Business Context and Reporting Period
Company: MillerKnoll, Inc. (MLKN)
Filing Type: Form 10-K (Annual Report)
Period Ended: May 30, 2026
Business Overview: MillerKnoll is a global leader in design, manufacturing, and distributing interior furnishings for residential, office, healthcare, and educational settings. The company operates under three reportable segments: North America Contract, International Contract, and Global Retail. Key brands include Herman Miller, Knoll, Design Within Reach, and HAY.
Key Financial Metrics
| Metric | Fiscal 2026 | Fiscal 2025 |
|---|---|---|
| Net Sales | $3,841.7 million | $3,669.9 million |
| Gross Margin | 38.8% | 38.8% |
| Operating Earnings | $198.3 million | $50.5 million |
| Adjusted Operating Earnings | $238.4 million | $248.7 million |
| Net Earnings (GAAP) | $91.5 million | ($36.9 million) loss |
| Diluted EPS (GAAP) | $1.32 | ($0.54) |
| Adjusted Diluted EPS | $1.86 | $1.95 |
| Operating Cash Flow | $199.9 million | $209.3 million |
| Total Debt | $1,294.6 million | $1,337.0 million |
| Cash and Cash Equivalents | $167.7 million | $193.7 million |
| Total Liquidity | $571.7 million | $575.9 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 4.7% year-over-year, driven by volume growth across all segments, pricing actions, and favorable foreign currency translation. Organic sales grew 3.6%.
- Profitability Surge: Operating earnings increased 292.7% to $198.3 million. This significant improvement was primarily due to the absence of $130 million in non-cash impairment charges (goodwill and intangible assets) recorded in fiscal 2025.
- Segment Performance:
- North America Contract: Sales up 4.9%; Operating margin improved 280 basis points to 9.0%.
- International Contract: Sales up 2.1%; Operating margin declined 150 basis points to 8.1% due to unfavorable currency translation and mix.
- Global Retail: Sales up 5.9%; Operating earnings turned positive ($25.3 million) from a loss of $66.0 million, largely due to the absence of prior-year impairment charges.
- Backlog: Unfilled orders decreased 10.8% to $678.8 million from $761.3 million.
Guidance, Outlook, Risks, and Unusual Items
- Management Commentary: The company is focused on driving customer demand through showroom enhancements and expanding the retail footprint. Capital expenditures for fiscal 2027 are expected to be between $125.0 million and $135.0 million.
- Leadership Transition: In June 2026, the company announced the departure of its CEO. Jeffrey M. Stutz serves as Interim CEO while a search for a permanent successor is conducted.
- Unusual Items:
- Impairments: No goodwill or intangible asset impairments were recorded in fiscal 2026, contrasting with $130 million in charges in fiscal 2025.
- Tariff Refunds: The company has submitted claims for refunds on IEEPA tariffs paid but has not recognized any asset or gain due to uncertainty regarding the legal resolution.
- Risks:
- Goodwill Sensitivity: While no impairment occurred, the International Contract, Global Retail, and Coverings reporting units have limited fair value cushions (3.1%, 1.1%, and 8.5% respectively). Modest adverse changes in assumptions could trigger future charges.
- Trade Policy: Tariffs and trade policy changes continue to impact raw material costs and gross margins.
- Geopolitical Instability: Conflicts in the Middle East and Russia-Ukraine pose risks to supply chains and energy costs.
Investor Verification Checklist
- Impairment Cushions: Verify the sensitivity of the International Contract and Global Retail goodwill valuations to changes in discount rates and revenue growth, given the narrow margins of safety.
- Leadership Continuity: Monitor the progress of the CEO search and the impact of the interim leadership on strategic execution.
- Tariff Resolution: Track the status of IEEPA tariff refund claims and the potential for future trade policy shifts affecting margins.
- Backlog Trends: Assess the 10.8% decline in backlog and its implications for future revenue visibility.
- Debt Covenants: Confirm continued compliance with the 4.00:1 net leverage ratio covenant under the credit agreement.