Ethan Allen Interiors (ETD) 25 Oct 232024 Q1 Earnings call transcript

Good afternoon, and welcome to the Ethan Allen Fiscal 2024 First Quarter Analyst Conference Call. [Operator Instructions] Please note, this conference is being recorded. It is now my pleasure to introduce your host, Matt McNulty, Senior Vice President, Chief Financial Officer and Treasurer. Thank you.

You may begin.

Doug. you, Thank thank Ethan and joining today us Good fiscal you XXXX discuss Allen's first to afternoon, for quarter results. is With CEO. today Farooq Chairman, our me President Kathwari, and Mr. I close open performance our will speak prepared midway Kathwari through. to and remarks, will financial our while remarks, our your prepared the for will we After open then call questions.

of and you like on copy the under News find Events tab I'd to that begin, live the we audience There, call webcast this Investor our Relations a page the Before will remind is website. being recorded of & which our A on also release, this call press financial will measures contains available release. non-GAAP our and Investor reconciliations Relations referred replay press this call made of of website. today's to on be in

include on and statements to are XX-K. obligation future SEC results forward-looking subject annual to our no described risk most actual cause matters to our may revise uncertainties could of a differ that update are risks assumes complete discussed materially. to our The results in for or factors filings significant that comments call. Our any Form risks. company affect this review that forward-looking could report today those The during Please refer

Kathwari. turn now call that, pleased I'm With to over to the Mr.

to to you XXXX call Thank fiscal you, Matt, and good our review initiatives. have first join our results our and

of of sales margin and operating XX.X% delivered margins, margin of reported, despite we gross strong XX.X% a maintained As decline operating we of XX.X%.

and impact in Vermont our sales are to flood major Our of manufacturing a the due of the impacted softening operations. economy

well. positioned are We

strengthen have enterprise. integrated to continued We our vertically

to balance. continued maintain cash also We strong have a

design results, of $X.XX providing an provides our also, announced we Design to various marketing, retail X. in distributed a overview financial $X.XX our regular I network Matt $X.XX logistics special growing positioning technology. with strengthening and manufacturing, and dividend; in increasingly we of by unique Interior combined quarter, yesterday, our brief our service Destination, After During discuss addition Matt? these us of business interior growing dividend a of regular the initiatives and our as talent, will and

Mr. Thank Kathwari. you,

reminder, events, we non-GAAP GAAP and corporate a the non-GAAP occurring exclude basis. unusual infrequently such results of the both actions. a As We performance on flood trends restructuring business. as operating better our the initiatives, Non-GAAP or other presentation Vermont reflects believe and present impairments, results and financial underlying

at cash robust I will cash positive in completed plant, are quarter results a being balance highlighted financial financial a sales Our margins, our payment first flooding by Despite dividend the produced flow, and our sheet. economy, operating special results, a casegoods operating just impacted discuss. by of positive in which strong the Vermont July operations now softening

decrease comparable consolidated reduced the strong in Vermont from flooding, order net $XX sales approximately which net production XX.X% resulted due from by to million, and of impact manufacturing totaled Our volume demand, unit the a year stoppage lowered prior million softening and sales $XXX.X temporary delivered quarter. work a backlog, lower the lower a in from

Wholesale during XX, was more a a ago back during leading XXXX, to million of first work production orders, were with backlog compared segment number access. the down set the expect retail weeks since last down home perspective, the while down are second seen Vermont XX.X% of XXXX, down through since difficult and impacted experienced third business to decreased by but and $X.X record written demand the flood. The from the shipments XX.X%. with notable the quarter September From levels normal upcoming a being high we comparison. in recover plant due wholesale contract We resumed we to of has Orleans written ended we combined segment to we as from the as height with June backlog high demand year last the to XX.X% Our near million, and delayed from backlog year pace of quarter orders operations, compared upholstery quarters. Sales pandemic. year, orders a historically to ago $XX.X within a up conditions, improvements XX, of year, the timing of

