MillerKnoll's sales fell 3.4% to $923.4M, but a $16.5M tariff refund lifted gross margin to 41.7% and diluted EPS to $0.38 from $0.29; orders rose 3.2% while full-year sales guidance was cut.
Revenue
$923M
-3.4% YoY
Net income
$27M
+31.7% YoY
Diluted EPS
$0.38
+31.0% YoY
Operating margin
5.6%
This period vs a year ago
Same period last year
This period
Revenue▼-3.4%
≈$956M
$923M
Net income▲+31.7%
≈$20M
$27M
Diluted EPS▲+31.0%
≈$0.29
$0.38
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
MillerKnoll, the Michigan-based owner of the Herman Miller, Knoll and Design Within Reach furniture brands, reported a quarter in which profit rose while sales fell. Net sales for the three months ended August 29, 2026 — the first quarter of its fiscal 2027, since the company's year ends around May 31 — were $923.4 million, down 3.4% from a year earlier. Diluted earnings per share rose to $0.38 from $0.29. The gap between those two numbers is mostly explained by a one-time item: $16.5 million of refunds of U.S. tariffs the company had previously paid, which were booked as a reduction in cost of sales.
At a glance
Net sales $923.4M, down 3.4%. Lower volumes in the office-furniture ("contract") business cut about $55 million from sales; price increases added back about $23 million.
Orders $913.9M, up 3.2%. New orders grew even as shipments fell, led by a 17.3% jump in International Contract orders — the best forward signal in the report, though backlog (orders received but not yet shipped) is still 3.1% lower than a year ago at $669.2 million.
Diluted EPS $0.38 vs $0.29. About $0.11 of the quarter's per-share profit came from the tariff refunds, which management treats as a one-off. Without them, the company's own adjusted EPS would have been roughly $0.42, below last year's $0.45.
The numbers
Metric
Q1 FY2027 (to Aug 29, 2026)
Q1 FY2026 (to Aug 30, 2025)
YoY Change
Net sales
$923.4M
$955.7M
-3.4%
Gross margin
41.7%
38.5%
+3.2 pts
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Operating expenses
$333.5M
$314.6M
+6.0%
Operating earnings
$51.8M
$53.5M
-3.2%
Operating margin
5.6%
5.6%
flat
Net earnings attributable to MillerKnoll
$26.6M
$20.2M
+31.7%
Diluted EPS (GAAP)
$0.38
$0.29
+31.0%
Adjusted diluted EPS (company's non-GAAP)
$0.53
$0.45
+17.8%
Orders
$913.9M
$885.4M
+3.2%
Backlog
$669.2M
$690.9M
-3.1%
Gross margin is the share of sales left after paying to make the products; operating margin is what is left after also paying for sales staff, stores, design and head office, before interest and tax.
Why sales fell but margins rose
The 10-Q breaks the $32.3 million sales decline into pieces: lower volumes in North America Contract (about -$48 million) and International Contract (about -$7 million), unfavorable currency translation (about -$1 million), partly offset by "price realization, net of discounting" of about +$23 million. In other words, MillerKnoll sold fewer units and charged more for each.
Gross margin jumped 320 basis points (3.2 percentage points) to 41.7%. The filing names two causes: list-price increases, and the refunds "related to previously incurred IEEPA tariffs, which contributed approximately $16.5 million to gross margin." IEEPA tariffs were import duties imposed in 2025 under an emergency-powers law; court rulings during fiscal 2026 opened the door for importers to reclaim them, and MillerKnoll received refunds this quarter. Working against those benefits were inflation in costs and "unfavorable leverage of fixed manufacturing costs resulting from lower sales volumes" — factories cost roughly the same to run whether they are busy or not, so fewer units means each one carries more overhead.
The extra gross profit did not reach the operating line. Operating expenses rose $18.9 million (6.0%): about $13 million of higher fixed and incentive pay, about $6 million of restructuring charges for facility consolidation and job cuts, and about $5 million for new retail stores. The net result: operating earnings slipped 3.2% to $51.8 million and operating margin stayed at 5.6%.
Segments: retail carried the quarter
Segment
Net sales
YoY
Orders YoY
Operating margin (vs last year)
North America Contract
$505.6M
-5.3%
-1.7%
9.4% (10.7%)
International Contract
$156.8M
-6.4%
+17.3%
2.4% (8.1%)
Global Retail
$261.0M
+2.6%
+4.3%
6.1% (0.6%)
North America Contract (office, healthcare and education furniture sold mainly through dealers) is the largest business and the weakest link this quarter. Volume losses of about $48 million outweighed about $20 million from pricing. Operating earnings fell 16.5% to $47.5 million because higher pay and restructuring costs more than offset a $0.8 million gain in gross profit.
