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Ethan Allen Announces Third Quarter Sales Decline

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Ethan Allen Interiors Inc., reported sales and earnings for the three and nine months ended March 31, 2007. Three Month Results Net delivered sales for the quarter ended March 31, 2007 amounted to $246.5 million as compared to $267.1 million in the prior year quarter. Net delivered sales for the Company’s Retail division decreased 0.3% to $167.7 million, while Wholesale sales decreased 10.6% to $171.9 million during that same period. Comparable Ethan Allen design center delivered sales decreased 8.6% as compared to the prior year quarter. For the quarter ended March 31, 2007, earnings per share amounted to $0.54 on net income of $17.5 million. This compares to earnings per share and net income of $0.59 and $20.0 million, respectively, in the prior year comparable period. Nine Month Results For the nine months ended March 31, 2007, net delivered sales totaled $746.8 million as compared to $794.4 million in the prior year comparable period. Net delivered sales for the Company’s Retail division increased 0.9% to $511.1 million, while Wholesale sales decreased 11.6% to $493.2 million during that same period. Comparable Ethan Allen design center delivered sales decreased 6.4% as compared to the prior year comparable period. For the nine months ended March 31, 2007, earnings per share, which includes a previously announced September 2006 restructuring and impairment charge, amounted to $1.50 on net income of $48.7 million. This compares to earnings per share and net income of $1.85 and $63.3 million, respectively, in the prior year comparable period which included a September 2005 restructuring and impairment charge. Excluding the impact of these charges in both periods, earnings per share amounted to $1.76 on net income of $57.2 million in the current year period as compared to earnings per share and net income of $1.93 and $65.9 million, respectively, in the prior year comparable period. Farooq Kathwari, Chairman and CEO, commented: "We are pleased to report quarterly operating earnings of 11.4% of sales despite continued softness within the home furnishings retail environment and a 7.7% decline in sales. As we have stated previously, results for the March 2006 quarter were favorably impacted by stronger economic conditions and our initiative to reduce lead times associated with the delivery of our products to the consumer, thereby substantially reducing our backlog during that period. As a result, we experienced a 15.5% increase in sales during the prior year period, making for very challenging year-over-year comparisons. For the nine months ended March 2007, we generated nearly $70 million in operating cash, utilizing approximately $59 million for capital expenditures and acquisitions. In addition, we’ve repurchased $40 million of our common stock, including 581,200 shares during the recent quarter at a cost of approximately $20 million, or $35.00 per share.” Mr. Kathwari further stated: “Our goal remains the positioning of Ethan Allen as a leading provider of interior design solutions. In order to achieve this objective, we continue to focus on service within all facets of our business, including improving the caliber of our associates at retail; developing stylish, high-quality products that reflect good value; and opening and/or relocating new design centers in key markets. We believe that these efforts, along with our comprehensive and coordinated marketing programs, provide us a distinct competitive advantage and an opportunity to grow our business.” Commenting on business trends, Mr. Kathwari continued: “While we recognize that the home furnishings retail environment remains uncertain, some positive trends have emerged in recent weeks. In addition, we continue to believe that our strategic initiatives provide us stronger positioning as conditions improve. As a result, we believe that we have the opportunity to generate earnings per share for the quarter ended June 30, 2007 in line with the current range of analyst estimates.” Ethan Allen Interiors Inc. is a leading manufacturer and retailer of quality home furnishings. The Company sells a full range of furniture products and decorative accessories through an exclusive network of 310 design centers in the United States and abroad, of which 154 are Company-owned. Ethan Allen has 9 manufacturing facilities, which include 2 sawmills, located throughout the United States.

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