a last Our wholesale exceeded maintain due margin sales consolidated and was more XX.X% year consecutive service delivered of out pre-pandemic from percentage as favorable backlog including in of is sales. lower a from business. partially expansion, are sales, costs company's up margin to gross volume control. margin XX.X% investments mix, gross that lower our levels down margin XX.X% customers. Consolidated as Adjusted business XX%. product These tenth unit wholesale were in year, input expense and lower offset a our last XX teams mix. Retail savings we was and to last operating approach compared our the delivered technology disciplined the sales year, reduced points primarily to cost our costs, quarter backlog, by ability lower gross contract from XX.X%, to offset consolidated XX.X%, consolidated approaching to down headcount, change and managing partially When gross by greater were was basis margin headcount,

sales, deleveraging. Our fixed from equaled last from XX.X% cost SG&A XX.X% up expenses of decreased and XX% year

flooding. XXXX, located damage from July in in stated, furniture our operations wood Orleans, manufacturing Vermont sustained previously As

of And is was net charges a pretax $X.X was restoration equipment, $X.XX the addition cleanup last compared flooding was from gross and and $X million. loss The with state-of-the-art related incurred Vermont disruption grant delay inventory, of resulted a disposal stoppage from associates amounted and the to many temporary to $XXX,XXX, and manufacturing financial loss from reported after million adjusted amount to of damage, of year. In earnings. Adjusted equipment $X.XX state inventory the $X.X and restructuring our shipments. in inoperable and work the machinery losses the excluded million other of from facility EPS for proceeds within of and also insurance a water and

months ended the our context, $X.XX. historical For XX, was XXXX, EPS adjusted September diluted for X

effective tax comparable rate XX.X%, which was is a year to ago. XX.X% Our

Now and million capital investments We cash of quarter balance the $XX.X the turning during was $XXX.X sheet activities and from resources. and debt. quarter, profits. including liquidity strong to no We driven generated outstanding of million which cash with our strong ended by operating a

from ago decreased Our million restore as decreases. $XX a our we levels norms inventory backlog year historical as levels operating more inventory to

continued returning were of a paid to in per We of shareholders to the dividend $X.XX our of on in declared our addition our regular of XX. August Board dividends. quarterly In practice share share, which cash of August, dividend capital both cash special cash per $X.XX form

lower our each years. a X a will yesterday, dividend announced We plant double-digit our as at to margin per integrated produce was Also, that in strong have which November. In stoppage past investments to share, now declared led our work of $XX.X positive paid our through Board during We a expense special just paid able operating protected quarterly million period a and business management. margins marked in cash regular a the $X.XX Vermont and a cash in and temporary generated vertically summary, industry-wide by softer sales. be dividend disciplined of demand flow

Mr. manage now turn our We will expense call to that, I will over back Kathwari. the to structure. With continue carefully

Well, thanks, Matt.

for interior decades. you focus As we have know, design had our

of internationally. Recently, with had under focus, impacts: centers the This across level. programs our across We center umbrella includes we the design concept launched in North design the launching interior different recently and XX repositioning year of Design initiative Interior our this However, entirely entire of our ribbon this consistent takes have the Destination, America our strong in of business following an network. centers started design Danbury the and recent and our April in locations. cuttings in to

Alabama. Bay, Just Plaistow, you New Georgia; (sic) grand Lancaster, Princeton, York; Albany, in projection Pennsylvania; near Hampshire; are New this Peachtree Cordova, Tennessee; City, in Birmingham, Island; Oklahoma; of City Wisconsin; Georgia. week, Kennesaw, Peach Pleasant, California; Carolina; openings Tennessee; Oklahoma Francisco, having South New This a ], Jersey; New and to perspective, City Island. the Long now, York; City, York; Marlton, we Atlanta; enhanced actually New Setauket, give in in process [ just Garden Long having including Mount That's in Westchester, New Manhattan, San Jersey; Green Knoxville,

America. center North to XXX is in objective in Our this design continue our implementing locations

XX in across will our such in Next of see consumers time North clients. in consumers North and in America amazing pandemic, the interior the attitude. The designers across other repositioned by the XX have has many COVID initiative Consistency operating design scheduled benefits, been focus -- their gross service North offering and margins. After projections homes as associates, and interior travel. helps focus improve and days, XXX end have of during and centers we areas more and strengthened America, consistent spent December, motivated consistent and have strengthening including and of December of across XX with continued the marketing are the products America, design

level We the moderate expect the focus and more that we at to see saw not home, during COVID on period. although

see continue of We and raw as to costs in materials, such energy transportation. reduction

products developed new X While to we very have we off introducing during COVID during the the to hold years, last strong decided X period.

