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Ethan Allen Interiors (ETD)

Participants
Corey Whitely Ethan Allen Interiors, Inc.
M. Farooq Kathwari Ethan Allen Interiors, Inc.
Cristina Fernández Telsey Advisory Group LLC
Justin Laurence Bergner Gabelli & Company
Beryl Bugatch Raymond James & Associates, Inc.
Jeremy Hamblin Dougherty & Co. LLC
Call transcript
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Operator

Good afternoon, and welcome to the Ethan Allen's Earning Release Conference Call. It is now my pleasure to introduce your host, Mr. Corey Whitely, Executive Vice President, Administration and CFO. Thank you.

You may begin.

Corey Whitely

Anna. you, thank Yeah, welcome quarter Allen's ended and our call fiscal third March to afternoon, conference Ethan for Good XX, XXXX. is will press release and call ethanallen.com non-GAAP information details, conference being this in webcast of and This the to live including where reconciliations you which call. also release, our on referred find contains supporting recorded on

SEC financial As our Farooq on are actual and our risks could the any cause for his during I that, some subject results telephone initiatives refer a will ongoing call. After differ filings Farooq uncertainties, company reminder, Please obligation the then here to With our comments review is risks. today CEO, will with update complete business to include up forward-looking opening Farooq or further statements provide Chairman materially. to results. discussed our of before will revise updates that remarks, a The lines matters no provides Kathwari which opening follow forward-looking questions. to this those on Kathwari. for and details assumes

M. Farooq Kathwari

have Corey, all good to you you, Thank call. on our and earnings

our we our discussed investor service XX we positioned As well and grow April are to meeting, in business.

Corey increase presence many We're brief for comments. our overview, also shares leveraging fashionable pleased Board Directors to further of that as strengthened questions expanding year cash provide importantly have shares. X repurchases by also multiplying the marketing. our open the manufacturing to provides most and dividends Corey? increasing and vertically financial premier initiatives, this this have and increased destination, month, including X% integrated a We've and and will about After outstanding XX.X%. I interior design information We repurchased share of our a million offerings, our our relevant logistics continued and we

Corey Whitely

X.X% XXXX Thank for Farooq. third you, million. increased quarter of net Consolidated $XXX.X to the Yeah. fiscal sales

helped from challenges shipments to quarter half, from Retail Our decreased working due X.X% increase in production now down moving wholesale. months. wholesale the the the we XX% sales. the the through backlogs backlog which the back come to next compared delayed to manufacturing manufacturing challenges, earlier made drive our good expect several year, first sales and production and retail to past primarily over progress increased the X.X%, during retail The prior order with

for to as the Our consolidated which in and including a shipments sales primary was sales gross a the government quarter, impact Higher gross raw consolidated XX.X% for the mix retail material also margin Strong for the margins. costs of was change year. percent contract wholesale The gross of to quarter to in was shipments, compared retail XX.X%. margin. our mix, drove XX.X% prior the impacted

million, our adjusted advertising and expenses the Our operating were by during expense quarter. XX% approximately $XX.X increased

totaled balance $XX.X securities cash the to and our sheet, Turning million.

$XX.X dividends During million quarter, of We XX% $XX.X we paid under the fiscal have out special increase the facility. debt credit outstanding million, in a period. with the our prior including dividend. over we no the quarter ended year And paid year-to-date, dividends,

fiscal the Jobs was rate the [Tax Cut a Jobs for tax quarter for period and XX.X% of year-to-date and Tax the effective Cuts Our Act]. XX.X% (sic) as and result Act

to the will turn be rate we I will back that, to Farooq. full XXXX, We year With the effective and XX%. for our approximately XX% approximately fiscal for expect fiscal be expect it effective over rate

M. Farooq Kathwari

Thank you, Corey.

company. provide help cash sales leading position us our grow profitability many I reinforce and as design stronger flow our as interior mentioned, initiatives As should our the and we

interior regarded company. as remain the design strengthening With Our about are of in associates design X,XXX focus X,XXX our internationally, we talent. interior North and leading areas America well

of in right process XX retain centers internationally, in our than of design total, in domestically which design The and attract continue are XX% centers We America last talent. continues. XXX the have we been during and relocated America. XXX to locations, years. The this have North More North

