According to the Bloomberg report Conn’s (NASDAQ:CONN) is readying a potential bankruptcy filing as the company faces sales declines and struggles to integrate a rival chain.

Sources close to the retailer also told Home News Now that said Conn’s has been looking for both operational and financial help from several advisors, including the Berkeley Research Group and Houlihan Lokey Inc.

Late last month, Home News Now’s Tom Russell, reported that the Nasdaq Stock Market has given specialty furniture, bedding and home goods and appliances retailer Conn’s Inc. 60 days to submit a plan to regain compliance with a rule related to the timely filing of its quarterly reports.

In that article, Russell noted that, on June 11, the company notified the U.S. Securities and Exchange Commission that it was unable to file a timely 10-Q financial report for its fiscal first quarter ended April 30. The company said the delay was because it had been unable to complete disclosures related to possible amendments to, or the refinancing of its revolving credit facility that were required to be included in its 10-Q.

Last year, in an effort to grow storefronts and increase volume, Conn’s acquired 120-yer-old W. S. Badcock LLC from Franchise Group LLC.  Despite that move, Conn’s has faced 48-months of losses.

At press time, Conn’s shares, which fell 77% this year, took another nosedive and is currently trading at $0.6576.

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MONROE, Mich. — From La-Z-Boy’s latest earnings call for its fourth quarter and full fiscal year ended April 27, it’s clear that retail development — both new store openings and acquisitions — remains a core part its strategy moving forward.   

Of course, none of this is new given the number of stores the company has in place currently. But it appears to be positioning itself for even further growth in the months and years ahead.  For example, during its latest earnings call, company President and CEO Melinda D. Whittington noted that the brand is looking to have about 400 La-Z-Boy Furniture Galleries over the next several years, up from 355 at the end of its latest fiscal year.

The 355, which is up six locations from the prior year, brings the number of total company owned stores to 187, including the six new store openings and 11 acquisitions during the full year, including the acquisition of a two-store independent network in Florida during the quarter. And in May, she said, the company also signed an agreement to acquire an additional one-store market from an independent dealer in the Midwest that’s set to close in the first quarter of fiscal year 2025.

Bob Lucian, senior vice president and chief financial officer, noted that the company plans to open 12-15 new stores — separate of any acquisitions — mostly in the second half of the year as part of a planned $70 million to $80 million in capital expenditures during the fiscal year, which he noted “includes land and building investments and stores to maintain the growth of our retail network.”

Obviously, the company is bullish on its store network during a time when furniture retail is struggling amid an environment of high interest rates that are hampering existing home sales, combined with consumers tightening their belts with high-dollar purchases.

During the call, Whittington noted that while total written sales for company-owned La-Z-Boy Furniture Galleries were up 1% for the quarter, written same-store sales for the entire network of 355 stores were down 3% for the quarter compared to the prior year and down 2% for the entire year. But she also noted that this performance is still better than the industry overall “against a backdrop of 8% industry contraction” during the quarter and down 6% for the year “as our significant outperformance versus the market persisted throughout the year.”

“Despite ongoing challenging traffic trends, our stores continued to execute very well, with higher conversions, higher ticket and design sales partially mitigating the traffic headwinds,” she noted.

In addition, the company now owns 53% of the stores in the La-Z-Boy Furniture Galleries network for the first time in its history. Of course, some of this has to do with the acquisition of stores from independent dealers looking to get out of the business during this ongoing period of malaise. Perhaps company ownership will improve the performance of these locations as things start to turn around, but that largely depends on support from the economy.

For Whittington, the growth of the store footprint makes sense moving forward.

“We see meaningful opportunity to expand the company-owned portion of the network through new store growth and acquisitions,” she said, adding, “These store acquisitions are immediately accretive to our profitability, allowing the company to benefit from integrated wholesale and retail margins.”

She also noted that growing the company-owned store network is important “as it enables the brand to control the end-to-end consumer experience and leverage the strength of our vertically integrated model.”

Another benefit in the company-owned store approach? It also helps guide product development.

