Ethan Allen Interiors (ETD) 29 Apr 222022 Q3 Earnings call transcript

Good afternoon and welcome to the Ethan Allen Fiscal 2022 Third Quarter Analyst Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. It is now my pleasure to introduce your host, Matt McNulty, Senior Vice President, CFO and Treasurer. you. Thank

begin. may You

Good for welcome quarter our XX. Paul. analyst ended Ethan conference call fiscal afternoon. you, to And Allen's March Thank XXXX third

me After remarks, call while President will speak open our will Joining the financials for and remarks, I Farooq midway we the Mr. then through. open prepared questions. CEO. prepared Kathwari Chairman, our close to is today our your and Kathwari, will

recorded call on I'd our begin, the to on be is will being you like A available and contains press reconciliations of this phone we Before of measures audience website. find transcribed also release the made via replay non-GAAP this remind in our and live which copy call. where today's ethanallen.com, of financial will and that a to on referred release, call

review that, of our matters As today complete cause call. to company Please this Kathwari. are to obligation now for SEC during discussed any forward-looking subject that statements results filings no With or risks Mr. include assumes refer revise pleased to the that will could update call forward-looking to and differ materially. uncertainties our turn over actual a those to reminder, I'm risks. to comments The a

Thank third all you. And call. [technical thank you our earnings quarter for review difficulty] in

adjusted year And $XX.X quarter increase. in expenses previous to previous year make from the XX, March ended our XXXX. compared control operating the Strong strong XX.X% million, resulting income increased a to over operating Sales of for XX.X% XX.X% continue We $XXX.X in results good progress areas, gross in quarter. of resulted financial XX.X% of million margins many quarter.

with provides our from $X.XX Matt that, of Matt, year over. brief take And areas increased financial of EPS a previous of After the focus. difficulty] adjusted please Our XX.X% quarter. [technical McNulty

with the a to impacted of material supply by of prior The ongoing Great. production which COVID-XX. offset you combined again. impacted availability. chain negatively that high manufacturing in led productions imports as being strong net XX.X% disruptions, levels by increased raw demand deliveries Consolidated increased result partially and Thank sales increased was year negatively

quarter container we of higher receipt in a shipping receipts. volume As saw an progressed, of product the third increase from

were to prior a retail to very orders strong X% year down compared Our comparable.

an were were compared were levels. our has we our level returned backlog, production the third of disruptions. half chain that up that increase experience third third orders the XX.X% retail remain first year, to continue our orders to to among last as fiscal The XXXX. quarter. but quarter to XXXX compared base, have However, X.X% supply in demand our material up employee to pre-pandemic X.X% our levels segment constraints times to absenteeism down manufacturing of Wholesale the led product also higher and fact raw with marked historical higher of COVID-XX was despite pre-pandemic Delivery than quarter lead higher average

retail a year during and and and strong compared raw productivity, in to with basis a of our March import are primarily cost. XX% gross higher product to sales change year beginning had XX% a consolidated through to related ago. XXst higher remain manufacturing by grew at that a XXX ago. deliveries backlog and increased product offset to their our Consolidated said, March were However, than points backlogs order sales actions enabled pricing to sales month. that mix decrease With us high partially way previous mix, due higher that mix P&L that material approximately margin work The production XX.X% XX.X% favorable

XX% to to input in we impact due XX.X%, a mix costs norms. of return approximately pleased gross were consolidated we expect of return to and to with sales our margin While near-term of the margin our more the historical

on last to in XX.X% sales, cost sales third from the year up increased XX.X% lower Adjusted current due of marketing higher shortly. as by margin leverage sales XX.X% of costs to the quarter. and last was a margins, including fixed marketing measures, from of Our year discussed in initiatives change operating XX.X% to operating will due be volume, gross Mr. year margin cost containment strong Kathwari retail

by well in Now, January, due turning $XX.X share, on increased cash technology. customer will subsequently million dividend Reflecting spending strong design be strong and to our the to net to paid We increased Also to generated in no operating of income efficiency, offset $XX.X regular and $X.XX million future capital North expenditures by and year-to-date $X.XX our February, sheet, resources. just our increase million. balance declared Tuesday, in cash partially help sheet and of with centers, projection million which Board upgrades $XXX.X which XX% two of against investments in of related ended quarterly manufacturing Carolina, was regular cash paid of as as capital the disruptions upholstery in centers and We the paid announced quarter of price from chain in deposits, balance this returning and design including strong strength purchases the to retail protect additional increases. Board investments plan of debt. liquidity to support our May. capacity construction a per primarily and as the dividends supply history share activities quarter new total to third to and production Capital a $X.X per increased of bringing cash to quarterly inventory improvements, past shareholders, and our expansion the manufacturing dividend were further

