Executive Summary
Ethan Allen Interiors delivered a solid Q4 2024 performance characterized by robust gross margins, disciplined expense management, and a strong cash position despite softer top-line dynamics in the broader home furnishings environment. For the full year, the company posted a gross margin of approximately 60.8% and an adjusted operating margin around 12.1%, with adjusted EPS of $2.49. The fourth quarter alone produced $168.6 million in revenue and $21.9 million of operating income, translating to a quarterly operating margin near 13.0% and a net margin just under 11%. Management emphasized continued cost discipline, acceleration of growth initiatives, and a vertically integrated model that has driven efficiency and service quality, supported by significant cash generation and a debt-free balance sheet.
Key drivers remain: (1) a vertically integrated North American manufacturing footprint (~75% in-house) and a redesigned, scalable interior design network; (2) a focus on a single-brand, consistent product program with high service standards (white-glove delivery, fixed delivered price across NA); (3) ongoing digital marketing and technology investments to enhance designer productivity and customer engagement; and (4) a capital return program including a regular quarterly dividend increase and a special dividend, underscoring financial flexibility. While near-term demand remains challenged in parts of the market, the company highlighted improving order activity in Q4 and ongoing improvements in lead times and backlog normalization. Management also signaled readiness to reintroduce new products in fiscal 2025 and to advance showroom optimization and marketing initiatives, which could support a modest uplift in demand as macro conditions stabilize.
Key Performance Indicators
QoQ: 15.17% | YoY:-10.00%
QoQ: 14.13% | YoY:-11.12%
QoQ: 54.34% | YoY:-31.00%
QoQ: 42.92% | YoY:-27.13%
QoQ: 43.14% | YoY:-27.00%
Key Insights
Revenue and profitability: Q4 2024 revenue of $168.6 million, gross margin 60.7% (approx. 60.9% referenced by management), operating income $21.9 million and operating margin ≈12.97%. Net income for the quarter was $18.5 million with a net margin ≈10.98% and earnings per share (EPS) $0.73 (diluted $0.72). For the full year, consolidated gross margin was 60.8% with adjusted operating margin of 12.1% and adjusted EPS of $2.49. Management notes that the quarterly gross margin exceeded 58% for 1...
Financial Highlights
Revenue and profitability: Q4 2024 revenue of $168.6 million, gross margin 60.7% (approx. 60.9% referenced by management), operating income $21.9 million and operating margin ≈12.97%. Net income for the quarter was $18.5 million with a net margin ≈10.98% and earnings per share (EPS) $0.73 (diluted $0.72). For the full year, consolidated gross margin was 60.8% with adjusted operating margin of 12.1% and adjusted EPS of $2.49. Management notes that the quarterly gross margin exceeded 58% for 13 consecutive quarters. The company ended the year with a cash and investments position of about $195.8 million and no outstanding debt, reflecting strong liquidity. Operating cash flow in the quarter was $26.2 million, bringing full-year operating cash flow to $80.2 million and free cash flow to $24.171 million. Inventory reduction during the year totaled $7.2 million. Capex for the year was $9.6 million (with $2.1 million in Q4). Dividends paid for fiscal 2024 totaled $50.3 million, including an 8.3% increase to the regular quarterly dividend to $0.39 per share and a $0.40 per share special dividend announced for August.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
168.63M |
-10.00% |
15.17% |
| Gross Profit |
102.38M |
-11.12% |
14.13% |
| Operating Income |
21.87M |
-31.00% |
54.34% |
| Net Income |
18.51M |
-27.13% |
42.92% |
| EPS |
0.73 |
-27.00% |
43.14% |
Key Financial Ratios
operatingProfitMargin
13%
operatingCashFlowPerShare
$1.03
freeCashFlowPerShare
$0.95
dividendPayoutRatio
53.8%
Management Commentary
Key insights from management and discussions on strategy, operations and market conditions:
- Strategy and operations: The company reaffirmed its vertical integration model (approximately 75% of products manufactured in North America), emphasizes a fixed delivered price “white glove” service, and has reduced headcount by 28% since 2019, with total headcount now about 3,400. The Interior Design Destination concept was highlighted as a lever to improve productivity and service across retail, manufacturing, and logistics.
- Marketing and technology: Marketing spend is about 2.8% of sales (lower than five years ago) and technology investments have been pivotal in driving efficiency and omnichannel engagement, including a digital magazine that reaches over 9 million households biweekly.
- Financials and liquidity: The company ended the year with approximately $196 million in cash and investments and no debt, and generated $26.2 million of cash from operations in the fourth quarter (full-year $80.2 million). Dividends remain a priority, including a $0.39 quarterly dividend and a $0.40 special dividend payable in August, marking the fourth consecutive year of a special dividend.
- Demand and backlog: Retail orders were down 1.3% in the quarter, while wholesale written orders grew 0.4% as the contract business improved. Wholesale backlog stood at $53.5 million, closer to historical norms. Executives noted improving order patterns and stronger lead times as inventory normalization occurs. In the State Department program, management observed a return to focus on home-related orders after geopolitical disruptions, suggesting upside potential in fiscal 2025.
- Future outlook: Management signaled continued expense discipline and investment in growth initiatives, with plans to introduce new products and optimize showroom footprints in fiscal 2025. They remain cautiously optimistic about demand recovery and orderly backlog normalization, supported by a strong balance sheet.
We ended our fiscal year with a robust balance sheet including cash and investments of $195.8 million and no outstanding debt.
— Farooq Kathwari
Technology has played a tremendously important role in all areas of our business, which has helped us reduce headcount from 5,000 to 3,400, a 32% reduction over 10 years (and 28% since 2019).
— Farooq Kathwari
Forward Guidance
Management guidance is qualitative rather than numeric for FY2025, emphasizing disciplined expense management and selective growth investments. The company intends to: (1) continue reducing overhead through technology-enabled process improvements and lean staffing aligned with demand; (2) expand product and showroom initiatives with scheduled new product introductions around April in fiscal 2025; (3) leverage the Interior Design Destination concept to raise salesperson productivity and customer engagement; (4) maintain North American manufacturing leadership (about 75% in-house) to sustain margin competitiveness; and (5) capitalize on State Department opportunities as global demand stabilizes. Achievability appears favorable given the current cash-rich, debt-free balance sheet, strong gross margins (around 60.8-60.9%), and positive cash flow trajectory. Key factors for investors to monitor include: 1) trajectory of domestic and international demand, particularly wholesale and contract orders; 2) the pace of backlog normalization and lead times; 3) progress in showroom optimization and product introductions; 4) the degree to which marketing and technology investments translate into higher conversion and design-center productivity; and 5) any shifts in capital returns or dividend policy contingent on cash flow and leverage.