Ethan Allen Announces Third Quarter Sales and Earnings

Furniture World Magazine

Ethan Allen Interiors Inc. reported operating results for the three and nine months ended March 31, 2008. Three Month Results Net delivered sales for the quarter ended March 31, 2008 decreased 4.3% to $235.9 million as compared to $246.5 million in the prior year quarter. Net delivered sales for the Company’s Retail division increased 3.0% to $172.8 million. Wholesale sales decreased 9.1% to $156.3 million during that same period. Comparable Ethan Allen design center delivered sales decreased 1.1% as compared to the prior year quarter. During the quarter ended March 31, 2008, four Design Centers were converted to smaller size Design Studios better suited to the markets they serve. In addition, seven Design Centers and two retail Service Centers were closed and, for the most part, were consolidated into other existing operations resulting in a total pretax restructuring and impairment charge of $4.0 million or $2.5 million after tax and $0.09 per diluted share. For the quarter ended March 31, 2008, earnings per diluted share, which includes the aforementioned restructuring and impairment charge, amounted to $0.30 on net income of $8.8 million. This compares to earnings per diluted share and net income of $0.54 and $17.5 million, respectively, in the prior year comparable period which also included a restructuring and impairment charge. Excluding the impact of the restructuring and impairment charges on both periods, earnings per diluted share for the current quarter amounted to $0.39 on net income of $11.4 million and for the comparable prior year period $0.54 per share on net income of $17.4 million. Nine Month Results For the nine months ended March 31, 2008, net delivered sales decreased 0.4% to $744.1 million as compared to $746.8 million in the prior year comparable period. Net delivered sales for the Company’s Retail division increased 7.2% to $548.1 million, while Wholesale sales decreased 5.0% to $468.5 million during that same period. Comparable Ethan Allen design center delivered sales decreased 0.5% as compared to the prior year period. For the nine months ended March 31, 2008, which includes the aforementioned restructuring and impairment charge, earnings per diluted share amounted to $1.58 on net income of $47.0 million. This compares to earnings per diluted share and net income of $1.50 and $48.7 million, respectively, in the prior year comparable period which also included a restructuring and impairment charge. Excluding the impact of these charges in both periods, earnings per diluted share for the current year amounted to $1.67 on net income of $49.5 million, from $1.76 per share, on net income of $57.2 million in the prior year comparable period. Farooq Kathwari, Chairman and CEO, commented, “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. Our results in the third quarter ended March 31, 2008, were impacted by a weaker economy and costs associated with the many initiatives we have implemented to strengthen our business.” Mr. Kathwari continued, “Sales in March particularly slowed down due to broader economic concerns raised by the extraordinary intervention of the Federal Reserve to stabilize financial institutions, and to some extent due to Easter falling 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.” Mr. Kathwari stated, “During the March quarter we continued to reposition our retail network. We opened four new relocated design centers, converted four into design studios, consolidated or closed seven design centers and two retail service centers, and substantially completed the implementation of Lifestyle presentations in nearly all of our 153 company-owned design centers. During the quarter that will end June 30, 2008, we expect to consolidate the two remaining Design Centers located in New York City with the opening of the new flagship Design Center in Manhattan located at 3rd Avenue and 60th Street. The company expects to take a $3 to $4 million pretax restructuring charge or $1.9 to $2.5 million after tax, during the fourth quarter. We also expect to open five or six additional new design centers during the fourth quarter.” Mr. Kathwari continued, “As we stated in our April 10, 2008, press release, we have absorbed costs related to all of these initiatives, especially in the third quarter, and we should see benefits in our next fiscal year. 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 about 30% to 50% from the current annual expenditure level of about $70 million.” Commenting on the outlook, Mr. Kathwari said: “While the near term economic environment remains uncertain, we remain confident that the many initiatives we have taken will help us to continue to do relatively well in the near term, and more importantly, that we are positioned to do well as the over all economy starts to move in a positive direction.” 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 a network of 291 design centers in the United States and abroad, of which 153 are Company-owned. Ethan Allen has nine manufacturing facilities, which include two sawmills, located throughout the United States and one facility located in Mexico.