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EA

ETHAN ALLEN INTERIORS INC (ETD)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered a beat on both revenue and EPS vs consensus, with consolidated net sales of $160.4M and adjusted diluted EPS of $0.49, driven by stronger retail written orders (+1.6%), firm gross margins (59.9%), and disciplined expense management . EPS and revenue exceeded Wall Street estimates of $0.45 and $152.2M, respectively; prior quarters Q2 and Q3 had missed consensus on both metrics *.
  • Operating cash flow was strong at $24.8M for Q4, boosting cash and investments to $196.2M; the Board declared a $0.25 special dividend and a regular $0.39 dividend, payable August 28, 2025, marking the fifth consecutive year of special dividends .
  • Management highlighted resiliency from vertical integration (about 75% of furniture manufactured in North America), technology-enabled marketing, streamlined logistics, and headcount reductions to 3,211 (-5.7% YoY) .
  • Retail demand improved sequentially through Q4 (written orders +1.6%), while wholesale written orders were down 6.8% amid softer contract business; gross margin was affected by promotions and clearance, partially offset by lower input costs and higher ticket pricing .
  • Narrative catalysts: the beat vs consensus, special dividend, continued margin strength, and positive retail order trend; tempered by wholesale softness and macro/tariff uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Retail written orders increased 1.6% YoY, signaling improving demand, supported by new product introductions and expanded digital marketing; management emphasized technology and vertical integration as “a game changer” for efficiency .
  • Strong margins and cash generation: Q4 gross margin at 59.9%, adjusted operating margin at 9.7%, and $24.8M operating cash flow; cash and investments reached $196.2M with no debt .
  • Shareholder returns: the Board approved a $0.25 special dividend alongside the regular $0.39 dividend payable August 28; fifth consecutive year of special dividends .

Quotes:

  • “The strengthening of our team and investing in technology has been a game changer and helped us operate more efficiently.” — CEO Farooq Kathwari .
  • “Our vertically integrated business delivered positive fiscal 2025 results…position us well as we head into fiscal 2026.” — CFO Matt McNulty .
  • “We are also pleased to have recently been named America’s #1 Premium Furniture Retailer by Newsweek for the third year in a row.” — CEO ; corroborating press release .

What Went Wrong

  • Wholesale softness: wholesale written orders declined 6.8% in Q4; wholesale backlog fell to $48.9M (from $57.7M in Q2 and $54.6M in Q3) as contract demand moderated .
  • Margin headwinds: Q4 gross margin ticked down to 59.9% (60.8% prior year), impacted by higher clearance and promotions, and lower manufacturing production; adjusted operating margin contracted YoY to 9.7% from 13.1% .
  • Prior quarters missed consensus: Q3 and Q2 revenue and EPS both came in below estimates, reflecting lower delivered unit volumes and macro/tariff uncertainty *.

Financial Results

Core P&L vs Prior Quarters

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$157.3 $142.7 $160.4
Adjusted Diluted EPS ($)$0.59 $0.38 $0.49
Gross Margin %60.3% 61.2% 59.9%
Adjusted Operating Margin %11.5% 8.0% 9.7%

Q4 2025 YoY vs Q4 2024 (Selected Metrics)

MetricQ4 2024Q4 2025
Revenue ($USD Millions)$168.6 $160.4
Adjusted Diluted EPS ($)$0.70 $0.49
Gross Margin %60.8% 59.9%
Adjusted Operating Margin %13.1% 9.7%

Segment Net Sales

Segment Net Sales ($USD Millions)Q2 2025Q3 2025Q4 2025
Retail$134.3 $117.6 $138.5
Wholesale$86.8 $99.0 $87.2

KPIs and Operating Metrics

KPIQ2 2025Q3 2025Q4 2025
Retail Written Orders YoY+15.8% -13.0% +1.6%
Wholesale Written Orders YoY+14.3% -11.2% -6.8%
Operating Cash Flow ($M)$11.6 $10.2 $24.8
Cash & Investments ($M)$184.2 $183.0 $196.2
Inventory ($M)$142.0 $150.4 $140.9
Customer Deposits ($M)$70.8 $79.3 $75.1
Wholesale Backlog ($M)$57.7 $54.6 $48.9
Advertising Expense (% of Sales)2.5% 3.4% 3.4%
Headcount (Associates)3,318 3,294 3,211

Results vs Wall Street Consensus

MetricQ2 2025 ConsensusQ2 2025 ActualQ3 2025 ConsensusQ3 2025 ActualQ4 2025 ConsensusQ4 2025 Actual
EPS ($)$0.61*$0.59 $0.455*$0.38 $0.45*$0.49
Revenue ($USD Millions)$160.6*$157.3 $146.85*$142.7 $152.2*$160.4

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue OutlookFY/Q4None providedNone provided; management “cautiously optimistic”Maintained
Margins (Gross/Operating)FY/Q4None providedNo formal guidance; continued focus on efficiencyMaintained
Advertising Expense (% of Sales)Q2 → Q4~2.5% (Q2 actual) ~3.4% (Q3/Q4 actual) Raised (spend mix shift)
DividendsQ2Regular $0.39 payable Feb 26, 2025 Regular $0.39 + Special $0.25 payable Aug 28, 2025 Raised (added special)
Tax RateQ4/FYNot guidedEffective tax rate 25.2% full-year; 26.4% for Q4 (disclosed) Informational

