Goodwill Impairment Explained: How a Write-Down Flatters Next Year's Growth (MillerKnoll FY26)
The Hook
MillerKnoll $MLKN reported one of the better-looking income statements in the furniture sector this year. Operating income went from $50.5 million to $198.3 million, up 293%. Net income swung from a $36.9 million loss to a $91.5 million profit. Diluted earnings per share went from negative $0.54 to positive $1.32.
The company's own adjusted operating income, the measure it publishes and manages to, fell. It has now fallen two years in a row: $262.2 million in fiscal 2024, $248.7 million in fiscal 2025, $238.4 million in fiscal 2026. Both statements come from the same 10-K, filed July 20, 2026, and both are true. The gap between them is a $130.0 million write-down that happened last year and did not happen this year.
And buried in the risk factors is the number that matters most. MillerKnoll ran its quantitative goodwill test in fiscal 2026 and took no impairment. But it disclosed how close it came: the Global Retail reporting unit's fair value exceeded its carrying value by 1.1%. International Contract by 3.1%. The Muuto trade name by 2.1%. The company carries $1,161.3 million of goodwill and $435.3 million of indefinite-lived intangibles against $1,342.6 million of shareholders' equity. A 1.1% cushion is not a cushion.
Company Snapshot
MillerKnoll is what you get when Herman Miller buys Knoll. It designs, manufactures and sells office and residential furniture in over 100 countries under Herman Miller, Knoll, Muuto, HAY, Design Within Reach, Holly Hunt, Maharam and a dozen other brands. Three reportable segments: North America Contract (office, healthcare and education furniture through dealers, plus the textile brands), International Contract (the same business across EMEA, Asia-Pacific and Latin America), and Global Retail (eCommerce, catalogs, physical stores and the Holly Hunt brand). Revenue in fiscal 2026 was $3,841.7 million.
This is the FY2026 annual report on Form 10-K, accession 0000066382-26-000092, covering the fiscal year ended May 30, 2026 and filed July 20, 2026. Every figure below comes from that filing or its comparative prior-year columns, except where a market price is named and sourced.
One housekeeping note that matters when you compare growth rates: MillerKnoll runs a 52/53-week fiscal calendar, and the year-end date moves. Fiscal 2026 ran June 1, 2025 to May 30, 2026. Fiscal 2025 ran June 2, 2024 to May 31, 2025. Fiscal 2024 ran June 4, 2023 to June 1, 2024. All three are 364 days, which is 52 weeks. There is no extra week in any of them, so none of the growth rates in this report are distorted by a 53rd week. That is worth stating because it is the first thing that goes wrong with a shifting fiscal calendar, and here it does not.
The Financial Story
There are three defensible ways to read fiscal 2026, and they do not agree.
| Reading of FY2026 operating income | FY2025 | FY2026 | Change |
|---|---|---|---|
| As reported (GAAP) | $50.5M | $198.3M | +293% |
| Excluding FY2025's $130.0M impairment only | $180.5M | $198.3M | +9.9% |
| Company's own Adjusted Operating Income | $248.7M | $238.4M | -4.1% |
The first reading is the headline every screener shows. The second is the obvious correction: fiscal 2025 carried $130.0 million of impairment charges ($92.3 million of goodwill against the Global Retail and Holly Hunt reporting units, $37.7 million against the Knoll and Muuto trade names) and fiscal 2026 carried none. Add it back and the improvement is a respectable 9.9%.
The third reading is the honest one, and it is the company's own. That second correction is incomplete, because fiscal 2025's operating expenses also carried roughly $28 million of acquisition-related integration charges that did not repeat, and fiscal 2026 carried $2.6 million of CEO transition costs that did not exist before. Strip the one-time items out of both years properly and MillerKnoll's adjusted operating income declined for a second consecutive year, from $262.2 million to $248.7 million to $238.4 million. Adjusted operating margin: 7.2%, then 6.8%, then 6.2%.