SOFR, the will enhanced provides Kathwari. and With over five Mr. agreement our provide of amended on credit back agreement product maturity extend XXXX. existing flexibility improved call of to over also to of turn with we a to amended revolving years. on facility line that, us the transition pricing credit call, January, future the next million borrowings $XXX our and I earnings January the us the mentioned as The Lastly,

like this talking I'm coming I I got All tell from just was plane just right, to would at New where that I Matt. from to X:XX. office York everybody got Washington, and delayed And into

So before work out. one this things minute call,

So, today. I'm lot areas and phone actually mobile from covering a my of speaking good

focus continue our us the which quarter will progress. help key the to of areas, on during key our areas continued -- Now

area product promoted talent. retail finance, including Development business continues our First key an our technology, important associates, area is of number strong integrated operational marketing, in talent We and focus of and manufacturing, within to division development, development, of enterprise. logistics. be vertically a

I'm place. very pleased -- in a team strong are We we that have

requires service. XX% management are of to shipments. and and to orders all almost our made North service About our manufacture and focus capabilities effective American our a made The is increase to in parts been key inventories of received. products timely in second Improving our area when production help of improving workshops manner. custom This has

continue our We greatly time. delivery improve to

upholstery to North in XX ship seven American weeks back. weeks XX made to products customer our compared workshops as in nine to Our six months

progress times are XX in in averaging improving made workshops, shipping We products our our to XX compared now weeks. American good wood also to about North in weeks to XX making as XX

manufacturing to Clarendon, our our our foot operations. a and operations of upholstery in technology to increased We American workforce recent XX,XXX in North key have new workshop and acquired and North North upholstery investment production to in efficiency. Carolina, addition continue maiden operation in been square our square consolidate Continued Carolina -- XX,XXX workshops foot technology,

invest and in workshops. to continue manufacturing also Honduras our We technology in Vermont, Mexico,

great We over years pleased our our a the logistics. have are manufacturing, we that invested deal in in

also foot million our In square have Just in square upholstery, X.X to also close million own to In We square it. manufacturing. we feet. These give goods, are logistics. X,XXX,XXX you of all to close case a in feet. our national logistics, perspective, space X.X of

increasing our model. is us In continued larger has our costs. to opportunity many reach reach reducing our new while improve consumer modes this base, a business to focus marketing, All great communication, of of utilizing a really given our greatly

greatly costs reduced expenses. producing of our the advertising further have reducing content thereby We

maintain money in most Now, of in have been reduced been while in have it. producing cost, mediums, has our we to -- various able our the spent not advertising overall we

mediums been in have digital marketing efforts. now, key -- month our each During

month, reaching we through XX digital million mediums. XXX about each During households page are now our

we quarter, During and also television national the commercials. ran regional

such selectively utilize as mediums direct mail. We printed other also

our social effort important who X,XXX Another are the via grassroots has and retail media. management reaching associates clients over designed of effort been

service to have continued as add to We new effectively. products ability with comfortable we our feel

a service strong product as and launch program have ready we position, and We our them. we -- with for feel launch comfortable will we

in been designers focus our to another technology. marketing, manufacturing a initiatives Now, a area our and our in be continues Combining changer. to our be service personal continues technology, improving service in logistics key profitability. game and and of sales clients, to has Investments increase ability and interior technology on major

value. offering due combining American said two years last factors, strong have our changer. to made as XX% business number North designers in be continues, as This to service COVID We to the interior quality, of importantly, And a such I a during our with maintained technology. of of due game the personal workshops.

technology and Westport, repositioning we San recently retail with locations one is about designers. two two concept, and weeks XXX retail. tremendously retail second is back centers close XXXX, X,XXX California, in there's designers. Francisco excellent associates in opened Connecticut. smaller Creek, important In retail one, retail area. size, Today use in the had division, Walnut projecting which And to our X,XXX the centers we Continued March, our this our in associates of design new and in of We design XXX have

and up considerably, is making of third our return this a the less happen. about teams is quality So and

a manner innovation. has is social in of our always our years and Managing safety XX responsible responsibility been socially a Finally, enterprise part focus. of our

our part and DNA. We We believe I'm our recommendations manner. any brief have is rewards socially many that overview, to this an happy receive in to business for open essential responsible questions comments. conducting a or With in of continued

