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Category: Stock Market and Ethan Allen
Date: 14 October 2019 Stock Price: $18.61 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Ethan Allen, a global interior design brand with roughly 1 500 interior designers that sells their products via 300 design centres worldwide. We recently covered Restoration Hardware earnings too.
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About Ethan Allen
Ethan Allen is an iconic global interior design brand with unparallelled recognition for quality, service, and value. We continually innovate ways to run our business in the best interests of our stakeholders and constantly reinvent our product offerings to stay relevant. As a vertically integrated company, our business is led by a highly experienced management team who work to leverage growth opportunities our distinct business model provides. We have approximately 1,500 interior designers in our North American Design Centers. Our products are sold exclusively through 300 Design Centers worldwide and a state-of-the-art ecommerce website.
Overview of Ethan Allen's latest earnings report
Data below refers to quarterly data unless specified otherwise:
- Revenue: $183.9 million (down from $205.6 million for the same period of the previous year)
- Revenues decreased by -10.6% over the last 12 months
- Cost of sales: $83.101 million (down from $94.440 million for the same period of the previous year)
- Cost of sales decreased by -12% over the last 12 months
- Net loss: -$3.310 million (down from $11.478 million profit for the same period of the previous year)
- Diluted loss per share: -$0.12 (down from $0.43 profit for the same period of the previous year)
- PE ratio of Ethan Allen: 19.38
- Dividend declared: $0.21
- Dividend yield: 4.5%
- Diluted weighted-average shares outstanding: 26.758 million (down from 27.323 million for the same period of the previous year)
- Cash and cash equivalents: $20.824 million
- Cash and cash equivalents per share: $0.78
- Cash and cash equivalents makes up 4.2% of Ethan Allen's market capital
- Cash and cash equivalents makes up 4.1% of Ethan Allen's total assets
- Accounts receivable: $14.247 million
- Accounts receivable makes up 2.79% of Ethan Allen's total assets
- Inventories: $162.389 million
- Inventories makes up 31.8% of Ethan Allen's total assets
- Stockholders equity in Ethan Allen: $363.929 million
- Stockholders equity per share: $13.60
- So Ethan Allen is trading a 1.37 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms tend to trade at.
Ethan Allen's management commentary on the results
Danbury, CT, July 31, 2019 (GLOBE NEWSWIRE) -- Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE: ETH) today reported financial results for its fiscal year and fourth quarter ended June 30, 2019.
Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “Despite many challenges, fiscal 2019 adjusted EPS increased 15.6%, and the Company generated strong cash flow, which allowed us to increase dividends by 59.2% to $47 million.”
“Sales during the year were impacted by a major decrease of sales in China and weaker retail sales in North America, particularly in Canada, and mostly in the fourth quarter. At the same time, newer areas of our business showed significant growth. We were pleased with a 50.5% increase in orders for the fiscal year from our U.S. government contract business, with a 118.6% increase in total contract sales for the fiscal year resulting from the higher order volume. We are also now operating at our normalized gross margins for the U.S. government program.”
Mr. Kathwari continued, “During the fourth quarter we began consolidating our Old Fort, North Carolina, and Passaic, New Jersey, operations which resulted in restructuring charges of $8.3 million, most of which were non-cash. We also incurred $12.1 million of mostly non-cash impairment charges within our retail segment, primarily related to certain design center long-lived assets. We expect to finalize the sale of our Passaic facility in the first quarter of fiscal 2020 for approximately $12 million.”
“Fourth quarter sales were impacted by reduction of sales in China of $10.0 million and other international also decreased, especially in Canada. Despite lower sales, our adjusted EPS for the quarter increased by 7.0%,” Mr. Kathwari concluded. “We are cautiously optimistic for fiscal 2020 due to continued strengthening of our talent, relevant offerings in place, transformation of our retail network, more efficient manufacturing and logistics, and investments in technology at all levels. In the fall, we plan to introduce a major new marketing campaign. We will continue to maintain focus on doing what is right for our clients, our people and our communities.”