May, be as the that a to the detail mid-century the style to strengthened: attainable Allen modern timeless, continue with Ethan offerings of we projection Our with known and elegance introduced of introduction all Artisan, in for. in and attention of September, quality is Uptown;

have including by XX% our from presence. We increased strong last marketing television national quarter, year a

continued We about to quarter fourth advertising in increase our by the XX%.

to quarter gross the due in range. we third In expect addition, business, the to a be larger margin wholesale

be position international interior government more X,XXX to Last shipped priority. our a have enable service expect. U.S. North personal integrated than areas to of with our We quarter, on the and them productive vertically and expanded clients to newer better and service to provide manufacturing tablets American all is designers our structure out business. in Retail, logistics we a technology technology be to Adding

both our continue all our and art be to in outside also invest suppliers. state of our refine business. and Conducting business We machinery within and socially organization to our relationships priority, manufacturing in the improve in responsible manner to software a with continues a

we with date July (sic) will payment record As of date XX. of in XX press [$X.XX] a regular $X.XX our XX, release, July mentioned company dividend of a the April a pay and

that strong to position our up pleased shares. prudence for question with to shares now repurchase plan a also ready advised our maintaining discussion company I the of questions of of April, in open X in repurchased am and liquidity. repurchase We answers? of outstanding Anna, and additional the comments. to and policy the X% authorized we keeping are of board for the a We and approximately goal any million

Operator

And question a we have from Fernández. Cristina

M. Farooq Kathwari

Yes. Cristina. Hello,

Cristina Fernández

the normalized manufacturing it look how wholesale break us the much make third meant, the the your with gross help to I at would I Farooq, margin to wanted the that is that's Oh, quarter, for what be the like the to and quarter, it that the sure third hi, on you through down similar you comment also, true how a And good sales margin? compression mix was really quarter. clarify for can margin when due fourth afternoon. inefficiencies we XX.X%. much gross to wanted

M. Farooq Kathwari

margin Cristina, we close third quarter in fourth Yes. gross will the quarter. what in to the be had

of a margin number Now, impacted the third factors. quarter gross by was

a retail, total main the one year margin, it retail factor, know XX.X% to has news wholesale mostly you versus government previous course, that That very the was higher and first the about due fact was about The we the to as of is total close mix retail to it important contract. gross news was business; quarter. is XX% business business in that the – the a increased our positive to was

X% of would increase there second costs quarter The price factor the material in we've about of say or of it in was the third those some raw on later still was even though will going impacted, Xst, costs due to increase I to months. the April are and that so margin show a as in gross impacted taken be

Cristina Fernández

less expected, was to Okay. Thanks. little we the that you higher marketing allow side, expenses bit better? how the than And that what were had increase a control increase to you spend then, much marketing, what given on SG&A the offsets

M. Farooq Kathwari

in given not the a one take not was, to would included restrictive of the things that stock and had I became we been some investor of expenses especially, and decided the third it I the that that Well, which we to credit meeting, quarter. reduced would take decided that had – at was that myself I our me. mention

have given back restricted expenses the upon also was reduction about this, the some to quarter. stock been of $X.X that also expenses, was in that addition based – of we performance it to million in credit In our that was would went had

Cristina Fernández

being this specific recurring think about just quarter should Thanks. But we not and this third forward? to going

M. Farooq Kathwari

quarter. third was That's in right. It specifically

Cristina Fernández

you. Thank Yeah.

Operator

question Bergner. And your comes next from Justin

M. Farooq Kathwari

Yeah. Justin. Hello,

Justin Laurence Bergner

afternoon, Good are Farooq. Hi. you? How

M. Farooq Kathwari

Thanks very much.

we you Now, are that, see buying Justin, our shares, right?

Justin Laurence Bergner

Yes.

M. Farooq Kathwari

ahead. Go right. All

Justin Laurence Bergner

Okay.

take for question. restricted quick the inclusive restricted million Is Just question couple ask the last credit stock to just $X.X I a top you're the that, of of wanted stock taking that or is but to on would million? about you that not $X.X the of normally clarifiers,

M. Farooq Kathwari

stock. decided I, XXXX to it. it in No, about be million fiscal it they but I not, me and not a our that was Actually I Justin, I $X.X did year, was this it any though not had cash it was. was, decided would fiscal XXXX, should to for what board considered take happened even they told fiscal in given last restricted was, give and what quarter XXXX And bonus

Justin Laurence Bergner

$X.X so Okay, $X.X but doesn't within million the that's become million, $X.X million?