Thank you.

question-and-answer session. you. be Thank Instructions] a [Operator We will now conducting

Our Brad Markets. your question. first Please KeyBanc question with is Capital proceed Thomas with from

Brad. How are you? Hello,

I Hi. Good And Farooq. the Matt. Farooq, afternoon, rest are … of relatively Good travels hope But your uneventful. afternoon,

Brad. Thanks

I could. A couple of questions if

been We've of bit other items was manufacturers April. things little of of bit retailers little bit talk could a a have about a could home Farooq, into pace about and hoping been from business you you've as you just First and what that, we was furniture month here. some last move I that more cadence softer and and or comment the the little all, hoping I so mattresses of seeing business. heard the over

strong factors The to the is, Brad. very one last have the very, relative months. question, seen There Yes, the two are six here. businesses the that we in in

continued March. have in that We

April being expected. be I course, think of -- it's we in are I see and was can this month, finished, cautious to that it I think not people but think

Value value. people those that at on looking and in areas. the cautious, but pricing in think, much we in of of also news on quality, I terms more of terms well they're positioned that pretty So, in are service. -- are clearly all terms Good hand, is other much carefully

So, I to think will while half, a forward. maintain continue that the do to happened the able not down, that have as slow business but kind expect crazy our last will we we thing people year a to momentum to move and in we be of

helpful. we it's would Gotcha. in deposit having one as look characterize that mentioned. history. company numbers some I highest you're numbers, know seen think we've And delivery you customer you times the the how success, when I But That's of all the reducing the today? at backlog

revenue and perspective? should a how that the of size backlog, for the we of the So, from think opportunity

Yeah.

at -- up in strong think if after XX% and take backlog, to previous backlog to compared is wholesale for the XX% I very deliveries. look a even retail between that instance, you our year, our compared

next continue certainly backlog. this think to for the that reduce I to few will months work So, we

reduced already it. of timeframe, positive in of have of course, our which deliveries, fact I the we We as also terms the is, mentioned because make

and production So, we backlogs has also our think that, right increased. I decent are but now, --

decent I continue to we right shipments is likely and deliveries to most at improve backlog will think, go now. So, levels and continue a will down, the our it although

And particular Did I the think the comment a margins heard quarter, in I you the gross a make you right? XX% or Matt, And level? on margin? on focused were What hear I range. being about comment annual you was Great. the gross

Yeah.

with expected continuing we material So, we freight and there. uncertainty higher out costs quarter ended but raw this QX XX.X%, at and some

specific provided XX% not come quarter, but the bit. that's We the in little and We down particular the near-term, to expect it in number to one near-term. a

-- certain close a gross making quarter, is is now, that margins. about our our at it again, record gross at correct And -- fourth just a Right to, Brad, XX.X%, margins were last high. look if it, year assumptions Matt? And you on I at into coming XX.X% take think,

Correct. Yeah. Yeah. Correct.

So, we already were still quite high.

saying XX%, XX% most up. end likely that most between is and where think is we that's likely I So, Matt what

very you Matt. Great. Thank and much Farooq

right, Thanks All Brad. much. very

Thank you.

Please comes Cristina with with next Our proceed question. from question Advisory Group. your Fernandez Telsey

Hello, Cristina.

Thank I and what you. well. as you're with, of Hi, had also, color on cost you good if afternoon I Farooq wanted as versus had questions to couple the seeing time price inflation more and increases. call can the far last of as the a start level Matt. we give

offset you around XX%. had last the think raise are that prices I inflation? time said you need you cost prices finding or raised still you case, more to that Is to

very Cristina. These areas, Yes. important are

too, you I we the are have Now, has discussing -- Matt but Matt, numbers I -- mean, numbers. the I and were

These our America. number products products imported products. factors. been we being -- fortunately have less our XX% in than of impacted of have made most One is North terms are of that In --

imported have XX%. seen often, increase anywhere me, are to Matt, Our correct of we products, XX% talking we an from but

is That correct.