“We continue to shift organizational decision-making to be more consumer-centric while also leveraging a data-driven approach,” Whittington said, adding, “This is enabling us to develop more consumer-relevant, on-trend upholstered furniture, particularly in the motion and reclining categories where we are a market leader.”

Of course, this consumer-driven approach is not just beneficial to the development of upholstery and recliners, but also wood categories such as occasional, along with bedroom and dining furniture offered by its sister brands.

The success of this growth initiative also obviously depends on a number of factors, ranging from interest rates and housing sales to the consumers’ willingness to return to spending more on the home. Yet despite these uncertainties, Whittington was optimistic about the company’s strategy, not just in its retail store footprint, but also how it is serving consumers in the market overall, ranging from the agility of its supply chain to product development initiatives.

“We know there are consumers out there still investing in their home, even in a challenging economy, and we believe we are disproportionately capturing them,” she said. “But if I were to step back and say ‘what is the biggest pivot for us as a total enterprise?’ It’s really this focus on driving our own company-owned retail and the reason for that is two-fold. We can control that brand experience for the consumer end-to-end. We can avail ourselves of the data from that consumer by interacting with them directly, and from a financial standpoint, we can take advantage of that integrated margin of owning the entire chain, from pieces of fabric and steel all the way to putting that product in the consumer’s home. And we believe that’s good for the consumer, and that’s good for our financials as well. So really, I would call continuing to expand our reach of our own retail probably the No. 1 biggest driver.”

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THE WOODLANDS, Texas — The Nasdaq Stock Market has given specialty furniture, bedding and home goods and appliances retailer Conn’s Inc. 60 days to submit a plan to regain compliance with a rule related to the timely filing of its quarterly reports.

On June 11, the company notified the U.S. Securities and Exchange Commission that it was unable to file a timely 10-Q financial report for its fiscal first quarter ended April 30. The company said the delay was because it had been unable to complete disclosures related to possible amendments to, or the refinancing of its revolving credit facility that were required to be included in its 10-Q.

“As a result, the company is unable to file, without reasonable effort or expense, the Form 10-Q on or prior to the prescribed filing date,” the company said in its June 11 disclosure.

On June 20, the company received a delinquency notification letter from Nasdaq stating it was not in compliance with Nasdaq Listing Rule 5250(c)(1) because it had not filed the report by the due date required by the SEC.   

The company said the notice has no immediate effect on its listing  or trading of its common stock on the Nasdaq Global Select Market. However, it said that it has until Aug. 19 to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rule.

Conn’s noted that if Nasdaq accepts its plan to regain compliance, Nasdaq may grant the company up to 180 calendar days from the prescribed mid-June due date for the 10-Q, or until Dec. 16, to file the 10-Q in order to regain compliance.

“However, there can be no assurance that these events will occur,” the company said in a statement issued Wednesday relating to the delinquency notice.

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WASHINGTON — Year-over-year furniture store sales fell 6.8% in May, representing a decrease from the 8.4% decline in April that many are hoping leads to growth in the second half.

According to figures released by the U.S. Department of Commerce Tuesday, furniture retail sales for the month of May totaled $10.7 billion, compared to $11.5 billion in May 2023 and $10.8 billion in April, a 1.1% decrease.

Overall retail sales were up 2.3% for the month, totaling $703.1 billion, compared to $687.5 billion in May 2023 and $702.5 billion in April, up .1%.

As has been the trend in recent months, furniture stores were the worst performing in terms of year-over-year sales activity among the major retail sectors tracked by the government.

The only other sectors with declines included building material and garden equipment and supplies dealers, down 4.3% to $40 billion, from $41.8 billion; sporting goods, hobby, musical instrument and bookstores, down 2.6% to $8.3 billion, from $8.6 billion; and health and personal care stores, down .7% to $36.1 billion, from $36.4 billion.

All other sectors posted an increase, showing some areas of the economy where consumers are increasing or shifting their spending.  

Miscellaneous store retailers, such as pet supply stores, religious supply stores and florists, were up 7.3% to, $15.3 billion, from $14.3 billion, while non-store retailers, including e-commerce portals and catalogs, were up 6.8%, to $118.6 billion, from $111.9 billion. Restaurant and bar sales were up 3.8% in May, while general merchandise stores, including department stores, were up 2.7% to $93.6 billion, from $90.2 billion.  

