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MillerKnoll (MLKN) Q2 Earnings Beat Estimates, Up Y/Y, View Up
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MillerKnoll, Inc. (MLKN - Free Report) reported mixed second-quarter fiscal 2024 (ended Dec 2, 2023) results, with earnings surpassing Zacks Consensus Estimate and net sales missing the same.
Although the top line declined year over year, the bottom line increased. The upside was backed by strategic inventory management, improved gross margins and pricing initiatives.
Gross margins surpassed last year's levels in all three business segments. The positive outcome can be attributed to product and regional mix optimization, moderating input costs and ongoing benefits of acquisition-related synergies. These synergies include efficiency enhancements in operations and logistics. MLKN is diligently managing operating expenses to offset existing demand pressures.
Despite challenges posed by the elevated cost of capital and geopolitical concerns, MLKN's confidence rebounded with increased project activity, improved orders and strong seasonal demand in the Retail segment. The company is confident in diversification, international expansion, technological investments, streamlined processes and innovation.
Quarter in Detail
MillerKnoll reported adjusted earnings of 59 cents per share, beating the Zacks Consensus Estimate of adjusted earnings of 52 cents per share by 13.5%. Also, the bottom line increased 28.3% from 46 cents per share reported a year ago.
MillerKnoll, Inc. Price, Consensus and EPS Surprise
Net sales of $949.5 million missed the consensus mark of $959.2 million by 1%. The metric also declined 11% from the prior-year quarter’s levels of $1,066.9 million.
Organically, sales were down 10.1% year over year. The downside was due to a lower beginning backlog, partially offset by faster fulfillment patterns.
Orders in the quarter amounted to $944 million, down 6.8% on a reported basis and a 6% organic decline from the prior year’s levels. Although the full-quarter order intake was lower year over year, it showed sequential improvement as the period progressed.
Operating Highlights
In the fiscal second quarter, the gross margin increased 470 basis points (bps) from the prior-year quarter’s levels to 39.2%. The upside was primarily driven by strategic inventory management, moderating input costs, the implementation of price optimization strategies and ongoing synergy efforts. The adjusted gross margin has expanded for the fourth consecutive quarter.
The consolidated adjusted operating expenses declined 2.3% year over year to $296.9 million, primarily driven by the continued focus on cost optimization and synergy capture.
The adjusted consolidated operating margin expanded 190 bps year over year to 7.9% in the quarter, marking the highest level since the acquisition of Knoll, Inc.
Segment Details
Americas Contract: Net sales declined 10.1% as reported and 10.3% organically from the prior-year quarter’s levels to $476.1 million.
New orders in the quarter amounted to $437.4 million, down 7.7% year over year on a reported basis and 8.1% organically.
The segment's gross margin expanded 380 bps year over year to 33.8%.
Adjusted operating margin expanded 130 bps year over year to 9.4%. The upside can be attributed to positive price/cost dynamics and benefits from synergy capture. These factors contributed to the overall resilience and operational success of the segment.
International Contract and Specialty: Net sales declined 8.9% as reported and 10.4% organically from the prior-year quarter’s levels to $241.2 million.
New orders amounted to $233.9 million, down 3.2% year over year on a reported basis and 5.1% on an organic basis.
The segment's gross margin expanded 280 bps year over year to 43.9%.
Adjusted operating margin contracted 80 bps year over year to 11.3%.
Global Retail: Net sales declined 14.7% as reported and 9.4% organically from the prior-year quarter’s levels to $232.2 million due to softened housing-related demand.
New orders amounted to $272.7 million, down 8.4% year over year on a reported basis and 3.0% organically.
The segment's gross margin expanded 850 bps year over year to 45.2%.
Adjusted operating margin expanded 570 bps year over year to 7.1%. The upside was backed by strategic inventory and shipping management, favorable product mix and effective discretionary promotional activity. These initiatives directed demand toward the company's highest-margin brands and collections.