OPTIMIZATION OF MANUFACTURING AND LOGISTICS
During April 2019 the Company announced plans to further improve its vertically integrated operations with a number of initiatives including converting its case goods manufacturing plant in North Carolina to a state-of-the-art distribution center, consolidating case goods manufacturing to its Vermont and other plants, adding an 80,000 square foot addition to one of its upholstery plants and moving distribution operations from New Jersey to North Carolina. In connection with these actions, the Company recorded pre-tax restructuring, impairment, and other related charges during the fourth quarter of fiscal 2019 totaling $8.3 million, which consisted of $3.1 million in non-cash asset impairments, $2.8 million in employee severance, $2.0 million in inventory write-offs and manufacturing variances and $0.4 million of other associated costs, including freight and relocation expenses. As of June 30, 2019, approximately 380 employee positions were eliminated due to these actions.
RETAIL SEGMENT IMPAIRMENT CHARGES
During the fourth quarter of fiscal 2019 the Company recorded $12.1 million of impairment charges within the retail segment. Approximately $9.9 million was a non-cash impairment charge for long-lived assets held primarily at a number of retail design centers. An additional $2.2 million represented remaining contractual obligations under leased space that was exited during the fiscal 2019 fourth quarter.
DIVIDEND INCREASE
On July 25, 2019, the Company announced that its Board of Directors had declared a regular quarterly cash dividend of $0.21 per share, which will be payable to shareholders of record as of Thursday, October 10, 2019, and will be paid on Friday, October 25, 2019. The $0.21 per share dividend, a 10.5% increase, reflects the continued strengthening of the Company’s balance sheet.
Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “Despite many challenges, fiscal 2019 adjusted EPS increased 15.6%, and the Company generated strong cash flow, which allowed us to increase dividends by 59.2% to $47 million.”
“Sales during the year were impacted by a major decrease of sales in China and weaker retail sales in North America, particularly in Canada, and mostly in the fourth quarter. At the same time, newer areas of our business showed significant growth. We were pleased with a 50.5% increase in orders for the fiscal year from our U.S. government contract business, with a 118.6% increase in total contract sales for the fiscal year resulting from the higher order volume. We are also now operating at our normalized gross margins for the U.S. government program.”
Mr. Kathwari continued, “During the fourth quarter we began consolidating our Old Fort, North Carolina, and Passaic, New Jersey, operations which resulted in restructuring charges of $8.3 million, most of which were non-cash. We also incurred $12.1 million of mostly non-cash impairment charges within our retail segment, primarily related to certain design center long-lived assets. We expect to finalize the sale of our Passaic facility in the first quarter of fiscal 2020 for approximately $12 million.”
“Fourth quarter sales were impacted by reduction of sales in China of $10.0 million and other international also decreased, especially in Canada. Despite lower sales, our adjusted EPS for the quarter increased by 7.0%,” Mr. Kathwari concluded. “We are cautiously optimistic for fiscal 2020 due to continued strengthening of our talent, relevant offerings in place, transformation of our retail network, more efficient manufacturing and logistics, and investments in technology at all levels. In the fall, we plan to introduce a major new marketing campaign. We will continue to maintain focus on doing what is right for our clients, our people and our communities.”
OPTIMIZATION OF MANUFACTURING AND LOGISTICS
During April 2019 the Company announced plans to further improve its vertically integrated operations with a number of initiatives including converting its case goods manufacturing plant in North Carolina to a state-of-the-art distribution center, consolidating case goods manufacturing to its Vermont and other plants, adding an 80,000 square foot addition to one of its upholstery plants and moving distribution operations from New Jersey to North Carolina. In connection with these actions, the Company recorded pre-tax restructuring, impairment, and other related charges during the fourth quarter of fiscal 2019 totaling $8.3 million, which consisted of $3.1 million in non-cash asset impairments, $2.8 million in employee severance, $2.0 million in inventory write-offs and manufacturing variances and $0.4 million of other associated costs, including freight and relocation expenses. As of June 30, 2019, approximately 380 employee positions were eliminated due to these actions.