Other areas that had sales increases included clothing and clothing accessories stores, up 2.4% to $26 billion, from $25.4 billion; electronics and appliance stores, up 1.8% to $7.8 billion, from $7.7 billion; gasoline stations, up 1.6% to $53.6 billion, from $52.8 billion; food and beverage stores, also up 1.6% to $82.7 billion from $81.4 billion; and motor vehicle and parts dealers, up 1.3% to $134 billion, from $132.4 billion.

On a positive note for furniture stores, May 2024 sales of $10.72 billion were still above pre-pandemic levels of $10.03 billion in May 2019, $9.9 billion in 2018, $9.5 billion in 2017, $9.3 billion in 2016 and $9.06 billion in 2015.

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MONROE, Mich. — Citing a slow housing market that continues to be hampered by high interest rates, La-Z-Boy reported a 1% drop in sales for its fiscal fourth quarter and a 13% decline for the full fiscal year ended April 27.

Total sales for the quarter were $553.5 million, down 1% from the $561.3 million reported the same period last year. For the full year, sales totaled $2.05 billion, down 13% from $2.3 billion reported last year.

Still, the company remains profitable, with an increase in earnings for the quarter. Net income totaled $40.3 million, or 91 cents per share, up 16.4%  from  $34.6 million, or 79 cents per share, the same period last year.

For the full year, net income totaled $124.6 million, or $2.83 per share, down 17.9% from the $151.9 million, or $3.48 per share, the same period last year.

Fourth-quarter sales in the wholesale segment totaled $392.5 million, compared to $394.6 million for the same period last year, and operating income totaled $31.7 million, compared to $33.7 million the same period last year.

For the full year, the wholesale segment generated $1.44 billion in sales, compared to $1.7 billion the year prior. Operating income totaled $99.4 million during the fourth quarter, compared to $115.2 million last year.

For the quarter, the retail segment had $227.9 million in sales compared to $242.7 million the same period last year. Operating income totaled $32.2 million, compared to $37.7 million the same period last year.

For the full year, the retail segment reported $855.1 million in sales compared to $982 million the same period last year. Operating income totaled $111.7 million, compared with $161.6 million the year prior.

Consolidated operating income totaled $50.1 million for the quarter compared to $54.1 million the same period last year. For the full fiscal year, consolidated operating income totaled $150.8 million, compared with $211.4 million last year.

Nonetheless, the company said that written sales again outperformed the industry, with total Q4 written sales for company-owned La-Z-Boy Furniture Galleries up 1% compared to last year and written same-store sales down just 5% from last year. The company said that written same-store sales for the entire La-Z-Boy Furniture Galleries network were down 3% from the same period last year.

“Trends were strongest in the first half of the quarter around key holiday events and recovery from January weather events,” the company said. “Written sales results continue to outperform the broader industry, which was down 8% for the quarter, as furniture and home furnishings spending remains depressed with overall traffic trends challenged and housing activity down due to continued higher interest rates.”

Company President and CEO Melinda Whittington said that the company had a strong finish to the fiscal year as Q4 results exceeded expectations.

“Wholesale unit volumes improved in the quarter, and recovery from weather and related disruptions in January also provided a tailwind,” she said, adding, “The industry continues to grapple with higher for longer interest rates and housing turnover near 30-year lows negatively impacting store traffic. However, our execution is the strongest it has ever been, including conversion rates at all-time highs and average ticket and design sales trending up for the year. We expect industry fundamentals to remain volatile for the near term, but remain confident in our ability to outperform the market and gain share longer term. Our first quarter is off to a good start, and we are encouraged by our solid Memorial Day results as we believe our assortment and best-in-class motion offerings are resonating with consumers in the marketplace.”

She also noted that during the quarter, the company expanded its total La-Z-Boy Furniture Galleries store network and the number of company-owned stores, with the opening of six new company-owned stores and the acquisition of 11 independent Furniture Galleries. Company-owned retail stores now represent more than half of the total La-Z-Boy Furniture Galleries network for the first time in company history, the report noted.

