Ethan Allen Reports Fourth Quarter & Full Year Financial Results

July 31, 2024  by Karen Parrish in Business Strategy, Industry   

Farooq Kathwari, Ethan Allen’s chairman, president and CEO commented, “We are pleased to report our strong performance in this post-pandemic period. Despite lower demand and reductions in high backlog, we did well. While sales were lower, our consolidated gross margin remained strong at 60.8% compared with 61.5% a year ago and 54.8% for the fourth quarter ended June 30, 2019.”

“We continued strong cash generation and ended the quarter with total cash and investments of $195.8 million, up from $172.7 million a year ago and significantly higher than $20.8 million five years back. Our inventories have been reduced by 12.5% since June 30, 2019, and totaled $142.0 million on June 30, 2024. We continue to strengthen our teams while also reducing headcount, which is down 28.1% since June 30, 2019.”

Mr. Kathwari continued, “During our fiscal year ended June 30, 2024, we distributed $50.3 million of cash dividends bringing our total to $209.6 million in paid regular and special cash dividends over the last five years. We are also pleased to announce that yesterday our Board approved a special cash dividend of $0.40 per share and a regular quarterly cash dividend of $0.39 per share, both payable on August 29, 2024.”

“During the just completed fiscal 2024 year we launched the very important initiative of projecting the Interior Design Destination, which involved major enhancements to our design center projections throughout North America and internationally. We were also recently named as America’s #1 premium furniture retailer by Newsweek for the second year in a row. We look forward to continuing our progress and remain cautiously optimistic,” concluded Mr. Kathwari.

FISCAL 2024 FOURTH QUARTER HIGHLIGHTS*

• Consolidated net sales of $168.6 million decreased 10.0%

• Retail net sales of $145.1 million were lower by 7.1%
• Wholesale net sales of $91.2 million were lower by 20.3%

• Written order trends

• Retail segment written orders were lower by 1.3%
• Wholesale segment written orders rose 0.4%

• Consolidated gross margin of 60.8% was 70 basis points lower than last year due to deleveraging from lower delivered sales, higher inbound freight and a change in product mix partially offset by lower manufacturing raw material input costs, reduced headcount, disciplined promotional activity, a change in sales mix and fewer designer floor sample sales
   
• Operating margin of 13.4%; adjusted operating margin of 13.1% compared with 16.3% last year due to fixed cost deleveraging from lower delivered sales, gross margin erosion and incremental advertising partially offset by lower headcount, less variable expenses including lower delivery and commissions, and the ability to maintain a disciplined approach to cost savings and operating expense control; the Company’s selling, general and administrative expenses were down 4.9% and equaled 47.7% of net sales, an increase from 45.1% last year due to lower sales volume relative to fixed costs
   
• Advertising expenses were equal to 2.8% of consolidated net sales in the current fourth quarter, up from 1.9% in the prior year period due to additional direct mail campaigns, including the mailing of the Company’s 2024 style book; promotional pricing levels remained disciplined and consistent with a year ago
   
• Diluted EPS of $0.72 compared with $0.99; adjusted diluted EPS of $0.70
   
• Ended the quarter with $195.8 million in total cash and investments with no debt outstanding
   
• Generated $26.2 million of cash from operating activities compared with $26.3 million a year ago
   
• Paid regular quarterly cash dividends of $0.39 per share, up 8.3% from last year, totaling $10.0 million
   

FISCAL 2024 FULL YEAR HIGHLIGHTS*

• Consolidated net sales of $646.2 million decreased 18.3%
  • Retail net sales of $540.6 million were lower by 18.4%
  • Wholesale net sales of $371.1 million were lower by 17.5%
• Written order trends
  • Retail segment written orders decreased 8.4%
  • Wholesale segment written orders declined 10.9%

 

