3QFY24 Earnings: Expense Control Drives EPS Beat as Revenue Falls Short
MillerKnoll reported 3QFY24 non-GAAP (adjusted) EPS of $0.45, beating our $0.43 estimate and consensus of $0.44. Consolidated sales were $872 million, missing our $908 million estimate by $36 million and likewise missing consensus by ~$37 million. Gross margin helped the Y/Y comparison, rising 455 bps versus 3QFY23. Operating expenses drove the EPS beat and were nearly 100 bps lower than our forecast. Expense control, including “targeted reductions in management workforce” and margin expansion delivered the positive earnings result. Incoming orders also disappointed relative to expectations in MillerKnoll’s Americas Contract (AC) and the Global Retail (GR) segments. The AC segment reported $420.1 million of incoming orders versus our $484 million estimate. GR orders were $183 million versus our $245 million estimate. Lower sales and orders combined to generate lower-than-forecast ending backlogs. Accordingly, the 4QFY24 revenue $880-920 million ($900 million midpoint) and $0.49-0.57 ($0.53 midpoint) non-GAAP EPS guides missed our $977 million and $0.70 pre-report estimates. Management avers that America’s customer activity, in the form of mockups, pricing requests, and contact activations, is “picking up.” Management is “not yet seeing their consistent impact on order rates.” It evinced optimism, however, because orders in the first two weeks of 4Q turned positive Y/Y. The International segment (IC&S) delivered lower revenue but improved orders, albeit inconsistent from month to month. Global Retail, which is tied to luxury housing turnover, saw lower sales and lower orders. A complete variance summary of results versus last year and our estimates is attached. We will update estimates shortly in a follow-up note.Herman Miller researches, designs, manufactures, and distributes interior furnishings for use in various environments including office, healthcare, educational, and residential settings and provides related services. The company's segments include: North America Contract, which designs, manufactures, and sells furniture and textile products for work-related settings throughout the U.S. and Canada; International Contract, which designs, manufactures and sells furniture products in the Europe, Middle East and Africa, Latin America and Asia-Pacific geographic regions; and Retail, which sells furnishings and accessories to third party retail distributors and direct to consumer sales.
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