MillerKnoll (NASDAQ:MLKN) executives told investors the company delivered a “solid” third quarter of fiscal 2026 results despite macroeconomic and geopolitical uncertainty and disruptions tied to severe winter weather, while also outlining expected fourth-quarter headwinds tied to conflict in the Middle East.
Third-quarter results: sales and orders rose, EPS roughly flat
Chief Financial Officer Kevin Veltman said adjusted earnings per share were $0.43, compared with $0.44 in the prior-year quarter. Consolidated net sales were $927 million, up 5.8% year over year on a reported basis and up 3.8% organically.
Balance sheet: cash generation supported debt reduction and liquidity
Veltman said the company generated $61 million in cash flow from operations and reduced debt by $41 million during the quarter. That lowered the company’s debt-to-EBITDA ratio (as defined by its lending agreement) to 2.75x, moving “meaningfully” toward its midterm target of 2.0x to 2.5x on a net debt-to-EBITDA basis. MillerKnoll ended the quarter with $594 million in liquidity.
The board declared a quarterly cash dividend of $0.1875 per share, payable April 15 to shareholders of record as of Feb. 28, 2026. Veltman said the annual indicated dividend of $0.75 per share equated to a 3.9% yield based on the prior day’s closing stock price.
Segment performance: Contract strength, Retail growth with margin pressure
North America Contract posted net sales of $489 million, up 4.4% reported and 4.1% organically. Orders were $491 million, up 13.1% reported and 12.8% organically. Operating margin was 8.6%, while adjusted operating margin was 9.8%, up 70 basis points year over year. Veltman said the improvement primarily reflected gross margin expansion driven by leverage on higher sales and operating efficiency.
Chief Executive Officer Andi Owen said the segment’s “cash generation engine” was evident in gross margin and operating income strength as sales grew year over year. She also pointed to improving industry benchmarks in Class A leasing, net absorption, and return-to-office trends, and said order growth was seen across most sectors. Management highlighted upcoming product launches planned for the Design Days trade show in early June.
International Contract net sales were $157 million, up 7.8% reported and 1.9% organically. Orders were $160 million, up 0.7% reported but down 4.3% organically, driven by lower orders in Latin America and the Middle East, partially offset by strength in Asia Pacific. Reported operating margin was 7.7% and adjusted operating margin was 8.2%, down 110 basis points year over year, which Veltman attributed to regional and product mix as well as foreign currency impact. Owen cited sales strength during the quarter in India, China, Japan, Southern Europe, Germany, and the U.K., while noting that the company’s diverse regional footprint can create quarter-to-quarter variability.
Global Retail net sales were $281 million, up 7.1% reported and 4.4% organically. Orders were $280 million, up 7.9% reported and 5.1% organically. Operating margin was 2.2%, with adjusted operating margin of 2.8%, down 340 basis points year over year. Veltman said the decline was primarily due to a prior-year freight benefit, targeted promotional actions to offset adverse weather, and the impact from new store openings.
Owen said segment comparable sales increased 5.5% in the third quarter, with North America comparable sales growth of 3.9%, including e-commerce and stores open at least 13 months. She said adverse weather reduced traffic and led to store closures, but the company still delivered comparable sales growth. MillerKnoll opened new Design Within Reach (DWR) stores in Fort Worth, Texas, and Pittsburgh, Pennsylvania, along with a Herman Miller store in Phoenix, Arizona, and expects 3-4 more openings in the fourth quarter for a total of 14-15 new U.S. stores in fiscal 2026.
Weather disruptions and macro uncertainty: retail hit hardest
During Q&A, management said severe winter storms negatively affected store traffic and caused closures across retail locations, while also shutting several plants during the period. Veltman said that relative to guidance, “a little under half” of the company’s top-line shortfall was tied to North America retail. Owen added that contract activity also saw a slowdown in showroom and headquarters visits in January, with some effect on order patterns.
On tariffs, Owen said the company does not expect recent developments to change its approach and expects to “fully offset tariff costs” for the remainder of the fiscal year, as it did in the third quarter.
Fourth-quarter outlook: Middle East conflict expected to weigh on sales and costs
For the fiscal fourth quarter, Veltman guided net sales to a range of $955 million to $995 million, with a midpoint of $975 million, representing 1.4% year-over-year growth at the midpoint. The outlook assumes the company will ship only a “minimal amount” of approximately $12 million in Middle East-related orders, and Veltman later clarified that $12 million represents orders the company anticipates it will not be able to ship in the quarter.
Gross margin is expected to be 37.5% to 38.5%, reflecting higher logistics costs from higher oil prices related to the Middle East conflict. Adjusted operating expense is expected to be $311.5 million to $321.5 million, higher year over year due primarily to increased compensation, variable selling expense, new store costs, and foreign exchange.
Adjusted diluted earnings per share are expected to range between $0.49 and $0.55. Veltman said the company’s estimate of the direct impact from the Middle East conflict is $8 million to $9 million in the quarter, or $0.09 to $0.10 per share, driven largely by logistics-related costs such as diesel. Management said other cost pressures, including potential increases in petroleum-related inputs like plastics and foam or container rates, had not yet flowed through meaningfully.
- Middle East impact embedded in guidance: $8 million-$9 million, or $0.09-$0.10 per share
- Unshipped Middle East-related orders: approximately $12 million in Q4
- New store operating expense: incremental $3.5 million-$4.5 million year over year included in Q4 expectations
Executives said the company is monitoring costs and evaluating tools including pricing and potential surcharges, though they noted the contract business may not be able to pass through abrupt cost changes immediately.
In additional Q&A commentary, North America Contract President John Michael said customers have become more accustomed to geopolitical uncertainty, which may slow timelines but has not eliminated activity. He also described tech-sector demand as “very active,” particularly in the Bay Area, and said business services, insurance, and financial sectors showed “nice activity” in the quarter. On federal government demand, Michael said the business has been “choppy” and expected to remain so for several months.
Owen also highlighted the company’s retail initiatives around assortment expansion, store growth, e-commerce acceleration, and brand awareness, including marketing campaigns and collaborations. Separately, she welcomed Claire Spofford to the company’s board, noting Spofford previously served as president and CEO of J.Jill.
About MillerKnoll (NASDAQ:MLKN)
MillerKnoll, Inc (NASDAQ: MLKN) is a global design and manufacturing company specializing in furniture, lighting, textiles, rugs and accessories for residential and commercial environments. The company’s portfolio features well-known brands such as Herman Miller, Knoll, Maharam, Geiger and Tuyama, offering solutions for office, healthcare, education, hospitality and home settings. Products span seating, workstations, tables, storage systems and outdoor furnishings, complemented by a range of services including space planning, ergonomic consulting and installation support.
Formed in July 2021 through the merger of Herman Miller and Knoll, MillerKnoll combines more than a century of design heritage with a modern portfolio of sustainable products and materials.
