Ethan Allen Reports Fiscal 2024 Second Quarter Results

Ethan Allen Interiors Inc. (NYSE: ETD), a leading interior design destination, today reported its financial and operating results for the fiscal 2024 second quarter ended December 31, 2023.

Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “We are pleased to report our financial and operating results for the fiscal 2024 second quarter ended December 31, 2023, marked by lower sales, strong gross and operating margins and a robust balance sheet. The pandemic period, defined by us as fiscal years 2021 through 2023, had strong consumer focus on the home, high demand and major increases in sales. We had record high backlogs, which are now returning to pre-pandemic levels. During this pandemic period, we undertook many important initiatives within our vertically integrated enterprise, including strengthening our Talent, Marketing, Service, Technology and Social Responsibility.”

“Compared to our second quarter ended December 31, 2018, each of these important areas contributed to the strengthening of our enterprise. Gross margin increased to 60.2% in our just completed second quarter compared to 55.2% for the quarter ending December 31, 2018. Cash and investments totaled $167.8 million, up from $38.8 million five years ago. Inventory levels are down 11.5% to $140.9 million, while headcount has been reduced by 31.1%. We strengthened our balance sheet during the pandemic period, enabling us to return additional capital to shareholders. We have returned $137.9 million to shareholders in the form of cash dividends, an increase of $41.4 million or 42.9% during the three-year period leading up to the pandemic,” continued Mr. Kathwari.

“During the last decade, our focus on developing a strong interior design-based enterprise and utilizing technology was a great advantage. We have continued to strengthen our enterprise with this focus and last fiscal year started repositioning our 173 design centers throughout North America as the Interior Design Destination. We also continued to invest in our North American manufacturing and logistics. About 75% of our products are made in these facilities with 75% custom orders. Our strong logistics network delivers our products to our clients home at one delivered price. We believe we are well-positioned to continue our journey and remain cautiously optimistic,” concluded Mr. Kathwari.

Fiscal 2024 Second Quarter Highlights*

• Consolidated net sales of $167.3 million decreased 17.7%
  • Retail net sales of $139.2 million were lower by 19.0%
  • Wholesale net sales of $90.6 million were lower by 14.7%
• Written order trends
  • Retail segment written orders decreased 9.4%
  • Wholesale segment written orders decreased 10.9%
• Consolidated gross margin of 60.2% was 80 basis points lower than last year due to deleveraging from lower unit volumes combined with changes in both sales and product mix partially offset by lower input costs including reduced inbound freight, raw material costs and headcount
• Operating margin of 13.0%; adjusted operating margin of 12.8% compared with 18.1% last year due to fixed cost deleveraging from lower consolidated net sales, gross margin erosion, incremental costs from new design centers and expenses incurred with the launch of the Interior Design Destination initiative partially offset by lower headcount, reduced variable expenses including lower delivery and commissions and the ability to maintain a disciplined approach to cost savings and expense control
• Advertising expenses were equal to 2.0% of net sales in both the current and prior year period; promotional activity remained disciplined
• Diluted EPS of $0.68 compared with $1.10; adjusted diluted EPS of $0.67; reported diluted EPS for the second quarter ending December 31, 2018 (pre-pandemic) was $0.45
• Generated $13.6 million of cash from operating activities compared with $2.5 million a year ago
• Paid regular quarterly cash dividend of $0.36 per share totaling $9.2 million
• Ended the quarter with $167.8 million in cash and investments with no debt outstanding
• Reduced inventory carrying levels to $140.9 million at December 31, 2023, down 11.8% from a year ago
• Celebrated the launch of Ethan Allen’s next reinvention as the Interior Design Destination with several design center grand reopenings during the quarter; images from each celebration are featured at www.ethanallen.com/grandreopenings
• Ethan Allen held its 2023 Virtual Convention in December, which celebrated over 91 years of innovation by highlighting the Company’s strategic repositioning as the Interior Design Destination across its vertically integrated enterprise, its history in classic style with a modern perspective, the service of its manufacturing and logistics operations and the strengthening of the Company’s retail network

* See reconciliation of GAAP to adjusted key financial measures in the back of this press release. Comparisons are to the second quarter of fiscal 2023.

Key Financial Measures*

* See reconciliation of GAAP to adjusted key financial measures in the back of this press release

Balance Sheet and Cash Flow

Cash and investments totaled $167.8 million at December 31, 2023, compared with $172.7 million at June 30, 2023. The decrease of $4.9 million was primarily due to $31.1 million in cash dividends paid and capital expenditures of $5.2 million as the Company continued to return capital to shareholders and reinvested back into the business. These cash outflows were partially offset by $30.3 million in cash generated from operating activities.

Cash dividends paid were $31.1 million, which included a special cash dividend of $12.7 million, or $0.50 per share paid in August 2023, and regular quarterly cash dividends of $18.4 million, or $0.36 per share, a 12.5% increase from last year’s regular quarter dividend of $0.32 per share.

Cash from operating activities totaled $30.3 million during the first half of fiscal 2024, a decrease from $40.9 million in the prior year period due to lower net income partially offset by a reduction in customer deposits.

Inventories, net totaled $140.9 million at December 31, 2023, compared with $149.2 million at June 30, 2023. Inventory balances continue to decline as the Company aligns its inventory with incoming order trends while also ensuring appropriate levels are maintained to service customer orders.

Customer deposits from undelivered written orders totaled $63.1 million at December 31, 2023, compared with $77.8 million at June 30, 2023.

No debt outstanding at December 31, 2023.

Dividends

On October 24, 2023, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.36 per share, which was paid on November 22, 2023, and totaled $9.2 million. More recently, on January 23, 2024, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.36 per share, payable on February 22, 2024, to shareholders of record on February 6, 2024. Ethan Allen has a long history of returning capital to shareholders and is pleased to continue to pay a regular quarterly cash dividend, which highlights the Company’s strong balance sheet.

For the complete press release, click here.

About Ethan Allen

Ethan Allen (NYSE:ETD), recently named America’s #1 Premium Furniture Retailer and among America’s Top 10 Retailers by Newsweek, is a leading interior design destination combining state-of-the-art technology with personal service. Our design centers, which represent a mix of independent licensees and Company-owned and operated locations, offer complimentary interior design service and sell a full range of home furnishings, including custom furniture and artisan-crafted accents for every room in the home. Vertically integrated from product design through logistics, we manufacture about 75% of our custom-crafted products in our North American manufacturing facilities and have been recognized for product quality and craftsmanship since 1932. Learn more at www.ethanallen.com and follow us on Facebook, Instagram, and LinkedIn.

Contact:

Matt McNulty – Senior Vice President, CFO and Treasurer – IR@ethanallen.com

Source: Ethan Allen Interiors Inc.