MillerKnoll (MLKN) Risk Analysis

The future success of our operations depends on our ability, and the ability of third parties on which we rely, to identify, recruit, develop and retain qualified and talented individuals in order to supply and deliver our products. Any shortage of qualified labor could have a negative impact on our business. Employee recruitment, development and retention efforts that we or such third parties undertake may not be successful, which could result in a shortage of qualified individuals in future periods. Any such shortage could decrease our ability to effectively produce and meet customer demand. Such a shortage would also likely lead to higher wages for employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in our results of operations.

We have significant manufacturing and sales operations outside of the United States. Concerns exist relating to imposed and potential tariffs and customs regulations and the potential for short term logistics disruption as any such changes are implemented. This will impact both our suppliers and customers, including distributors, and could result in product delays and inventory issues. Further uncertainty in the marketplace also brings risk to accounts receivable and could result in delays in collection and greater bad debt expense. There also remains a risk for the value of the British Pound, Danish Krone, and/or the Euro to further deteriorate, reducing the purchasing power of customers in these regions and potentially undermining the financial health of the Company's suppliers and customers in other parts of the world. We have manufacturing operations in the United Kingdom, China, India, Italy, Canada, Mexico and Brazil. Additionally, our products are sold internationally through controlled subsidiaries or branches in Canada, the United Kingdom, Denmark, Italy, Korea, Mexico, Australia, China (including Hong Kong), India, Brazil, and other European countries. The Company's products are offered in Canada, Europe, the Middle East, Africa, Latin America and the Asia/Pacific region primarily through dealers and retail channels. Doing business internationally exposes us to certain risks, many of which are beyond our control and could potentially impact our ability to design, develop, manufacture, or sell products in certain countries. These factors include, without limitation, political, social, and economic conditions; global trade conflicts and trade policies; legal and regulatory requirements; labor and employment practices; cultural practices and norms; natural disasters; security and health concerns; protection of intellectual property; and changes in foreign currency exchange rates. In some countries, the currencies in which we import and export products can differ. Fluctuations in the rate of exchange between these currencies could negatively impact our business and our financial performance. Additionally, tariff and import regulations, international tax policies and rates, and changes in U.S. and international monetary policies have had, and are expected to continue to have an adverse impact on results of operations and financial condition.

Changes in U.S. or international social, political, regulatory, or economic conditions, including laws and policies governing foreign trade, tariffs, customs, and import/export regulations, and any potential negative sentiment toward the U.S. as a result of such changes, have affected and could continue to materially and adversely affect our business. The U.S. has instituted, and may continue to institute or modify, trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., and other government regulations affecting trade between the U.S. and other countries (such as Canada, Mexico, China, and the European Union) where we conduct our business. Global trade disruption, significant introductions of trade barriers, bilateral trade frictions, and related uncertainty may materially and adversely affect our supply chain, customer demand, financial performance, and results of operations. Tariffs and tariff-related uncertainty have affected, and may continue to affect, the cost and availability of steel, plastic, aluminum components, particleboard, and other raw materials, components, and finished goods that we use or source. Tariff-related costs, net of pricing actions taken to help offset costs, adversely impacted gross margin during the first half of fiscal 2026. Although we have implemented mitigation actions, including pricing actions and tariff surcharges, these actions may not fully offset increased costs, may reduce customer demand, may be delayed by contractual limitations or competitive pressures, and may not protect us from additional or retaliatory trade measures. During fiscal 2026, court rulings created the potential for importers to seek refunds of certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA), and we have submitted, and/or intend to submit, claims for refunds on substantially all IEEPA tariffs paid that may be eligible for recovery. However, uncertainty remains regarding the ultimate resolution of the related legal proceedings, including the U.S. government's appeal, and the amount and timing of any refunds that may be realized remain uncertain. Even if we ultimately recognize refunds, the tariff environment may remain volatile, and new, modified, or retaliatory tariffs or other trade measures could continue to adversely affect our business, financial condition, and results of operations.

