Ethan Allen Interiors Inc. (“Ethan Allen” or “the Company”)
(NYSE:ETH) today provided updates on its business.
Update on Current Business
Conditions
It has been over five weeks since Ethan Allen
temporarily closed its Company-owned retail design centers and some
of its manufacturing operations.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “The impact of the COVID-19 crisis and
the closing of our North American design centers and manufacturing
has had a major impact on the results of the March quarter. We had
to take unprecedented steps including the furloughing of over 3,000
associates.”
“I am grateful and proud of the attitude and the
efforts of our associates throughout our vertical enterprise. Our
interior design associates we retained continue to create design
solutions that satisfy customer needs while sheltering in their
homes. The interior design associates working remotely have been
utilizing technology we deployed over the past few years, including
the Ethan Allen inHome augmented reality app, 3-D room planning
tool, and communication tools including Skype and FaceTime. We are
looking forward to the planned reopening of our design centers in a
number of states starting from May 1st and have begun to
increase production in some of our North American manufacturing
plants. We are making good progress with our new products including
Lucy, a mid-century modern inspired upholstery collection that has
just launched very successfully online, and Farmhouse, a country
cottage inspired furniture collection that is launching in two
phases over the next few months. We are also pleased our
independent retailer in China has opened most of their 105 retail
locations and our U.S. government contract business remains
strong,” Mr. Kathwari continued.
Mr. Kathwari concluded, “Finally, we are pleased
to maintain a strong balance sheet including cash of $117 million,
which includes $100 million drawn from our revolving line of
credit. We believe we are well positioned for when the economy
reopens and improves.”
Preliminary Financial
Results
The Company expects to report the following
financial results for its third quarter ended March 31, 2020:
- Consolidated net sales of $150 million
- GAAP consolidated gross margin of 56.1%; Adjusted gross margin
of 56.0%
- GAAP diluted EPS in the range of ($0.80) to ($0.82) including a
$25 million non-cash goodwill impairment charge
- Adjusted diluted EPS in the range of $0.01 to $0.02
- Cash on hand of $117 million as of March 31, 2020 and long-term
debt of $100 million
- Generated $15 million of cash from operating activities
- Paid regular quarterly cash dividend of $5.5 million
- Share repurchases of $14.3 million, representing 992,636 shares
or 3.8% of outstanding shares
The Company expects to report the following
fiscal 2020 year-to-date financial results:
- Consolidated net sales of $498 million
- GAAP consolidated gross margin of 55.2%; Adjusted gross margin
of 56.2%
- GAAP diluted EPS in the range of $0.01 to $0.03; Adjusted
diluted EPS in the range of $0.63 to $0.65
- Generated $39 million of cash from operating activities
As previously announced on April 1, 2020, the
Company implemented its action plan in response to the COVID-19
health crisis. Measures taken included, among other things, the
continued temporary closure of its design centers and most of its
manufacturing facilities, the furlough of approximately 70% of its
global workforce, the decision by M. Farooq Kathwari, the Company’s
CEO, to temporarily forego his salary, a temporary reduction in
salary of up to 40% for all senior management and up to 20% for
other salaried employees, the Board of Directors temporarily
reduced their cash compensation by 50%, the elimination of all
non-essential operating expenses, a delay of most capital
expenditures, the suspension of the share repurchase program and
placed future undeclared dividends under review.
Fiscal Third Quarter Analyst Conference
Call
The Company also announced today that it will
release its financial and operating results for the fiscal 2020
third quarter ended March 31, 2020, after the market closes on
Monday, May 11, 2020. Following the release, the Company will host
an analyst conference call at 5:00 PM (Eastern Time) to discuss its
results. The analyst conference call will be webcast from the
"Events and Presentations" page at
http://www.ethanallen.com/investors. To access the conference call,
dial 844-822-0103 (or 614-999-9166 for international participants),
and enter conference ID 6853339. For those unable to listen live,
an archived recording of the call will be made available on the
Company's website for at least 60 days.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETH) is a
leading interior design company and manufacturer and retailer of
quality home furnishings. The Company offers complimentary interior
design service to its clients and sells a full range of furniture
products and decorative accessories through ethanallen.com and a
network of approximately 300 design centers in the United States
and abroad. Ethan Allen owns and operates nine manufacturing
facilities including six manufacturing plants in the United States,
two manufacturing plants in Mexico and one manufacturing plant in
Honduras. Approximately 75% of its products are made in its North
American plants. For more information on Ethan Allen's products and
services, visit www.ethanallen.com.
