Ethan Allen reports weaker results
Company makes progress in repositioning efforts
Jay McIntosh -- Furniture Today, April 22, 2008
DANBURY, Conn. — Ethan Allen’s income fell 49.7% in its fiscal third quarter ended March 31 as sales slipped 4.3% in a weaker economy, the company reported.
Earnings came to $8.8 million or 30 cents per share on sales of $235.9 million. Sales in the company’s retail division increased 3% to $172.8 million, while wholesale division sales fell 9.1% from the comparable quarter a year earlier, to $156.3 million.
Part of the earnings decline was attributed to a $2.5 million after-tax restructuring and impairment charge as the company closed seven stores and two distribution centers, consolidating most of the business into other existing operations. The company also converted four of its design center stores into smaller design studios, better suited to the markets they serve.
Excluding such charges in both quarters, earnings were $11.4 million or 39 cents per share in the 2008 period, down 34.5% from $17.4 million or 54 cents per share a year earlier.
“Despite the challenges of a weak economy, we are pleased with the major progress we are making in positioning Ethan Allen as a provider of design solutions and service,” said Farooq Kathwari, chairman and CEO. “Our results in the third quarter … were impacted by a weaker economy and costs associated with the many initiatives we have implemented to strengthen our business.”
He said sales in March in particular slowed because of economic concerns, with the Federal Reserve taking extraordinary steps to stabilize financial institutions, and to some extent because Easter fell in March this year.
“With a relatively calmer economic environment in April, and Easter behind us, the decline in sales so far has been considerably reduced,” said Kathwari.
For the nine months ended March 31, sales were down 0.4% to $744.1 million and earnings fell 0.3% to $47 million. Excluding restructuring and impairment charges in both years, earnings in the 2008 year to date were $49.5 million, down 13.5%.
Earnings per share for the nine months increased to $1.58 from $1.50 a year ago because the company had fewer shares outstanding.
Kathwari said that in addition to closing, opening and converting stores, the company has nearly finished implementing Lifestyle presentations in all 153 company-owned stores. In the current quarter, it expects to consolidate the two remaining design centers in New York into a new flagship store in Manhattan, at Third Avenue and 60th Street.
He said the company also will open six other design centers in the current quarter. It expects to take restructuring charges of $3 million to $4 million or $1.9 million to $2.5 million after taxes.
Kathwari said the company should see benefits of the relocation and updating in the next fiscal year, which starts in July.
“Most of the major relocation of our design centers is expected to be completed this fiscal year, and we expect our capital expenditures for the next fiscal year to be reduced by 30% to 40% from the current annual expenditure level of about $70 million,” he said.
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