Ethan Allen Reports Strong Fiscal 2023 Second Quarter Operating Results

Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE: ETD) today reported its financial and business results for its fiscal 2023 second quarter ended December 31, 2022.

Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “We are pleased with our second quarter operating performance. Our strong delivered net sales of $203.2 million were helped by our backlog. Our gross margins increased to 61.0% and operating margins rose to 18.2%. Our adjusted diluted earnings per share of $1.10 grew by 15.8%. We continued to generate strong operating cash flow and as of December 31, 2022, we had total cash and investments of $140.4 million and no debt. Our retail written orders have returned to near pre-pandemic levels. We are also pleased that yesterday we announced a regular quarterly cash dividend of $0.32 per share, payable February 21, 2023.”

Mr. Kathwari continued, “In November 2022 we opened a new state-of-the-art design center in Skokie, Illinois, a suburb of Chicago. This design center projection continues to position us as a leading Interior Design Destination. Combining personal service of our talented interior designers with advanced technology is an important focus. Over the next twelve months, we plan to greatly enhance the projection of all our design centers.”

“We are well-positioned with continued strengthening of our vertically integrated structure, which includes enhancing our product offerings, continued re-positioning of our retail network as a premier Interior Design Destination, investments in our North American manufacturing, which accounts for about 75% of our net sales, and investing in technology and logistics. We remain cautiously optimistic,” concluded Mr. Kathwari.

Fiscal 2023 Second Quarter Highlights

• Consolidated net sales of $203.2 million decreased 2.4%
  • Retail net sales of $171.8 million decreased 4.4%
  • Wholesale net sales of $106.2 million decreased 8.3%
• Written order trends
  • Retail segment written orders decreased 1.5% compared with the pre-pandemic second quarter of fiscal 2019; down 16.3% compared with the second quarter of fiscal 2022
  • Wholesale segment written orders were 18.6% lower than the second quarter of fiscal 2019; declined 20.2% from a year ago
• Consolidated gross margin increased to 61.0%, up from 58.8% a year ago due to product pricing actions taken over the past 12 months, a favorable product mix, disciplined promotional activity and lower inbound freight costs
• Operating margin of 18.2%; adjusted operating margin of 18.1% compared with 15.7% last year due to wholesale gross margin expansion and maintaining a disciplined approach to cost savings and expense control partially offset by lower net sales and higher retail delivery costs; adjusted selling, general and administrative expenses decreased from 43.1% of net sales to 42.9%
• Advertising expenses were equal to 2.0% of net sales, the same as in the prior year second quarter; we continue to utilize various advertising mediums including national television, direct mail and digital
• Diluted EPS of $1.10 compared with $1.05; adjusted diluted EPS of $1.10 increased 15.8%
• Generated $2.5 million of cash from operating activities; cash and investments totaled $140.4 million with no debt outstanding
• Ended the quarter with $159.9 million in inventory, down $16.6 million from June 30, 2022
• The Company held a 2022 Virtual Convention in December, which highlighted Ethan Allen’s rich history in classic style with a modern perspective, the service of its vertically integrated manufacturing and logistics networks, the strengthening of the retail network and the importance of being an interior design destination

Balance Sheet and Cash Flow

Cash and investments totaled $140.4 million at December 31, 2022, compared with $121.1 million at June 30, 2022. The increase of $19.3 million during the year was primarily due to $40.9 million in cash generated from operating activities and $8.1 million in proceeds received from a sale-leaseback transaction completed in August 2022 partially offset by $20.9 million in cash dividends paid and capital expenditures of $8.5 million as the Company continues to return capital to shareholders and reinvest back into the business.

Cash dividends paid were $20.9 million during the first six months ended December 31, 2022, which included a special cash dividend of $12.7 million, or $0.50 per share. During the second quarter of fiscal 2023, the Company’s Board declared a regular quarterly cash dividend of $0.32 per share, which was paid on January 4, 2023 to shareholders of record as of December 7, 2022. The $0.32 per share cash dividend represented a 28.0% increase over the prior year regular quarterly cash dividend.

Cash from operating activities totaled $40.9 million during the first half of fiscal 2023, an increase from $22.7 million in the prior year period due to an improvement in working capital and higher net income. The increase in working capital was primarily from a reduction in customer deposits as net shipments outpaced written orders and improved collections on outstanding accounts receivable, which converted shipments to cash at a faster pace, partially offset by a reduction in inventory carrying levels. 

Inventories, net decreased to $159.9 million at December 31, 2022, compared with $176.5 million at June 30, 2022, as the Company restores its operating inventory levels to more historical norms as backlog declines. Inventory balances continue to decrease as the Company seeks to reduce its levels of inventory while also ensuring appropriate levels are maintained to service its customer base.

Customer deposits from written orders totaled $83.7 million at December 31, 2022, a decrease of $37.4 million during the fiscal year as net shipments outpaced written orders.

No debt outstanding at December 31, 2022.

Dividends

On January 24, 2023, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.32 per share, payable on February 21, 2023, to shareholders of record at the close of business on February 7, 2023.

For the complete press release, click here.

About Ethan Allen

Ethan Allen Interiors Inc. (NYSE: ETD) is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. The Company is a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers its customers stylish product offerings, artisanal quality, and personalized service. The Company provides complimentary interior design service to its clients and sells a full range of home furnishings through a retail network of design centers located throughout the United States and abroad as well as online at ethanallen.com. Ethan Allen owns and operates ten manufacturing facilities located in the United States, Mexico and Honduras, including one sawmill, one rough mill and a lumberyard. Approximately 75% of its products are manufactured or assembled in these North American facilities.

Contact:

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

Source: Ethan Allen Interiors Inc.