here discusses Farrah Kathwari President and Ceo of Ethan Allen
Farooq, welcome to the show. Such a pleasure
to have you sir. Experts anticipate a slowdown in
home furnishings in the year second half. Are you
seeing demand pulling back and what is the company doing
to maybe get ahead of this trend? Yes.
Well, good to be good to talk to you
. Yes, you're right that the last two years
have been extraordinary in terms of consumers interest in the
home and People were staying at home. That's where
their focus was. And it's not a surprise that
as this COVID sort of has abated people are now
doing other things. So the demand is less but
still relatively strong compared to let us say 2019 which
we consider the base here. Now, you know
, we are somewhat better positioned than most because we
maintained 75% of our products are made in our own
workshops in North America And 75% of our products are
made custom when we get an order. So we
have been impacted some somewhat because of supply of parts
and lumber and fabrics and things like that, but
not to any degree what the industry has faced.
So are we are well positioned. We are also
a vertically integrated company From concept of design to manufacture
to logistics with over 1500 interior designers that provide service
and that service today combined with technology is the difference
. Yes. To answer your question, we have
had great business, you know last quarter up 12%
earnings up 60%. So as we said in our
release and I made comments that we expect the demand
to be lower than what we had in the past
because of the fact that the consumer's interest in other
areas going forward. I do want to ask you
about growth challenges especially with uncertainty around record inflation rising
interest rates, supply chain challenges that you just mentioned
as well. Yeah, of course The impact of
inflation, the impact of for instance transportation costs now
we are less dependent on products coming from East Asia
is crazy. A container cost from East Asia has
gone on an average from$2,000 to$30,000. If
75% of our business came from East Asia we would
be in a much difficult state. That is not
the case. We have been impacted our transportation costs
in North America have also increased but not to the
degree. So we are positioned well We don't have
an issue like for instance, you know you go
from scarcity to plenty. People are worried about inventories
and all that stuff. That is not the case
with us because as I said 75% of product is
made when we get an order and that's a big
difference and I see going forward that yes, we'll
have to make sure that our marketing gets and gets
the message across of our differentiation and continue to grow
our business. How is the company dealing with the
increase of raw materials purchase parts and labor costs?
Well, as I said that they're all increasing and
we know that inflation is taking is impacting every every
every place. But as I said, our impact
is less than the industry because of the fact of
our products being made in north America. Transportation has
been one of the major costs in addition to raw
materials, labor and others. Transportation is the largest
course, especially if you're dependent on imports. That
is not the case with us Ethan Allen is investing
in more technology for its Northeast facilities. What kind
of innovation is the company into implementing and how will
this investment help boost the brand's competitive advantage in this
current market? Well, you know We are celebrating
90 years today, that's why I'm on the new
york stock exchange For 90 years. We have been
around because of the fact we have constantly innovated,
we have maintained manufacturing in north America when everything went
out and one of the major reasons is we invested
in technology technology in Vermont in north Carolina in our
operations in Mexico in Honduras. Today we have 50%
less people producing 50% more products than we did 20
years back. Technology is the main factor. So
we've invested greatly in technology in our manufacturing and now
we've also invested technology in our retail, our interior
designers in the last two years would not have been
effective if we had not invested in technology in providing
them the ability to do virtual design, combining personal
service And virtual design is what has made it possible
on the retail side. And our investment in technology
in manufacturing is, has been a major factor and
congratulations on those 90 years in the home furnishing industry
. That is quite the feat. Talk to us
about the milestone and what the company is doing to
even grow its brand further. Well, the number
of number of first is you've got to be relevant
in your offerings. We 90 years back. We
were very relevant in early American colonial. Today,
our products are still classic but modern. So we
have to be relevant in our offerings. We have
to also make sure that our design centers, that's
our stores. We call them. Design centers are
positioned in the right places. In the last 20
years. over 60% of our design centers are Stroh's
have been relocated to better locations. We have also
on plans to open up new design centers. We've
just opened up a few In the last few months
, but our objective in the next 3-4 years to
open another 60 design centers but most importantly is to
do better and more business with our existing design centers
in terms of relocation in terms of technology in terms
of having more qualified interior designers. We are most
likely the largest interior design company around through Kathwari President
and Ceo of Ethan Allen on the floor of the
new york stock exchange. We really appreciate your time
, sir, thank you so much.