and started do to XX the continue have now We products, introducing we'll next in months. new so

operations, During the our teams last professionals X XX% the we interior have interior to continue including do to in design design demand, same who design and streamline about our about are strengthening strengthen Today, we less centers. years, our despite high business.

whether less logistics they by in headcount game and in changer. is our as using us XX%. XXXX, in our it whether our company our more interior the from in the total helped designers By it's our our retail, has technology, is in fact, and -- retail, In especially say, make in proficient is manufacturing, --

and furniture our talent. new us of experienced talent recent We has strengthened also have and brought unfortunate bankruptcies retailers

from our the in use has North the mind are made Keep American also And XX% XX% of benefit order. manufacturing that technology. custom of made receive when are we operations. and Our strong all of teams products our to products in continued

but have and in that we economy a -- -- we some the because are we challenges So of are positioned and good we I well. position, are know

offerings for with open terms that, our both We terms and of facilities. And any and up questions to stronger, our I'd like people, our comments. in are in in of it

comes Our Budd Instructions] Water the from line with question Bugatch of Tower Research. first [Operator

second. Just Bugatch. Budd It's

Congratulations challenging to few do I'd have just and got project trying questions, to I'm forward. what say, on the margin be, and a very has And environment. performance a I

year-over-year at noted at down would at deposits. XX% are look the customer That going that be deposits you you retail. about volume your forward, As and

I'm job orders down -- a in were for than So were you good sales. retail net and you of actual the pretty -- less thinking you less in did

than XX% than me. I -- retail the be XX% saw less quarter, -- than lower So year-over-year down that, in lower the probably somewhat we quarter, what pardon the the retail, suspect first for but second for sales will

backlogs mind, our retail. that Budd, good at bit a but little XX% it's we reduced early, as a are I great wholesale, in is said, while degree down it's the delivered. but keep Yes, I backlog that because now or comments We're think to still, your down sense have and by our XX% XX% our at so in -- we because down and about comments

of a So we reasonably good still lot generated backlog. a have backlog. We

is expecting last back expecting, months, instance, back somewhat X hopefully, when -- about mentioned, -- and XX% gives But than backlog, an hope year. you areas. of tremendous continue spent after, travel we is the a backlog method, in so We backlog a amount have consumers' had backlog us to go to that still X was not go I we have is but opportunity still XXXX, time And when, our attitudes, products. still into pre-COVID in decent in to are they as as other we're home are going it also what last or for to not we a are ship higher that

look the you note quarter? obligatory. the I'll year-over-year, those that. I quarter comparisons down the did How And did proceed as understand were What during progressed? did orders ask XX% that retail that and the like

talking the this first -- quarter? last of You're

Yes, a there sir. quarter XX% -- Yes. -- was for It little for the entire trend. was was

It was a part consistently the more same. or less

you know notable but one compared kind the is with had Orleans versus us of XX%, disclose performance, -- give give wholesale? thing the And on margin plant. me, that Okay. can which you how too, for you don't a that flavor that, us I issue in a know retail of I just the

curious that proceeded. just to how I'm So as

Matt, give margins or what? those do we

on We do margin. out an wholesale We and gross not a on operating retail do break perspective. margins

was this Budd, generally, out happened I what take extraordinary. Orleans question you again, if Orleans say in but in what of would -- that as this, happens considered

our we've on in think I consistent both and been the wholesale that a our basis operations, retail margins of margins.

again, year-over-year. last for It's And retail about on Okay. retail what that think, -- XX% compare it, me inventory. wholesale? versus was How down, the does I

It's approximately, information? do let me just you have see. that Matt,

XX% down is year. Inventory from last

inventory says he No, down... is

more retail versus down wholesale the be the on side. side would It

As the have with was new floor out bit bigger year centers, a versus product wholesale. ago pointed design of a Mr. compared coming little out, that's inventory a our that to the the do Kathwari retail we so on higher decrease

Yes, about XX% or down, Budd. so

the Group. of question line Fernandez Telsey Cristina comes from next Our Advisory with

ask deleverage to about in XX% on the SG&A know that decline. obviously significant but quarter. wanted I I expenses the the declined sales

seen get refreshes quarters? to wanted the operating -- macro think was back should a anything margin new the what what the I store we given level And that what couple can higher you've to level of incremental past it refreshes the initiative and the or related quarters of I guess bit is in about Or next know, So onetime to this little couple in the there in a stores? like like that XX% the the was quarter?

