Ethan Allen Interiors Q2 2025 Earnings Report

U.S. Bancorp EPS Results

• Actual EPS: $0.59
• Consensus EPS: $0.60
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

U.S. Bancorp Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $160.60 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

U.S. Bancorp Announcement Details

• Quarter: Q2 2025
• Date: 1/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 5:00PM ET

The earliest precursor to U.S. Bancorp (NYSE:USB) was founded in 1863 and is now headquartered in Minneapolis, Minnesota. The company owns the 24th national charter, issued in 1863, and is the second oldest original charter holder still in existence. Today, the bank is the 5th largest financial institution in the U.S. and is considered to be systemically important by the FSB. The company’s revenue in 2021 topped $22.7 billion, it listed more than $573 million in total assets and employed more than 68,700 people.

U.S. Bancorp Is now operating as a financial services holding company. The company provides various financial and banking-related services to individuals, businesses, institutions, and governments under the U.S. Bank, Elavon, and Elan Financial Services banners. Elavon is a payment processor for merchants while Elan Financial Services is a credit card issuer that works in conjunction with small banks and credit unions across the U.S.

The U.S. Bank's name got its start in 1891 as the United States National Bank of Portland. That bank was merged with several others over the years before the one resulting in US Bancorp of Oregon. That bank lasted until the late 1990’s when it was merged with the First Bank System of Minnesota. That merger created the now-recognizable U.S. Bancorp but the mergers do not end there. A final takeover by Firstar, another bank with a long history of mergers, resulted in the bank being traded on the New York Stock Exchange today.

U.S. Bank operates in 5 segments that include Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services and Treasury and Corporate Support segments. The company’s long-term debt all carries AA or A+ ratings and are considered investment quality.

U.S. Bancorp’s financial services include deposits, checking, savings accounts, and CDs as well as a range of lending and investment services. Lending services include consumer and business loans, lines of credit and credit cards as well as personal loans, and others. Investment and insurance services include asset management, fund administration, IRA, and access to markets. Services are available through a network of 2,213 branch offices throughout the western and midwestern U.S. Accounts are also accessible through 4,052 ATMs, mobile, online, and telephone. U.S. Bancorp has operations in 26 states.

U.S. Bancorp Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, and welcome to the Ethan Allen Fiscal 2025 Second Quarter Analyst Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Matt McMonte, Senior Vice President, Chief Financial Officer and Treasurer.

[Operator]

Thank you. You may begin.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Thank you, operator. Good afternoon, and thank you for joining us today to discuss Ethan Allen's fiscal 2025 Q2 results. With me today is Farooq Kefewari, our Chairman, President and CEO. Mr. Kefewari will open and close our prepared remarks, while I will speak to our financial performance midway through.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

After our prepared remarks, we will then open the call for your questions. Before we begin, I'd like to remind the audience that this call is being webcast live under the News and Events tab within our Investor Relations website. A replay of today's call will also be made available on our Investor Relations website. There you will find a copy of our press release, which contains reconciliations of non GAAP financial measures referred to on this call and in the press release. We believe the non GAAP presentation better reflects underlying operating trends and performance of the business.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Our comments today may include forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. The most significant risk factors that could affect our future results are described in our quarterly report on Form 10 Q. Please refer to our SEC filings for a complete review of those risks. The company assumes no obligation to update or revise any forward looking matters discussed during this call. With that, I am pleased to turn the call over to Mr.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Cafflari.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Thank you, Matt, and thanks for participating in our Q2 results ended December 31, 2024. I would like to start with the devastating effect of wildfires in Southern California, which have resulted in loss of life and devastated many communities. Our team members and our clients have been impacted and we pray for this safety. Fortunately, our design center in Pasadena closest to the fire escaped the fire and is back in operations along with all of our 6 design centers and a major retail service center in the area. As we mentioned in our press release, despite a challenging political and economic environment, we had strong financial results in our Q2, especially in our book orders.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

We reported consolidated net sales of $157,300,000 gross margin of 60.3%, operating income of $18,200,000 operating margin of 11.5 percent and diluted EPS of $0.59 We had strong operating cash flow and ended with $184,200,000 an increase of $16,400,000 from a year ago. We paid $10,000,000 in cash dividends and pleased that yesterday our Board approved a regular cash dividend of $0.39 per share payable on February 26, 2025. After Matt presents a more detailed financial information, I will review our ongoing initiatives to continue our progress. Matt?

