Why Knoll Stock was slipping today

What happened

Shares of Mound ( KNL ) were down today after the interior design specialist reported below-average fourth-quarter earnings. As a result, the stock was down 13.8% at 12:09 a.m. EDT.

So what

Knoll, which owns design brands such as Spinneybeck and Edelman Leather, said sales rose 4.7% to $371.4 million, which missed estimates of $391.8 million. The company noted that macroeconomic drivers of workplace and residential demand have become more mixed and cited issues with tariffs and stagnant corporate earnings.

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Operating profits for the company’s lifestyle segment increased from $26.2 million to $19 million, with more sales going through its dealer network, and adjusted earnings per share fell from 0, $57 to $0.52, below analyst consensus of $0.63.

While management acknowledged that sales slowed in the second half of the year, they also struck an optimistic tone, saying: “Positive secular drivers and impactful acquisitions in the trend from Muuto to Fully, as well as organic investments in new products and increased sales and marketing capabilities should, we believe, enable us to continue to grow faster than the markets we serve in 2020.”

Now what

Looking ahead, Knoll said the market is expected to grow 2% in 2020 and the company is targeting mid-single-digit revenue growth. It also sees its gross margin increase by 20 to 30 basis points due to cost reduction initiatives and lower raw material prices. Ultimately, he called for adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin expansion to be moderate, but still targeting 15% in 2021.

Wall Street will likely cut its 2020 forecast based on these numbers, which helps explain why the stock is down double digits today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Richard L. Militello