Investor/Media Contact:
Matt McNultyVice President,
FinanceIR@ethanallen.com
ABOUT NON-GAAP FINANCIAL
MEASURES
In this press release the Company has included
financial measures that are not prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”). The Company
computes the non-GAAP financial measure of adjusted diluted EPS by
adjusting the GAAP diluted EPS to remove the impact of certain
charges and gains and the related tax effect of these adjustments.
The presentation of this non-GAAP financial measure is not intended
to be considered in isolation or as a substitute for, or superior
to, the financial measure presented in accordance with GAAP. The
Company uses this non-GAAP financial measure for financial and
operational decision making and to evaluate period-to-period
comparisons. The Company believes that it provides useful
information about operating results, enhances the overall
understanding of past financial performance and prospects, and
allows for greater transparency with respect to key metrics used by
management in its financial and operational decision making.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), which represent management's beliefs
and assumptions concerning future events based on information
currently available to the Company relating to its future results.
Such forward-looking statements are identified in this press
release by use of forward-looking words such as “anticipate,”
“believe,” “plan,” “estimate,” “expect,” “intend,” “will,” “may,”
“continue,” “project,” “target,” “outlook," "forecast," “guidance,"
and similar expressions and the negatives of such forward-looking
words. These forward-looking statements are subject to management
decisions and various assumptions about future events and are not
guarantees of future performance. Actual results could differ
materially from those anticipated in the forward-looking statements
due to a number of risks and uncertainties including, but not
limited to: a volatile retail environment and changing economic
conditions may further adversely affect consumer demand and
spending; global and local economic uncertainty may materially
adversely affect manufacturing operations or sources of merchandise
and international operations; disruptions of supply chain; changes
in United States trade and tax policy; competition from overseas
manufacturers and domestic retailers; failure to successfully
anticipate or respond to changes in consumer tastes and trends in a
timely manner; ability to maintain and enhance the Ethan Allen
brand, marketing and advertising efforts and pricing strategies;
the number of manufacturing and logistics sites may increase
exposure to business disruptions and could result in higher
transportation costs; fluctuations in the price, availability and
quality of raw materials could result in increased costs or cause
production delays; current and former manufacturing and retail
operations and products are subject to increasingly stringent
environment, health and safety requirements; the use of emerging
technologies as well as unanticipated changes in the pricing and
other practices of competitors; reliance on information technology
systems to process transactions, summarize results, and manage its
business and that of certain independent retailers; disruptions in
both primary and back-up systems; product recalls or product safety
concerns; cyber-attacks and the ability to maintain adequate
cyber-security systems and procedures; loss, corruption and
misappropriation of data and information relating to customers;
loss of key personnel; additional asset impairment charges that
could reduce profitability; access to consumer credit could be
interrupted as a result of conditions outside of the Company’s
control; its ability to locate new design center sites and/or
negotiate favorable lease terms for additional design centers or
for the expansion of existing design centers; materially adverse
changes to fiscal and tax policies; its operations present hazards
and risks which may not be fully covered by insurance; possible
failure to protect its intellectual property; failure to
successfully transition from a promotional to a membership model;
potential risks and uncertainties relating to the duration,
severity and geographic spread of the COVID-19 pandemic; actions
that may be taken by governmental authorities to contain the
COVID-19 pandemic or to mitigate its impact; the potential negative
impact of COVID-19 on the global economy, consumer demand and the
supply chain; and the impact of COVID-19 on the Company's financial
condition, business operations and liquidity.
Given the risks and uncertainties surrounding
forward-looking statements, you should not place undue reliance on
these statements. Many of these factors are beyond the Company’s
ability to control or predict. These forward-looking statements
speak only as of the date of this press release. Other than as
required by law, the Company undertakes no obligation to update or
revise its forward-looking statements, whether because of new
information, future events, or otherwise. Accordingly, actual
circumstances and results could differ materially from those
contemplated by the forward-looking statements.
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