M. Farooq Kathwari

No, it million. is $X.X (XX:XX:XX)

Justin Laurence Bergner

to does affect margin or about gross comment secondly, similar the and margin QX, the back And the margin, the to Okay. QX in that to add small adjusted wholesale it regards back gross that add does to being then the SG&A? operating $XXX,XXX,

M. Farooq Kathwari

it's an SG&A. No,

Justin Laurence Bergner

Okay.

So, of purposes is for margin as sort reported the gross of modeling.

M. Farooq Kathwari

Yeah. Yeah.

Justin Laurence Bergner

for this what mean I of of then in what slow million And repurchases repurchase, repurchase on you'd sort share a from clearly purchased the is is April. rate that's beyond to you've gone assume timeframe million? anticipated the $X in April, that Okay. I rate a pretty dramatic and $X the

M. Farooq Kathwari

we beyond that's is it purchased, what Yeah, right.

in As good my we'll some I mentioned judgment. use comments,

As how went see since now we in our and buy, sure business and past, we have continue close back make liquidity, our XX% to to have to conditions I back stock that view repurchase done we'll keeping the want public. in price, company we in the of shares purchased

our put will pressure We'll been but have think continue also sure the cash are want don't low. to that. prices I that that we I make – we and to it, doing So flow. do much buy don't relatively on that too

Justin Laurence Bergner

of April then, month-to-date And any Okay. sort trends? comment on lastly,

M. Farooq Kathwari

about XX%, will of last XX% five, the days see. six get month, We the in so business our we of

campaign. very a strong television very, have national We

We in week increase seen have days, XX last traffic. or in the

because this expect last And have seen year last the The seven, versus in days, next eight period are have first Easter in it that year we we week But in XX somewhat traffic. two it in week, to slow Passover positive increase in a or an days. time was impact fell the March.

Justin Laurence Bergner

you. Thank Okay.

M. Farooq Kathwari

right. All

Justin.

Operator

from your next comes And question Budd...

M. Farooq Kathwari

Bugatch.

Operator

Bugatch. Yes

M. Farooq Kathwari

Hello, are Bugatch. Yeah, you? How Budd.

Beryl Bugatch

I'm all are right, you? How Farooq.

M. Farooq Kathwari

as easier is is name Your yours, – name my Budd. than

Beryl Bugatch

Well, bit about a Farooq. Talk that's advertising. good,

I think it...

M. Farooq Kathwari

Yeah.

Beryl Bugatch

think and terms more bit you quarter can initially and than for come in us, about little the a will year? in fourth you of you the talk told where expense in it ...came

M. Farooq Kathwari

nature. spend stage I had perhaps XX%, be run had in I things at close the $XX We'll In we that's in next say And ran probably that after and Budd, we'll think in quarter, what and that continuing this quarter close quarter, are would would the April. think that it said came to instead million some then, spending the advertising. most it this I in we we're cable advertising. about at May. we it to pretty said. to spending run looking close We what national, that did. fourth of national to close at of we national look to we'll We in

Beryl Bugatch

did million, say? you $XX

M. Farooq Kathwari

Yes, $XX million. Yeah.

Beryl Bugatch

Okay.

Okay.

M. Farooq Kathwari

increase. Which is about XX% an

Beryl Bugatch

particularly is you most in able wholesale. substantially, in fourth Okay. backlog up that Will deliver be of And the your quarter? to

M. Farooq Kathwari

I think make fiscal a fourth yes, in but quarter it, would of the the into I of that, we some not on it go most of say and first big next impact will will it year. quarter

Beryl Bugatch

for characterize quarter Department much backlog how have And is the orders the can you come of State and the in state? how

M. Farooq Kathwari

a our wholesale, wholesale. we maybe mentioned in Well, have have XX% increase in – we Corey about

Corey Whitely

Right.

M. Farooq Kathwari

amount contract say is receive I would new Budd, continued government. wholesale. we've the in a the XX% to and fair of from government that orders,

Beryl Bugatch

quarter, a And little was bit foreign the How overseas business. talk that? the Okay. about business for

M. Farooq Kathwari

has Overseas China. positive, in also business been especially

We licensees, opened just Allen with up, up have Ethan also an opened have in we Cambodia. our

back Allen one, in up few in months Taipei. We opened have a Indonesia, a Ethan an small opened in

conference, I making mentioned And Chengdu, capital of is province. I recently there, China, course, of design at the a is major one. opened investor as you So as But was center Sichuan our they in which we're know major progress.

