Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ethan Allen Interiors Inc (ETD, Financial) reported a strong gross margin of 60.8% for the first quarter of fiscal 2025.
- The company ended the quarter with $186.4 million in cash and investments, indicating strong cash generation.
- Ethan Allen Interiors Inc (ETD) declared a regular cash dividend of $0.39 per share, continuing its practice of returning capital to shareholders.
- The company has reduced its headcount while maintaining productivity, thanks to the integration of technology and strong interior design services.
- Ethan Allen Interiors Inc (ETD) benefits from its North American manufacturing, which accounts for 75% of its production, providing stability amid potential international trade uncertainties.
Negative Points
- Consolidated net sales decreased by 5.8% compared to the previous year, primarily due to lower contract sales and a decline in delivered unit volume.
- Retail segment orders were down 6.8%, and wholesale segment orders decreased by 4.8%, reflecting a soft home furnishings market.
- The company experienced a 15.2% decrease in wholesale backlog from a year ago, although it was up since June 30 due to timing of incoming contract orders.
- Hurricane Helene and import disruptions impacted first-quarter net sales by approximately $2 million.
- The adjusted operating margin decreased to 11.5% from 12.1% a year ago, indicating some pressure on profitability.
Q & A Highlights
Q: Can you discuss the cadence of written orders during the quarter and any trends observed, particularly around Labor Day and October?
A: Farooq Kathwari, CEO, noted that written orders held up relatively well with no major changes month-to-month. Retail sales were somewhat lower throughout the quarter but remained stable without significant fluctuations.
Q: How might potential tariffs impact Ethan Allen, considering 75% of your products are manufactured in North America?
A: Farooq Kathwari, CEO, explained that the company is relatively insulated from potential tariffs due to its North American manufacturing base, which includes the U.S., Mexico, and Honduras. While there is uncertainty with international tariffs, the North American treaty remains stable, providing an advantage over competitors who manufacture overseas.
Q: What is your outlook on the potential recovery for the industry and Ethan Allen, considering recent Fed rate cuts?
A: Farooq Kathwari, CEO, expressed cautious optimism, highlighting that the company is well-positioned with strong marketing, a robust network, and reduced headcount. The combination of technology and personal service is key, and the company is hopeful that post-election stability will refocus consumer attention on home furnishings.
Q: Can you provide insights into regional demand trends and the impact of recent storms on sales?
A: Farooq Kathwari, CEO, acknowledged that storms in Texas and Florida, as well as disruptions in Asheville, impacted sales. However, operations have largely returned to normal, and the company is beginning to catch up on any lagging effects.
Q: How are new product introductions for fiscal year '25 being received, and what percentage of your offerings do they represent?
A: Farooq Kathwari, CEO, stated that while design centers have reduced floor space, new products are being introduced as options for designers to use with clients. Technology plays a crucial role, allowing designers to showcase new products even if they are not physically present in the design centers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
