Ethan Allen Reports Fiscal 2024 Third Quarter Results Highlighted by Robust Balance Sheet, Strong Cash Dividends and Double-Digit Operating Margin; Lower Demand Reflects Post Pandemic Period
- None.
- Lower demand post-pandemic impacting sales
- Consumer interest previously diverted to other areas like travel
Insights
Ethan Allen Interiors Inc.'s financial statement reflects a company that is maneuvering through the post-pandemic market with a certain finesse. A double-digit operating margin is commendable, as it suggests efficiency in managing expenses relative to revenue. This is a paramount indicator for investors, as it shows the company's ability to translate sales into profits.
Additionally, the emphasis on a robust balance sheet and strong cash dividends could be a signal of the company's financial stability and a commitment to returning value to shareholders. In an era where cash is king, a strong balance sheet provides a cushion against market volatility. Investors would be wise to consider the company's cash position and debt levels in their evaluations.
The mention of lower demand in the post-pandemic period is a critical piece of information. It indicates a shift in consumer behavior, potentially moving away from the home goods sector, which saw a surge during the pandemic as people invested in their living spaces. The consumer interest 'returning back to the home' suggests that there may be a stabilization on the horizon, but the question remains whether this interest will translate into sales at pre-pandemic levels.
For the retail investor, understanding these market dynamics can help in making informed decisions about the longevity of Ethan Allen's growth. It's important to keep an eye on broader economic indicators and consumer trend reports to anticipate future demand fluctuations.
The company's continued investments in North American manufacturing could be viewed as a strategic move to mitigate risks associated with global supply chains. This may lead to improved production lead times and quality control, which are important factors in maintaining brand reputation and customer satisfaction.
However, the shift toward localized production could also involve increased costs. Retail investors should weigh the potential for margin compression against the benefits of a streamlined supply chain when considering the company’s long-term growth prospects.
DANBURY, CT, April 24, 2024 (GLOBE NEWSWIRE) -- Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE: ETD), a leading interior design destination, today reported its financial and operating results for the fiscal 2024 third quarter ended March 31, 2024.
Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “We are pleased with our financial performance and the continued strengthening of our enterprise. We are also seeing incremental consumer interest returning back to the home after being previously diverted to other areas such as travel.”
“We have launched a number of important initiatives including strengthening of our talent, introduction of new products, stronger marketing campaigns, continued investments in our North American manufacturing, which make about
“Combining technology with our interior design talent has been a game changer. Compared to the pre-pandemic third quarter ended March 31, 2019, we have reduced headcount by
FISCAL 2024 THIRD QUARTER HIGHLIGHTS*
- Consolidated net sales of
$146.4 million decreased21.4% - Retail net sales of
$122.6 million were lower by18.8% - Wholesale net sales of
$89.8 million were lower by21.3%
- Retail net sales of
- Written order trends
- Retail segment written orders decreased
8.6% - Wholesale segment written orders decreased
14.6%
- Retail segment written orders decreased
- Consolidated gross margin of
61.3% was 140 basis points higher than last year due to a change in sales mix, lower manufacturing input costs and reduced headcount partially offset by lower unit volumes and higher sales of designer floor samples - Operating margin of
10.5% ; adjusted operating margin of10.0% compared with15.2% last year due to fixed cost deleveraging from lower consolidated net sales partially offset by gross margin improvement, lower headcount, less variable expenses and the ability to maintain a disciplined approach to cost savings and operating expense control - Advertising expenses were equal to
3.4% of net sales in the current third quarter, up from2.2% in the prior year period due to additional direct mail campaigns; promotional activity remained disciplined and consistent with a year ago - Diluted EPS of
$0.50 compared with$0.87 ; adjusted diluted EPS of$0.48 ; reported diluted EPS for the third quarter ended March 31, 2019 was$0.31 - Ended the quarter with
$181.1 million in cash and investments with no debt outstanding - Generated
$23.7 million of cash from operating activities compared with$33.4 million a year ago - Paid regular quarterly cash dividend of
$0.36 per share totaling$9.2 million - Reduced inventory carrying levels by
4.7% ; totaled$144.5 million as of March 31, 2024 - Ended the quarter with total employee count of 3,448, down
9.6% from a year ago and32.7% less than March 31, 2019 - For the fifth year in a row, the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility recognized Ethan Allen’s upholstery manufacturing operations in Silao, as “Environmentally and Socially Responsible” for the Company’s ongoing commitment to socially responsible management.