“We also invested in both our stores and manufacturing operations through remodels and improving the agility of our supply chain,” Whittington said. “As a market leader in comfortable custom furniture with quick delivery, we are positioned to continue to outperform the industry and grow share. Our focus remains on executing our proven playbook of expanding our Retail segment through new and acquired stores, delivering sales growth double the industry, and driving margin expansion. I want to thank all of our dedicated employees for their strong contributions throughout the year. The momentum in our business is palpable, particularly with our strong merchandising offerings and new “Long Live the Lazy” brand campaign building awareness, consideration and purchase intent. We are excited to build further on this foundation in fiscal 2025.”

Other highlights of its recently completed fourth quarter and full fiscal year are as follows:

+ For Q4, the company reported consolidated delivered sales of $554 million, up 22% compared to its most recent fiscal 2019 pre-pandemic fourth quarter.

+ It also said it generated $53 million in operating cash flow for the quarter.

+ During the quarter, it grew its company-owned La-Z-Boy Furniture Galleries network by three stores including two stores it acquired.

+ It also reported generating $158 million in operating cash flow for the year.

+ Its balance sheet includes $341 million in cash and no external debt.

+ The company said it also returned $85 million to shareholders through share repurchases and dividends.

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MARTINSVILLE, Va. — Hooker Furnishings reported a drop in its consolidated net sales and a net loss for its first quarter ended April 28.

Facing an industrywide downturn that could result in major cost cuts moving forward, the company said that consolidated net sales fell to $93.6 million, down 23.2% from the $121.8 million reported the same period last year.

It reported a net loss of $4.9 million, or 39 cents per share, compared to net income of $1.9 million, or 13 cents per share, last year.

CEO Jeremy Hoff said that the current environment has necessitated an adjustment of its costs to current and expected medium-term demand, “through a realignment of operations, which we expect will lead to a 10% overall reduction in overall fixed costs, the largest cut in our history, but one necessitated by current industry conditions.”

He noted that planned actions include consolidating the Bobo Intriguing Objects brand into Hooker Branded, further reducing its Georgia warehouse footprint and consolidating other operations as well as additional fixed cost reductions.

“We’re still finalizing those plans and expect to have more information in the current fiscal quarter,” he added. “We’re intensely focused on creating an appropriate expense structure, while not jeopardizing the pace and impact of our strategic initiatives, which we believe will have a significant positive impact on Hooker once demand normalizes. We expect to be profitable in the current fiscal year and beyond.”

The company said that about 25% of its fiscal Q1 sales decrease is because of the absence of sales from divisions the company exited in the prior year in its Home Meridian segment. In addition, year-over-year overall industry furniture sales have continued to fall, according to data from the U.S. Department of Commerce.

Gross profit totaled $19.2 million, down 31% from the $27.9 million reported last year. The company said this was related to lower sales volume across all segments of its business. In addition, it noted, that an unfavorable customer and product mix in its Home Meridian segment drove reduced gross profit, combined with under-absorbed costs in its Domestic Upholstery segment, resulting from lower production and sales.

It also reported a consolidated operating loss of $5.2 million, compared to operating income of nearly $2 million last year and a 1.6% margin the same period last year.

“The ongoing weak demand that’s adversely impacting the furniture industry made our first quarter challenging,” Hoff said. “However, we remain confident that the strategies we are pursuing in operations, marketing and merchandising are transformative. Times like these present an opportunity to recalibrate and even reinvent aspects of our business.”

“While we are disappointed to report a rare operating loss this quarter, the loss was almost entirely driven by the sales reductions in each segment, and we strongly believe we’ll return to profitability once demand and revenues rebound,” Hoff added. “We do, however, expect some short-term volatility in earnings until the industrywide downturn ends.”

