Ethan Allen sales up in 2Q, earnings down 9.5%
By Jay McIntosh -- Furniture Today, February 17, 2008
Danbury, Conn. — Ethan Allen's sales rose 0.8% in the fiscal second quarter ended Dec. 31 but higher costs sent earnings down 9.5%, the manufacturer and retailer reported.
Same-store sales at Ethan Allen design centers slipped 0.6% from the comparable 2006 quarter, the company said.
While net earnings declined to $20.6 million from $22.8 million a year ago, the company's repurchases of stock kept earnings per share level at 70 cents. The 2006 quarter also included a $314,000 pretax credit for a reduction in restructuring and impairment charges.
Sales for the quarter came to $259.5 million. In the retail division, net delivered sales were up 8.6% from a year earlier to $192.6 million, while wholesale division sales fell 5.9% to $155.9 million.
Farooq Kathwari, chairman and CEO, said the company's gross margin improved to 53.7% in the latest quarter from 52% a year earlier. Selling, general and administrative expenses, however, rose to 40.8% of sales from 37.9%.
Kathwari noted that in the first half of its fiscal year, the company has generated $47.4 million in operating cash and has used $30.3 million for capital expenditures, mainly to open new stores. He said the company also has spent $64.8 million to repurchase shares of its stock.
"Our positive results reflect the ongoing repositioning of our company to provide interior design solutions," he said. Initiatives have included strengthening the retail network by moving stores — which the company now calls design centers — to better locations, with 10 opened in the past six months. To enable all stores to offer design services, the company also has hired designers and intensified its training.
He said the company also has remerchandised 80% of its product line, pursued a strong regional and national advertising program, and invested in its manufacturing and logistics network.
Kathwari said he was cautiously optimistic that the company's initiatives will enable it to continue to do well despite what he said was "a difficult economic environment, especially for the home and home furnishings categories."
For the six months ended Dec. 31, the company's sales were up 1.6% to $508.2 million. Earnings were up 22% to $38.1 million, mainly because the company took a pretax charge of $13.6 million in the 2006 first half for restructuring and impairment. Excluding the effect of the charge, net earnings were down 4.3%.
Ethan Allen sells through 305 design centers in the United States and abroad, 160 of which are company-owned.
| Ethan Allen | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/31 | 2007 | 2006 | Change |
| (a) Includes a pretax credit of $314,000 in the 2006 quarter and a pretax charge of $13.6 million in the 2006 six months, both related to restructuring and impairment. (b) Based on average shares outstanding of 29.5 million in the 2007 quarter, 32.5 million in the 2006 quarter, 30 million in the 2007 six months and 32.6 million in the 2006 six months. | |||
| Sales | $259,510,000 | $257,419,000 | 0.8% |
| Operating income | 33,497,000 | 36,215,000 | (7.5%) |
| Net income (a) | 20,622,000 | 22,792,000 | (9.5%) |
| Earnings per share (b) | 0.70 | 0.70 | 0.0% |
| 6 months ended 12/31 | 2007 | 2006 | Change |
| Sales | $508,237,000 | $500,242,000 | 1.6% |
| Operating income | 61,294,000 | 64,381,000 | (4.8%) |
| Net income (a) | 38,126,000 | 31,244,000 | 22.0% |
| Earnings per share (b) | 1.27 | 0.96 | 32.3% |
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