* See reconciliation of GAAP to adjusted key financial measures in the back of this release. Comparisons are to the third quarter of fiscal 2023.
KEY FINANCIAL MEASURES*
| (Unaudited) | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||||||
| Net sales | $ | 146,421 | $ | 183,316 | (21.4 | %) | $ | 477,589 | $ | 604,007 | (20.9 | %) | ||||
| Gross profit | $ | 89,824 | $ | 111,551 | (19.5 | %) | $ | 290,601 | $ | 365,187 | (20.4 | %) | ||||
| Gross margin | 61.3 | % | 59.9 | % | 60.8 | % | 60.5 | % | ||||||||
| GAAP operating income | $ | 15,325 | $ | 28,788 | (46.8 | %) | $ | 55,364 | $ | 105,507 | (47.5 | %) | ||||
| Adjusted operating income* | $ | 14,571 | $ | 28,318 | (48.5 | %) | $ | 55,867 | $ | 102,883 | (45.7 | %) | ||||
| GAAP operating margin | 10.5 | % | 15.5 | % | 11.6 | % | 17.5 | % | ||||||||
| Adjusted operating margin* | 10.0 | % | 15.2 | % | 11.7 | % | 17.0 | % | ||||||||
| GAAP net income | $ | 12,953 | $ | 22,356 | (42.1 | %) | $ | 45,303 | $ | 80,402 | (43.7 | %) | ||||
| Adjusted net income* | $ | 12,390 | $ | 22,005 | (43.7 | %) | $ | 45,679 | $ | 78,442 | (41.8 | %) | ||||
| Effective tax rate | 25.1 | % | 25.1 | % | 25.4 | % | 25.4 | % | ||||||||
| GAAP diluted EPS | $ | 0.50 | $ | 0.87 | (42.5 | %) | $ | 1.77 | $ | 3.14 | (43.6 | %) | ||||
| Adjusted diluted EPS* | $ | 0.48 | $ | 0.86 | (44.2 | %) | $ | 1.78 | $ | 3.07 | (42.0 | %) | ||||
| Cash flows from operating activities | $ | 23,664 | $ | 33,419 | (29.2 | %) | $ | 53,954 | $ | 74,358 | (27.4 | %) | ||||
* See reconciliation of GAAP to adjusted key financial measures in the back of this release.
BALANCE SHEET and CASH FLOW
Cash and investments totaled
Cash dividends paid were
Cash from operating activities totaled
Inventories, net totaled
Customer deposits from undelivered written orders totaled
No debt outstanding at March 31, 2024.
DIVIDENDS
On January 23, 2024, the Company’s Board of Directors declared a regular quarterly cash dividend of
CONFERENCE CALL
Ethan Allen will host a conference call with investors and analysts today, April 24, 2024, at 5:00 PM (Eastern Time) to discuss these results. The conference call will be webcast live from the Company’s Investor Relations website at https://ir.ethanallen.com.
The following information is provided for those who would like to participate in the conference call:
- U.S. Participants: 877-705-2976
- International Participants: 201-689-8798
- Meeting Number: 13744610
For those unable to listen live, an archived recording of the call will be made available on the Company’s website referenced above for up to six months.
ABOUT ETHAN ALLEN
Ethan Allen (NYSE:ETD), 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 Company-operated and independent licensee 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
Investor Relations Contact:
Matt McNulty
Senior Vice President, Chief Financial Officer and Treasurer
IR@ethanallen.com
ABOUT NON-GAAP FINANCIAL MEASURES
This release is intended to supplement, rather than to supersede, the Company's consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). In this release the Company has included financial measures that are derived from the consolidated financial statements but are not presented in accordance with GAAP. The Company uses non-GAAP financial measures, including adjusted operating income and margin, adjusted net income and adjusted diluted EPS (collectively “non-GAAP financial measures”). The Company computes these non-GAAP financial measures by adjusting the comparable GAAP measure to remove the impact of certain charges and gains and the related tax effect of these adjustments. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, or superior to, the financial performance measures prepared in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measure reported in accordance with GAAP is provided at the end of this release.