By segment, the results were as follows:

+ In its Hooker Branded segment, the company reported net sales of $35.4 million, compared to $43.4 million last year, an 18.6% decrease. The segment also reported operating income of $7,000, compared to operating income of $2.7 million last year. The company said the sales decrease was related to decreased unit volume and to a lesser extent, lower average selling prices that resulted from price reductions implemented late last year because of lower ocean freight costs. It added that soft demand across the industry led to a 13% decrease in incoming orders during the quarter with a corresponding 14% decrease in backlog compared to the same period last year. The backlog was also 40% higher than pre-pandemic levels at the end of the first quarter of 2020.

+ The Home Meridian segment reported net sales of $26.4 million, down 37% from the $41.9 million reported last year. It reported an operating loss of $3.4 million, compared to a loss of $2.1 million last year. The company said that nearly half of its revenue decline was attributed to the absence of its Accentrics Home liquidation sales after the company exited the business last year. The remaining decreases, it said, were because of lower sales through major furniture chains, independent furniture stores and the hospitality business. It also noted, however, that fixed costs decreased by $2 million, related to business repositioning, including redeploying space at its Georgia warehouse to support the Sunset West outdoor furniture division’s East Coast expansion.

Incoming orders in the Home Meridian division also rose by 6.4% compared to the same period last year, with orders more than tripling at SLH. The division’s quarter-end backlog was also 22% higher than the same period last year and 37% higher than its fiscal 2024 year end in January, the company said.

+ Sales in the Domestic Upholstery segment totaled $30 million, down 14.5% from $35.1 million reported the same period last year. It also reported a $446,000 operating loss, compared to operating income of $48,000 last year. The company said the sales decrease was because of decreased volume at Bradington-Young, HF Custom and Shenandoah. Meanwhile, Sunset West reported a 20% sales increase that is related to the expansion of its East Coast distribution and the stabilization of its new ERP system during the quarter. The company said Sunset West also had a 9% increase in incoming orders compared to last year’s first quarter.

“For much of last year, Sunset West experienced some speed bumps related to onboarding a new operating system and building out the resources and personnel needed to expand its distribution,” Hoff said, adding, “Sunset West is now beginning to hit its stride for a positive trajectory going forward.”

For the Domestic Upholstery segment, incoming orders rose by 2.8%. However, its quarter-end backlog also decreased compared to the end of the prior-year quarter, while increasing from the end of fiscal year 2024. Excluding Sunset West, the company said that the order backlog in the segment was 38% higher than the end of the pre-pandemic fiscal 2020 first quarter.

Other highlights from the report are as follows:

+ The company reported cash and cash equivalents of $40.9 million, down $2.3 million from the end of fiscal 2024. During the first quarter, it said, cash and cash equivalents on hand and some $1.5 million generated from operating activities were used to fund $2.5 million in cash dividends to shareholders, $1.3 million for further development of its cloud-based ERP system and $843,000 for capital expenditures.

+ In addition to the cash balance, the company said, an aggregate of $28.3 million was available under the existing revolver and $28.7 million in cash surrender value of company-owned life insurance policies was outstanding at quarter end.

“Much remains unsettled on the macroeconomic front,” Hoff said, adding, “Economic indicators remain mixed with unemployment continuing under 4% and inflation easing slightly in April, leading to record stock market performance in mid-May. However, the consumer sentiment index fell nearly 10% in May after holding steady for months, indicating a deterioration in optimism across age, income and education levels.”

“Additionally, in both March and April, existing home sales decreased year-over-year. Because the Federal Reserve has yet to cut interest rates this year, we believe home sales may be ‘stuck.’ As long as interest rates remain high, we believe the housing industry — and therefore home furnishings demand — will remain subdued.”

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MOORESVILLE, N.C. — Home improvement retailer Lowe’s Cos. reported a 4% decrease in sales and a 22.3% drop in earnings for the first quarter ended May 3.

Its total sales for the quarter were $21.4 billion, compared to $22.3 billion in the same period last year. The company noted that comparable-store sales for the quarter decreased 4.1% because of a decline in DIY big-ticket discretionary business. This was partially offset by an increase in comparable sales in its online and its Pro contract and trade segments.

Total net income was $1.75 billion, or $3.06 per share, compared to $2.26 billion, or $3.77 per share, the same period last year.

