MillerKnoll (MLKN)

Office furniture manufacturer MillerKnoll (NASDAQ:MLKN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $876.2 million. Next quarter’s revenue guidance of $930 million underwhelmed, coming in 3% below analysts’ estimates. Its non-GAAP profit of $0.44 per share was in line with analysts’ consensus estimates.

Company Overview

Created through the 2021 merger of industry icons Herman Miller and Knoll, MillerKnoll (NASDAQ:MLKN) designs, manufactures, and distributes interior furnishings for offices, healthcare facilities, educational settings, and homes worldwide.

The sector faces a tepid outlook as workplace dynamics continue to evolve. Hybrid work means that enterprise demand for office furniture is lower. Consumer demand for the same products likely will not offset the loss from enterprises, as individual workers tend to have less space and need for the sector's wares. The Trump administration also possesses a high willingness to impose tariffs on key partners, which could result in retaliatory actions, all of which could pressure those selling furniture that may feature components or labor from overseas. Lastly, the COVID-19 pandemic showed that there is always a risk that something disrupts supply chains, and companies need contingency plans for this.

MillerKnoll's primary competitors in the contract furniture industry include Steelcase Inc. (NYSE:SCS), Haworth, and HNI Corporation (NYSE:HNI). In the retail home furnishings market, the company competes with Restoration Hardware (NYSE:RH), Wayfair (NYSE:W), Williams-Sonoma (NYSE:WSM), and Crate & Barrel.

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $3.60 billion in revenue over the past 12 months, MillerKnoll is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, MillerKnoll’s 6% annualized revenue growth over the last five years was decent. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. MillerKnoll’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 7.8% over the last two years.

This quarter, MillerKnoll’s $876.2 million of revenue was flat year on year, falling short of Wall Street’s estimates. Company management is currently guiding for a 4.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 7% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will spur better top-line performance.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

MillerKnoll was profitable over the last five years but held back by its large cost base. Its average operating margin of 5% was weak for a business services business.

Analyzing the trend in its profitability, MillerKnoll’s operating margin decreased by 7.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. MillerKnoll’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q1, MillerKnoll generated an operating profit margin of negative 9.4%, down 15.4 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for MillerKnoll, its EPS declined by 9.6% annually over the last five years while its revenue grew by 6%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of MillerKnoll’s earnings can give us a better understanding of its performance. As we mentioned earlier, MillerKnoll’s operating margin declined by 7.5 percentage points over the last five years. Its share count also grew by 15.4%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q1, MillerKnoll reported EPS at $0.44, down from $0.45 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.1%. Over the next 12 months, Wall Street expects MillerKnoll’s full-year EPS of $2.02 to grow 22.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

MillerKnoll has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.5%, subpar for a business services business.

Taking a step back, we can see that MillerKnoll’s margin dropped by 8.8 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

MillerKnoll historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.8%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, MillerKnoll’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

MillerKnoll reported $169.8 million of cash and $1.79 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $360.5 million of EBITDA over the last 12 months, we view MillerKnoll’s 4.5× net-debt-to-EBITDA ratio as safe. We also see its $39.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its full-year EPS guidance missed significantly and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 3.3% to $17.74 immediately after reporting.

Updated: June 14, 2025 at 11:28 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own MillerKnoll, you should also grasp the company’s longer-term business quality and valuation.

MillerKnoll falls short of our quality standards. Although its revenue growth was good over the last five years and Wall Street believes it will continue to grow, its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its cash profitability fell over the last five years.

MillerKnoll’s P/E ratio based on the next 12 months is 6.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $38 on the company (compared to the current share price of $16.66).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.