Operating cash flow tells the same story without any adjustment at all. It went $352.3 million, $209.3 million, $199.9 million across the same three years. Capital expenditures rose to $122.3 million from $107.6 million, so free cash flow fell to roughly $77.6 million from roughly $101.7 million. The 293% year produced less cash than the loss year did.
One segment is carrying two. The consolidated numbers hide a genuine divergence, and it runs in the opposite direction from the headline.
| Segment (FY2026) | Net sales | Gross margin | Adj. operating earnings | Orders, organic |
|---|---|---|---|---|
| North America Contract | $2,061.2M (+4.9%) | 36.5% (+80bps) | $213.1M (+11.6%) | -1.1% |
| International Contract | $674.0M (+2.1%) | 36.0% (-50bps) | $58.3M (-20.7%) | -5.6% |
| Global Retail | $1,106.5M (+5.9%) | 44.5% (-140bps) | $32.7M (-37.0%) | +3.1% |
North America Contract is genuinely good. It grew sales 4.9%, expanded gross margin 80 basis points on price and product mix, and lifted adjusted operating earnings 11.6% to $213.1 million, its second straight increase from $177.2 million in fiscal 2024. On a GAAP basis it looks even better, up 54.2%, but that is the integration charges rolling off.
Global Retail is the problem, and it is the problem the company has designated as its growth strategy. The 10-K states plainly that "a key element of the Company's growth strategy is to scale the Global Retail business." Retail grew sales 5.9%, gave up 140 basis points of gross margin, and saw adjusted operating earnings fall 37% to $32.7 million, down from $64.6 million two years ago. It also spent $15 million opening new stores in the year its adjusted operating margin fell from 5.0% to 3.0%. On a GAAP basis the segment looks like a triumph, from a $66.0 million loss to $25.3 million of earnings, up 138%. That is the same trick as the consolidated headline, on a smaller scale, and for the same reason: last year's impairment.
The flat gross margin is genuinely flat. The obvious challenge to the base-effect reading is that consolidated gross margin of 38.8% in both years might be a mix artifact, with a shrinking high-margin retail business masking real improvement underneath. That is not what happened. Global Retail carries by far the highest gross margin of the three segments at 44.5%, and its share of revenue rose from 28.5% to 28.8%. Segment mix was a small tailwind of roughly 10 basis points, not a mask. Hold segment mix constant at fiscal 2025 weights and apply fiscal 2026 segment margins and the consolidated margin comes to about 38.7%, slightly below the 38.8% reported. The composition, though, is stark: contract manufacturing improved 80 basis points while retail gave up 140.
The MD&A names the offsetting forces directly. Favorable channel and product mix, list price increases, and fixed-cost leverage on higher volumes all pushed margin up. Tariff-related costs net of pricing actions, incurred in the first half of fiscal 2026, pushed it back down. MillerKnoll has filed refund claims on substantially all IEEPA tariffs it believes may be recoverable, with the outcome pending a U.S. government appeal. If those refunds land, they are a real one-time benefit that has nothing to do with the operating business.
The restructuring savings are not showing up below the gross line either. Operating expenses fell $82 million, or 5.9%, but that is entirely the $130 million impairment and $28 million of integration charges not repeating. Normalize both years and operating expenses rose roughly 6.1% against revenue growth of 4.7%. The drivers the filing lists: compensation up about $33 million, new store costs up $15 million, variable selling costs up $14 million, foreign currency up $10 million, other spend up $5 million. Restructuring charges themselves fell to $11.9 million from $14.8 million and $30.8 million, so the program is winding down. The savings are not visible in either the gross margin or the expense ratio.
Demand is the leading indicator, and it is negative. Revenue grew 4.7% while orders grew 0.4% as reported and declined 0.7% organically. Backlog fell 10.8%, from $761.3 million to $678.8 million. Revenue growth in fiscal 2026 was fed substantially by converting the order book, not by new demand. And the split inverts the earnings picture: North America Contract, the segment doing the earning, saw orders decline 1.1% organically. International Contract orders fell 5.6% organically. Global Retail, the segment losing money on an adjusted basis, is the only one with growing orders at 3.1%.
