Kathwari: Top line sales are down on interior-design focus

Ethan Allen Interiors Inc. (NYSE: ETD) reported a decline in top-line sales for the fiscal 2026 third quarter, with consolidated net sales falling to $135.8 million compared to $142.7 million in the same period the previous year. The drop in revenue was attributed to reduced business with the State Department, lower international sales, and a challenging home furnishings market marked by weather disruptions and macroeconomic uncertainty.

Chairman and CEO Farooq Kathwari emphasized that the company's strategic focus on interior design services and vertical integration remains a core strength. Ethan Allen operates 172 retail design centers in North America and continues to leverage its network of 1,500 interior designers to drive customer engagement. Kathwari noted that while foot traffic in stores has declined, the company has seen increased sales from existing clients, supported by long-term relationships with its design team.

Despite the sales decline, Ethan Allen maintained a strong gross margin of 59.4% and reported adjusted operating income of $6.8 million for the quarter. The company also generated $15.1 million in operating cash flow and ended the quarter with $180.9 million in total cash and investments, with no outstanding debt.

Kathwari highlighted Ethan Allen’s vertically integrated model, which allows the company to manufacture approximately 75% of its furniture in North American facilities. This approach, he said, provides a competitive advantage in an industry increasingly reliant on imported goods. The company plans to continue expanding its design center network and investing in technology to enhance customer experience and operational efficiency.

Looking ahead, Ethan Allen faces ongoing challenges from tariffs and a sluggish housing market. However, Kathwari expressed cautious optimism, noting that the company’s focus on quality, craftsmanship, and personalized service positions it well for long-term growth.