Ethan Allen Interiors (ETD) investor relations material

Executive summary

• Net sales for Q3 FY2026 were $135.8 million, down 4.8% year-over-year, mainly due to lower contract, international, and U.S. State Department sales, as well as sluggish home furnishings demand amid macroeconomic uncertainty and weather disruptions.

• Retail written orders were flat year-over-year, while wholesale orders declined 7.6% due to reduced government and international business.

• Tariffs, especially new ones on Mexican manufacturing, significantly reduced earnings, with $4 million in incremental costs this quarter and annual exposure estimated at $15–$20 million.

• Operating cash flow and liquidity remained strong, with $180.9 million in cash and investments and no debt at quarter-end.

• Gross margin was 59.4%, supported by sales mix changes and selective price increases, but pressured by tariffs and increased promotional activity.

Financial highlights

• Consolidated net sales reached $135.8 million, supported by higher average ticket prices and increased clearance sales, but offset by lower contract sales and delivered unit volume.

• Gross margin was 59.4%, down from 61.2% year-over-year, impacted by tariffs, promotional activity, and higher clearance sales, partially offset by lower freight and headcount.

• Adjusted operating income was $6.8 million (5.0% margin), with adjusted diluted EPS at $0.24 and an effective tax rate of 24.2%.

• Operating cash flow for the quarter was $15.1 million; nine-month cash flow from operations was $30.1 million.

• Inventory at quarter-end was $148.6 million, up 5.5% since June 30, 2025.

Outlook and guidance

• Retail written orders in April have shown positive trends, continuing the stability seen in the prior quarter.

• Management expects continued macroeconomic uncertainty, sluggish demand, and ongoing tariff impacts to pressure results.

• New product introductions and strategic marketing investments are expected to support future growth.

• Plans to open new design centers in North America, including Rancho Cucamonga, CA, and Aventura, FL, during 2026.

• Awaiting outcome of State Department contract rebid, with potential for price increases to offset tariff impacts.