MillerKnoll (MLKN -4.42%) reported first-quarter fiscal 2026 results on September 23, 2025, with consolidated net sales of $956 million, up 10.9% year over year, and adjusted earnings per share (EPS) rising 25% to $0.45. The quarter featured strong execution in contract segments, ongoing tariff headwinds, and an accelerated U.S. retail expansion.

The following insights highlight key drivers and risks shaping the long-term investment thesis.

Gross margin expansion signals improved execution

Gross margin reached 38.5% despite $8 million in net tariff-related costs, and adjusted operating margin in North America Contract expanded 200 basis points year over year to 11.4%. The company generated $9 million in operating cash flow, ended the period with $481 million in liquidity, and maintained a net debt to EBITDA ratio of 2.92 turns, well below covenant thresholds.

“In the first quarter, we generated adjusted earnings of $0.45 per share, significantly outperforming the midpoint of our guidance and 25% ahead of prior year, driven by better than expected sales and strong gross margin performance that benefited from leverage on our sales growth. Consolidated net sales in the first quarter were $956 million, above the midpoint of our guide. Versus prior year, net sales were up 10.9% on a reported basis and up 10% organically, driven by strength in all segments of the business.”
— Kevin Veltman, Interim Chief Financial Officer

This margin outperformance demonstrates management’s ability to drive profitable top-line growth and cost discipline in a challenging macro and tariff environment, reinforcing MillerKnoll’s business model resiliency.

Retail expansion and new products fuel growth

MillerKnoll opened four new retail stores in North America and plans to open a total of 12 to 15 U.S. locations in fiscal 2026, aiming to more than double its DWR (Design Within Reach) and Herman Miller store footprint over several years. New product launches accounted for more than 20% year-over-year order growth in retail, with North America web traffic up 17% and net sales in the region up 7% year over year.

“For the full fiscal year, we anticipate opening a total of 12 to 15 new stores in the U.S., as we execute on our strategy to more than double our DWR and Herman Miller store footprint over the next several years. Onto our retail assortment expansion initiatives. This year, we’re launching 50% more product newness than we did in fiscal 2025. And new product is already positively impacting our performance with new product order growth of over 20% in the quarter. This bodes well for the future.”
— Andi Owen, Chief Executive Officer

This aggressive cadence of retail expansion and product innovation indicates MillerKnoll’s prioritization of omni-channel growth and customer acquisition, supporting a long-term growth thesis.

Pricing actions and tariff mitigation protect margins

Net tariff-related expenses reduced gross margin by $8 million and are expected to pressure next quarter’s results by $2 million to $4 million. Management asserts that mitigation measures, including surcharges and price increases introduced in June, will restore margin in the second half of the fiscal year.

The company’s backlog declined $67 million to $691 million, as previously signaled due to fourth-quarter order pull forwards triggered by announced tariff surcharges and list price changes.

“The point of the net is to say we’ve been working on pricing. We put a surcharge in place. We had a price increase in June as well. And the way it works for us is those take a little while to flow through back and through our contracts with customers. So the net impact in the short term is the $8 million that we called out from a pressure perspective. We expect that to be less in Q2, $2 million to $4 million of net impact. And then when we get into the back half of the year, we believe our pricing mitigation actions will be offsetting those costs based on the current tariff environment.”
— Kevin Veltman, Interim Chief Financial Officer

Effective pricing and mitigation strategies are critical to offsetting external cost pressures and maintaining profitability as tariffs persist.

Looking ahead

Management expects net sales between $926 million and $966 million, gross margin of 37.6% to 38.6%, and adjusted EPS between $0.38 and $0.44 for the next quarter. Tariff impacts are forecast to reduce gross margin by $2 million to $4 million, but company actions are anticipated to fully offset these costs in the second half of the year. No full-year margin or EPS guidance was provided due to macro uncertainty.