Herman Miller Inc. (NASDAQ:MLHR) Q1 2020 Earnings Conference Call Transcript

Sep 19, 2019 • 09:30 am ET

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Herman Miller Inc. (NASDAQ:MLHR) Q1 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] And our first question comes from Budd Bugatch with Raymond James. Your line is open.

Analyst
Budd Bugatch

Good morning, Andi. Good morning, Jeff. Good morning, Kevin. Congratulations on a nice start to the fiscal year.

Executive
Andrea (Andi) Owen

Good morning, Budd. Thank you.

Executive
Jeffrey Stutz

Thanks, Budd.

Analyst
Budd Bugatch

Thank you. A couple of questions, if I could. Let's talk a little bit about gross margin. It was most notable in terms of the segments, in the retail segment, you addressed it qualitatively and perhaps directionally. But can we get a little more clarity and then some data on the impact of commodities, tariffs and what the new distribution center of transition costs could be called out for, and what that looks like going forward for the next quarter or in the next couple of quarters?

Executive
Jeffrey Stutz

Yeah, Budd. This is Jeff, I'll start. John is here, so will try to chime in John with any color you have. So just to clarify, Budd, do you want just retail or do you want to get a sense for costs price pressures and benefits for the consolidated group?

Analyst
Budd Bugatch

Both if I could. I mean, we view segment model, the Company and we obviously like to carry that forward with -- for consolidated results.

Executive
Jeffrey Stutz

Yeah. So let me start with the consolidated numbers, Budd, and then we can talk -- we can kind of dig into that -- a few comments on the retail segment. So for the quarter, I'll talk year-over-year. I'll just give you kind of a walkthrough of some of the major drivers on gross margins. All-in-all, we were up about 70 basis points. Tariffs, tariff pressures on a gross basis, of course, this is before any of the actions that we've taken, which will be -- I'll cover in some of the other category here, 90 basis points of pressure year-on-year.

In the retail business specifically, the impact of the net freight pressures that were referenced on the prepared remarks, about 50 basis points of pressure at the consolidated level. The distribution center moved by itself, and John can provide further color on this, of course, that's probably another 40 basis points year-on-year on the gross margin, negative. And then offsetting that, we had a -- this combination of profit improvement initiatives that we've talked a lot about, along with some specific pricing actions that have been taken in the business, accounted for about 210 basis points of benefit year-on-year. And then steel and commodity prices, also now a -- help to our gross margins, about 40 basis points of benefit. So I did my math right. That should get you close.

Analyst
Budd Bugatch

Well, you got 250 basis points, this is -- taken consolidated 250 basis points of good guys and I heard 130 basis points of bad guys. That's 120 basis points. What did I miss? Tariffs [Speech Overlap] the other one of the negative 40 basis points of the...?

Executive
Jeffrey Stutz

Yeah. Hey, Budd, let me just walk you through one more time here quick, just