by Company says written orders in its retail segment are still up 3.6% compared to its pre-pandemic third quarter of fiscal 2019
DANBURY, Conn. — Ethan Allen Interiors reported a drop in consolidated net sales and a drop in net income during its fiscal third quarter ended March 31.
The company’s consolidated net sales totaled $186.3 million, down 5.7% from $197.7 million for the same period last year.
Retail net sales fell 9.5% to $150.9 million and wholesale net sales fell 5.7% to $114.2 million.
Net income for the period totaled $22 million, or 87 cents per share, down 7.2% from $23.7 million or 97 cents per share for the same period last year.
For the retail segment, written orders were up 3.6% compared to the pre-pandemic third quarter of fiscal 2019 but were down 12.3% from the third quarter of fiscal 2022. Customer deposits from written orders totaled $92.8 million as of March 31, down by $28.3 million during the fiscal year as retail net shipments outpaced written orders.
Written orders for the wholesale segment fell 5.9% compared with the third quarter of fiscal 2019 and fell 9.3% from last year.
Chairman, President and CEO Farooq Kathwari said that the company is pleased with its third-quarter performance, as it achieved a gross margin of nearly 60% and an operating margin of 15.5%. This compares to a gross margin of 60.4% for the same period last year and an operating margin of 16.5% last year.
The company said that consolidated gross margin decreased due to a change in the sales mix and lower delivered unit volume, and was partially offset by “product pricing actions taken over the past 12 months, disciplined promotional activity and lower input costs,” such as reduced inbound freight and raw materials costs. The change in operating margin was due to lower consolidated net sales, a gross margin reduction and higher retail delivery costs, which was partially offset by “our ability to maintain a disciplined approach to costs savings and expense control.”
Other highlights of the report were as follows:
+ Selling, general and administrative expenses fell 5.7% and equaled 44.7% of net sales — roughly the same as last year — which the company said was due to the careful management of “expenses in a declining net sales environment.”
+ The company lowered inventory levels to $151.7 million as of March 31, which was down $24.8 million from June 30, 2022. This has occurred as the company “restores its operating inventory levels to more historical norms as backlog declines. Inventory balances continue to decrease as the company seeks to reduce its levels of inventory while also ensuring appropriate levels are maintained to service its customer base.”
+ Advertising expenses were 2.2% of net sales compared to 2.3% in the prior year third quarter as the company continued to use various advertising mediums including digital, direct mail, national television and radio. “Disciplined promotional activity remained comparable to the prior year,” the company said.
+ The company generated $33.4 million in cash from operating activities, up 93.2% from last year.
+ It paid regular quarterly cash dividends of $16.3 million during the quarter.
+ The company also said it ended the quarter with $156.2 million in cash and investments with no debt outstanding.
Kathwari also noted that the company reopened its flagship design center in Danbury last week and said that it continues to strengthen technology options available for interior designers and their clients. Over the next six months, he said, most of the brand’s 172 design centers in North America will be updated to mirror the Danbury flagship facility.
“We are confident in the investments that we are making for the future, but recognize the need to remain cognizant of the slower economic environment in which we are currently operating in,” he said. “We remain cautiously optimistic.”
