• Consolidated Net Sales: $157 million.
• Gross Margin: 60.3%.
• Operating Income: $18.2 million.
• Operating Margin: 11.5%.
• Diluted EPS: $0.59.
• Operating Cash Flow: Increased by $16.4 million to $184.2 million.
• Retail Segment Orders Growth: 15.8%.
• Wholesale Segment Orders Growth: 14.3%.
• Wholesale Backlog: $57.7 million, up 5% from a year ago.
• Headcount: 3,318 associates, a decrease of 6.9% from a year ago.
• Adjusted Operating Margin: 11.5%, compared to 12.8% a year ago.
• Adjusted Diluted EPS: $0.59, compared to $0.68 a year ago.
• Effective Tax Rate: 25.4%.
• Cash and Investments: $184.2 million with no outstanding debt.
• Capital Expenditures: $3.8 million.
• Retail Design Centers: 172 in North America, including 141 company-operated and 31 independently owned.
• Quarterly Cash Dividend: $0.39 per share.

• Warning! GuruFocus has detected 2 Warning Sign with ETD.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ethan Allen Interiors Inc (NYSE:ETD) reported strong financial results with consolidated net sales of $157 million and a gross margin of 60.3%.
• The company experienced a significant increase in retail segment orders by 15.8% and wholesale segment orders by 14.3%, driven by promotional activities and strong financing programs.
• Ethan Allen Interiors Inc (NYSE:ETD) ended the quarter with a robust balance sheet, including cash and investments of $184.2 million and no outstanding debt.
• The company has a strong vertically integrated enterprise, with 75% of its furniture made in North American facilities, providing a competitive advantage in logistics and delivery.
• Ethan Allen Interiors Inc (NYSE:ETD) continues to invest in technology and marketing, increasing its marketing spend by 15% to attract new customers and enhance its design services.

Negative Points

• Consolidated net sales decreased from $167.3 million a year ago to $157.3 million, indicating a decline in sales performance.
• The adjusted operating margin decreased to 11.5% from 12.8% a year ago, reflecting challenges in maintaining profitability.
• Adjusted diluted EPS dropped to $0.59 from $0.68 a year ago, showing a decline in earnings per share.
• The company faced operational disruptions due to natural disasters, such as wildfires in Southern California and flooding from Hurricane Helene.
• Ethan Allen Interiors Inc (NYSE:ETD) is exposed to potential risks from tariffs on imports from Mexico, where 25% of its manufacturing is located, which could impact costs and operations.

Q & A Highlights

Q: What factors contributed to the strong end-of-quarter performance for Ethan Allen? A: Farooq Kathwari, Chairman, President, and CEO, explained that the strong performance was due to a combination of factors, including special savings promotions, strong product programs, and an efficient retail network. Despite a weak start in January due to weather, the company is well-positioned with strong manufacturing logistics and a reduced headcount, thanks to technology integration.

Q: Will Ethan Allen continue with the incremental promotions that boosted recent performance? A: Farooq Kathwari stated that the company will use both incremental promotions and regular promotions, depending on timing and opportunities, such as holidays and special events.

Q: What drove the impressive acceleration in orders from the September to December quarter? A: Kathwari noted that the introduction of new products and increased marketing efforts, including a 15% increase in marketing spend, contributed to the acceleration. The company is focusing on innovative marketing strategies to attract new customers.

Q: How did the special promotion in December impact demand trends? A: Kathwari acknowledged that while there was improvement throughout the quarter, the special promotion in December, which offered an additional 5% savings, significantly boosted demand. The decision to increase promotions was supported by improved service capabilities.

Q: What is Ethan Allen's exposure to manufacturing in Mexico, and how might potential tariffs affect operations? A: Kathwari explained that approximately 25% of Ethan Allen's total manufacturing is in Mexico, primarily for upholstery products. The company has flexibility to adjust, including potentially raising prices or shifting more production to North Carolina, depending on tariff developments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.