ETH - Earnings call transcript Q3 2019 | Ethan Allen Interiors Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the Ethan Allen 2019 Fiscal Third Quarter Analyst Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Corey Whitely, Executive Vice President, Administration and CFO. Thank you.

You may begin.

Corey Whitely

Thank you. to March conference XX, welcome third for and ended quarter XXXX. afternoon Ethan call Allen's our Good This conference press call information this on supporting ethanallen.com, call. is including referred being recorded you details, release also and to will in find and of our reconciliations release the contains where which non-GAAP webcast on live

on SEC As are actual and our risks revise brief business could ongoing our cause for subject results initiatives. discussed refer our details during differ filings uncertainties Company today Chairman and matters Please We'll any financial growth up the obligation to include then will review the questions. risks. call. updates results, comments for reminder, update complete to our a forward-looking Kathwari, forward-looking or that materially. After telephone to the of statements some a The on Farooq no lines which and on to I provide CEO, those open this provide will assumes

$X.XX sales to offset by quarter in a increase million due lower quarter. sales a $X.XX China. share. $X.XX Consolidated million XXX% primarily source third compared prior sales quarter the retail lower sales During international was the rate EPS net getting current year and to net an the that our per taking the strength of XXX% sales year during for retail decreased international the net Adjusted EPS the to tax sales increase a sales late a sales. due in lower decrease were third prior diluted benefited in sales quarter. XX.X% weakened. X.X% increased caught to from were shipments improved per within $XXX.X the quarter net $X.XX to the up containment third from share, drive Consolidated network to wholesale in help half while diluted net during primarily American were from a effective $XXX.X of for expenses first The wholesale earnings year our up during wholesale was cost margin the sales up for North gross Contract X.X% reduction of

Our retail third profit gross current quarter. basis driven our division by third by for Gross the grew increase in point reflected year expansion the $X.X million orders quarter margin. return X.X% of XXX in

operating income in national same to X.X% million or X.X% of net growth net income due $XX Significant the to television of rate was Jobs tax million in the the quarter Act. changes the Tax in with and compared XX.X% to from XX.X% law and compared due income profit. million for year sales. reduction cost year was prior Operating For net of was XX.X% from mix comparable sales XX.X% the in XXXX compared sales X.X% XX.X% XX.X% to $XX.X period. margin year of sales to million Adjusted together retail change total retail the year three a margins ago months the or March ended wholesale and sales the with prior period. or year The current gross $X.X gross Retail primarily XX, prior of the in advertising period. improved sales in in gross of due with X.X% higher to consolidated tax were sales income relative effective sales up was $X.X operating Cuts benefit was net or the year prior compared

increase reflected dividend million comparable share. we of total a date cash $X prior dividends compared year special to of million months Nine XX% quarter, dividends the $XX.X period. the to $XX.X paid including During paid per year

million, million the over and $XX.X I'll Farooq. cash debt to million to turn inventory Turning we call quarter the $X of the and that outstanding. ended with balance bank $XXX.X of sheet, With securities of

Farooq Kathwari

at call. I'm us the positive that just Bedford operating retired. mentioned. as of earnings conference and strong all XXX.X% by you gross thank and Controller. share advertising normalized integration in that by vertical increased we adjusted McNulty Thank has also consolidated was of resulted and joined are income you, Corey President margins Corey to also position Corporate years third XXX.X%. growth in XX.X% more earnings expenditures Despite Vice Mac sales this joined The many participating operating delivered pleased for adjusted from and the increased quarter XX.X% per many, impact X% for increased John lower our by [ph] in for

increase during have stockholders continued mentioned last to our dividends million quarter, year. to XXX% over as Corey We the paid return cash $XX.X were cash of

a release plant initiatives foot to As manufacturing retail many our and plants. foot Old in Maiden, plants North Fort, from announced our Carolina manufacturing plans North and square new strategic logistics including in operations distribution moving XX,XXX announced casegoods Vermont and of and state-of-the-art consolidating our Also initiatives talents, manufacturing a our of operating in in investing addition distribution foot integrated upholstery operations with New Carolina. a and square XXX,XXX XXX,XXX enterprise square including with to our our manner. center vertically we converting relevant [indiscernible] casegoods strengthen Carolina number continue products, to Jersey our other and our to North investing repositioning our further we press our vertically XX, in mentioned improve network, responsible integrated On technology April enterprise socially introducing to to

So million, to million about upholstery in additional $X North have our Maiden, of Carolina, and North of $X XX% in $X conversion cost million location. to the Fort, non-cash, we $X operations in about expect consolidation Old invest Carolina million

