Increased expenses revolving around new product launches offset a rise in sales as Ethan Allen Interiors’ first quarter net income fell 12.3 percent, to $11.5 million.

Selling, general and administrative expenses rose 7.6 percent in dollars and 263 basis points as a percentage of sales, to 46.6 percent. The increase in costs emerged from Ethan Allen’s investments in new products, in particular the high-profile unveiling of its Ethan Allen|Disney collection, which will debut in the company’s Design Centers in November. The company also ramped up investments in advertising, marketing and the opening of new Design Centers in the quarter, said Farooq Kathwari, chairman and CEO.

Total net sales increased by 1.5 percent to $193.3 million in the quarter, which ended on Sept. 30. Retail sales gained 4.3 percent, including a 5.7 percent rise in same-store sales, a pickup of 8.1 percent in retail written orders and an increase of 8 percent in comparable written orders. Wholesale revenue fell 4.9 percent.

The launch of the Ethan Allen|Disney collection is part of “the largest product refresh in recent history, and management remains optimistic that this will improve top-line results,” said Brad Thomas analyst with Keybanc Capital Markets, in a research note about the results. The line will include Disney-inspired furniture and home décor, will be available in Ethan Allen Design Centers in the United States and Canada, and will be supported by a digital presence with stories combining Ethan Allen’s craftsmanship with Disney’s storytelling capabilities.

Ethan Allen’s “results have been volatile in recent quarters, and the company has posted only modest sales growth in the past three years,” Thomas said. “Nonetheless, we are hopeful that new merchandise will be able to attract new customers to the company’s design centers.”

(Source: hfndigital.com  Author: David Gill)