many, question, also this the with the technology taken hard this just retail, we has to technology operating the at about writing how service. in were technology. It's that At efficiently, are designers because it's I in stage, level. a our When has manufacturing people where helped from when decrease about had XX% important COVID our and the place us, of the associates, levels of we course, back, more good their a it the really all them of than less working homes. many the use the and with news years especially It's their talked at Cristina. because combination especially business retail much and what few interior in personal of And good was at both more is are say tremendously level amazing today

areas So would a major and or I say, our business, wholesale I retail. X it consistent think that more between from the less, perspective, is of

like is room you cut there on as sort expenses the Maybe this go can asked is more? as another saw kind quarter to $XX of way, you of Or the million side? expense low

good that decline million it's Well, from in $XX $XX year-to-year. we from when million, because quarter pretty a question that's went year major previous in had a to -- we the

done, a keep taking look So we needs there's but a that I possibility. always always what think on be at to

service We important. said, retail, in the are is And I manufacturing, combination opportunities. in our again, and always our our looking at in the as technology logistics tremendously of personal

we it a is there quite have a down So possibility, bit. but think cut I

your seeing, feedback I relative to share this color to if then Maybe centers, can from on see side. behavior quarter. this X wanted on getting. you're like year? their changing What more the consumer color another any And how down earlier demand Okay. you It X, the you're -- you're step months the seems seeing design the more ago from took it's

still if consumers, I conservative. think that right somewhat now, look at take you a they're it very

it we how to remain can compare will the differences we months. our tough expecting -- a in I a see to wholesale to back we to instance, of than are is what question to. Comparing we few retail -- is higher business. our it are are last think that very the it you -- you both was business, -- again, comparing pre-COVID are comparison. year actually if that the And that going But starting at for for next it pre-COVID,

back -- are done this, and furnishing it. think to They've somewhat homes. we would see that a consumers I into looking the consumers lot And already get of are their

spent they amount time travel areas. and in think fair of other I a

home. quarter, this certainly quarter that say coming the have and would consumers in next we more should we the and more so into interest And

question with KeyBanc. line Donnelly from of Zach next the Our comes

break Q, that based segment. you in margins or the retail for wholesale don't earlier that gross out kind unchanged know had the margins of I noticed retail gross were just that on Matt segment. you But mentioned year-over-year mentioned had

clearance but I sales form noticed so wondering costs favorable you're some seeing favorable that that assuming And higher. on was input I'm end, mix were -- of product

segment. if wondering margins you impact for clearance or that help maybe us us has was what the of gross kind had retail I bridge So on understand on could elevated

we projection, because country. after it we it products in some of saw of good it it that's of One also also we and the over sold now that fact design to we all question be are with has strong Danbury a a of the course, I Manhattan, Yes, launching number but has was, What had all did a course, great job you that that is this. centers, think initiatives. of the It that center our done having a design had did in great very clearance. created done projection

and -- a that at sold margin. has that is clearance So been lower

affected our margins. that gross So

we not for are many, XX going what the the much, is went not changing. I XXXXX-square-foot Danbury, XXXXX-square-foot was X,XXX, think Danbury we to part thing have to repositioned a for XX,XXX in a which we -- going design It's to has Keep said years over and In when regular and change. we foot square instance, mind, is of starting feet. be that many mentioned so, areas size in our may other center. did, centers a were -- of country, anything did, square which center, in X,XXX, we design The already location we XX,XXX, have Manhattan, design we, will or of X,XXX we also too

sold combination floors we back, did certainly brought we we years of margins. and the of also floors. X created a why lower technology. XX benefit lower sold had interior sold, greater short design products mentioned that and are I as sell that of a margin. the at They business, space, design us that did having term, XX,XXX-, we out good sell at less because, the but a products have give things products on in They obviously XXXXX-square-foot So all be we -- will whatever also, it centers. product so XX% today, showed customers, had on was products. that get we we to in That's the those, almost is of products But