XXX addition million margin. XXXX gross beginning and of new our the completion programs XXXX interior margins the we initiatives. with X,XXX to initiatives relevant fiscal interior new relaxed professional modern designers, develop a to retail advertising finance after strong to changes we to provide consumer June, management plan our in and and gross of provide product million program. to strengthened Continuing adding initiatives opportunity development. to strengthen basis and to several strong our for products the $X XXX very by strong We business fiscal during introduce expect network marketing design our to continue improvement to the $X In and leaders talent by these point benefit We've

We center both and continue with to internationally. at network renovations America relocations North position the design and

somewhat as our internationally mentioned. Corey business just in down were While

We continue in be very to proactive as opening in centers design partners Asia. well new as China our with Southeast

in experience. on We continue all of technology emphasis on to focus enterprise our including customer areas

salesforce, expanded our CRM are capabilities also We have platform. digital implementing XD and

by quarter shipments China During were the we mentioned. we've just orders through lower as and impacted

and this brief to the this to We any open have strong questions introduction, business. orders the quarter. or also the US pleased contract expect for With happy Government programs in marketing with improve We're growth and comments. of

Operator

your our line now line from question first Instructions] open. James. Raymond the [Operator from Griffin Bobby is comes of Bobby

Bobby Griffin

On the the the through quarter the X.X% the what of just you X% was and understand happened down for the first there months number then March the X.X% two first between to slow the orders. shipments on wanted any the business or help - growth. in just I'm timing we in talk dots quarter. the were did I that impacted Can with me and impacts, trying told that connect was to

Farooq Kathwari

impacted it. March, return lower and incoming the In was that business

Bobby Griffin

trajectory? view in there your level changes guessing or Was you any do or marketing in think opinion, Farooq what and change high message drove anything in the

Farooq Kathwari

what many taken that factors month news. taking from month the people think to about place so there economy, internationally all that is hard is concerned the I place are It's in was

particular So just think it I went I that, was April. business nothing of that think to just would it was that some

Bobby Griffin

far? April? Can in back bounce a April see what on color you like you so did look Okay, us any give orders

Farooq Kathwari

- its you done month. tomorrow as last XX% should about of and get days the of two we business is XX% yesterday Well still between and know the the in

quarter. that we and rarely I think So programs that I we but business think should place into our strong continue move we'll as to have see we grow in this

Bobby Griffin

retail maybe need perspective secondly further segment. I or that is just and driven wanted little structural segment aspect? the to in that on there done and is some or profitability pathway changes all a be what there just Is that growth from cost how a for on talk it the to view sales out Okay

Farooq Kathwari

Well our overall a at our wholesale that sales impact our in business you look is have because retail sense our of margins, unique the sort retail margins margin. to take

lots retail profitability the place to and business to and retail expect impact profitability. So the especially positive program growth we our in on we a and wholesale of that have will have

margin If a our positive you retail they of you the were about an want at I to wholesale wholesale them. just of our both opportunity look what our are was that of only at the wholesale. may the make operating But have kept not day instance the retail does margins at but business, quarter? level. retail XX% of on all we I some provide for for the if chances - - do take a retail impact And have, Corey, want our we improving End have retail

Corey Whitely

about it's XX%. Actually

Farooq Kathwari

XX% on a wholesale. our the also on gross the of somewhat from retail margins, wholesale the we is sales very that Despite efficiency increased lower and quarter. of part positive delivered impact is course of of the our

we got it's that's together the nature So our business. of not combine to the two

Bobby Griffin

guess spends. me, on just it's I advertising lastly from Okay and then

going relaxed we more introduction can model did any be to in mention on. advertising Is to You big modern the in run, of now Is normalized forward third kind here run levels as run that at we spend there that you're going coming introduction? the something in quarter. uptick of our for expect

Farooq Kathwari

and see our at the take anyway has a advertising last. X% run X% expense between look No, you we if

between X% get would. this year, in last were we say So we rate at We X% the thought a extraordinary. this benefit I is two the normalized of would stage quarters and didn't just

Bobby Griffin

of detail questions for forward. luck answering Okay, thank and best I again all appreciate the my going you and

Operator

comes of line Brad Thomas now Markets. question your is next from KeyBanc Your Capital Brad the from open. line

Brad Thomas

what's What ask you China trends softer wanted in in that and in I some you press there? obviously your to you're trends first there. release that your are seeing outlook market seeing referenced about

Farooq Kathwari

have impacted. We factors of number

China China weak, for our as First they I has in others. was well in our partner mean that been overall had business as

to had purchased issue. are some whether did much concerned know, an inventory. as the fact they concerned about so at year of third are And still All you of inventory they factors be degree. this duties how tariff the last out of those impacted us. to of Secondly, create was, situation and get that going somewhat were to and whole excess People

that almost I quarter, Now as they tension had. and were on out stable say excess would - issue we the are a of less the aggressive. is somewhat inventories fourth There really of of our in whole they into duties things and move these sense they're the

the in major two marketing In XX,XXX design also they're move continuing and China opened next [indiscernible] develop programs center they in advertising quarter. up fact as months we foot just forward and to strong back square some

