Ethan Allen posts $48.7 million loss in quarter

Sales decline 40.6% from a year earlier

Jay McIntosh -- Furniture Today, April 30, 2009

DANBURY, Conn. — A big charge for asset impairment and restructuring, along with a 40.6% sales decline, led to a loss of $48.7 million or $1.69 per share for Ethan Allen in the quarter ended March 31, the company reported today.

Sales of $140.2 million in the company's fiscal third quarter were down from $235.9 million a year earlier. The manufacturer and retailer had posted a profit of $8.8 million or 31 cents per share in the 2008 quarter.

The results were in line with a forecast the company issued last week. The company took a $30.6 million asset impairment charge, writing off the accumulated goodwill in the retail side of its business, and had $4.6 million in other impairment and restructuring charges.

Delivered sales in the company's retail division in the latest quarter were down 40.2% from the same period a year earlier, and wholesale sales declined 43.6%. Same-store sales at company-owned Ethan Allen Design Centers were off 41.8%.

For the first nine months of the fiscal year, sales were down 28% to $535.6 million with retail delivered sales off 25.9% and wholesale volume down 32.1%.

The net loss for the nine months was $35.8 million or $1.24 per share, compared with a profit of $47 million or $1.58 per share a year earlier.

Ethan Allen also announced that it is terminating its $100 million cash flow-based revolving credit facility, and will replace it with an asset-based lending facility of about $60 million, which it says will be more flexible. The company said it has no plans to use the facility in the near term.

Chairman and CEO Farooq Kathwari said the latest quarter was a challenging one because of the decline in consumer confidence, compounded by "major competitive home furnishings liquidations." But he said the company was able to improve aspects of its business.

"We introduced new products - many with eco-friendly finishes; maintained a strong national advertising presence; launched a cutting-edge new Web site; created a Membership Rewards program, and offered strong finance options," said Kathwari. "We also took major steps to reduce our costs and expenses, and on an annual basis, reduced over $100 million from our underlying cost structure. We have reduced our inventories during the quarter by $13.5 million and ended with a $51 million cash balance. We maintained a cash dividend, although at a reduced level."

He also mentioned the new Celebrating American Innovation campaign, which highlights certain products and underscores that 65% of the company's goods are made in America.