Financials
As of Dec 2, 2023, the company had $583.1 million in liquidity. It had $225.8 million of cash and equivalents at second-quarter fiscal 2024 end, up from $223.5 million at the fiscal 2023 end.
Long-term debt was $1,278.2 million, down from $1,365.1 million from fiscal 2023-end.
During the second quarter, MLKN generated $82.4 million in cash flow from operations and reduced total outstanding debt by $18.9 million. The company repurchased approximately 1.4 million shares, with a total cash outlay of $27.9 million.
Q3 and Fiscal 2024 Guidance
For third-quarter fiscal 2024, the company expects net sales in the range of $890 to $930 million, compared with $984.7 million reported in the prior year quarter. Gross margin is expected between 37.8%-38.8% for the quarter.
Operating expenses are expected to be between $285 million and $295 million. Interest and other expenses, net, are expected to be in the range of $15.5-$16.5 million.
The company expects diluted adjusted earnings per share to be in the range of 40-48 cents for the quarter, compared with 54 cents per share reported in the prior year quarter.
The company raised its fiscal 2024 adjusted earnings guidance. It expects adjusted earnings to be in the range of $2.00-$2.16 per share compared with the prior expectation of $1.85-$2.15 per share and $1.85 per share reported in the fiscal 2023.
Zacks Rank & Key Picks
MillerKnoll currently carries a Zacks Rank #4 (Sell).
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. RCL’s shares have surged 144.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.7% and 187.9%, respectively, from the year-ago period’s levels.
Live Nation Entertainment, Inc. (LYV - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 28.5% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 29.5% and 132.8%, respectively, from the year-ago period’s levels.
Stride, Inc. (LRN - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 44.3% on average. Shares of LRN have increased 85.2% in the past year.
The Zacks Consensus Estimate for LRN’s 2024 sales and EPS indicates a rise of 9.1% and 34.7%, respectively, from the year-ago period’s levels.
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MillerKnoll (MLKN) Q2 Earnings Beat Estimates, Up Y/Y, View Up
MillerKnoll, Inc. (MLKN - Free Report) reported mixed second-quarter fiscal 2024 (ended Dec 2, 2023) results, with earnings surpassing Zacks Consensus Estimate and net sales missing the same.
Although the top line declined year over year, the bottom line increased. The upside was backed by strategic inventory management, improved gross margins and pricing initiatives.
Gross margins surpassed last year's levels in all three business segments. The positive outcome can be attributed to product and regional mix optimization, moderating input costs and ongoing benefits of acquisition-related synergies. These synergies include efficiency enhancements in operations and logistics. MLKN is diligently managing operating expenses to offset existing demand pressures.
Despite challenges posed by the elevated cost of capital and geopolitical concerns, MLKN's confidence rebounded with increased project activity, improved orders and strong seasonal demand in the Retail segment. The company is confident in diversification, international expansion, technological investments, streamlined processes and innovation.
Quarter in Detail
MillerKnoll reported adjusted earnings of 59 cents per share, beating the Zacks Consensus Estimate of adjusted earnings of 52 cents per share by 13.5%. Also, the bottom line increased 28.3% from 46 cents per share reported a year ago.
MillerKnoll, Inc. Price, Consensus and EPS Surprise
MillerKnoll, Inc. price-consensus-eps-surprise-chart | MillerKnoll, Inc. Quote
Net sales of $949.5 million missed the consensus mark of $959.2 million by 1%. The metric also declined 11% from the prior-year quarter’s levels of $1,066.9 million.
Organically, sales were down 10.1% year over year. The downside was due to a lower beginning backlog, partially offset by faster fulfillment patterns.
Orders in the quarter amounted to $944 million, down 6.8% on a reported basis and a 6% organic decline from the prior year’s levels. Although the full-quarter order intake was lower year over year, it showed sequential improvement as the period progressed.
