DANBURY, CT — Ethan Allen Interiors Inc. reported lower sales but strong margins and a robust balance sheet for fiscal 2024's second quarter financial and operating results ended December 31, 2023.

Farooq Kathwari, Ethan Allen’s Chairman, president and CEO said the results show a return to pre-pandemic levels. "The pandemic period," Kathwari said, "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 the second quarter ended December 31, 2018, he said that each of these important areas contributed to the strengthening of the enterprise. Gross margin increased to 60.2% in the 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," he said. "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.”

“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,” said 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