MillerKnoll (MLKN) Struggles Reflect Structural Challenges in Office Furniture Market

MillerKnoll’s recent earnings report underscores the ongoing challenges facing the office furniture sector as it navigates a sluggish recovery. Despite efforts by employers to bring workers back to the office, results from MillerKnoll and peer Steelcase indicate that the sector is far from rebounding robustly in the near term.

While there are positive developments within the company, the broader outlook remains cloudy.

Mixed Results Highlight Sector Struggles

For the second quarter, MillerKnoll reported a modest 2.2 percent year-over-year increase in revenue to $970.4 million, surpassing expectations. However, the company issued disappointing adjusted EPS guidance for the third quarter, citing slower-than-anticipated order recovery. Full-year adjusted EPS guidance was also revised downward to $2.11 to $2.17, further dampening investor sentiment.

Although order trends have improved compared to last year, the pace of recovery remains underwhelming. New product launches and promotional campaigns have performed well, offering some optimism, but these efforts have not been sufficient to counterbalance the overall sluggishness in demand.

Segment Performance: Strengths and Weaknesses

The Americas Contract segment remains a bright spot for MillerKnoll, with sales growing 6.2 percent year-over-year organically to $504 million in the second quarter.

However, new orders in this segment, while up 4.9 percent on an organic basis, fell short of expectations. International and Specialty segment sales increased by 2.1 percent, driven by strong demand in the Middle East and parts of Asia. The company is expanding its global footprint with initiatives like the new MillerKnoll flagship in London and a fulfillment center in Belgium.

Conversely, the Retail segment continues to struggle, with sales declining 5.3 percent year-over-year. On an organic basis, the drop was 4 percent, reflecting ongoing challenges in consumer-facing channels.

Macroeconomic and Policy Considerations

MillerKnoll is closely monitoring potential tariff changes and their impact on supply chain costs. The company has experience managing similar challenges and is exploring mitigation strategies, such as alternative sourcing and potential price adjustments.

Meanwhile, the potential extension of the 2017 tax cuts, particularly the reinstatement of bonus depreciation, could provide a tailwind for the company and the broader industry.

Looking Ahead: Cautious Optimism

While MillerKnoll is building momentum for the second half of its fiscal year, the macroeconomic environment remains a significant headwind. Higher interest rates and lingering economic uncertainty could further delay the recovery of the office furniture sector. Nonetheless, the company is encouraged by improved order trends, international growth, and the success of its product launches and promotional efforts.

For the industry to turn around meaningfully, a broader economic recovery and increased corporate spending on office spaces will likely be required. While these conditions may take time to materialize, MillerKnoll’s efforts to expand internationally and refine its product offerings position it well to benefit when the sector rebounds.

Conclusion

MillerKnoll’s recent performance reflects the ongoing challenges in the office furniture market, with macroeconomic uncertainty and tepid demand weighing on growth.

While the company has identified pockets of strength and is making strategic moves to bolster its long-term prospects, the path to recovery appears to be gradual. Investors should remain patient, as the sector is likely to face continued volatility before achieving sustained growth. MillerKnoll’s focus on innovation and international expansion, however, provides a foundation for future resilience in a challenging market.