Operating Highlights
In the fiscal second quarter, the gross margin increased 470 basis points (bps) from the prior-year quarter’s levels to 39.2%. The upside was primarily driven by strategic inventory management, moderating input costs, the implementation of price optimization strategies and ongoing synergy efforts. The adjusted gross margin has expanded for the fourth consecutive quarter.
The consolidated adjusted operating expenses declined 2.3% year over year to $296.9 million, primarily driven by the continued focus on cost optimization and synergy capture.
The adjusted consolidated operating margin expanded 190 bps year over year to 7.9% in the quarter, marking the highest level since the acquisition of Knoll, Inc.
Segment Details
Americas Contract: Net sales declined 10.1% as reported and 10.3% organically from the prior-year quarter’s levels to $476.1 million.
New orders in the quarter amounted to $437.4 million, down 7.7% year over year on a reported basis and 8.1% organically.
The segment's gross margin expanded 380 bps year over year to 33.8%.
Adjusted operating margin expanded 130 bps year over year to 9.4%. The upside can be attributed to positive price/cost dynamics and benefits from synergy capture. These factors contributed to the overall resilience and operational success of the segment.
International Contract and Specialty: Net sales declined 8.9% as reported and 10.4% organically from the prior-year quarter’s levels to $241.2 million.
New orders amounted to $233.9 million, down 3.2% year over year on a reported basis and 5.1% on an organic basis.
The segment's gross margin expanded 280 bps year over year to 43.9%.
Adjusted operating margin contracted 80 bps year over year to 11.3%.
Global Retail: Net sales declined 14.7% as reported and 9.4% organically from the prior-year quarter’s levels to $232.2 million due to softened housing-related demand.
New orders amounted to $272.7 million, down 8.4% year over year on a reported basis and 3.0% organically.
The segment's gross margin expanded 850 bps year over year to 45.2%.
Adjusted operating margin expanded 570 bps year over year to 7.1%. The upside was backed by strategic inventory and shipping management, favorable product mix and effective discretionary promotional activity. These initiatives directed demand toward the company's highest-margin brands and collections.
Financials
As of Dec 2, 2023, the company had $583.1 million in liquidity. It had $225.8 million of cash and equivalents at second-quarter fiscal 2024 end, up from $223.5 million at the fiscal 2023 end.
Long-term debt was $1,278.2 million, down from $1,365.1 million from fiscal 2023-end.
During the second quarter, MLKN generated $82.4 million in cash flow from operations and reduced total outstanding debt by $18.9 million. The company repurchased approximately 1.4 million shares, with a total cash outlay of $27.9 million.
Q3 and Fiscal 2024 Guidance
For third-quarter fiscal 2024, the company expects net sales in the range of $890 to $930 million, compared with $984.7 million reported in the prior year quarter. Gross margin is expected between 37.8%-38.8% for the quarter.
Operating expenses are expected to be between $285 million and $295 million. Interest and other expenses, net, are expected to be in the range of $15.5-$16.5 million.
The company expects diluted adjusted earnings per share to be in the range of 40-48 cents for the quarter, compared with 54 cents per share reported in the prior year quarter.
The company raised its fiscal 2024 adjusted earnings guidance. It expects adjusted earnings to be in the range of $2.00-$2.16 per share compared with the prior expectation of $1.85-$2.15 per share and $1.85 per share reported in the fiscal 2023.
Zacks Rank & Key Picks
MillerKnoll currently carries a Zacks Rank #4 (Sell).
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. RCL’s shares have surged 144.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.7% and 187.9%, respectively, from the year-ago period’s levels.
Live Nation Entertainment, Inc. (LYV - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 28.5% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 29.5% and 132.8%, respectively, from the year-ago period’s levels.
Stride, Inc. (LRN - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 44.3% on average. Shares of LRN have increased 85.2% in the past year.
The Zacks Consensus Estimate for LRN’s 2024 sales and EPS indicates a rise of 9.1% and 34.7%, respectively, from the year-ago period’s levels.