Ethan Allen(ETD) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales totaled $167.3 million, reflecting lower delivered unit volume and reduced manufacturing from lower backlogs [10] - Consolidated gross margin was 60.2%, marking the 11th consecutive quarter exceeding 58% [13] - Adjusted operating margin was 12.8%, impacted by lower sales and gross margin erosion [14] - SG&A expenses decreased by 9.1%, equating to 47.3% of net sales, up from 42.9% last year [15] - Adjusted diluted EPS was$ 0.67, with an effective tax rate of 25.5% [15][16] Business Line Data and Key Metrics Changes - Wholesale segment written orders decreased by 10.9%, while retail segment written orders were down 9.4% [11] - The wholesale backlog ended at $54.9 million, near pre-pandemic levels [11] Market Data and Key Metrics Changes - The home furnishings market continued to soften, impacting written order trends and design center traffic [10] - Customer lead times improved due to increased production in Vermont, which operated at approximately 75% capacity [12] Company Strategy and Development Direction - The company is repositioning its design centers throughout North America to strengthen its retail network and focus on interior design [21] - Plans to introduce new products as supply chain improvements are realized [21] - Marketing expenses have been reduced to 2% of net sales, down from 4% prior to the pandemic [22] Management Comments on Operating Environment and Future Outlook - Management noted a return to pre-pandemic levels of consumer focus on home furnishings, with cautious optimism for future sales [30] - The company is well-positioned to navigate the post-pandemic environment, despite challenges in the broader market [30] Other Important Information - The company ended the quarter with cash and investments of$ 167.8 million and no outstanding debt [16] - A regular quarterly cash dividend of $0.36 per share was declared, reflecting a commitment to returning value to shareholders [17] Q&A Session Summary Question: Variance across the country in terms of volume and results - Management indicated that results were consistent across the country, with no significant regional differences [33] Question: Consumer focus on home and traffic trends - Management observed increased consumer interest in home furnishings in December, indicating a positive trend [35] Question: Impact of floor sample sales on revenue and margin - Management acknowledged that selling floor samples impacted both revenue and margins, but noted that this was largely resolved [40] Question: New products and changes in product assortment - Management plans to introduce new products while utilizing technology to enhance design capabilities [48] Question: Recent trends and weather impact - Weather has affected sales, with better performance in regions not impacted by severe weather [55] Question: Updates on delayed sales due to flooding - Approximately 25% to 35% of delayed sales from the flood were delivered in the December quarter, with the remainder expected to flow through in the upcoming quarter [63] Question: Cost perspective on input costs and materials - Management noted that while transportation costs have fluctuated, the company is less impacted due to its North American manufacturing focus [70]