Shares of Ethan Allen Interiors Inc. (ETD) plummeted 5.41% on Wednesday after the company reported a decline in sales and orders for the first quarter of fiscal 2025, reflecting a challenging environment for the home furnishings industry.

The furniture retailer and manufacturer saw consolidated net sales decrease by 5.8% compared to the prior year, primarily due to lower contract sales and a decline in delivered unit volume. Retail segment orders were down 6.8%, while wholesale segment orders decreased 4.8%, as the housing market remained soft and impacted demand for home furnishings.

Despite the softness in demand, Ethan Allen maintained a strong gross margin of 60.8%, benefiting from a favorable sales mix and reduced raw material costs. However, the adjusted operating margin dipped slightly to 11.5% from 12.1% a year ago, as the company grappled with industry headwinds.

In the earnings call, CEO Farooq Kathwari expressed cautious optimism for a potential recovery, citing the company's robust marketing, vertically integrated operations, and reduced headcount. He also highlighted Ethan Allen's advantage in North American manufacturing, which accounts for 75% of its production and insulates the company from potential tariff impacts.

While the quarterly results were impacted by broader economic uncertainties and weather disruptions, Ethan Allen's financial position remains solid. The company ended the quarter with $186.4 million in cash and investments and no outstanding debt, while also returning $20.2 million to shareholders through dividends.