efficient. will think as this good in all products had has tremendous is, we we'll impact. the these off centers But and country. that more I X centers or design of it in move news take had forward, excess months go that design All sell to The forward, smaller we another much we as so have us

piggybacking then gross we've over over it. of Got as of of sense something have what you're on and just retail what you you out that? margins. sales could quarters, percent kind -- the interest retail with so past really And on of financing in that of called really do margins, your tracking associated items. noticed, just to kind you've really gross We've been financed of closely end, segment nonfinanced? are delinquencies color rates in kind impact discretionary kind That's an seeing And on helpful. credit increased honing just any provide you wondering, of costs or versus any off X month financing the that, maybe can for I past was ticket of for big retail is terms

good offering, a X XX mean interest interest. months? up And with or months that's I bit. free I quite we question has months until were Yes, back, months financing a XX gone loans XX on rates know, for, interest don't because a free

XX.

with XX still business sufficient. we forward, was done with went even down that financing, no, think to that who need XX% close go realize and those close -- up loans, is probably of And XX% to that took X%, -- the X% our And so will months from of said instead though think because And XX most but too was rates much. months. interest XX we months. we that we XX it is X% to are believe there months I what feel we people that I we as to to

that we to lose be we business. Now careful want have to don't

or interest this very, of about on to months has gone margins, stage, from so. going impact I we the said, taken have to X% So has down we're an the XX the X% from But -- carefully. watch at XX to which months, as very impact

Got it.

XQ year-over-year then last of of were trends That just noticed in orders, We any just helpful. those next makes really out. sort maybe there's is moving guess what for kind the down us. you my wholesale of of think if of sense just pushing can would is I that Okay. and about order written maybe the just impacted to about shift into was kind that terms this orders where on That quarter. quarter. timing impact that maybe wondering GSA out on potentially later to XX% And or question and I that that's touch fiscal if is how be breaking you contract sort you into

at of they'll end September It used a to most the But fiscal actually to all year. next the it is You've the that year, that government's the the them answered the had is XX, year, don't the do question fiscal orders after I in. to yourself. be of end GSA cutoff have if of year. put this know orders enter have allowed They

way, of that sort September orders it's didn't in. to everybody it's done because have what created in it put So now lower is

So in they put this to going quarter. are now this

we one they'll major quarter. that So And hear been that's this factor. in, we come in what or September, come is that in didn't the believe orders

wholesale, and been by about majority wholesale business lower, it impacted all that our of does And our to referred you of by when has the wholesale The orders obviously, the not in the lower. enter nonretail business was and government the State retail September. Department that yes, talk government, if But business to orders you the -- other the division. decision that is, that's GSA outside affect question this our own is is of you from retail most asked our when

helpful. a maybe. final Got as then on just I really it. That's guess follow-up it. point a And Got that

assume down believe so maybe kind that being that fiscal your next timing of we XQ, that contract XQ, comparisons the moving the prior of just orders written year, Would orders into I on maybe were fair order trends shift. around the next we that see XX%, written also sort shift, the some in into quarter, of with benefit fiscal timing So to as be case, moving contract the of see moving improvement benefit in it quarter? side XQ sequential into should easier the the

different, can Yes, we network because I think make the that depend that how how of are the the And but retail, our something course, that. we the expecting is. works, unless assumption has upon government -- retail how economy will

-- economy. are impact didn't this initiative We our people end into are do are think to it soft is we Design at motivated. going Destination that I Interior because This of very the we -- of fact creating a because, we're of the lot time, get right and out -- is to given message that has great at a do. But being the time us We thing given is of the that did a when opportunity around this only discounts going of business. it to deep out our was message

strong are that offerings. our well are we very getting So the alive, and we in message across

going is us. to that think help I

us. Good strong Yes, this for that's it. congrats on the the quarter. it and luck margin on Got refresh

very Any much. Thanks other questions?

There are questions in for to to the back it Kathwari closing remarks. Mr. no queue. like I'd hand further

you and likely, I thank very this around quarterly just Budd is And thank over XXXth, getting for XXXth started. and call. think much, Well, participating And we're most attending. knows, you consecutive as

of things got stay a So good happening. we've and with lot us,

participating. for much very thanks So

and Thank Ladies this participation. teleconference. today's you does for your gentlemen, conclude

your You a at may day. lines and this disconnect time, have wonderful