted earnings per share are anticipated to fall between $0.42 and $0.48, roughly in line with the just-reported $0.43 that exceeded expectations. Management reiterated its focus on expanding the retail footprint, further optimizing the supply chain, and using its balance sheet to pursue growth and market-share opportunities, signaling sustained investment in both organic and structural drivers of profitability.

In sum, MillerKnoll’s earnings call painted a picture of a company leaning into growth as demand recovers, even as it navigates margin pressure, international softness, and seasonal variability. Strong order momentum, standout retail performance, and clear plans for store expansion and tariff mitigation underpin a constructive outlook. For investors, the key takeaways are rising orders, stable-to-improving margins supported by mitigation actions, and a management team willing to invest for the long term while maintaining disciplined financial guidance.