Furniture giant Ethan Allen says manufacturing tweaks are paying off – Source Journal | So Good News

Fiscal 2023 is off to a good start for Ethan Allen, with the home furnishings maker and retailer posting 17.7 percent consolidated net sales growth and earnings of $1.11 per share on revenue of $214.53 million.

Matt McNulty, Ethan Allen’s chief financial officer, in 2022; September 30 September 30, 2022 He credited the company’s ability to ramp up production and fill outstanding orders as contributing to the increase in the first quarter of the fiscal year ended.

“Previous constraints, including COVID-related closures, labor disruptions, supply chain challenges, shipping delays and raw material availability, have eased in recent times, which has allowed us to reduce the time it takes to turn mail-in shipping orders,” McNulty said. “Starting two quarters ago, we have improved our productivity and during the first quarter we have seen a rise in imports and raw material receipts from shipping container receipts, which was a strong boost in sales.”

As of Sept. 30, Ethan Allen’s wholesale sales were $106 million, down 24.4 percent from a year ago but up 62.1 percent from September 2019. Written orders fell 8.6 percent, but orders rose 7.4 percent compared to an unprecedented 2021 peak. through the first quarter of fiscal 2020 until the pre-epidemic period. Orders written in the wholesale segment fell 7.2 percent from last year, but were down almost as much compared to Q1 2020.

Ethan Allen’s consolidated gross margin was 60.4 percent for the first quarter. McNulty said the company’s retail segment has become a larger part of a favorable product mix, driven by transaction mix and input costs.

On the retail side of the business, Ethan Allen reported sales growth of 18.5 percent, increasing its retail mix from 85 percent of consolidated sales last year to 85.6 percent in the first quarter of this year, boosting overall net profit.

“As we increase shipments of higher wholesale orders, we expect consolidated sales to return to a normalized recovery level on the back of higher wholesale sales as a higher percentage of retail sales,” McNulty said.

Ethan Allen’s adjusted consolidated operating margin increased to 17.6 percent in the current first quarter from 15.2 percent last year. McNulty’s adjusted operating margin increase was primarily due to higher net sales; McNulty said the increase was partially offset by higher cost of sales combined with higher marketing spending along with cost control measures along with retail and wholesale net gross expansion.

When expressed as a percentage of net sales, the company’s SG&A expenses fell to 44.7 percent in 2021, compared to 42.9 percent in the first quarter of this year.

“Our ability to maintain disciplined costs and expenses, including strong cost control measures and tight cost management within our G&A expenses, will continue to help drive operating income growth,” said McNulty.

Ethan Allen’s operating margin expansion combined with double-digit sales growth helped it deliver another quarter of solid profits, with EPS of $1.17, down 48.1 percent from a year earlier. The company’s effective tax rate for the quarter was 25.3 percent, compared to 26.3 percent a year ago.

As of Sept. 30, Ethan Allen had $142.4 million in cash and investments and no debt. The company generated $38.4 million from operating activities during the quarter, an increase from $17 million in the year-ago period, primarily due to higher net income and an increase in working capital.

Ethan Allen’s capital expenditures were $3.2 million for the quarter, including manufacturing, Further investments in various areas including retail design centers and technology. The company continues to pay quarterly special cash dividends, and in August its board declared a special cash dividend of $0.50 per share, in addition to our regular quarterly dividend of $0.32 per share paid on August 30.

CEO Farooq Kathwari says Ethan Allen’s focus going forward will continue to transition from a simple furniture store to an interior design destination. The company has increased its number of interior design associates in its North American stores to 1,200. The company refreshed and repositioned its stores to enhance their status as an interior design destination.

CEO’s take: Ethan Allen enjoyed the same revenue growth that home goods companies experienced in late 2020 and most of 2021, but the company expects softening demand and a return to normal sales numbers ahead, Kathwari said.

“We’re entering the next phase after going through very high demand in our industry, especially in household products, and we’ve seen a sharp decline,” he said. “But as Matt said, we’re still doing higher than our business before COVID. So I’d say we’ll continue to do well because of the various programs. Our written business is moderate, not as high as it was two years ago, but it’s still there. So we’ll continue to see some growth.”