• Consolidated gross margin rose to 60.8%; adjusted operating margin of 12.1%
• Diluted EPS of $2.49 compared with $4.13 last year
• Generated $80.2 million of cash from operating activities compared with $100.7 million a year ago
• Increased the Company’s regular quarterly cash dividend by 8.3% in April 2024 and paid a $0.50 per share special cash dividend in August 2023; paid total cash dividends of $50.3 million during fiscal 2024
• Reduced inventory carrying levels by 4.8%; totaled $142.0 million on June 30, 2024
• Ended the year with 3,404 total associates, down 9.2% from a year ago and 28.1% less than June 2019
• For the second year in a row Ethan Allen was named one of America’s Top 10 Retailers by Newsweek, including recognition as the #1 retailer of Premium Furniture
• Hosted grand reopening events in many of its design centers as part of a series of events unveiling the Company’s next reinvention as the Interior Design Destination; images from each celebration are featured at www.ethanallen.com/grandreopenings
• New state-of-the-art design centers in The Villages, FL, Avon, OH, New York, NY and Louisville, KY were opened during fiscal 2024 that showcase the Company’s unique vision of American style while combining complimentary interior design services with technology
• Ended the fiscal year with 172 retail design centers in North America, including 142 Company-operated and 30 independently owned and operated locations; the Company also has design centers outside North America
• Announced plans to open additional design centers during fiscal 2025, including in Albuquerque, New Mexico and Watchung, New Jersey
• Held the Company’s annual Ethan Allen Day celebration in June to honor the pioneering spirit of its namesake and celebrate the 92-year heritage of Ethan Allen as a proud American brand
• For the fifth year in a row, the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility recognized Ethan Allen’s upholstery manufacturing operations in Silao, Mexico as environmentally and socially responsible 
   

* See reconciliation of GAAP to adjusted key financial measures in the back of this release. Comparisons are to the fourth quarter and full fiscal 2023 year.

 

For comparison purposes, the Company reported the following financial measures during the pre-pandemic fourth quarter of fiscal 2019:

• Consolidated net sales of $183.9 million
• Consolidated gross margin of 54.8%; adjusted gross margin of 55.9%
• Operating margin of -2.5%; adjusted operating margin of 8.6%
• Diluted loss per share of $0.12; adjusted diluted EPS of $0.46
• Cash and investments of $20.8 million
• Generated $10.9 million of cash from operating activities
• Inventories, net totaled $162.4 million

BALANCE SHEET and CASH FLOW

Cash and investments totaled $195.8 million on June 30, 2024, compared with $172.7 million a year ago. The increase of $23.1 million was primarily due to $80.2 million in cash generated from operating activities partially offset by $50.3 million in cash dividends paid and capital expenditures of $9.6 million as the Company continued to return capital to shareholders and reinvest back into the business.

Cash from operating activities totaled $80.2 million during fiscal 2024, a decrease from $100.7 million in the prior year due to lower net income partially offset by improvements in working capital, including lower inventory carrying levels combined with a decrease in accounts receivable from strong cash collections and lower contract sales.

Cash dividends paid were $50.3 million, which included a special cash dividend of $12.7 million paid in August 2023, and an 8.3% increase to the regular quarterly cash dividend.

Inventories, net totaled $142.0 million at June 30, 2024, compared with $149.2 million a year ago. Inventory balances continue to decline as the Company adjusts its operating inventory amounts to reflect lower backlog while also ensuring appropriate levels are maintained to service customer orders.

Customer deposits from undelivered written orders totaled $73.5 million on June 30, 2024, down from $77.8 million a year ago as delivered orders outpaced incoming written orders during fiscal 2024. Wholesale backlog was $53.5 million on June 30, 2024, down 27.7% from a year ago, but is more reflective of historical norms and pre-pandemic levels.

No debt outstanding on June 30, 2024.

DIVIDENDS
During the fourth quarter of fiscal 2024, the Company’s Board of Directors declared and increased the regular quarterly cash dividend by 8.3% to $0.39 per share, which was paid on May 23, 2024, and totaled $10.0 million.

More recently, on July 30, 2024, the Board of Directors declared a $0.40 per share special cash dividend to shareholders of record on August 13, 2024, payable on August 29, 2024. The Board also declared a regular quarterly cash dividend of $0.39 per share, payable on August 29, 2024, to shareholders of record as of August 13, 2024. Ethan Allen has a strong history of returning capital to shareholders and this year marks its fourth consecutive year in which the Company has declared and paid a special cash dividend.

CONFERENCE CALL

Ethan Allen hosted a conference call with investors and analysts on July 31 at 5pm to discuss the results. The conference call will be webcast live from the Company’s Investor Relations website at https://ir.ethanallen.com.

For those unable to listen live, an archived recording of the call will be made available on the Company’s website referenced above for up to six months.