By the end of the quarter, the company operated 1,746 stores totaling nearly 195 million square feet of retail selling space.

“We are pleased with our start to spring, driven by strong execution and enhanced customer service,” said Marvin R. Ellison, chairman, president and chief executive officer. “This quarter we rolled out our new DIY loyalty program nationally, expanded same-day delivery options and took market share in key categories. We continue to gain momentum with our Total Home strategy, reflected in our growth in Pro and online. I would like to thank our frontline associates for their hard work, commitment to customers and disciplined focus on productivity.”

Other highlights of the report were as follows:

+ The company reported operating income of $2.65 billion, or 12.4% of sales, compared with $3.3 billion, or 14.7% of sales, the same period last year.

+ Its gross margin was $7.1 billion, or 33.2% of sales, compared with $7.5 billion, or 33.7% of sales, last year.

+ At the end of the quarter, it reported cash and cash equivalents of $3.2 billion, compared with $2.95 billion the same period last year.

While home improvement, lawn and garden and other segments such as counters and cabinetry represent a majority of its business, the retailer also sells furniture on its website, www.lowes.com

Core categories include bedroom and dining furniture, living room furniture such as upholstery and occasional, plus office furniture and mattresses. In many cases, consumers can order these products online and pick them up at the store or have them delivered to their home. Delivery is typically free of charge to consumers that live in the same city or town where the store is located.

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MONTREAL — Dorel Industries reported a 5.4% increase in revenue for its first quarter ended March 31, while also narrowing its net loss.

The company said revenue totaled $351.1 million, up 5.4% from $333.2 million the same period last year. Its net loss for the quarter was $17.6 million, or 54 cents per share, down from a net loss of $31.5 million or 97 cents per share last year. It reported an adjusted net loss of $16.9 million, or 52 cents per share compared to $31.5 million, or 97 cents per share last year.

The company’s Home segment, which includes furniture sales, reported revenue of $138.4 million, up 3.9% from $133.2 million the same period last year.  The company noted that brick-and-mortar gross sales rose 23.3% from last year and that there was also an increase in replenishment orders as store inventories came down. Meanwhile, e-commerce gross sales decreased by 6.1%.

“The current high inflationary environment as well as an increase in U.S. mortgage rates continue to constrain consumer spending on home furnishings,” the quarterly report said, adding that “attendance was excellent at Dorel Home’s booth at the recent High Point furniture market with customers enthused about the segment’s new product lineup.”

Gross profits in the segment totaled $11.7 million, or 8.5% of revenue, compared to $1.9 million, or 1.4% of revenue last year.

The segment reported an adjusted operating loss of $3.4 million compared to $13.9 million last year.

The report noted that gross margin in the Home segment rose by 710 basis points from last year largely because of lower freight and raw material costs and “a slight increase in factory volumes which helped overhead absorption. Efficiencies have improved and operating costs have been reduced through the segment’s restructuring plan initiated in the fourth quarter of 2023. Inventories were down $27.8 million from a year ago.”

Revenue in the Dorel Juvenile segment totaled $212.7 million, compared to $200 million last year, a 6.3% increase. It noted that revenues increased 6.2% after removing the impact of various foreign exchange rates. The growth, the report noted, was mainly from the U.S. and European markets “where the brick-and-mortar distribution channel rebounded strongly.” Brazil and certain other export markets also contributed to the year-over-year increase in revenue.

In the U.S., car seats led increases in the segment, and “Safety 1st did particularly well, the result of new product placements and a recent rebranding of this iconic brand.”

The segment reported gross profits of $56.5 million, or 26.5% of revenue, compared with $44.8 million, or 22.4% of revenue last year. It reported adjusted operating profits of $1.1 million, compared to an adjusted operating loss of $8.9 million last year.

“The U.S. dollar strengthened against most major currencies since the start of the year and if it had remained at the levels at the end of 2023, this would have added an additional $2 million to earnings in the quarter,” the report said. It added that both Dorel Juvenile USA and Dorel Juvenile Europe significantly increased operating profit compared to the comparable period last year with gross margin for the segment being 410 basis points higher than the prior year.

