Miller Knoll Reports 4th Quarter and Year End Fiscal Results

June 26, 2024  by HFBusiness Staff in Business Strategy, Industry   

Business Highlights

• Orders in the fourth quarter were up 1.1% on a reported basis and up 2.9% organically from last year.
• Fourth quarter and full year gross margin improved 250 basis points and 410 basis points, respectively year-over-year.
• Achieved annualized run-rate cost synergy target of $160 million related to the integration of Knoll.
• Full year GAAP and adjusted diluted earnings per share improved 101.8% and 12.4% respectively, from the prior year.

MillerKnoll finished fiscal year 2024 strong with significant year-over-year earnings per share growth in the fourth quarter. By leveraging the advantage and scale of MillerKnoll's collective of brands, diversified business channels and global operations, teams continued to drive substantial margin expansion while protecting strategic investments for growth.

The improving internal demand indicators throughout the year were validated in the fourth quarter by a return to year-over-year order growth within America's Contract segment. This drove a 6.9% sequential improvement in the consolidated order backlog, giving an added momentum to begin fiscal year 2025.

There is accelerated activity in contract business. Earlier this month, dealers and customers met at Design Days, an annual large trade show in Chicago. Appointments at showrooms were up year-over-year and importantly, there was a shift in dialogue from theoretical return to office ideas to specific project needs.

During the show, 30 new products were launched capturing industry awards for Knoll's Tugendhat and Morrison Hannah chairs, Knoll's Cove Collection for private offices and NaughtOne's Percy chair. In addition, Herman Miller refreshed the versatile Vantum Gaming Chair with new ergonomic enhancements and introduced a seating option with a lower carbon footprint, the Mirra 2 task chair. 

Investment in MillerKnoll showrooms, digital platforms, and enhanced tools to fuel contract business and support MillerKnoll dealers were underway, and work is also in process to open newly enhanced MillerKnoll spaces in London, New York and Los Angeles later in the year.

While retail business and the industry continue to navigate tough conditions in the short-term, Miller Knoll is making investments for long-term growth by enhancing the store and online experience for customers. Product assortment is optimized through the introduction of complementary categories and additional materials.

Miller Knoll is optimizing foot traffic and densifying floor arrangements to show more options and offering design services that help drive larger sales with less returns. In addition, they are testing store formats such as the beautiful new Design Within Reach studio in San Francisco and will apply learnings as we open new stores. 

Fourth Quarter and Fiscal 2024 Consolidated Results

Consolidated net sales for the fourth quarter were $888.9 million, reflecting a decrease of 7.1% year-over- year and a decrease of 5.2% organically compared to the same period last year. Orders in the quarter of $933.0 million were up 1.1% as reported and 2.9% on an organic basis. Orders grew sequentially 12.4% from the previous quarter on a reported basis.

Gross margin in the quarter was 39.6%, which is 250 basis points higher than the same quarter last year. The year-over-year increase in gross margin was driven mainly by the realization of price and channel optimization strategies, cost synergies and continued reductions in freight and distribution costs.

Consolidated operating expenses for the quarter were $328.7 million, compared to $343.1 million in the prior year. Consolidated adjusted operating expenses were $278.8 million, a decrease of $18.8 million year-over-year, primarily due to lower variable selling expenses, the continued benefit of synergy savings, and recently implemented restructuring actions.

During the fourth quarter, the Company recorded special charges of $22.1 million associated with previously announced restructuring measures, which included a workforce reduction and showroom consolidation. In addition, the Company recognized non-cash, pre-tax charges totaling $16.8 million related to the impairment of the Knoll and Muuto trade names. This charge was determined based on the Company's annual impairment review process.

Operating margin for the quarter was 2.7% compared to 1.2% in the same quarter last year. On an adjusted basis, consolidated operating margin for the quarter was 8.3% compared to 5.9% in the same quarter last year, reflecting an adjusted operating margin expansion of 240 basis points.

Reported diluted earnings per share were $0.14 for the quarter, compared to break-even for the same period last year. Adjusted diluted earnings per share were $0.67 for the quarter, reflecting growth of 63.4% compared to $0.41 for the same period last year.

As of June 1, 2024, our liquidity position reflected cash on hand and availability on our revolving credit facility totaling $552.7 million. During the fourth quarter, the business generated $78.4 million of cash flow from operations. We repurchased approximately 1.4 million shares for a total cash outlay of $37.3 million. We ended the fourth quarter with a net debt-to-EBITDA ratio, as defined by our lending agreement, of 2.63x. Our scheduled debt maturities (which exclude the maturity of the revolver) for fiscal years 2025, 2026 and 2027 are $43.6 million, $46.8 million and $276.4 million respectively.

For fiscal 2024, net sales were $3.6 billion, reflecting a year-over-year decrease of 11.2%. On an organic basis, net sales decreased by 8.1% year-over-year.

For fiscal 2024, gross margin and operating margin both improved year-over-year. Reported and adjusted gross margin increased 410 and 370 basis points, respectively. Reported operating margins were 160 basis points higher than last year, while adjusted operating margin increased 90 basis points year-over-year. 

Diluted earnings per share for the full year totaled $1.11, compared to $0.55 in fiscal 2023. On an adjusted basis, diluted earnings per share for the full year totaled $2.08 compared to $1.85 in fiscal 2023, reflecting an increase of 12.4%.