The balance sheet has two dated events in it. Long-term debt is $1,260.6 million, down from $1,310.6 million. The maturity schedule is not smooth.
| Fiscal year due | Amount |
|---|---|
| 2027 | $25.1M |
| 2028 | $25.8M |
| 2029 | $76.2M |
| 2030 | $642.2M |
| 2031 | $5.5M |
| After 2031 | $519.8M |
Roughly half of all debt comes due in fiscal 2030, and the filing says what it is: the syndicated revolving line of credit ($309.2 million drawn, due April 2030) and Term Loan A ($392.5 million, 5.3703%, due April 2030). Both mature in the same month. MillerKnoll already refinanced Term Loan B during fiscal 2026, pushing it to August 2032 at 5.6203% and taking an $8 million loss on extinguishment to do it. That handled the far maturity and left the near one.
The second dated event is smaller, earlier and less discussed. MillerKnoll's January 2022 interest rate swap fixes $575.0 million of borrowings at 1.650%, and it terminates January 29, 2027, inside fiscal 2027. The replacement, entered in February 2026, covers $200.0 million at 3.380%. So $375 million of debt loses its hedge entirely and $200 million reprices from 1.650% to 3.380%, against term loans carrying stated rates of 5.37% and 5.62%. Interest expense fell to $69.9 million this year from $76.7 million. On those stated rates it should rise materially next year even if total debt keeps falling. That is arithmetic on disclosed terms, not a forecast, but the exact figure will depend on where floating rates sit in January 2027.
Two other balance sheet facts deserve naming. Goodwill of $1,161.3 million plus intangibles of $649.3 million is $1,810.6 million against $1,342.6 million of equity, so tangible book value is negative $468.0 million. And of $167.7 million of cash, $161.7 million sits outside the United States, leaving about $6.0 million domestically. Domestic pre-tax income was $16.2 million against $112.0 million foreign. Total liquidity including revolver availability is $571.7 million, which is comfortable for the near-term maturities and not obviously sufficient for a $642.2 million single-year wall without refinancing.
The Goodwill Question
This is the part of the filing that most coverage will skip, because it lives in Item 1A rather than the financial statements. MillerKnoll took no impairment in fiscal 2026. It also disclosed exactly how much room it had.
| Asset tested | Cushion (fair value over carrying value) |
|---|---|
| Global Retail reporting unit | 1.1% |
| Muuto trade name | 2.1% |
| International Contract reporting unit | 3.1% |
| Knoll trade name | 6.8% |
| Coverings reporting unit | 8.5% |
The filing's own words: "relatively modest adverse changes in projected revenue growth, operating margins, royalty rates, discount rates, or other valuation assumptions could result in material impairment charges."
Set that beside the segment table. The two reporting units with the thinnest cushion, Global Retail at 1.1% and International Contract at 3.1%, are exactly the two whose adjusted operating earnings fell this year, by 37.0% and 20.7%. That is not a coincidence. Reporting unit fair value in these tests is driven by forecast revenue growth and operating margins, and both segments delivered less of both than the prior forecast presumably assumed. Global Retail is also the only one of the three that already took a goodwill write-down, in fiscal 2025.
So the mechanism that produced this year's 293% headline is fully loaded to fire again. A 1.1% miss on a discounted cash flow model is nothing. If Global Retail's margin does not stabilize, fiscal 2027 takes a charge, and then fiscal 2028 gets to report another spectacular recovery.
Valuation
At $22.91 per share on July 29, 2026, with 68.18 million shares outstanding, MillerKnoll is worth about $1.56 billion of equity (stockanalysis.com). Add net debt of $1,118.0 million ($1,285.7 million total debt less $167.7 million of cash) and enterprise value is about $2.68 billion. That is 17.4 times GAAP diluted earnings of $1.32, 0.41 times sales, about 6.9 times adjusted EBITDA of $386.7 million (adjusted operating income of $238.4 million plus $148.3 million of depreciation and amortization), and a free cash flow yield of about 5.0% on $77.6 million. Net debt to adjusted EBITDA is about 2.9 times. Note that enterprise value here excludes $515.8 million of operating lease liabilities, which matters for a business with a growing retail store base.
