by Company remains profitable with a consolidated gross margin of 61.5% for the quarter compared to 58.2% a year ago
DANBURY, Conn. — HNN 125 retailer Ethan Allen reported declines in quarterly and full-year consolidated sales as consumer demand has continued to wane because of a slower economy.
For the fourth quarter ended June 30, the company reported consolidated net sales fell 18.4% to $187.4 million, compared to $229.7 million the same period last year. This was driven by a 17.2% decline in retail net sales and a 16.7% decline in wholesale net sales.
Written retail sales during the quarter were down 12.5% compared to the fourth quarter of last year and were down 1.2% compared to the pre-pandemic fourth quarter of 2019. Meanwhile, wholesale written orders fell 14.7% from the same period last year and were down 2.5% compared to the same period in 2019.
Adjusted net income for the quarter was $24.6 million, or 96 cents per share, compared to adjusted net income of $31.9 million, or $1.25 per share, the same period last year, a 22.8% decrease.
For the full year, the company said that consolidated net sales totaled $791.4 million, down 3.2% from $817.8 million in fiscal year 2022. Net retail sales fell 4%, while wholesale net sales fell 7.1%.
Written retail sales for the year were down 12.3% compared to fiscal 2022 but rose .8% compared to pre-pandemic levels in 2019. Written wholesale sales declined 9% from last year and were down 2.1% compared with fiscal 2019.
For the full year, adjusted net income totaled $103 million, or $4.03 per share, compared to $100.3 million, or $3.93 per share, last year, a 2.8% increase.
Other highlights of the report were as follows:
+ The company said it reduced inventories to $149.2 million as of June 30, which was down $27.3 million or 15.5% from last year. This occurred as the company said it is restoring its operating inventory levels to more historical norms as the 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.”
+ Consolidated gross margin rose to 61.5% during the quarter, up from 58.2% the same time last year. The company attributed this to a favorable sales mix, disciplined promotional activity and lower input costs, including reduced inbound freight and raw materials costs, partially offset by lower delivered unit volume. For the full year, its gross margin was 60.7%, compared to 59.3% last fiscal year.
+ Adjusted operating margins during the quarter were 16.3% compared to 18.5% last year because of lower consolidated sales, higher retail delivery and health insurance costs, along with new product display, merchandising and sample costs, partially offset by gross margin expansion and the company’s ability to maintain a disciplined approach to cost savings and expense control.
+ SG&A expenses during the quarter decreased 7.6% and were 45.1% of net sales, which the company said was an increase from 39.8% last year because of fixed cost deleveraging on lower sales.
+ Advertising expenses totaled 1.9% of net sales compared to 1.5% during the prior year fourth quarter. It also reported an increased use of digital and direct mail advertising while promotional activity “remained disciplined and was comparable to the prior year.”
+ The company said it generated $26.3 million in cash from operating activities during the quarter compared to $29.4 million last year and paid regular quarterly dividends of $9.2 million during the quarter, up 12.7% from last year. It paid a total of $46.4 million in cash dividends during the year, which included a special cash dividend of $12.7 million, or 50 cents per share, paid in August 2022.
+ Cash and cash investments totaled $172.7 million as of June 30 compared with $121.1 million last year. The company said the increase was primarily due to $100.7 million in cash generated from operating activities and $8.1 million in proceeds received from a sale-leaseback transaction competed in August 2022 and partially offset by $46.4 million in cash dividends paid and $13.9 million in capital expenditures. It also reported no outstanding debt.
Chairman, President and CEO Farooq Kathwari said he was pleased with the overall results for the quarter and full fiscal year.
“I would like to thank our team for continuing to develop a strong entrepreneurial enterprise with a focus on great quality, service and strong financial results,” he said. “As we enter the post-Covid-19 era, we believe we are well positioned. During the last three years, we have strengthened major areas of our vertically integrated enterprise including talent, marketing, service, technology and social responsibility.
“Our focus moving forward will continue to strengthen the various areas of our vertically integrated structure, including developing a strong team which is entrepreneurial and disciplined, enhancing our product offerings under the umbrella of Classics with a Modern Perspective, repositioning our retail network as an interior design destination, and ongoing investments in technology to further enhance our marketing, our North American manufacturing and our logistics. While we understand the challenges of a slower economy and the reduction of consumer focus on the home that had occurred due to the Covid-19 pandemic, we remain cautiously optimistic due to our many initiatives over the last three years.”
