This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Good morning and welcome to Herman Miller's second quarter earnings conference call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kevin Zeltman, Vice President of Investor Relations and Treasurer.
spk03: Good morning, everyone. Joining me today on our second quarter earnings call are Andy Owen, our President and Chief Executive Officer, Jeff Stutz, our Chief Financial Officer, John Michael, President of North America Contracts, Debbie Probst, President of Herman Miller Retail, and Ben Groom, our Chief Digital Officer. Similar to last quarter, we have changed our approach to the quarterly press release to adopt a shareholder letter format that replaces our prepared remarks on the conference call. We believe this approach both provides more timely information for investors and allows for more questions and dialogue on the call. We have posted yesterday's press release on our investor relations website at HermanMiller.com. Wherever any figures are presented on a non-GAAP basis, we have reconciled the GAAP and non-GAAP amounts within the press release as well. Before we begin today's Q&A session, I would like to remind everyone that this call will include forward-looking statements. For information on factors that could cause actual results to differ materially from these forward-looking statements, please refer to the earnings press release as well as our annual and quarterly SEC filings. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of new information or future events. Today's call is scheduled for 60 minutes. With that, I'll turn the call back over to the operator, and we will take your questions.
spk05: Thank you. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, if you have a question at this time, please press star, then 1. Our first question comes from the line of Greg Burns with Sedodian Company. Your line is open. Please go ahead.
spk02: Morning. Can we start off talking about the order trends throughout the quarter on both the contract and the retail side and maybe some insight into the first couple weeks of this quarter? Thank you.
spk01: Morning, Greg. This is Jeff. Yeah, I'll unpack that a little for you. So what we saw at the consolidated group level, what we saw was an improvement in order trends in total as we moved toward the back portion, back half of the quarter. To kind of give you an idea, we were down in the mid-teen percentages for September and October, kind of on average. That improved down closer to around 9% in the month of November. And in the first couple of weeks of the third quarter, we trended down close to that down 9%, between 9% and 10%.
spk02: Okay. And at the segment level, is there any kind of notable trends there?
spk06: We have some interesting order trends in retail I can discuss. This is Debbie. Good morning. In September, our order trends were plus 29%. October plus 28, and then we saw a big spike in November at plus 62. And we had a cyber holiday period that bridged Q2 and Q3. So we're coming into Q3 with really strong backlogs in retail, 70 million, well ahead of our typical backlogs, and saw strong orders in the first couple of weeks of Q3 pertaining to those cyber sales.
spk02: Okay, great. And that, I guess, leads me to my next question. The consolidated order growth on the retail side was, I guess, up 40% the last couple of quarters. So I thought, you know, I was thinking maybe the growth would even be a little bit stronger this quarter. So for this quarter, was there any supply constraints or, you know, product limitations that maybe curtailed? revenue a little bit. And then it sounds like as we look into the third quarter, maybe, you know, based on the backlog and the order growth, we might see revenue growth re-accelerate. If you can give us any color on that, that would be helpful.
spk06: Well, our order growth for the quarter was 41% ahead of last year for the retail segment. And we specifically feel really good about the shift in growth from October into November. November, December, January are three months that we typically haven't been aggressive from a marketing campaign perspective in the past. So what we're seeing as we build from September and October into that nice November growth is some of our new initiatives activating across marketing, some builds in digital, and also executing some of our new task seating campaigning and go-to-market strategies. So we feel like the growth that we're seeing throughout the quarter is indicative of continued strength in the residential channels. And it might be helpful just to break down this segment a little bit for you, Greg. A retail consumer, the consumer that's purchasing product for themselves, grew at 84% in orders in the quarter. And our trade business, obviously interior designers purchasing on behalf of a residential consumer, grew at 14% in the quarter. So trade actually rebounded this quarter versus what we saw in Q1, and the residential channel grew. So we're feeling really good about the trends we're seeing in the consumer segment that we feel like we can continue to build on.
spk04: Okay, and if we... But as you see architectural billing start to improve, as you see home building and home sales start to improve, there's a nice tie-in there, too.
spk01: Yeah. And, Greg, this is Jeff. Just one more bit of color for you. As you kind of look under the consolidated at the segment level, from an order trend perspective, the North American contract business was, I would say, fairly consistent. When you draw a line through the quarter, we were kind of in that down 30 to down 35% range. pretty consistently throughout the quarter. It got a little deeper in October and rebounded in November a bit. But I wouldn't say any notable change there. So clearly, we continue to see depressed order activity there. Still, and John can speak to this, a lot of inquiries and conversations with customers that give us hope. But the one thing I want to highlight is our international business, which, as we said to you last quarter, is very encouraging because that, in many ways, kind of leads on the leading edge of the post-virus activity, we saw a nice bump in order activities. We moved through the quarter. In fact, in November, on an organic basis, international orders were actually up about 5%, bringing the full quarter to down 2% on an organic basis for total orders. So the trends there are very, very encouraging.
spk02: Okay, great. And then In terms of the retail segment, can you maybe just give us a little bit of color on where the growth is coming from? Because if we look at the comparable sales, same brand sales for DWR, they're actually down. So where is the retail growth coming from? Is it coming from HermanMiller.com, Hay? And within DWR, what is the split between traditional brick-and-mortar channels versus e-commerce?
spk06: Greg, we typically don't break down at the brand level, the business performance, but certainly at the channel level, we continue to see really strong performance from our e-commerce up 220% to last year. But we're also really pleased with the performance we saw in the quarter from our studios or physical retail locations, which in order is built at 14% over last year, despite the fact that traffic was down 35. So we're seeing a slight improvement in AOV in our stores and studios, and an improvement in conversion. We're still seeing that very dedicated traffic coming into the studios and stores at the end of their customer journey to validate the decisions that they've made through their online research.
spk02: Okay, great. And then lastly, I know you updated the DWR website in July. Where are you in terms of updating, I guess, the rest of your e-commerce platforms, HermanMiller.com, Hey.com, and have you continued to see the benefit of those changes in the conversion rates and order numbers?
spk00: Yeah, Greg, so I'll take this. We've been really impressed with the performance of the new DWR.com since we re-released that site in July. We've seen significant conversion improvement in that site. I can tell you that compared to immediately pre-launch, we're seeing a 26% increase in conversion on that site. So we're really impressed with how that site's performing. And as you mentioned, we're focusing now on developing the new Home Miller store. We're currently on track to re-release that site in Q4. So there's a lot of work going into that. And then we'll turn our attention to hey.com and relaunch that in the next financial year.
spk02: Okay, thank you.
spk05: Thank you. And again, ladies and gentlemen, if you have a question at this time, please press stars and one. I'm showing no further questions, and I'd like to turn the conference back over to Annie Owens for any further remarks.
spk04: Okay. I'm sorry, guys. We had some technical difficulties, so I hope you can hear me this morning. Thanks for joining us on the call. We really appreciate your continued interest in Herman Miller, and we look forward to updating you again next quarter. And on behalf of all of us at Herman Miller, I want to wish you and your families a wonderful holiday season. Thank you.
spk05: Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.
Disclaimer