RETAIL SEGMENT IMPAIRMENT CHARGES
During the fourth quarter of fiscal 2019 the Company recorded $12.1 million of impairment charges within the retail segment. Approximately $9.9 million was a non-cash impairment charge for long-lived assets held primarily at a number of retail design centers. An additional $2.2 million represented remaining contractual obligations under leased space that was exited during the fiscal 2019 fourth quarter.
DIVIDEND INCREASE
On July 25, 2019, the Company announced that its Board of Directors had declared a regular quarterly cash dividend of $0.21 per share, which will be payable to shareholders of record as of Thursday, October 10, 2019, and will be paid on Friday, October 25, 2019. The $0.21 per share dividend, a 10.5% increase, reflects the continued strengthening of the Company’s balance sheet.
Ethan Allen (NYSE: ETH) stock price history
The image below, obtained from Google, shows the stock price history of Ethan Allen over the last 5 years. And it's not been a very good time for Ethan Allen stockholders. 5 years ago the stock was trading at around $24.60 a stock and its currently trading at $18.61 a stock. That's a loss of -24.34% suffered by Ethan Allen stockholders over the last 5 years.
The stock of Ethan Allen is trading at a lot closer to its 52 week low of $16.63 than it is to its 52 week high of $23.11 which to us is an indication that the short term sentiment and momentum of Ethan Allen's stock is negative right now.
The stock of Ethan Allen is trading at a lot closer to its 52 week low of $16.63 than it is to its 52 week high of $23.11 which to us is an indication that the short term sentiment and momentum of Ethan Allen's stock is negative right now.
Recent coverage of Ethan Allen
The extract below discussing Ethan Allen's loyalty program is as obtained from TheStreet.com
Danbury, CT, Oct. 01, 2019 (GLOBE NEWSWIRE) -- Ethan Allen, a leading global interior design company and a renowned manufacturer and retailer of quality home furnishings, announced the launch of a new Member Program that will enhance the customer experience and provide special members-only everyday savings and benefits. "The new membership program puts our customers front and center," says chairman and CEO, Farooq Kathwari. "Our Members will no longer have to plan projects around short-term sales and promotions; instead, they will enjoy consistent, predictable and attractive everyday savings on products for any room in their home—plus free shipping and premier in-home delivery, and in our U.S. design centers, access to special financing options. This level of value, enhanced by our complimentary design service, creates a customer experience that's second to none." For an annual membership cost of $100, Ethan Allen Members will receive everyday savings of 20% on purchases, plus free shipping and premier in-home delivery
Danbury, CT, Oct. 01, 2019 (GLOBE NEWSWIRE) -- Ethan Allen, a leading global interior design company and a renowned manufacturer and retailer of quality home furnishings, announced the launch of a new Member Program that will enhance the customer experience and provide special members-only everyday savings and benefits. "The new membership program puts our customers front and center," says chairman and CEO, Farooq Kathwari. "Our Members will no longer have to plan projects around short-term sales and promotions; instead, they will enjoy consistent, predictable and attractive everyday savings on products for any room in their home—plus free shipping and premier in-home delivery, and in our U.S. design centers, access to special financing options. This level of value, enhanced by our complimentary design service, creates a customer experience that's second to none." For an annual membership cost of $100, Ethan Allen Members will receive everyday savings of 20% on purchases, plus free shipping and premier in-home delivery
Ethan Allen (NYSE: ETH) latest stock valuation
So what is Ethan Allen's stock worth based on the release of their latest earnings report and their fiscal guidance provided? Based on Ethan Allen's latest earnings report our valuation models provide a target (full value) price for Ethan Allen's stock at $20.80 a stock. We therefore believe that the stock of Ethan Allen's is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $20.80. Therefore we believe a good entry point into Ethan Allen's stock is at $18.72 or below. Since the stock of Ethan Allen's is trading at just below our recommended entry price we rate Ethan Allen's stock as a buy
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $20.80. Therefore we believe a good entry point into Ethan Allen's stock is at $18.72 or below. Since the stock of Ethan Allen's is trading at just below our recommended entry price we rate Ethan Allen's stock as a buy
Next earnings release date for Ethan Allen
It is expected that Ethan Allen (NYSE: ETH) 1st quarter 2020 earnings report will be released on 22 October 2019.