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Thank you, Mr. Kepouari. Our financial results in the just completed Q2 were highlighted by strong demand, margins and operating cash flow. Our consolidated net sales were $157,300,000 compared with $167,300,000 a year ago as a higher average retail ticket price and lower sales helped to offset lower backlog, fewer contract sales and a lower delivered unit volume. Demand levels improved sequentially throughout the quarter and concluded with a strong December aided by our special promotion.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Retail segment orders grew by 15.8%, while wholesale segment orders were up 14.3%. Written order improvement was driven by increased promotional activity, strong financing programs and elevated interest in the home post the U. S. Elections held in early November. We ended the quarter with 172 Ethan Allen retail design centers in North America, including 141 company operated and 31 independently owned and operated locations.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Wholesale backlog at December 31st totaled 57,700,000 dollars up 5% from a year ago. As expected, our wholesale backlog declined in the past 3 months as our State Department delivered sales outpaced incoming orders. Our distribution center in North Carolina that previously sustained flooding from Hurricane Helene in September resumed operations and we're thankful to those who helped us recover. Strong consolidated gross margin of 60.3% was driven by a favorable change in the sales mix, lower headcount, selective price increases, lower raw material input costs and a higher retail average ticket price. Our consolidated headcount totaled 3,318 associates at December 31, 2024, a decrease of 6.9% from a year ago as we continue to identify operational efficiencies and leverage the use of technology to streamline workflows throughout our vertically integrated enterprise.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Adjusted operating margin was 11.5% compared with 12.8 percent a year ago. Our double digit operating margin reflects our ability to tightly manage expenses. Compared to our pre pandemic quarter ended December 31, 2019, our adjusted operating margin has improved 6 10 basis points due to streamlining our vertically integrated enterprise. Adjusted diluted EPS was $0.59 compared with $0.68 a year ago. For historical context, adjusted diluted EPS for the 3 months ended December 31, 2019 was $0.27 Our effective tax rate was 25.4 percent for the quarter, which varies from the 21% federal statutory rate primarily due to state taxes.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Now turning to our liquidity. We ended the quarter with a robust balance sheet, including cash and investments of 184,200,000 dollars and no outstanding debt. We generated $11,600,000 of cash from operating activities and kept inventory levels consistent with a year ago. Capital expenditures were $3,800,000 and included additional investments in technology, retail design center relocations and improvements and remodeling costs associated with our hotel. New and relocated state of the art design centers in Wauchung, New Jersey and Peoria, Arizona were opened during fiscal 2025 that showcase our unique style while combining complementary interior design services with technology.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

We also continued our practice of returning capital to shareholders in the form of cash dividends and have a current yield of 5.5%. In October, our Board declared a regular quarterly cash dividend of $0.39 per share, which was paid on November 27. Also, as just announced in our earnings release, our Board declared a regular quarterly cash dividend of $0.39 per share, which will be paid this February. In summary, we are pleased with our performance that saw incremental consumer interest return back to the home. Disciplined investments and solid execution throughout our vertically integrated business produced strong written demand, positive operating cash flow and double digit operating margin.

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

Our robust balance sheet has us well positioned as we continue to move through the calendar year. With that, I will now turn the call back over to Mr. Caffari.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Well, thank you, Matt. We are positioned well as a vertically integrated enterprise, which includes a very strong and dedicated team, the ability to provide interior design services with state of the art technology, offering relevant high quality products that offer both a modern design with a classic perspective and a classic design with a modern perspective. And this is very important, these two attitudes. 75% of our furniture is made in our North American facilities. Our national and retail logistics is unique and a great competitive advantage enabling us to deliver our products with what we say white glove delivery at one cost in North America to our clients.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Our retail network of 172 design centers in North America and additional design centers internationally are well positioned. During the last 2 years, we have continued to strengthen our network with new and relocated design centers and especially with freshening the interiors of all with our products and attitudes. We continue to relocate to stronger locations and add new design centers. After the pause due to COVID, we have been introducing new products to strengthen our offerings. Our marketing initiatives continue to get our message across.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