Note: Company did not issue formal quantitative forward revenue/margin guidance; emphasis remained on operational execution and cautious optimism .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2025)Trend
Tariffs/MacroDetailed mitigation steps; low China exposure; partners cost-sharing; imports mainly Indonesia/Vietnam; demand improved in Dec aided by promotions Impact limited due to ~75% North American manufacturing; tariff uncertainty persists; retail orders up despite macro Neutral-to-cautious
Promotions/MarketingIncreased spend (2.0%→2.5%, +$0.5M); special December promo supported orders Advertising ~3.4% of sales; emphasis on digital magazines and targeted comms; promotions used surgically Higher sustained spend; more efficient
Supply Chain/LogisticsNC DC resumed post-Hurricane Helene; backlog management; service position improved White-glove logistics at one cost; backlog normalized; lead times improved Stabilizing
Product/InnovationNew introductions resumed post-COVID; higher average ticket; design center refresh/relocations Continued new product cadence; retail order improvement tied to introductions and clearance Positive
Contract BusinessState Dept contract caution, softer recent activity Wholesale written orders -6.8%; backlog down; contract softness noted Softer
Technology EnablementHeavy use of digital magazines; rapid content cycles; marketing efficiency gains Technology “game changer” for efficiency and marketing; headcount reductions through workflow automation Structural tailwind
Headcount/CostsHeadcount down 6.9% YoY (Q2); SG&A efficiency; marketing mix shift Headcount 3,211 (-5.7% YoY); operating leverage evident; gross margin resilient despite promotions Continued efficiency

Management Commentary

  • Strategy: Reinforce five areas—talent, service, marketing, technology, social responsibility; leverage vertical integration across U.S., Mexico, Honduras to sustain quality, margins, and service .
  • Efficiency: Technology has been “a game changer,” enabling headcount reductions since 2019 while improving marketing ROI; digital magazines replacing expensive legacy print .
  • Balance sheet: Strong liquidity ($196.2M cash/investments, no debt) supports continued dividends and investments in retail and manufacturing .
  • Quotes:
    • “Our fourth quarter results are highlighted by retail segment written order growth, strong gross margin and $24.8 million in operating cash flow…” — CEO .
    • “Our robust balance sheet and financial stability provide a solid foundation and position us well as we head into fiscal 2026.” — CFO .
    • “We continue to make about 75% of our furniture in our North American workshops…white-glove delivery at one cost to our clients in North America.” — CEO .

Q&A Highlights

  • Tariffs and pricing: Impact limited due to North American manufacturing; management does not anticipate broad-based price hikes, only small adjustments on select imported products if needed .
  • Promotions and gross margin: Promotions used selectively; management prefers efficiency and traffic quality over deep discounting; gross margin remained near 60% despite elevated clearance .
  • Demand trajectory: Improvement through Q4 with better consumer attitudes and effective digital marketing; retail orders up 1.6% .
  • Contract business: State Dept orders showing caution in recent weeks; still in place but moderating, contributing to wholesale softness and backlog declines .
  • Cost discipline: Headcount reductions maintained; ongoing technology-led efficiencies across manufacturing, retail, logistics, and marketing .

Estimates Context

  • Q4 2025: EPS $0.49 vs $0.45 consensus; revenue $160.4M vs $152.2M consensus — bold beat on both metrics as retail orders rose and margins stayed strong despite promotions *.
  • Q3 2025: EPS $0.38 vs $0.455 consensus; revenue $142.7M vs $146.85M — miss, reflecting lower delivered unit volume and macro uncertainty *.
  • Q2 2025: EPS $0.59 vs $0.61 consensus; revenue $157.3M vs $160.6M — modest miss, with demand strengthening late in quarter from promotions *.

Where estimates may adjust:

  • Upward revisions to near-term EPS/Revenue likely given Q4 beat and improving retail order trend; wholesale softness and promotions remain watchpoints for margin durability *.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q4 print was a clean beat on EPS and revenue vs consensus, supported by retail order improvement and strong gross margin; watch for sustained order momentum into FY26 *.
  • Special dividend ($0.25) plus regular ($0.39) underscores balance sheet strength and capital return discipline; a potential near-term stock catalyst .
  • Vertically integrated North American manufacturing (~75%) materially limits tariff exposure vs peers, supporting margin resilience and pricing flexibility .
  • Marketing mix shift to digital (advertising ~3.4% of sales) is driving traffic efficiently; management expects continued efficiency gains rather than heavy discounting .
  • Wholesale/contract headwinds persist (written orders -6.8%; backlog down to $48.9M); retail is the nearer-term growth lever .
  • Cash/investments of $196.2M and no debt provide flexibility for dividends, capex, and strategic initiatives; risk-buffer amid macro uncertainty .
  • Execution focus: sustain margin discipline amid promotions and clearance while scaling new product introductions and design center optimization; monitor trajectory of customer deposits and backlog trends .