“While a significant portion of the improvement was due to lower cost inventories to start the year, improved pricing, a better product mix and better cost absorption at the U.S. manufacturing facility also contributed to the quarter’s improvement,” the report said.

“Dorel Juvenile posted significant gains year-over-year, with adjusted operating profit improving by $10.1 million versus last year’s first quarter,” said Dorel President and CEO Martin Schwartz. “Internal optimism is high as the segment is capitalizing on its introduction of a diverse selection of exciting new products. Both our retail partners and consumers have reacted well to the new offerings, with in-store sales rebounding nicely, driving growth through market share gains.”

“Through a combination of higher sales and by further reducing Juvenile costs we are more comfortable than ever that this business will continue its year-over-year earnings improvement,” Schwartz added. “Dorel Home also made substantial progress during the first quarter, narrowing its adjusted operating loss by $10.5 million. This was despite on-going softness in the furniture market, where industry sales continue to lag all other consumer product categories. The previously announced plan to simplify and combine certain key areas of the Home segment has made the combined operations more effective and cost efficient. Savings are expected to be $4 million annually. Home is making all the right moves with new customers and new product listings growing. The meaningful benefits will come once industry volumes increase to more traditional levels.”

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DANBURY, Conn. — Coming out of a challenging winter that also impacted the sales of other public companies, Ethan Allen execs presented a glimmer of hope during the company’s latest third fiscal quarter 2024 conference call highlighting its prospects in the coming months.

Pleased overall with its “financial performance and continuing strength of our enterprise,” Chairman, President and CEO Farooq Kathwari said, “We are also seeing incremental consumer interest for returning back to the home after being previously diverted to other areas such as travel.”

Matt McNulty, chief financial officer, senior vice president and treasurer, echoed these comments, noting, “We remain cautiously optimistic as the strength and stability of our balance sheet has positioned us to maximize our vertically integrated structure in anticipation of a better macroeconomic and home furnishings environment. We are building a fundamentally stronger company, protecting our profitability and enhancing our operational efficiency.”

Supporting this is a balance sheet of cash and investments totaling $181.1 million and no outstanding debt. In addition, McNulty said that the company generated $23.7 million in cash from operating activities during the quarter ended March 31 related to what he described as improvements in net income and working capital.

And despite a 21.4% drop in sales for the period ended March 31, the company remains profitable with nearly $13 million in net income during the quarter, although this is down from the $22.4 million reported the same period last year.

It also reported an operating margin of 10%,  that while lower than the 15.2% the same period last year, is higher than the 6.2% pre-pandemic. Consolidated gross margin for the quarter was 61.3%, which McNulty said was the 12^th consecutive quarter that the company has reported gross margins higher than 58%.  

Contributing to this success is the fact that the company is a much leaner operation than it was pre-pandemic, with 3,448 workers, down 9.6% from a year ago and nearly 33% less than the 5,120 it employed as of March 31, 2019.

Yet while cutting costs is one way toward profitability, it isn’t always a guarantee for long-term growth. Which is why Ethan Allen’s success moving forward will depend largely on regaining the same sales it believes are returning to the industry in the near future.

Here are several takeaways from the call on how the company is looking to rebuild the business in both sales and profitability:

+ Kathwari said that its merchandising efforts are focused on strengthening its mix of products and “introducing them to our network and consumers in a very planned manner.” On that note, he added, look for some aggressive introductions in the next six months. Some of its inspiration will come from fashion and furniture products seen during the spring show in Milan. “Our focus has to be products that differentiate us. That will be our focus.”

+ The company has also sharpened the focus of its 175 Design Centers in North America, not only from a product standpoint, but also in terms of square footage allotted. For example, Kathwari noted that the company’s plan is to have these be a maximum of 12,000 square feet, down from 20,000 square feet previously. He said the additional space is being used for a floor sample area where designers can buy product off the floor for their clients. While some of this product is being sold at lower margins, it also is generating extra cash by reducing some inventory.

