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Performance was driven by disciplined execution and the power of the North American Contracts segment as a cash generation engine, despite severe weather and geopolitical uncertainty.
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Contract growth in North America is supported by improving benchmarks in Class A leasing and return-to-office trends, with order growth across most industry sectors.
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The global retail segment achieved comparable sales growth of 5.5% by leveraging four strategic levers: store expansion, product assortment, e-commerce and brand awareness.
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International contract performance is based on a diverse regional footprint where strength in markets such as India, China and the United Kingdom mitigates weakness in others.
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Management maintains a competitive advantage through the MillerKnoll Performance System (MKPS), a 30-year partnership with Toyota that ensures manufacturing efficiency and quality.
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The company successfully offset tariff costs through seasoned policy change expertise and expects to continue this mitigation for the remainder of the fiscal year.
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Fourth-quarter guidance incorporates a projected headwind of between $8 million and $9 million due to the Middle East conflict, primarily due to shipping disruptions and higher logistics costs.
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The company plans to open 14 to 15 new stores in fiscal 2026, executing a long-term strategy to approximately double the footprint of DWR and Herman Miller stores.
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Management expects to ship only a minimal amount of approximately $12 million in Middle East-related orders in the fourth quarter due to ongoing regional instability.
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Strategic investments in new product launches for workspaces and healthcare are scheduled for the upcoming Design Day trade show in early June.
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Capital allocation priorities remain focused on reducing net debt to EBITDA to a target range of 2.0 to 2.5 times, while maintaining dividend commitments.
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Bad weather in January led to store closures and lower retail traffic, which accounted for a significant portion of the revenue loss relative to domestic guidance.
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The Middle East conflict is expected to impact fourth-quarter earnings per share by $0.09 to $0.10, driven by both lost sales and rising oil-related input costs.
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Retail operating margins were pressured by the absence of a prior year freight benefit and targeted promotional actions used to offset weather-related traffic declines.
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Management is monitoring potential cost increases in plastics and foams due to oil market volatility, although no immediate changes to the supply chain have been required.