Ethan Allen Interiors Inc. — First Quarter 2027 Earnings Summary

Financial Performance:

• Consolidated net sales were $129.6 million, a decrease from $147.0 million in the prior year period.
• Retail net sales were $114.4 million, down from $128.6 million in the prior year; Wholesale net sales were $79.0 million, down from $87.0 million in the prior year.
• Consolidated gross margin was 59.6%, compared to 61.4% in the prior year, impacted by incremental tariffs, higher designer floor sample sales, and lower manufacturing production.
• Consolidated operating margin was 1.3% (GAAP) and 2.2% (adjusted), compared to 7.2% adjusted operating margin in the prior year.
• Diluted earnings per share (EPS) were $0.07 (GAAP) and $0.10 (adjusted), compared to $0.41 (GAAP) and $0.43 (adjusted) in the prior year.
• Selling, general and administrative (SG&A) expenses decreased 5.8% year-over-year to $75.1 million, driven by lower variable expenses, cost controls, reduced headcount, and lower marketing costs.
• Marketing spend totaled $4.7 million (3.6% of consolidated net sales), up from 3.5% in the prior year.
• Cash used in operating activities was $0.8 million, a decrease from $16.8 million provided in the prior year.
• Net merchandise inventory levels were $153.8 million, up 3.6% from June 30, 2026.
• Customer deposits from undelivered written orders totaled $74.3 million, up from $62.7 million at June 30, 2026.
• Wholesale backlog was $55.0 million, an increase of 2.7% over the prior year.

Guidance and Future Outlook:

• The Company anticipates higher marketing expenses during the remainder of fiscal 2027.
• Retail written orders rose 13.2% sequentially in the first quarter compared to the fourth quarter of fiscal 2026, with momentum continuing into October, which saw a 0.3% increase.
• Additional new design centers are planned for fiscal 2027 in Burlington (VT), Huntersville (NC), and Naples (FL).

Business Segments and Product Lines:

• Retail segment written orders declined 1.2% year-over-year.
• Wholesale segment written orders decreased 1.3% year-over-year.
• The Company opened new Company-operated design centers in Aventura (FL) and Victoria Gardens (CA) during the quarter.
• The Company ended the quarter with 172 retail design centers in North America (142 Company-operated and 30 independently owned).
• The upholstery operation in Silao, Mexico received the Great Place to Work® certification for the ninth consecutive year.

Market and Competitive Landscape:

• Lower sales and tariffs pressured margins, partly offset by operating efficiencies.
• Written order declines were primarily attributed to lower design center traffic, a soft housing market, global unrest, and U.S. midterm election uncertainty.
• New tariffs under Section 301 of the Trade Act of 1974 became effective July 24, 2026, ranging between 10% and 12.5%, replacing previously issued 10% global tariffs under Section 122.
• The Company manufactures approximately 75% of its custom-crafted furniture in its own North American facilities.

Risks and Challenges:

• Margins were impacted by incremental tariffs, higher designer floor sample sales, lower manufacturing production, and fixed cost deleveraging from lower consolidated net sales.
• Operating results were affected by a change in sales mix, reduced headcount, and a higher average ticket price.
• Cash flow from operations was impacted by lower net income, incremental restructuring payments, and working capital changes.

Management Commentary and Tone:

• Management noted that despite challenges, sequential momentum in retail written orders carried into October.
• The Company held its annual convention under the theme "We're Just Getting Started," reviewing initiatives in manufacturing, logistics, technology, marketing, and retail.
• The tone reflected a focus on cost controls, including reduced headcount (6.3% fewer associates than a year ago, ending with 2,988 associates) and operational efficiencies.

Other Key Points:

• The Company ended the quarter with $92.2 million in cash and cash equivalents and no outstanding debt.
• Total cash dividends paid were $92.2 million, comprising special dividends totaling $3.25 per share and a regular quarterly dividend of $0.39 per share, compared to $16.4 million in the prior year.
• Capital expenditures totaled $3.4 million, up from $2.4 million in the prior year, supporting new retail design centers, additional manufacturing equipment, and technology upgrades.
• Credit availability was $121.5 million at September 30, 2026.
• Five new directors were elected at the 2026 Annual Meeting of Stockholders: Douglas G. Bergeron, Maria Eugenia Casar, Kristine E. Miller, Stephen Oblak, and Tara I. Stacom.