+ Repeating a subject that comes up in just about every call, the company said that 75% of its products continue to be made in North America. This has helped it remain insulated from freight rate increases resulting from international conflicts. The impact of higher freight rates, Kathwari noted, has primarily been on the products it imports, including accents and some furniture.

+ Technology, including the use of digital assets, remains at the forefront of its initiatives from both a marketing and design perspective.  For example, the company employs 3D room planners that customers can use themselves or with a designer. In similar fashion, the Ethan Allen inHome interior design app allows customers to put 3D images of its furniture and accessories in any space. Marketing materials, such as its recently released StyleBook, are also available digitally and in print, Kathwari noted.

+ While the company has reduced its headcount in both retail and manufacturing, it has increased its marketing spend to about 3.4% of sales versus 2.2% of sales last year, McNulty noted. Even with the reduction in sales year over year, this represents more dollars being spent on marketing.

Such efforts to reach the consumer, including new product, digital design assets and marketing initiatives, could be instrumental in getting consumers in the door. With those assets in hand, it will be worth watching to see if Ethan Allen’s predictions about consumers returning to the home come true moving forward, not just for the company, but the entire industry.

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ATLANTA — Retailer Havertys reported a 18.1% drop in sales for its first quarter ended March 31 related to an ongoing slowdown at retail that is resulting from continued softness in the housing market.

The HNN 125 retailer said that consolidated sales totaled $184 million, compared to $224.8 million the same period last year. Meanwhile, net income fell to $2.4 million, or 14 cents per share, compared to $12.4 million, or 74 cents per share, last year.

The company said that total sales were down 18.1% while same-store sales were down 18.5% for the quarter. Total written sales were down 12.6% and written comp-store sales were down 13%.

Meanwhile, the retailer’s gross profit margin rose to 60.3% up from 59.1% the same period last year, with SG&A expenses at 59.4% of sales, compared to 52.7%. The company said that overall, these expenses fell by $9 million, including a $4.8 million drop in selling expenses tied to commission-based compensation expenses and third-party creditor costs, and a $3.2 million drop in warehouse and delivery costs related to reduced headcount via attrition and lower expenditures for supplies and fuel.

It also reported a $600,000 decrease in advertising expenses it said was driven by reduced spending on television and interactive marketing and partly offset by increased technology costs.

The company said that it has some $32 million in planned capital expenses for the year, and plans to increase its overall retail square footage by 3.4% this year compared to 2023.

It plans to open a total of five new stores this year, which includes plans to enter the Houston market with one store expected to open in the fourth quarter. Other locations are planned in early 2025.

“This is a sizable new market within our distribution footprint that we believe aligns well with the Havertys brand,” said Clarence H. Smith, chairman and chief executive officer.

He said the four other stores this year include one in Southaven, Mississippi, in the Memphis, Tennessee, market that opened in March and three previously announced stores in Florida that are expected to open in the second and third quarter.

Of the most recent quarterly performance, Smith said, “Our sales reflect the challenges from the ongoing weak housing market. The decline in demand requires exceptional customer engagement and operational flexibility. We began highlighting our regret-free guarantee early in 2024 and continued promoting our free-in home design service which grew 10.4% in the first quarter compared to last year and was 32.3% of our total written business. Our teams generated another quarter of excellent gross margins of 60.3% and the prudent reductions in operating costs generated positive results for the quarter.”

Other highlights of the quarterly report are as follows:

+ The company reported cash, cash equivalents and restricted cash equivalents of $117.9 million.

+ It reported generating $3.1 million in cash from operating activities, primarily from earnings and charges in working capital including a $5.1 million increase in customer deposits, a $1.9 million reduction in inventories and a $12.8 million decrease in vendor repayments and accrued liabilities.

+ It invested $6.4 million in capital expenditures.

+ It paid $4.8 million in quarterly cash dividends and reported no outstanding debt as of March 31 and credit availability of $80 million.  

“We are making important investments in our stores and online presence to be well positioned to gain additional market share at the reversal of this near-term demand cycle,” Smith added. “The board’s decision to increase the quarterly dividend reflects our strong financial position and long-term outlook as we invest in our business and return capital to our stockholders.”

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