And talking I maybe I American, that XX% while mean mean, our our of North domestic, XX%. you're mix, or

the And costs that so, I going. has -- and impact with of this freight -- lot been international of a also the think

the also, facilities one I -- to our also has products from and on I'm our to North that as cost And America, cost about mean, We then -- had talking some Honduras, we network. maybe nationally. know domestically, it our domestically, deliver to have and of shipping at Mexico all retail transportation you impact

to has XX%. gone think I that X% also up

think are at to have I that overseas, increases So, to and averages see XX% increase, And and I taken certainly seen have we And most would I pricing next Cristina. but may most between and X% transportation possibly. months, forward, anywhere that's price as likely worst to say increases the have we look what six we that we the think, -- the at in of we'll in continue looking XX% going have we XX%. move between perhaps forward, our take, we would

Okay. very increases price -- thinking year color. No, cautious being the to How to guess, tone promotions cost because the and a -- I that more need promotions inflation are pricing you I guess, your values? about the been year-over-year. comes promotional -- And get helpful I a when with expect follow-up. consumer how get reconciling little did that's just are bit and guess take it you to offset low we lot a have you you about asked we as still progresses? as

a Yeah. That's good question.

what approximately everyday maintained have say We we a XX% savings on our, best price.

be fact careful that accept. price think to kind the consumers will the what I has are and concerned of one of about increases

the in very really offshore been America both XX% impacted been but transportation. the the because of North have been to all most product, again, made a the of being careful, degree, product, great We where prices the fact in the cost importantly, in have have

cost a know, you $XX,XXX. As $X,XXX gone has to of container from

that We have domestically. seen fortunately not

right. So, you're I think

price we increases. our cautious very are while being in are price We taking

continue sure continue not and have perspective do continue to special to that are prices. competitive keep offer to just that We'll to higher we also paying we'll that. able going savings more into people and make to keep consumer that been is We on we

to absolutely. to made? Then, you've on still just come able X% Last X%. you can topic on target another guess to how back commented you been mean, with call, the think based discuss you've wanted or you marketing getting about talked Yeah, changes I efficient I marketing. that number a was Is the that more there I was be to marketing. about below

what Well, did X% this we did we spend? Matt, what we less, spend, quarter, -- or

X.X%.

X.X%.

in we more Interestingly, were of Number we while factors. a reduced are there reasons. mentioned expenditures, as number my effective. our comments, Now, I of

also mind, the X% our -- placing producing marketing, it is studio in our all reduced advertising -- we includes First our -- keep when actually includes X%, we in talk of advertising. then also also our costs and or marketing, photo that’s our the it -- costs, costs, are the

include costs all marketing that. our So, of

have the are reduced we We we substantially production. have manufacture, using. And mediums reduced our our able then, through to that costs, also been

direct of printed on amount we direct mail, mail. spent money instance, a For fair

in mediums. year Now we two the digital increasingly or using years, so, been have last

three sending are -- instance, Two even think magazines. mentioned, -- For mediums as -- years it. we didn't I digital we now was back, out, three it direct of

cost mediums plus changing. is are So, the changing, also producing of the

all said that, around having for in keep think, of So, but mind. keeping I anywhere fair budgeting think between X% purposes, to and I X% a thing is

of new a more home and on and just introductions. new I LVT, one then, improvement last product sort Ethan is which And the Thanks. I introduced the Allen category it's that Okay. had noticed on you for like side. flooring one

talk about year? or you're category -- that is And yourself? last that you can compared this new to the year are product to So, is to expand, manufacturing how decided introductions why product just

based can by be also Yes. materials. joins as the It putting without ability kinds we product it It's -- is products. works And it our than be be it's being upon like things product I our very manner can having -- -- designers. have is sold is mean, This also of but that introduced concept. that in a applied cemented used, together. all availability, that. products that obviously a is together in it in is flooring or innovative -- a It to program put rather a it sell

a So it. easier much using much, way of

have area in do had always in rugs. we program a strong carpeting, Now

programs So, we and received. upon as this been to look has very an well those addition

you Thank good and this luck quarter. have. I all That's Okay.

Cristina, thanks right. All very much.

comments. closing there Thank queue floor this further for in Farooq over you. turn the looks at time. questions to like back I'd any the no like It Kathwari are to

to joining. want great thank doing and thanks our for a job, forward growth. everybody much. Well, our I progress And to for also we And and look teams continuing very right. All thanks

much. very thanks So,

concludes today's This you. conference. Thank

this disconnect your Thank may your for You participation. lines at you time.