Ethan Allen Interiors Inc. ETH reported second-quarter adjusted EPS of 46 cents Monday, in-line with consensus estimates. The company is taking initiatives to drive the top line, but it is up against a highly competitive market at home, and its international sales have slowed, according to KeyBanc Capital Markets.
The Analyst
Analyst Bradley Thomas maintains a Sector Weight rating on Ethan Allen Interiors.
The Thesis
Ethan Allen’s quarterly results reflect a decline in underlying trends, Thomas said in a Monday note.
While international sales softened, the State Department orders that were delivered during the quarter involved highly competitive bids, the analyst said.
Comparative net sales grew 2.7 percent, but written comps declined by a meaningful 4.2 percent, Thomas said. The company’s operating margin contracted 35 basis points to 8.33 percent, partly due to the competitive bids for the State Department orders, he said.
The furniture retailer expressed optimism regarding top-line growth going forward given its recently completed product refreshes, the analyst said. Ethan Allen has invested in its digital capabilities and introduced new merchandise for a younger target audience, he said.
Ethan Allen is poised to benefit from recent Amazon.com, Inc. AMZN and Walt Disney Co DIS launches as well as from a ramp up in State Department orders, Thomas mentioned. The analyst added that further traction needs to be seen “before getting more positive on the shares.”M<
Price Action
Ethan Allen shares were slipping 6.35 percent to $17.56 at the time of publication Tuesday.
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