This includes direct mail magazines, digital magazines, our website, local and regional advertising. During the last few years, while strengthening our offerings, our retail network, our manufacturing, our logistics, marketing and technologies, we have been able to also reduce our headcount. Technology has played a very important role in that. At December 31, 2024 was 3,318 down 7% from a year ago and 27% less than December 2019. During this period, we also repositioned our manufacturing, our national logistics and our retail network.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

In summary, we continue to strengthen the various areas of our vertically integrated enterprise and are well positioned to meet the opportunities and challenges ahead. With this, I would like to open it up for any questions or comments.

[Operator]

Great. Thank you so much. We will now be conducting a question and answer session. First question is from Brad Thomas from KeyBanc Capital Markets. Please go ahead.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Hello, Brad.

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

Hi. Good afternoon, Farooq. Good afternoon, Matt. And first and foremost, congratulations on the very strong end of the quarter, I should say, end of the calendar year on the order front.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes. Thank you. It is very encouraging to see that.

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

It really is. We've all been waiting for a turn in the industry and I think we're hopeful that that is what's coming to fruition here. I guess that was going to be my first question was, what's the degree of confidence that you have Farooq that this is the turning point here for the company and for the industry?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Well, I should also mention that there are factors that led to this as well. Certainly, obviously, it reflected our enterprise, our strong product programs, our network, but it also reflected the fact that we did give a special savings during this quarter, which helped. Now but it would not have happened without all the other factors. So I think that all of those factors helped make this quarter especially on the written business very, very strong. Now your next question about as we move forward, we are positioned very, very well.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

January did start weak mostly because of weather. We had very tough weather in many parts of the country for the 1st 3 weeks. But when as the weather improved in the last week or so, we can see more robust activity. We feel good about it. To answer your question, we have strong programs.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Our retail network has been repositioned. Our we have strong manufacturing, logistics. And as I said, we have been able to do all of this while making it extremely efficient. So I think the opportunity of having strong product programs, the opportunity of the efficiencies that we have brought in and really a strong designer network and combined with technology. As I mentioned, this major decrease in our headcount is mostly due to the fact of combining good talent with technology.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

And I think as we do that, we feel confident that we'll keep the we'll continue with the progress.

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

That's great. And clearly the incremental promotions seem to be a positive for you here. Do you intend on keeping up these incremental promotions or will you be more normalized going forward?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

We'll use both. It depends on the as opportunities take place, as there is certain opportunities of timing, certain special timing of holidays, events, it gives us an opportunity to do that. So we'll combine both as we go forward.

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

Great. And maybe just one more last one for me here, Farooq. Just it was such a again impressive acceleration from your September quarter to your December quarter in terms of orders. Any other nuances that you might highlight? Is this all new customers or incremental customers coming in?

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

Or is there anything different happening in terms of the average ticket or the types of customers or the types of products? Just any other detail would be really interesting.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes. I would say that in the last year or so we have also been introducing new product. We will continue to do that because again before prior to that we were cautious. We are cautious because we had very high backlogs and we didn't want to introduce new products because of service. Our service position is very good right now so that we are now being more aggressive in introducing new products.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

The other one is that we are also increasing our marketing. In fact, in this last quarter, we increased our marketing spend And we will in terms of and a lot of that we are doing is in terms of marketing, in terms of getting more new customers in and the new forms of marketing utilizing technology to bring people in. So we'll we increase our marketing, what was $500,000 Correct. Increase our marketing, think of this in last quarter by $500,000 which was what about 0.5 percent?

[Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors]

15% higher.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes, but 2.5 percent from 2% to 2.5%, 15% higher, Brad. So we will continue to do that also, but by continuing to utilize more innovative ways of marketing than the old traditional ways we used to do.

[Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets]

That's great. We've certainly heard some good data points out of the industry, but this really exceeded anything that we've heard out of anybody else here of late. So congratulations and I'll turn it over to Eilers.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes. Thanks very much.

[Operator]

Next question is from Christina Fernandez from Telsey Advisory Group. Please go ahead.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Hello, Christina. How are you?

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

How are you and good afternoon, Farooq and Matt. I wanted to follow-up on Brad's questions about the demand trends. I mean, you talked about progression through the quarter. How were trends in October November? I guess what I'm trying to get through was how much did that special promotion in December help or how you already started to see an improvement in the prior months?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Christina, I think that there was improvement, but a major improvement did take place in December because of the special. And look, it was not that a major promotion. It was 5% more savings. And so it was the combination of all factors that made it happen.

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

And then I guess what was the impetus for increasing the promotions? I feel like you've been pretty steady over the past couple of years, usually like 20%, 15% to 20% off. Is it a response to competition that you still out there just wanting to accelerate the order intake? Maybe walk us through I guess that decision that you haven't done too much of that before?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Well, it's a combination of number of factors. It is the fact that we felt that because we were in a much better service position that we would be able to deliver the products. That was a very important factor because I didn't want to spend a lot of money and we had delays of service because of the backlogs. So that was an important factor. We felt we are ready and that's why it was that was a major factor in investing in marketing.

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

And with the higher promotions, should we expect an impact to the gross margin, which has been very high the past couple of quarters going forward?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes. Keep in mind that if you take a look at historically, it was not that many years back, we used to spend close to 5% of sales on our marketing. Now with all the technology and other elements, we took it to half of that. So keep in mind, we have reduced our total marketing by almost 50% as a percentage of sales than what we used to do. We increased this time by about 0.5%.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

And so we'll continue with that kind of a rate.

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

And then another topic I wanted to talk about was your exposure to Mexico. You've always talked about 75% of manufacturing in North America. Obviously, we are all aware of potential tariffs. How much of that 75% is manufactured in Mexico? And if there were to be tariffs on imports from that country, would you look to move it to the U.

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

S. Or Honduras? Or I guess how are you planning for the different outcomes?

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Yes. That's an important issue. And in fact, we were having a discussion with our team on that today that Mexico is our upholstery products that are made in Mexico. We have 2 major operations, 1 in Mexico and 1 in North Carolina. And the Mexico operation makes and cuts fabrics for our operation in North Carolina.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

And then it also makes products full products in Mexico. So it is approximately at this stage, I would say that close to of our total manufacturing in Mexico represents approximately 25% of our total manufacturing. So we have some flexibility as we go forward. There's a possibility we could consider raising prices. There's a possibility that more of that product could be made in North Carolina because we have manufacturing in both places.

[Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group]

Thank you and best of luck here this quarter.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

All right. Well, thank you very much and we look forward. We got our team members. They're really motivated. They're working hard.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Lot of we are looking at all these uncertainties. But the good news is, as I said, we are well positioned based upon our manufacturing in North America, which includes United States, Mexico, Honduras and we do have some manufacturing comes out of countries like Indonesia and Vietnam just for furniture. We do make some accessories in other products in many other places from Italy to China, but most of it is right here in North America.

[Operator]

And if there are no further questions, I have to turn the floor back to Mr. Kaffuri for any closing comments.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

Anubha, thank you very much. We are thank you for attending. We are our teams are working very, very hard. We are looking at all the events in the world. And the good news is we are well positioned and we are also positioned to take steps based upon whatever happens and whether it's question about duties and anything else, we are all we are watching it very carefully.

[Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors]

But I think at this stage, our main focus is to continue to grow our business and to continue to strengthen the various elements of our vertically integrated structure. Thanks very much for participating.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Participants

Analysts

• Matt McNulty, Senior VP, Treasurer & CFO at Ethan Allen Interiors
• Farooq Kathwari, Chairman & CEO at Ethan Allen Interiors
• Bradley Thomas, Associate Director of Research at KeyBanc Capital Markets
• Cristina Fernández, Managing Director & Senior Equity Research Analyst at Telsey Advisory Group