I over I that, worst and So moving that towards we're more is the to would think me would direction. appear positive

Brad Thomas

in That's where segment, color you're then, us more on within fourth trajectory department business thinking you of and its in, wholesale the that quarter. contribution your state the can to how the of came helpful. terms XQ about And give in some on,

Farooq Kathwari

the we committing terms against both was would numbers business a say you that Right bankruptcy margins. because it margins sales year also as don't give but of it positive our in were that, know really in impacted last and and is I we

normalized developments. and So business positive the margins to increasing, then we're back also it's is

Brad Thomas

back and have that think go customers? noise you look I then third or think just about such. your as consumer salt how and a because experienced there guess tax we your refunds pressure as backdrop I the guess proof, for taxes questions of you quarter, lot sales any rates at and was changed [ph] your particular of you for in fiscal and tax Great me. lastly about do

Farooq Kathwari

let's the do deduct is we the real you're have living that, taxes are the There to East a impact Coast especially an if impacted well taxes, - and communities been especially estate with taxes people say fact in high. pretty can't

that you have So but I some, of competitions know. as overall we there though there lot think even seen out is a

into the - overall are product positive But discounts. quarter. as I we We have fourth pretty a go somewhat see selling people major things

Brad Thomas

so Farooq. helpful. much That's you Thank

Operator

from Jeremy Company. line & Your of next now is the question Jeremy from Dougherty Hamblin comes line open. your

Jeremy Hamblin

I commentary the wanted to on come back for a China second. to

centers to that in You've from seen pretty that retail up have significant number geography a ago I expansion of of XX you XXX. year think the

business there? for concern your number potentially it's Can there is that of been partner centers Is you third state a affairs how comments, sluggish looking of there have there. give and the closure of forward? us risk, that kind a the party at we your going in of partner terms is you there of your Given

Farooq Kathwari

aggressive yet competition proactive, hand, not not the they're there. of as anything strong. very impacted have have other But fact but they an our renovations fact I attitude, major or somewhat also more being, them they're of seen down. newer been slower have slowdown they're we competition Well they've consumer introducing also the and seen from I've in so in But and products far aggressive months so would more being really by the them say in on that any over growing slowed They manner. and next holding making six

Jeremy Hamblin

Okay. And then another wanted to was to back that I point come made.

Either in your segment like talked the saw that to don't were I You down million operating XXX that's about segment margins us that tied allocation or sales point could arriving being and entirely despite you basis that at just advertising of you year-over-year, down improvement dynamic. I know wholesale your change op just we're but expense about Corey, but point which how $XX in if million. margin and or higher sales profitability if to XXX you in $XX wanted walk in see through basis

Farooq Kathwari

think government, of to expenses efficiently question lower state contract I including the higher government I advertising at the But Corey with combination a our operating margins. can this would manufacturing more and say add it's of it.

So factors in Right it in the it's Corey? a increase two say would has margins. combination of gross that this resulted

Corey Whitely

the improved is that helped production efficiency well, Just have that in primarily - really benefit advertising our efficiency. yet we us manufacturing

Farooq Kathwari

America in strong Mexico. much United know, changes have that in Vermont very now us made and especially we which production will manufacturing to North of to have States. North And be as are we in as in ones increase still manufacturing This we the as in have our casegoods supported objective in you Carolina upholstery help continue as one our our in operation by few

very in vibrant, are years, we competitive also is XX years as go North operating and in States - years and mind, but keep bought margins, gross back our should operations by rest supported a American help and Honduras those us wholesaler the Honduras its combination and of [indiscernible]. our and of casegoods six Mexico about plant the gives those and back XX plants Our we margins in our forward United advantage further or last XX

Jeremy Hamblin

XX% quarter-to-quarter were, as kind will points your on how tough backlog year. be return QX. at strong sales the guidance, had kind you starting sales of that's that but Okay, QX some just with want about your be your XX% those I year given assumption end your I June wholesale in of I and in is we growth should of And points up wanted don't wasn't in get helpful. provide to, last It's down X.X%. thinking like it's looks on segment about were backlog then know significant segment. lapping the your orders that total down pretty to compares QX and from quarter, retail this just you well with starting sense backlog as last a that down of a pretty there

Farooq Kathwari

we also this yes but got add ended delivered the third number including got had, a up that department to fourth of that amount due we in that in we Corey perspectives our benefit saying on two can high to just sales there the state year, delivered of quarter this, I I'm last the In quarter. factors then backlogs fair those are orders Well this. think, from we've

million $X a consolidated I deliveries our and were orders. at - last year when mean return you our sales [indiscernible] $X but look take on So million,

Our orders in down our XX.X%. were retail return division

down was X.X%. wholesale Our

gives the the they look was yes, a one have that, return last on So opportunity if date us an you the delivered soft. because opportunity take at challenge, we hand

Corey Whitely

of heavy benefit ship this the without to more now much timely got we year. were being able you fiscal that backlogs lower those product backlogs in prior with then year And fighting the

Farooq Kathwari

much we more had highest sales, mean I but it's time this efficient.