So grow. China continued has to

Beryl Bugatch

earn-back had you your expected. And as And $XX of originally this think quarter for you're to Where number of there for in the the Okay. Is talking be comfortable you that think Cristina in offset course, spending restricted took incentive we the would probably at comp for the million about stock said $XX had in do that you operating fourth million, expense? and quarter? come I down. SG&A a

M. Farooq Kathwari

because retail would our – and are it our and we depends deliveries, based it you depends in retail but upon I do say John here, would deliveries is, that also business upon I Corey I as especially think up, know, expenses number this quarter. go of also Well, the upon

range – expect line, So depends we to XX%, in the of on the it really of expect be it sales. we top total our I would XX% it all say that, that but again,

Beryl Bugatch

very, you Thank much. right. All Okay. very

M. Farooq Kathwari

Thanks, Budd.

Operator

next Jeremy your from comes Hamblin. question And

M. Farooq Kathwari

Yeah. Hello, Jeremy.

Jeremy Hamblin

come the second Thanks back for gross Hi. Good evening. taking here. to for want margins the I questions. to a

is I think raw costs. year-over-year about sounds points XXX of it like basis the due impact to material

your attribute basis? seeing you more it kind of inefficiencies out from your Some How of end that on of that's control. peers you're on hard execution would versus a the of year-over-year to much some pressures discounting there, to kind of competitive

M. Farooq Kathwari

a and that's meeting the question challenge out an and a of we some are. see Lots important There Jeremy, pressure. we not on discounting to Yeah. are what to we because degree, going there. level of is that

characterize So, XX% probably have I had I to would plus is it, – our a XX% Then to these inefficiencies plants. new of prior due say in of I gross the we impact would to we making that that done that some raw most material if increases. mix. say this making of we also And products the our that have are due then

say So, factors. a those I it's mixture would all of

Jeremy Hamblin

a just have overall are year. compression, points the item, I profitability at likely probably you compensation. you line look some How – the moving expectations? overall in taking operating with envisioned know not of do you speak seen you on margins that incentive and When get start forward? the of is you're that to that's promotions in to year. again, related been kind think competitive the year, you're prior had you question disappointed terms in year? quite Could And the think track primarily kind gross terms success, aggressive know the some the the done on – where you've to compensation versus the again it speak XXX indication we of for Okay. always in you that maybe the basis incentive then that? had more but – yourselves, back And of call it's similar be on tough of time hasn't down guys the just potentially mean, of a you for past over any much on think I I but margin of of an and we performance set really can if Do that your do what to I

M. Farooq Kathwari

back. will you our very that reason me, last smaller associates that tell our sometimes to what you I or felt earlier but back Overall, any many on decided take, I would gross is this. something decision that I mix contract, margin, was for rest a to of relatively raw or Jeremy, material XX%, XX% year, give in due of and I what price, XX% higher of think it, steps our our this the making I that was probably the is to maybe not I the to – duty that, should so but maybe me, say decide due impact the gave and increases of give – even the too this the impact just somewhat unusual or I discounting. said to was it's I as say due maximum that On due our earnings. I I cost taking board very, I of not I did – incentive, – get to though because and take is sometimes much decided

Jeremy Hamblin

honorable Okay. thing, down. a that to just And turn certainly that's

that coming mix. back Just you're the to making point about

from at are positive rest a State there your point relative standpoint of contract, wholesale the have mix. that the that had your impact overall have you've your a margins margin the and historically, wholesale million segment Department So, $XX negative a your would year is $XX of might the can on thought to may is any million. have versus better think wholesale wholesale this be of this as we Is that business? going I percentage up draw conclusion to I your businesses significantly down be been to quite and businesses bit is rest seen on retail

M. Farooq Kathwari

is not. It No.

that in in, put we that contract. a of is this and – of capacities a I of government we you impact quarter, because the when Carolina expanding, most of lot North think is in increasing us. think our behind had product and you had I And people in of lot inefficiencies, lot new especially the hire new but there of

Jeremy Hamblin

to Okay, just to great. Amazon I Last question, relationship. wanted the back come

last an that business? exploratory that the way that's change know you're helping had that any from I kind or partnership, deal you to drive your but I of summer. this you've gained learnings traction that that, doing don't own it's that think point, at significant was from e-commerce

