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Ethan Allen Reports Fiscal 2023 and Fourth Quarter Results

General News
Ethan Allen Interiors Logo - Furniture Manufacturer

Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE: ETD) today reported its financial and operating results for the fiscal 2023 full year and fourth quarter ended June 30, 2023.

Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “We are pleased with our financial and operating results for the fiscal 2023 full year and fourth quarter ended June 30, 2023. For the fiscal year, we reported consolidated net sales of $791.4 million, gross margin of 60.7%, adjusted operating margin of 16.9% and adjusted diluted EPS of $4.03. We continue to generate strong operating cash flow and as of June 30, 2023, we had total cash and investments of $172.7 million and no debt. For our fourth quarter ended June 30, 2023, we delivered consolidated net sales of $187.4 million, gross margin of 61.5%, adjusted operating margin of 16.3% and adjusted diluted EPS of $0.96. During our fiscal year ended June 30, 2023, we distributed $46.4 million of cash dividends. We are also pleased to announce that yesterday our Board approved a special cash dividend of $0.50 per share and our regular quarterly cash dividend of $0.36 per share, both payable on August 31, 2023.”

Mr. Kathwari continued, “I would like to thank our team for continuing to develop a strong entrepreneurial enterprise with a focus on great quality, service and strong financial results. As we enter the post COVID-19 era, we believe we are well positioned. During the last three years we have strengthened major areas of our vertically integrated enterprise including talent, marketing, service, technology and social responsibility.”

“Our focus moving forward will continue to strengthen the various areas of our vertically integrated structure, including developing a strong team which is entrepreneurial and disciplined, enhancing our product offerings under the umbrella of Classics with a Modern Perspective, repositioning our retail network as an Interior Design Destination and ongoing investments in technology to further enhance our marketing, our North American manufacturing and our logistics. While we understand the challenges of a slower economy and the reduction of consumer focus on the home that had occurred due to the COVID-19 pandemic, we remain cautiously optimistic due to our many initiatives over the last three years,” concluded Mr. Kathwari.

Full Fiscal Year 2023 Highlights*

  • Consolidated net sales of $791.4 million were lower by 3.2%
    • Retail net sales of $662.6 million were lower by 4.0%
    • Wholesale net sales of $449.6 million were lower by 7.1%
  • Written order trends
    • Retail segment written orders increased 0.8% compared with pre-pandemic fiscal 2019; down 12.3% compared with fiscal 2022
    • Wholesale segment written orders decreased 2.1% compared with fiscal 2019; down 9.0% from last year
  • Consolidated gross margin rose to 60.7%; adjusted operating margin improved to 16.9%
  • Diluted EPS of $4.13 compared with $4.05; adjusted diluted EPS of $4.03 increased 2.5%
  • Generated $100.7 million of cash from operating activities, up from $69.4 million a year ago
  • Paid cash dividends of $46.4 million; increased the Company’s regular quarterly cash dividend by 12.5% in April 2023 and paid a $0.50 per share special cash dividend in August 2022
  • Ethan Allen launched its next reinvention with the grand reopening of the Danbury Connecticut Design Center as an Interior Design Destination
  • Opened multiple new design centers during fiscal 2023 that showcase the Company’s unique vision of American style while combining complimentary interior design services with technology
  • Named one of America’s Top 10 Retailers by Newsweek, including recognition as the #1 retailer of Premium Furniture
  • For the fourth year in a row, Ethan Allen’s upholstery manufacturing operation in Mexico has been named “Empresa Socialmente Responsable” (Environmentally and Socially Responsible) by the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility

Fiscal 2023 Fourth Quarter Highlights*

  • Consolidated net sales of $187.4 million were lower by 18.4%
    • Retail net sales of $156.2 million were lower by 17.2%
    • Wholesale net sales of $114.5 million were lower by 16.7%
  • Written order trends
    • Retail segment written orders decreased 1.2% compared with the pre-pandemic fourth quarter of fiscal 2019; down 12.5% compared with the fourth quarter of fiscal 2022
    • Wholesale segment written orders decreased 2.5% compared with the fourth quarter of fiscal 2019; decreased 14.7% from a year ago
  • Consolidated gross margin increased to 61.5%, up from 58.2% a year ago due to a favorable sales mix, disciplined promotional activity and lower input costs including reduced inbound freight and raw material costs partially offset by lower delivered unit volume
  • Operating margin of 16.9%; adjusted operating margin of 16.3% compared with 18.5% last year due to lower consolidated net sales, higher retail delivery and health insurance costs, and new product display, merchandising and sample costs partially offset by gross margin expansion and the Company’s ability to maintain a disciplined approach to cost savings and expense control; selling, general and administrative expenses decreased 7.6% and equaled 45.1% of net sales, an increase from 39.8% last year due to fixed cost deleveraging on lower sales
  • Advertising expenses were equal to 1.9% of net sales compared to 1.5% in the prior year fourth quarter; increased use of digital and direct mail advertising to further penetrate the market; promotional activity remained disciplined and was comparable to the prior year
  • Diluted EPS of $0.99 compared with $1.23; adjusted diluted EPS of $0.96 decreased 23.2%
  • Generated $26.3 million of cash from operating activities compared to $29.4 million a year ago
  • Paid regular quarterly cash dividends totaling $9.2 million, up 12.7% from last year
  • Ended the quarter with $172.7 million in cash and investments with no debt outstanding
  • Reduced inventory levels to $149.2 million as of June 30, 2023, down $27.3 million or 15.5% from a year ago

* See reconciliation of GAAP to adjusted key financial measures in the back of this press release. Comparisons are to the fourth quarter and full fiscal 2022 year.

Key Financial Measures*

Ethan Allen Key Financial Measures table

Balance Sheet and Cash Flow

Cash and investments totaled $172.7 million at June 30, 2023, compared with $121.1 million a year ago. The increase of $51.6 million during the fiscal year was primarily due to $100.7 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 $46.4 million in cash dividends paid and capital expenditures of $13.9 million as the Company continues to return capital to shareholders and reinvest back into the business.

Cash dividends paid were $46.4 million during fiscal 2023, which included a special cash dividend of $12.7 million, or $0.50 per share paid in August 2022 and a 12.5% increase to the regular quarterly cash dividend.

Cash from operating activities totaled $100.7 million during fiscal 2023, an increase from $69.4 million in the prior year due to a reduction in inventory carrying levels and accounts receivable combined with higher net income partially offset by a decline in customer deposits. 

Inventories, net decreased to $149.2 million at June 30, 2023, compared with $176.5 million a year ago, 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 $77.8 million at June 30, 2023, a decrease of $43.3 million during the fiscal year as net shipments outpaced written orders, which also helped reduce backlog. As of June 30, 2023, wholesale order backlog was $74.0 million, down 27.7% from a year ago. The number of weeks of wholesale backlog was reduced by 6.7% compared to the prior year, bringing backlog more current but still higher than pre-pandemic levels.

No debt outstanding at June 30, 2023.

Dividends

On August 1, 2023, the Company’s Board of Directors declared a $0.50 per share special cash dividend to shareholders of record on August 15, 2023, payable on August 31, 2023. The Board also declared a regular quarterly cash dividend of $0.36 per share, payable on August 31, 2023, to shareholders of record at the close of business on August 15, 2023. Ethan Allen has a long history of returning capital to shareholders and is pleased to pay a special cash dividend, which highlights the Company’s strong balance sheet and operating results. The Company has paid a special cash dividend each of the past three years and paid an annual cash dividend every year since 1996.

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.