Yahoo Finance MillerKnoll (MLKN) Q4 Earnings Beat Estimates, Net Sales Lag
MillerKnoll, Inc. MLKN reported mixed fourth-quarter fiscal 2024 (ended Jun 1, 2024) results, with earnings surpassing Zacks Consensus Estimate and net sales missing the same. On a year-over-year basis, the top line declined while the bottom line grew.
The quarter’s results reflect the company’s ability to leverage the advantage and scale of its portfolio of brands, diversified business channels, and global operations to drive substantial margin expansion while protecting strategic investments for growth. However, soft contributions from MLKN’s Americas Contract and Global Retail segments marred the top-line growth, which was partially offset by notable contributions from its International Contract and Specialty segment.
Nonetheless, MillerKnoll is optimistic about its strategic investments, including showrooms, digital platforms and enhanced tools to drive its contract business and support its dealers. The company is also seeking opportunities to bring its collective brands into its dealers’ showrooms and its own showrooms. It is on its way to opening newly enhanced MillerKnoll spaces in London, New York and Los Angeles later in 2024.
The company is confident about diversification, international expansion, technological investments, streamlined processes and innovation.
Quarter in Detail
The company reported adjusted earnings of 67 cents per share, which topped the Zacks Consensus Estimate of 53 cents by 26.4%. In the prior-year quarter, it reported adjusted earnings per share of 41 cents.
Net sales of $888.9 million missed the consensus mark of $899 million by 1.1%. The metric also declined 7.1% from the prior-year quarter’s level of $956.7 million.
MillerKnoll, Inc. Price, Consensus and EPS Surprise
MillerKnoll, Inc. price-consensus-eps-surprise-chart | MillerKnoll, Inc. Quote
Organically, sales were down 5.2% year over year. On the other hand, orders amounted to $933 million, up 1.1% on a reported basis and 2.9% on an organic basis from the prior year’s levels.
Segmental Details
Americas Contract: Net sales declined 12.2% as reported and 12.3% organically from the prior-year quarter’s levels to $416.6 million. New orders amounted to $480.1 million, up 5.7% year over year.
The adjusted operating margin contracted 280 basis points (bps) year over year to 7.3%. The downside can be attributed to lower sales and reduced fixed-cost leverage.
International Contract and Specialty: Net sales grew 3.2% as reported and 3.8% organically from the prior-year quarter’s levels to $245 million on the back of strong performance in India, the Middle East, China, and Korea, along with positive activity in the healthcare, technology and financial sectors. New orders amounted to $238.7 million, marginally down 0.5% on a reported basis and flat on an organic basis year over year.
The adjusted operating margin expanded 520 bps year over year to 14.5%. The uptrend was driven by product and price optimization, cost synergies, efficiencies gained by localized sourcing, and production within India and China, along with the benefit of stabilized energy costs in Europe.
Global Retail: Net sales declined 7.2% as reported but were slightly up organically from the prior-year quarter’s levels to $227.3 million due to softened housing-related demand. New orders amounted to $214.2 million, down 6.2% year over year on a reported basis but marginally up 0.9% organically.
The adjusted operating margin expanded 790 bps year over year to 8.6%. The upside was backed by significantly improved operational efficiencies in the North American distribution centers and fewer inventory adjustments.
Operating Highlights
In the fiscal fourth quarter, the gross margin increased 250 bps from the prior-year quarter’s levels to 39.6%. The uptrend was primarily driven by the realization of price, channel optimization strategies and cost synergies, accompanied by continued reductions in freight and distribution costs.
Consolidated adjusted operating expenses declined 6.3% year over year to $278.8 million, primarily driven by lower variable selling expenses, the continued benefit of synergy savings, and recently implemented restructuring actions.
The adjusted consolidated operating margin expanded 240 bps to 8.3% year over year.
Fiscal 2024 at a Glance
In fiscal 2024, MillerKnoll’s net sales declined 11.2% to $3.63 billion year over year. It reported an adjusted earnings per share (EPS) of $2.08, up 12.4% from the adjusted EPS of $1.85 reported in the prior fiscal year.
The gross margin was 39.1%, up 410 bps year over year. Adjusted operating expenses declined 2.6% year over year to $1.16 billion and grew 90 bps as a percentage of net sales.
Financials
As of Jun 1, 2024, the company had $552.7 million in liquidity. It had $230.4 million of cash and equivalents at the fourth-quarter fiscal 2024-end, up from $223.5 million at fiscal 2023-end.
Long-term debt was $1.29 billion, down from $1.37 billion reported at fiscal 2023-end.
Cash flow from operations, at the end of the quarter, was $78.4 million. MillerKnoll repurchased approximately 1.4 million shares with a total cash outlay of $37.3 million.
As of the end of fiscal 2024, net cash provided by operating activities was $352.3 million compared with $162.9 million at fiscal 2023-end.
Q1 and Fiscal 2025 Guidance
For the first quarter of fiscal 2025, MillerKnoll expects net sales to be in the range of $872-$912 million compared with $917.7 million reported in the prior-year quarter.
The company expects adjusted EPS to be in the range of 38-44 cents compared with 37 cents reported in the prior-year quarter.
The gross margin is expected between 39% and 40% compared with 39% reported in the year-ago quarter. Adjusted operating expenses are anticipated between $291 million and $301 million compared with $302.7 million reported a year ago.
For fiscal 2025, it expects adjusted earnings in the range of $2.10-$2.30 per share compared with $2.08 reported in fiscal 2024.
Zacks Rank & Key Picks
MillerKnoll currently carries a Zacks Rank #3 (Hold).
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