M. Farooq Kathwari

from them. e-commerce base; happening we seen a that smaller great few increasing small. relatively years, with at is got Our Amazon, we XX% XX%, relationship a still have the this last relatively what's is increase in And

have We your Ethan or are it have at you they really People can want site, to designs, lot makes their on it possible they Allen, up. coming a Amazon is Studio of site. What looking in not in to Allen come site which the with if on chat live our money spending Design to great advertising doing for They their are through Ethan there. go designers us. products look is we

objective to shopping we do to with XX% digital mediums you as sites any what to that's So, is mediums the people able they our Amazon. help our bring our bring of digital our important get traffic stores our are are window into digital XX%, on because know, and their and folks to doing where mediums, so more us is

Jeremy Hamblin

Great. of the Thanks the questions. year. luck for my Good rest taking

M. Farooq Kathwari

Thanks. Jeremy. right, All

Operator

next And Gabelli Bergner from Justin with & question comes your Company.

M. Farooq Kathwari

Justin. Hi,

Justin Laurence Bergner

fourth for quarter? be a also sales as taking Thanks my you percentage Thanks. third expecting gross retail the margin, respect with to overall quarter of follow-up. With consistent to the sales the are

M. Farooq Kathwari

is that Corey, right? Yes.

Corey Whitely

Yes.

M. Farooq Kathwari

because XX% is really so. going operating Objective to we wholesale. reason is and business got we've that's will And is as forward as range be long is had We is in XX.X% is move XX.X%, it be. margin. as okay it the about Yeah, improve our not range or what that to the in that XX% at higher in

Justin Laurence Bergner

you decline, which you think were the about how those catch points material then do about of material basis of and I And of year-on-year raw sort margin gross headwinds, – sorry, year-on-year margin headwinds? the Sure. the half said when XXX gross to up raw

M. Farooq Kathwari

we April Well, price month. X or did X% in about of a this X% increase take

that of However, competitive mentioned earlier, of we as have have consider kind you price also into or not material to take we are a giving. raw we indicated discounting environment had the the also increases, to account what only

say important, ability do manufacturing within is we business April all terms gross margin. Also to efficiencies our in benefit So, of any I catching so those would in the of impact of of is seeing it days improving start we'll terms factors up, our generally, – the in our XX in XX that when we that. is

Justin Laurence Bergner

up I'm Okay. I really on inflation? beyond impact pricing larger guess that was amount to XXX is, sort out what pressure guess that because to able is figure just cost trying not I'm of mix pricing the on mentioned trying residual margin. you I impact gross than and figure residual the to material full points small raw a of beyond catch basis to that of out, going impact you're be impact

M. Farooq Kathwari

last greater The be said, it price as fourth this are, impact this would I increase, the X%. Well, a chances quarter, without was quarter.

increase, Our the lot an of of price level. our do level efficiency, discounting, factors. manufacturing increases we terms our The the then much volume impact overall will our and variable in about both other at a at question question help, there discount margins products. on has The regional also are that also, overall but but how of

you we're integrated company. As vertically know

other sales on of on is those. negative it is go an positive terms it on So it's positive impacts of If all we retail. – is on our both down, positive on logistics, impacts the in leverage they sides. hand, all do increase, our our That manufacturing, get

Justin Laurence Bergner

underlying a like though helpful. I in to very versus, anything seems competitiveness the is of was curious of ago. a if are you I finger sort your competitive something the call the environment getting it, there things more year just mean environment? just on put little accelerate could changed It That's challenging. that

M. Farooq Kathwari

about said us, say – there I for from was a For our our not us do talking margins. if you're I big as sales, impact

of concerned, margin overall competitive. the I mentioned it environment is far the as is as course, On very side factors,

all giving As kinds discounts of most folks at every in level. retail are

in is have history that – we competitive. wasn't company interior that are design that and we designers folks of quality The are position chances lot have that certainly if we not a in interior this we a a industry. But better of it so fact great the that much a be than great are and position are So would service. that today, it we X,XXX we we're a in

Justin Laurence Bergner

in the rest year. luck Okay. the Good of

M. Farooq Kathwari

All right.

Operator

this no have we And questions time. at

M. Farooq Kathwari

thanks very to of Anna, at much Any thank right. call. please an we seeing had know Thanks questions, let our most Conference. of you and you Anna. talking being and I feel thank know. just All for and on us opportunity very the free Investor you, other much,

Operator

conference Thank for you. call, this may disconnect. Ladies you now and your Thank gentlemen, today's you participation. concludes