FORWARD-LOOKING STATEMENTS
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally, forward-looking statements represent management’s beliefs and assumptions concerning current expectations, projections or trends relating to results of operations, financial results, financial condition, strategic initiatives, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, investments, future economic indicators, business conditions and industry performance. Such forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,” “future,” “strategy,” “opportunity,” “would,” “guidance,” “non-recurring,” “one-time,” “unusual,” “should,” “likely,” “pandemic,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The Company derives many of its forward-looking statements from operating budgets and forecasts, which are based upon detailed assumptions. While the Company believes that its assumptions are reasonable, it cautions that it is difficult to predict the impact of known factors and it is impossible for the Company to anticipate all factors that could affect actual results and matters that are identified as “short-term,” “non-recurring,” “unusual,” “one-time,” or other words and terms of similar meaning may in fact recur in one or more future financial reporting periods.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected. Actual results could differ materially from those anticipated in the forward-looking statements due to a number of risks and uncertainties including, but not limited to, the risks and uncertainties disclosed in Part I, Item 1A. Risk Factors, in the Company’s 2023 Annual Report on Form 10-K and other factors identified in its reports filed with the Securities and Exchange Commission (the “SEC”), available on the SEC's website at www.sec.gov.
All forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements. A reader should evaluate all forward-looking statements made in this release in the context of these risks and uncertainties. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond the Company’s ability to control or predict. The Company is including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. The forward-looking statements included in this release are made only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.
| Ethan Allen Interiors Inc. | |||||||||||
| Condensed Consolidated Statements of Comprehensive Income | |||||||||||
| (Unaudited) | |||||||||||
| (In thousands, except per share data) | |||||||||||
| Three months ended March 31, | Nine months ended March 31, | ||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||
| Net sales | $ | 146,421 | $ | 186,316 | $ | 477,589 | $ | 604,007 | |||
| Cost of sales | 56,597 | 74,765 | 186,988 | 238,820 | |||||||
| Gross profit | 89,824 | 111,551 | 290,601 | 365,187 | |||||||
| Selling, general and administrative expenses | 75,253 | 83,233 | 234,734 | 262,342 | |||||||
| Restructuring and other charges, net of gains | (754 | ) | (470 | ) | 503 | (2,662 | ) | ||||
| Operating income | 15,325 | 28,788 | 55,364 | 105,507 | |||||||
| Interest and other income, net | 2,037 | 1,123 | 5,541 | 2,420 | |||||||
| Interest and other financing costs | 64 | 52 | 177 | 157 | |||||||
| Income before income taxes | 17,298 | 29,859 | 60,728 | 107,770 | |||||||
| Income tax expense | 4,345 | 7,503 | 15,425 | 27,368 | |||||||
| Net income | $ | 12,953 | $ | 22,356 | $ | 45,303 | $ | 80,402 | |||
| Net income per diluted share | $ | 0.50 | $ | 0.87 | $ | 1.77 | $ | 3.14 | |||
| Diluted weighted average common shares | 25,650 | 25,599 | 25,632 | 25,580 | |||||||
| Ethan Allen Interiors Inc. | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| (Unaudited) | ||||||
| (In thousands) | ||||||
| March 31, | June 30, | |||||
| ASSETS | 2024 | 2023 | ||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 63,862 | $ | 62,130 | ||
| Investments | 82,356 | 110,577 | ||||
| Accounts receivable, net | 7,991 | 11,577 | ||||
| Inventories, net | 144,474 | 149,195 | ||||
| Prepaid expenses and other current assets | 27,627 | 25,974 | ||||
| Total current assets | 326,310 | 359,453 | ||||
| Property, plant and equipment, net | 219,013 | 222,167 | ||||
| Goodwill | 25,388 | 25,388 | ||||
| Intangible assets | 19,740 | 19,740 | ||||
| Operating lease right-of-use assets | 114,023 | 115,861 | ||||
| Deferred income taxes | 929 | 640 | ||||
| Other assets | 36,813 | 2,204 | ||||
| Total ASSETS | $ | 742,216 | $ | 745,453 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued expenses | $ | 24,774 | $ | 28,565 | ||
| Customer deposits | 80,526 | 77,765 | ||||
| Accrued compensation and benefits | 19,057 | 23,534 | ||||
| Current operating lease liabilities | 27,208 | 26,045 | ||||
| Other current liabilities | 4,544 | 7,188 | ||||
| Total current liabilities | 156,109 | 163,097 | ||||
| Operating lease liabilities, long-term | 100,974 | 104,301 | ||||
| Deferred income taxes | 3,032 | 3,056 | ||||
| Other long-term liabilities | 4,763 | 3,993 | ||||
| Total LIABILITIES | $ | 264,878 | $ | 274,447 | ||
| Shareholders’ equity | ||||||
| Ethan Allen Interiors Inc. shareholders’ equity | $ | 477,391 | $ | 471,028 | ||
| Noncontrolling interests | (53 | ) | (22 | ) | ||
| Total shareholders’ equity | $ | 477,338 | $ | 471,006 | ||
| Total LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 742,216 | $ | 745,453 | ||
Reconciliation of Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with GAAP, the Company uses non-GAAP financial measures, including adjusted operating income and margin, adjusted net income and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below.
