Name: ETHAN ALLEN INTERIORS INC Q2 2025 Earnings Call
Start: 2025-01-29T22:01:00.000Z

Executive Summary

Q2 FY25 net sales were $157.3M, gross margin 60.3%, operating margin 11.5%, and diluted EPS $0.59; cash and investments ended at $184.2M with no debt .
Written orders inflected higher: Retail +15.8% and Wholesale +14.3% driven by increased promotions, financing, and rising home interest post U.S. elections; December was notably strong .
Sequentially better demand versus Q1 FY25 ($154.3M sales, GM 60.8%, EPS $0.57) while YoY sales declined (-6%) and EPS fell (from $0.68) .
Board approved a regular quarterly dividend of $0.39 per share payable Feb 26, 2025; management is “cautiously optimistic” as operations normalized after prior disruptions .

What Went Well and What Went Wrong

Strong demand momentum: “Retail segment written orders increased 15.8%; Wholesale… rose 14.3%,” aided by promotions and financing programs .
Margin resilience: consolidated gross margin held at 60.3% driven by mix, lower input costs, selective price increases, and higher average ticket, despite promotional activity .
Operational recovery and efficiency: North Carolina distribution center resumed operations post Hurricane Helene; headcount down 6.9% YoY as technology streamlines workflows .
Quote: “We are positioned well as a vertically integrated enterprise… [manufacturing] approximately 75%… in our own North American facilities” .

Delivered sales and earnings down YoY: net sales $157.3M vs $167.3M (-6%); diluted EPS $0.59 vs $0.68; adjusted operating margin 11.5% vs 12.8% .
Higher advertising ratio: 2.5% of sales vs 2.0% prior year; promotions (extra 5% savings) were required to catalyze demand, potentially pressuring margin cadence .
Contract and delivered unit volume softness: lower backlog and fewer contract sales noted; wholesale backlog declined over the quarter as State Department deliveries outpaced orders .

Metric	Q4 2024	Q1 2025	Q2 2025
Net Sales ($USD Millions)	$168.6	$154.3	$157.3
Gross Profit ($USD Millions)	$102.5	$93.9	$94.8
Gross Margin (%)	60.8%	60.8%	60.3%
Operating Income ($USD Millions)	$22.6	$17.6	$18.2
Operating Margin (%)	13.4%	11.4%	11.5%
Adjusted Operating Margin (%)	13.1%	11.5%	11.5%
Diluted EPS ($)	$0.72	$0.57	$0.59
Adjusted Diluted EPS ($)	$0.70	$0.58	$0.59
Cash from Operations ($USD Millions)	$26.2	$15.1	$11.6
Cash & Investments ($USD Millions, period-end)	$195.8	$186.4	$184.2

Segment net sales

Segment	Q4 2024	Q1 2025	Q2 2025
Retail Net Sales ($USD Millions)	$145.1	$132.8	$134.3
Wholesale Net Sales ($USD Millions)	$91.2	$86.1	$86.8

KPIs and balance indicators

KPI	Q4 2024	Q1 2025	Q2 2025
Retail Written Orders YoY (%)	-1.3%	-6.8%	+15.8%
Wholesale Written Orders YoY (%)	+0.4%	-4.8%	+14.3%
Wholesale Backlog ($USD Millions)	$53.5	$63.9	$57.7
Customer Deposits ($USD Millions)	$73.5	$74.1	$70.8
Inventory ($USD Millions)	$142.0	$143.2	$142.0
Advertising Expense (% of Sales)	2.8%	2.3%	2.5%
Employees (total)	3,404	3,347	3,318

Note: No debt outstanding in each period .

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Quarterly Dividend per Share	Next Payment (Feb 26, 2025)	$0.39 (Nov 27, 2024 payment)	$0.39 payable Feb 26, 2025	Maintained
Special Dividend	FY25 YTD	$0.40 paid Aug 29, 2024	None announced in Q2	Maintained (none)
Revenue/Margins/OpEx/Tax	FY25/Q3	Not provided	Not provided; “cautiously optimistic”	N/A

Dividend timing and amounts per Board action announcements .

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Demand cadence	Q4: retail orders -1.3%, wholesale +0.4%; signs of improvement . Q1: retail -6.8%, wholesale -4.8% amid soft market	Written orders surged (+15.8% retail; +14.3% wholesale); strong December	Improving
Promotions & marketing	Q4: advertising 2.8% of sales; digital/print campaigns . Q1: ad 2.3%; selective pricing	Added “5% more savings” in Dec; ad at 2.5%; +$0.5M spend; mix still supports margin	Incrementally more promotional, targeted
Supply chain disruptions	Q4: industry freight headwinds . Q1: Hurricane Helene impact; port strike timing	NC DC operations resumed; delivery normalized	Normalizing
Tariffs/Mexico exposure	Q1: 75% NA manufacturing; watching tariff risk	~25% of total manufacturing tied to Mexico upholstery; flexibility to shift or price	Monitoring; contingency planning
Technology & headcount	Q4/Q1: tech-enabled efficiency; headcount down since 2019	Continued tech leverage; headcount -6.9% YoY	Ongoing efficiency
State Department/contract	Q4: contract/orders timing; backlog near norms	State Dept deliveries outpaced orders; wholesale backlog down QoQ	Mixed; deliveries strong

“We are positioned well as a vertically integrated enterprise… [manufacture] approximately 75% of our furniture in our own North American facilities” — Farooq Kathwari, CEO .
“Strong consolidated gross margin of 60.3%… driven by favorable sales mix, lower headcount, selective price increases, lower raw material input costs and a higher retail average ticket” — Matt McNulty, CFO .
“Written order improvement was driven by increased promotional activity, strong financing programs and elevated interest in home post the U.S. elections” — CFO .
“January did start weak, mostly because of weather… more robust activity [as weather improved]” — CEO .

Demand inflection: Analysts probed confidence in a turn; management cited combined impact of strong programs, promotions, and improved service position; weather temporarily slowed January .
Promotions strategy: Will deploy incrementally around holidays/events; Dec’s “5% more savings” boosted orders; ad spend lifted to ~2.5% of sales (+$0.5M) .
Margin considerations: Management noted historical ad ratio near 5% years ago; current levels remain structurally lower even with recent increase .
Mexico/tariffs: ~25% of total manufacturing tied to Mexico upholstery; flexibility to price-adjust or shift production to North Carolina if needed .

S&P Global Wall Street consensus for Q2 FY25 EPS and revenue was unavailable at time of analysis due to data access limits; therefore, a beat/miss assessment versus consensus cannot be provided. Estimates may need to adjust to reflect the sharp written-order improvement and steady gross margins communicated this quarter .

Demand pivot: Double-digit written-order growth, strong December, and sequentially higher net sales signal potential delivered-sales reacceleration into Q3; watch conversion and backlog trajectories .
Margin durability: Gross margin held ~60% despite more promotions, supported by mix, pricing, and cost discipline; operating margin stable at 11.5% .
Cash return + balance sheet: $184.2M cash/investments, no debt, and $0.39 quarterly dividend maintained underpin defensive posture and shareholder returns .
Supply chain normalization: NC distribution center back online, catching up post-Helene; delivery cadence improving .
Tariff sensitivity manageable: ~25% Mexico upholstery exposure with ability to shift or price; diversified NA manufacturing footprint reduces risks .
Marketing lever: Incremental targeted promotions and higher ad spend (still below historical levels) are driving traffic/orders; monitor margin trade-offs .
Near-term trading setup: Positive order momentum and dividend yield could support the stock; volatility possible around macro/tariff headlines and Q3 conversion from orders to deliveries .