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Why Knoll Stock Was Sliding Today

By Jeremy Bowman - Feb 19, 2020 at 2:25PM

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Shares of the office-furniture retailer dipped after a weak earnings report.

What happened

Shares of Knoll (KNL) were falling today after the interior-decorating specialist turned in a subpar fourth-quarter earnings report. As a result, the stock was down 13.8% as of 12:09 p.m. EDT.

So what

Knoll, which owns design brands including Spinneybeck and Edelman Leather, said sales increased 4.7% to $371.4 million, which missed estimates of $391.8 million. The company noted that macroeconomic drivers of workplace and residential demand became more mixed and cited issues related to tariffs and stagnating corporate profits.

Contemporary living room design.

Image source: Getty Images.

Operating profits in the company's lifestyle segment fell from $26.2 million to $19 million, as a greater portion of sales went through its dealer network, and adjusted earnings per share declined from $0.57 to $0.52, below the analyst consensus of $0.63.

Though management acknowledged that sales decelerated in the second half of the year, it also struck an optimistic tone, saying, "Positive secular drivers and impactful on-trend acquisitions from Muuto to Fully, as well as organic investments in new products and expanded sales and marketing capabilities should, we believe, allow us to continue to grow faster than the markets we serve in 2020."

Now what

Looking ahead, Knoll said the market is expected to grow 2% in 2020 and the company is targeting a mid-single-digit revenue-growth rate. It also sees gross margin expanding by 20 to 30 basis points due to cost-savings initiatives and lower commodity prices. On the bottom line, it called for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expansion to moderate but is still targeting 15% in 2021.

Wall Street will likely dial down its 2020 forecast based on those numbers, which helps explain why the stock is down double digits today.

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