These non-GAAP measures are derived from the consolidated financial statements but are not presented in accordance with GAAP. The Company believes these non-GAAP measures provide a meaningful comparison of its results to others in its industry and prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, its financial performance measures prepared in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than the Company does, limiting the usefulness of those measures for comparative purposes. Despite the limitations of these non-GAAP financial measures, the Company believes these adjusted financial measures and the information they provide are useful in viewing its performance using the same tools that management uses to assess progress in achieving its goals. Adjusted measures may also facilitate comparisons to historical performance.
The following tables provide a reconciliation of non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures.
| (Unaudited) | ||||||||||||||||||
| (In thousands, except per share data) | Three months ended | Nine months ended | ||||||||||||||||
| March 31, | March 31, | |||||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||||||||
| Consolidated Adjusted Operating Income / Operating Margin | ||||||||||||||||||
| GAAP Operating income | $ | 15,325 | $ | 28,788 | (46.8 | %) | $ | 55,364 | $ | 105,507 | (47.5 | %) | ||||||
| Adjustments (pre-tax)* | (754 | ) | (470 | ) | 503 | (2,624 | ) | |||||||||||
| Adjusted operating income* | $ | 14,571 | $ | 28,318 | (48.5 | %) | $ | 55,867 | $ | 102,883 | (45.7 | %) | ||||||
| Consolidated Net sales | $ | 146,421 | $ | 186,316 | (21.4 | %) | $ | 477,589 | $ | 604,007 | (20.9 | %) | ||||||
| GAAP Operating margin | 10.5 | % | 15.5 | % | 11.6 | % | 17.5 | % | ||||||||||
| Adjusted operating margin* | 10.0 | % | 15.2 | % | 11.7 | % | 17.0 | % | ||||||||||
| Consolidated Adjusted Net Income / Adjusted Diluted EPS | ||||||||||||||||||
| GAAP Net income | $ | 12,953 | $ | 22,356 | (42.1 | %) | $ | 45,303 | $ | 80,402 | (43.7 | %) | ||||||
| Adjustments, net of tax* | (563 | ) | (351 | ) | 376 | (1,960 | ) | |||||||||||
| Adjusted net income | $ | 12,390 | $ | 22,005 | (43.7 | %) | $ | 45,679 | $ | 78,442 | (41.8 | %) | ||||||
| Diluted weighted average common shares | 25,650 | 25,599 | 25,632 | 25,580 | ||||||||||||||
| GAAP Diluted EPS | $ | 0.50 | $ | 0.87 | (42.5 | %) | $ | 1.77 | $ | 3.14 | (43.6 | %) | ||||||
| Adjusted diluted EPS* | $ | 0.48 | $ | 0.86 | (44.2 | %) | $ | 1.78 | $ | 3.07 | (42.0 | %) | ||||||
* Adjustments to reported GAAP financial measures including operating income and margin, net income and diluted EPS have been adjusted by the following: | ||||||||||||
| (Unaudited) | Three months ended | Nine months ended | ||||||||||
| (In thousands) | March 31, | March 31, | ||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Orleans, Vermont flood | $ | (103 | ) | $ | - | $ | 2,243 | $ | - | |||
| Gain on sale-leaseback transaction | (656 | ) | (655 | ) | (1,966 | ) | (3,566 | ) | ||||
| Severance and other charges | 5 | 185 | 226 | 942 | ||||||||
| Adjustments to operating income | $ | (754 | ) | $ | (470 | ) | $ | 503 | $ | (2,624 | ) | |
| Related income tax effects on non-recurring items(1) | 191 | 119 | (127 | ) | 664 | |||||||
| Adjustments to net income | $ | (563 | ) | $ | (351 | ) | $ | 376 | $ | (1,960 | ) | |
(1) Calculated using the marginal tax rate for each period presented
FAQ
What were Ethan Allen's fiscal 2024 third quarter results?
What initiatives has Ethan Allen launched recently?
Why is there lower demand for Ethan Allen products post-pandemic?