We, our vendors, and other third parties on which we rely are subject to evolving and increasingly sophisticated cybersecurity threats, including threats from criminal hackers, ransomware operators, phishing and social engineering schemes, insiders, hacktivists, and nation-state or state-sponsored actors, including actors associated with areas of geopolitical instability such as Iran. These actors may attempt to gain unauthorized access to our systems or data; misappropriate assets, confidential information, intellectual property, or personal information; introduce malware or corrupt data; extort payments; disrupt our operations, supply chain, eCommerce websites, retail studios, manufacturing, distribution, or financial reporting processes; or compromise third-party systems connected to our operations. Our systems maintain personally identifiable information, including employee data, customer and payment-related information, and other confidential business information. We cannot guarantee that our security measures, monitoring, incident response processes, vendor risk management program, or other controls will prevent or timely detect all unauthorized access, misuse, or disclosure of such information. A cybersecurity incident could result in operational disruption, loss of business information, litigation, regulatory investigations, notification obligations, fines, claims for damages, remediation costs, increased compliance costs, negative publicity, reputational harm, and loss of confidence by customers, dealers, suppliers, employees, and other stakeholders, any of which could adversely affect our business, financial condition, and results of operations.

Government and other regulations apply to the manufacture and sale of many of our products. Failure to comply with these regulations or failure to obtain approval of products from certifying agencies could adversely affect the sales of these products and have a material negative impact on operating results.

We have established and publicly announced sustainability goals. These goals include science-based targets for the reduction of Scope 1, 2 and 3 greenhouse gas emissions. Our ability to achieve any stated goal, target or objective is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures or imposing different requirements, the pace of changes in available materials and technology, as well as the availability of suppliers that can meet our sustainability and other standards. We may incur significant costs as we work to implement our sustainability goals, which were announced fiscal year 2025, which include efforts to reduce our carbon footprint. Furthermore, standards for tracking and reporting sustainability matters continue to evolve. Our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or differ from other companies. Methodologies for reporting these data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. If we fail to achieve, or are perceived to have failed or been delayed in achieving, or improperly report our progress toward achieving these goals and commitments, it could negatively affect consumer or customer preference for our products as well as potentially expose us to enforcement actions and litigation. Additionally, continued focus by governmental authorities on climate change and other environmental matters has led to enhanced regulation in these areas, which is expected to result in increased compliance costs and could subject us to additional potential liabilities. The extent of these costs and risks is difficult to predict and will depend in large part on the extent of final regulations and the ways in which those regulations are enforced. We operate and have manufacturing facilities in multiple regions across the globe, and the impact of additional regulations in this area is likely to vary by region. It is expected the costs we incur to comply with any such final regulations and execute on our own sustainability goals could be material.

We are one of several companies competing for new business within the furniture industry. Many of our competitors offer similar categories of products, including office seating, systems and freestanding furniture, casegoods, storage products, as well as residential, education and healthcare furniture solutions. Although we believe that our innovative product design, functionality, quality, depth of knowledge, and strong network of distribution partners differentiate us in the marketplace, increased market pricing pressure and other factors could make it difficult for us to win new business with certain customers and within certain market segments at acceptable profit margins. The retail furnishings market is highly competitive. We compete with national and regional furniture retailers, mail order catalogs and online retailers focused on home furnishings. We compete with these and other retailers for customers, suitable retail locations, vendors, qualified employees and management personnel. Some of our competitors have significantly greater financial, marketing and other resources than we possess. This may result in these competitors being quicker at important metrics such as adapting to changes, devoting greater resources to the marketing and sale of their products, generating greater national brand recognition, or adopting more aggressive pricing and promotional policies, including free shipping offers. In addition, increased catalog mailings and/or digital marketing campaigns by our competitors may adversely affect response rates to our own marketing efforts. As a result, increased competition may adversely affect our future financial performance.

The operations of our Global Retail segment are sensitive to a number of factors that influence consumer spending, including general economic conditions, consumer disposable income, unemployment, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, and consumer confidence in future economic conditions. Adverse changes in these factors have reduced, and in the future may further reduce consumer demand for our products, resulting in reduced sales and profitability.