International Contract earned just $3.7 million, down 72.6%, on lower volumes, about $4 million of net discounting, showroom investment and the timing of sales events. The 17.3% rise in orders ($181.2 million, more than the segment shipped) is the counterweight: if those orders convert, sales should recover in coming quarters.
Global Retail (Design Within Reach and Herman Miller stores, eCommerce, sales to third-party retailers, and Holly Hunt) was the only segment to grow sales, and its operating earnings rose to $16.0 million from $1.4 million. But $11.8 million of the $16.5 million tariff refund landed here — the company's own release puts the net refund benefit at 410 basis points of the segment's adjusted margin. Excluding it, the retail margin improvement is real but much smaller than the headline 6.1% suggests. North America retail orders rose 7.5%. Four stores opened in the quarter (Raleigh, Columbus, St. Louis and San Antonio).
Takeaway: The 31% jump in EPS is not a turn in the underlying business — about $0.11 of the $0.38 came from one-time tariff refunds, and without them the company's adjusted EPS would have fallen from last year. The more useful signal is orders: up 3.2% overall and 17.3% internationally while shipments fell, which is the first evidence that sales could stabilize later in fiscal 2027.
What the headline numbers hide
One-offs flatter this year and hurt last year. This quarter includes the $16.5 million gross tariff refund (about $10 million net to operating income and $0.11 per share, per the earnings release). Last year's quarter included a $7.8 million loss on refinancing debt (about $0.11 per share pre-tax). Strip both out and the underlying profit trend is flat to down, not up 31%.
GAAP vs adjusted gap. The company's adjusted EPS of $0.53 adds back $0.08 of amortization of intangible assets from the Knoll acquisition, $0.10 of restructuring charges ($6.5 million under a new "2027 restructuring plan" for job cuts and facility consolidation), and $0.02 of CEO transition costs ($1.7 million; the company is currently run by Interim CEO Jeff Stutz), less $0.05 of tax. Notably, the tariff refund is not excluded — it sits inside adjusted EPS too.
A lower tax rate helped. The effective tax rate fell to 21.5% from 26.5%, which the filing attributes to lower non-deductible executive pay, higher export tax incentives and more foreign tax credits. At last year's rate, tax would have been about $1.7 million higher (roughly $0.02 per share). Lower interest expense ($16.2 million vs $18.4 million) also helped pre-tax profit.
Buybacks did not help EPS. Diluted shares used for the calculation rose to about 70.0 million from 69.2 million, so share repurchases ($9.5 million including tax withholding on employee awards) did not offset dilution from stock compensation.
Cash conversion was good. Operating cash flow was $49.1 million, 1.8x net earnings of $27.6 million, versus just $9.4 million a year ago, helped by better receivable collections and smaller payouts of accrued liabilities. After $32.5 million of capital spending, free cash flow was about $16.6 million — less than the $12.8 million of dividends plus $9.5 million of share repurchases paid in the quarter.
Inventory went up while sales went down. Inventories rose 5.4% to $514.7 million from $488.4 million at the May 30 year-end; the filing cites "higher inventory levels" as a use of cash. Receivables moved the other way (trade receivables $314.3 million from $357.4 million), though unbilled receivables rose to $30.1 million from $18.3 million.
Debt is still meaningful. Long-term debt of $1,270.4 million plus $28.4 million current, against $178.6 million of cash. The release puts net debt to EBITDA (as its credit agreement defines it) at 2.75x. Total liquidity was $580.4 million.
Guidance: sales outlook cut, profit outlook held
Management lowered its fiscal 2027 net sales range to $3.88–$4.03 billion from $3.93–$4.13 billion, but kept adjusted EPS guidance at $1.85–$2.15. The interim CEO described "softer than expected demand patterns in the quarter." The full-year EPS range now absorbs the $0.11 tariff refund benefit and an estimated $0.07 hit from Canada-related tariff costs over the next three quarters — so the unchanged range partly relies on the one-time refund to make up for lower sales.
For the second quarter (ending around late November 2026), the company guides to net sales of $972 million to $1.012 billion, gross margin of 38.3%–39.3% (well below Q1's refund-boosted 41.7%), and adjusted EPS of $0.43–$0.49. It plans 14–18 new retail stores for the year (5–7 in Q2) and $125–$135 million of capital spending.
Our read: This is the first MillerKnoll quarter we have covered, so there is no earlier outlook of ours to check. Going forward, the numbers to watch are (1) whether the order growth — especially the 17.3% international jump — turns into shipped sales in Q2, since the $972 million low end of guidance implies a step-up from Q1's $923.4 million; (2) whether North America Contract, the core business, stops shrinking; and (3) whether Global Retail's margin holds up without refund help as new store costs build. The filing also says the company is pursuing further IEEPA refund claims that are not yet recognized, which could add upside, but the company flags a risk of "clawback or reversal" of refunds.