Jeremy Hamblin

you maybe million. was can other to amount, going assumption where fund last something of about little debt, just on Any used able bit color on part give your that not the access be and also, cash comfortable significant I capital is understand and - provide in a special - access question me. some just structure some My but debt forward, a that a Wanted being I is that first I debt dividend things. and you have color you that $X flow long-term see to the think while. buybacks more Understood, thinking feel in it's use make did for you be of you might from would or that to if that noted helpful?

Farooq Kathwari

folks we're you to [ph] First please [indiscernible]. says handlers the everybody wanted is, debt are we because taking all

the to take this, mean and have in debt - forward a had million know analysts of hope I'm the said going needed I those was. hand having gave we struggle, look use cash some we happy. you $XX We you I've as I our gone of degree all dividends of on that. XX% as are go good gone interested So short-term debt some sense. and to kinds makes of the over and at bit to But all that you what kinds know we cash all through know not things through of we're

repurchase whether it I'm much. but this to so So as to to that the past go mind the million return through of at stockholders. stock. nearly we need period. take forward it. We too as over some going have see forward have and go have purchased we to gone but we'll when not I've you stock we a look debt, purchased, $XXX but taking money spent In we'll of I done we've don't we our continue In makes the company we debt

Jeremy Hamblin

for Got you. luck. taking good Thanks the questions,

Operator

next Group. Cristina line your the question Fernandez now Advisory of from Telsey [Operator Cristina line open. is Instructions] comes your from

Cristina Fernandez

with on should off on how quarter. so to the sort think couple wholesale from had just margin, help mix year start manufacturing of versus between could lapping improvement I the of like biggest inefficiencies of basis that points year. you last component seems benefit we and natural it questions gross of this retail XXX the the have a the about this of the have been those sort because sort

Farooq Kathwari

There hand, We to given in last of a did take margins. the September, which price number on gross also bigger savings. a other was also contributed October factors. we're increase But increase

a savings we yes, higher then we So factors. away have on it these got can hand but one out margin, we of so give balance

higher higher savings. but price we we've have increase then So - got we a got

have as see We margins question both manufacturing the margin and obviously level margins improved. of and improved the better wholesale operating margins gross retail can improved at you our because The this and level this advertising. wholesale of it

So see, levels opportunity to those there's you but levels. maintaining the forward go you as say it's of that hard think I an

Cristina Fernandez

part And that beyond, with understand then fiscal $X basis plan you're consolidation quantify XXXX just you year beyond savings happen to initial that another XXX, to plan leg, next $X and the you're us next looking what the the XXX help of longer is consolidation you and specific basis to be the from term capture able Can cost points. doing. million points year to XXX to million doing, needs

Farooq Kathwari

in opportunity increasing By volumes gross of in Vermont. increasing Vermont our an producing, our margin by has that

higher our to Honduras products it some degree Second, also in will margins. which plant, add has

product will increases the of some that margins. outsourced be Thirdly, also

see So wholesale the us three increase our we factors gross at that going those will and are level margins forward. that help

Cristina Fernandez

this expect contributing we next start to should when And year?

Farooq Kathwari

be some benefit going start also the and continue, I we some doing have of us that opportunity product. should we benefits things our and you benefit cost see already we'll next we're because but year then said it to we next We're of next certainly into nature give our and in should some will the think press and it this that release fiscal in seeing consolidating in to there's of Vermont fiscal we as and start-up starting an year and plants other year. Well

Corey Whitely

second Mostly in the half.

Farooq Kathwari

year. Of next fiscal

Cristina Fernandez

if spent last was of is correct. math quarter. sales then And of marketing one you. question I about this my thank estimate on marketing, Okay, X.X%

that is below about should for that I spend X%? the the calls come year, in prior in target think still you or talked X% that

Farooq Kathwari

No, we advertising year. spent this

take you to - as quarter is is spent, what at and we we this look X%. forward that X.X%. go and a it's about you you be what going that If third between This if take X% it is

Cristina Fernandez

Okay, thank you.

Operator

no at Instructions] [Operator on are questions queue. you time this there continue. Presenters may

Farooq Kathwari

anything much. you us Please comments, let very and very thank well much or everybody know. right questions thanks any All else. Thanks

Ethan Allen Interiors (ETD) 29 Apr 192019 Q3 Earnings call transcript