Ethan Allen Interiors 2025 Q3 Earnings Misses Targets as Net Income Falls 25.8%

Ethan Allen Interiors (ETD) reported its fiscal 2025 Q3 earnings on May 5th, 2025. The company missed earnings expectations, reporting an EPS of $0.38, below estimates of $0.46. Revenue came in at $142.7 million, under the forecasted $148.3 million, marking a 2.5% decrease from the previous year. Despite challenging market conditions, Ethan Allen remains focused on operational efficiency and indicated plans for capital expenditures in new design centers and technology investments. The company did not adjust its guidance, maintaining a cautious optimism for future performance.

Revenue
Ethan Allen Interiors experienced a 2.5% decline in total revenue for fiscal 2025 Q3, amounting to $142.69 million compared to $146.42 million in the same quarter last year. The wholesale segment generated $98.99 million, partially offset by intersegment sales reductions of $73.92 million. The retail segment contributed significantly with $117.62 million, culminating in a consolidated total revenue of $142.69 million.

Earnings/Net Income
Ethan Allen Interiors reported a decrease in EPS, falling 25.5% to $0.38 in Q3 2025 from $0.51 in Q3 2024. The company's net income also declined by 25.8%, reaching $9.61 million, down from $12.95 million in the previous year. This performance indicates a challenging period for the company.

Price Action
The stock price of Ethan Allen Interiors has edged down 0.21% during the latest trading day, has edged up 1.89% during the most recent full trading week, and has climbed 3.89% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing Ethan Allen Interiors shares following its earnings release and holding them for 30 days has historically yielded a 68.77% return over the past five years, slightly underperforming the benchmark's 85.86% return. Despite this underperformance, the strategy demonstrated a moderate risk-adjusted return, reflected in a Sharpe ratio of 0.37. The maximum drawdown recorded was -27.86%, with a volatility of 30.13%. This suggests that while the strategy presents some risk, it has generally provided positive returns, although not as robust as the benchmark.

CEO Commentary
Farooq Kathwari, Chairman, President and CEO, expressed satisfaction with the company's performance, noting strong margins and cash flow despite a challenging economic environment. He emphasized the importance of continual reinvention, highlighting Ethan Allen's vertical integration, which allows the company to produce 75% of its furniture in North America, mitigating tariff impacts. Kathwari remarked on the strategic focus on relevant design offerings and technological advancements in marketing and operations as key to maintaining competitiveness. He acknowledged recent softness in demand but indicated a cautious optimism with signs of improvement in May, reinforcing the company's strong market position.

Guidance
Ethan Allen Interiors expects continued focus on operational efficiency and product introductions over the next 12 months. The company anticipates maintaining its current pricing strategy, with potential minor adjustments for limited imported items. While not providing specific revenue or EPS guidance, Kathwari indicated a commitment to prudent capital management, suggesting sustained cash flow and robust balance sheet maintenance. The company plans capital expenditures of approximately $2 million for new design centers and technology investments, reinforcing its dedication to growth despite external challenges.

Additional News
Ethan Allen Interiors has made significant strides in expanding its retail presence, opening new design centers in Middleton, Wisconsin and Toronto, Canada. These centers showcase the company's home furnishings and emphasize its commitment to combining interior design services with cutting-edge technology. Furthermore, Ethan Allen's upholstery operations in Silao, Mexico received recognition for the sixth consecutive year as "Empresa Socialmente Responsible," underscoring the company's dedication to environmental and social responsibility. The company continues to enhance its operational capabilities, reducing headcount by 35.7% since 2019 through investments in technology, demonstrating its focus on efficiency and sustainable growth.