What happened
Shares of MillerKnoll (MLKN 1.46%) were up 29% as of 12:14 p.m. ET on Wednesday after the company reported another sales decline for the fiscal first quarter of 2024 but management issued a better-than-expected forecast for full-year earnings.
Net sales fell 14.9% year over year (YOY) while adjusted earnings per share were down 15.9%. However, management noted signs of stabilizing sales trends and fading risk of a recession, which bolstered investor confidence for a stock that is down 61% off its previous highs.
So what
The home furnishings industry has faced obstacles over the last year from high inflation and other macroeconomic headwinds. While management sees the risk of a recession fading in North America, a weak housing market continues to pressure sales. China and Europe are still wrestling with challenging economic conditions, which sent the company's global retail segment sales down 26% YOY.
But the sales decline is starting to show signs of stabilizing. Orders of $913 million were down 1.3% on an adjusted (organic) basis YOY. This is much better than the 7.8% decline in the previous quarter.
The company also posted a small improvement in adjusted operating margin of 6%, up from 5.8% in the previous quarter. It has already achieved $142 million in run-rate cost synergies from the Knoll acquisition two years ago.
Now what
The stronger-than-expected start to fiscal 2024 allowed management to raise full-year earnings guidance. It now sees adjusted earnings per share in the range of $1.85 to $2.15, up from the previous forecast of $1.70 to $2.00.
With a better outlook for the business, investors were quick to buy shares that still trade at a low forward price-to-earnings ratio of 13.6 based on analysts' earnings estimates. However, MillerKnoll is still facing headwinds in the furniture industry that could limit further gains in the near term.
