Ethan Allen to close 12 company stores
By Clint Engel -- Furniture Today, January 14, 2008
Danbury, Conn. — Ethan Allen said it will close 12 company-owned stores and two service centers, transferring most of the business to other locations serving the same market areas.
About half of the approximately 175 full-time and part-time employees affected are expected to transfer to nearby locations.
"As Ethan Allen has evolved into a business model focused on providing interior design service and solutions, including free in-home design consultations, we do not need to have as many neighborhood locations in major markets," said Farooq Kathwari, Ethan Allen chairman and CEO.
In New York, for example, two Manhattan design centers and one in Queens will be consolidated into a new flagship design center scheduled to open on Third Avenue, across from Bloomingdale's, by May.
Kathwari said the 12 design centers closing account for about $34 million in annual sales. The new Manhattan location is expected to absorb about 50% of that business — or roughly the sales generated by the three stores closing in that market.
"We expect most of the remaining business to be picked up by our other design centers," he said. The company did not identify the markets of the other nine closing stores.
Ethan Allen expects the consolidation will improve operating profits by about $3 million to $4 million annually starting in fiscal 2009, which begins in July.
As of Dec. 31, Ethan Allan had an international network of 305 design centers — 160 company-owned and 145 independently owned.
In the second half of its fiscal year ending June 30, the company expects to record pretax restructuring, impairment and related charges of about $9.5 million to $10.5 million. They will be primarily non-cash. It expects to book half of the charge in its fiscal third quarter and the rest in the fourth quarter.
Ethan Allen owns the real estate at five of the closing stores and leases the others. It expects the sale of the properties over the next 12 to 15 months will generate pretax gains of $4 million to $5 million.
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