A scenario discounted cash flow, with explicit assumptions and a range rather than a point:
| Scenario | Revenue growth | Adj. operating margin | WACC | Terminal growth | Implied per share |
|---|---|---|---|---|---|
| Bear | 0% | 5.2% | 10.5% | 1.0% | ~$9 |
| Base | 2% | 6.2% (FY2026 level) | 9.5% | 2.0% | ~$21 |
| Bull | 3% | 7.2% (FY2024 level) | 9.0% | 2.5% | ~$33 |
All three assume a 25% tax rate, depreciation and amortization near $150 million, and capital expenditure of $128 to $133 million, consistent with the company's own fiscal 2027 guidance of $125.0 to $135.0 million. Net debt of $1,118.0 million is subtracted in every case. This is implied value under stated assumptions, not a price target and not investment advice.
The peer cross-check lands in the same place. Office furniture is consolidating: HNI agreed to acquire Steelcase at roughly 5.8 times trailing adjusted EBITDA including $120 million of expected synergies, and HNI and Steelcase have traded around 8.5 and 7.5 times EV to EBITDA respectively (Investing.com, koalagains.com). Apply that band to MillerKnoll's $386.7 million of adjusted EBITDA and equity value runs from about $16.50 per share at the take-out multiple to about $31.80 at HNI's multiple, with the current $22.91 sitting at roughly 6.9 times, below both listed peers.
So the DCF range and the peer range agree: roughly $9 to $33, clustered near $21 to $26. At $22.91 the market is paying slightly above a flat-margin base case. What today's price implies is that fiscal 2026's 6.2% adjusted operating margin holds and Global Retail stabilizes. The order book and the 1.1% cushion are both arguing the other way.
Risks
The concentrated risk is the goodwill test, and it is not hypothetical: the company has already taken $92.3 million of goodwill and $37.7 million of trade name impairments once, and now discloses a 1.1% cushion on the same segment. A charge would be non-cash, but it would hit book equity, which is already thin relative to intangibles, and it would land while a $642.2 million maturity approaches. Second, the demand signal: orders declined organically and backlog fell 10.8%, so fiscal 2027 revenue starts from a weaker book. Third, tariffs, which the filing says already hurt gross margin in the first half of fiscal 2026, with any IEEPA refund contingent on a pending government appeal. Fourth, the interest rate hedge expiring in January 2027. Fifth, governance and execution: the CEO departed in June 2026, after the fiscal year closed, and the Chief Operating Officer is serving as interim CEO while the board searches. A permanent successor may well revisit the retail strategy, the store openings and the carrying values that depend on them.
Balancing that: North America Contract is real, profitable and improving, liquidity is $571.7 million, near-term maturities are trivial at $25.1 million and $25.8 million, and the company has already demonstrated it can refinance by pushing Term Loan B to 2032.
The Bottom Line
MillerKnoll did not recover in fiscal 2026. It stopped writing things down. One segment improved, two deteriorated, gross margin was flat for real rather than by mix, operating expenses grew faster than revenue, cash flow fell, orders declined organically and the backlog shrank 10.8%. What to watch is not the earnings line, which will keep bouncing off whatever was impaired the prior year. Watch three things: Global Retail's adjusted operating margin, which needs to stop falling for the 1.1% cushion to hold; organic orders in North America Contract, which turned negative this year; and the refinancing of the April 2030 revolver and Term Loan A, which is the one obligation the company cannot restructure by adjusting a number.
All figures are from MillerKnoll's FY2026 Form 10-K (accession 0000066382-26-000092, filed July 20, 2026) and its comparative prior-year columns, except the market price, market data and peer multiples, which are attributed inline. This is analysis, not investment advice, and contains no price targets.
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