MillerKnoll Upgraded to Buy After Q2 2026 Earnings Beat, Driven by Retail Expansion and Return-to-Office Demand
MillerKnoll Upgraded to Buy Following Strong Q2 2026 Performance
MillerKnoll Inc. (MLKN) has been upgraded to a Buy rating after reporting fiscal Q2 2026 results that exceeded market expectations, signaling a potential turnaround year for 2026. The company’s performance was marked by an earnings per share (EPS) beat, driven by strategic initiatives focused on retail expansion and capitalizing on the global shift back to physical workplaces.
The positive results triggered a significant market reaction, with MLKN shares rallying over 36% in the month leading up to the announcement. Management highlighted sequential order growth, improved margins, and issued guidance that was notably above consensus estimates, reinforcing the optimistic outlook.
Strategic Growth and Operational Improvements
The core driver of the improved financial health appears to be the company's focus on growth investments. Specifically, MillerKnoll is aggressively pursuing increased store openings and benefiting from robust contract demand, especially in North America.
“In the contract business globally, probably primarily in North America, but definitely globally, we are seeing return to office really taking off. So the way we're thinking about capital allocation right now is, one, you've heard us talk about some of the growth investments that we're making sure we can fund.”
This strategic capital allocation is aimed at funding growth initiatives, including the expansion of its retail footprint. While the company successfully surpassed EPS expectations, it continues to navigate challenges, notably in its international sales segment.
Financial Metrics and Forward Guidance
Management projects sustained mid-single-digit growth, continued margin expansion, and leverage reduction moving forward. The company's Q2 2026 results provided a strong foundation for this optimistic forecast.
- Q2 2026 EPS: Surpassed expectations.
- Order Growth: Sequential improvement noted.
- Margin: Improvement observed in the quarter.
Looking ahead, MillerKnoll issued cautious guidance for the current quarter ending in February. The company expects adjusted EPS to range between 42 cents and 48 cents. This range reflects a slight adjustment from previous expectations, where the low end of the range (42 cents) would represent a minor decline from the prior year's 43 cents, while the high end (48 cents) suggests modest growth.
Furthermore, gross margin is projected to slip slightly, anticipated to fall between 37.9% and an unspecified higher bound. Despite this cautious near-term guidance, the overall narrative remains focused on the long-term turnaround potential fueled by operational improvements and market tailwinds like the return-to-office trend.
Market Impact and Investor Sentiment
The upgrade to a Buy rating reflects the view that 2026 is poised for a significant turnaround, supported by rising demand and operational efficiencies. The substantial rally in the stock price over the last month indicates strong investor confidence in the company's ability to execute its growth strategy and deliver on its promise of sustained growth and margin expansion. The focus on strategic retail expansion is seen as a key differentiator, helping MillerKnoll capture market share despite broader economic uncertainties affecting some international segments.
