Q4 2026 Ethan Allen Interiors Inc Earnings Call

July 29, 2026

Speaker #1: Good evening, and welcome to the ETHAN ALLEN FQ 2026 fourth quarter analyst conference call. At this time, all participants are on a listen-only mode.

Operator 1: Greetings, and welcome to the Ethan Allen Fiscal 2026 Q4 analyst conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt J. McNulty, Senior Vice President, Chief Financial Officer, and Treasurer. Thank you. You may begin.

Operator: Greetings, and welcome to the Ethan Allen Fiscal 2026 Q4 Analyst Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt McNulty, Senior Vice President, Chief Financial Officer, and Treasurer. Thank you. You may begin.

Speaker #1: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: It is now my pleasure to introduce your hosts, Matt McNulty, Senior Vice President, Chief Financial Officer, and Treasurer. Thank you. You may begin.

Speaker #2: Thank you, operator. Good afternoon, and thank you for joining us today to discuss ETHAN ALLEN's fiscal 2026 full year and fourth quarter results. With me today is Faruq Kathwari, our Chairman, President, and CEO.

Matt J. McNulty: Thank you, operator. Good afternoon, and thank you for joining us today to discuss Ethan Allen’s fiscal 2026 full year and Q4 results. With me today is Farooq Kathwari, our Chairman, President, and CEO. Mr. Kathwari will open and close our prepared remarks while I will speak to our financial performance midway through. After our prepared remarks, we will then open up the call for your questions. Before we begin, I would like to remind the audience that this call is being webcast live under the News & Events tab within our investor relations website. A replay and transcript of today’s call will also be made available on our investor relations website. There, you will find a copy of today’s press release, which contains reconciliations of non-GAAP financial measures referred to on this call and in the press release.

Matt McNulty: Thank you, operator. Good afternoon and thank you for joining us today to discuss Ethan Allen’s fiscal 2026 full year and Q4 results. With me today is Farooq Kathwari, our Chairman, President, and CEO. Mr. Kathwari will open and close our prepared remarks while I will speak to our financial performance midway through. After our prepared remarks, we will then open up the call for your questions. Before we begin, I would like to remind the audience that this call is being webcast live under the News & Events tab within our investor relations website. A replay and transcript of today’s call will also be made available on our investor relations website. There, you will find a copy of today’s press release, which contains reconciliations of non-GAAP financial measures referred to on this call and in the press release.

Speaker #2: Mr. Kathwari will open and close our prepared remarks while I will speak to our financial performance midway through. After our prepared remarks, we will then open up the call for your questions.

Speaker #2: Before we begin, I'd like to remind the audience that this call is being webcast live under the news and events tab within our investor relations website.

Speaker #2: A replay and transcript of today's call will also be made available on our investor relations website. There you will find a copy of today's press release, which contains reconciliations of non-GAAP financial measures referred to on this call and in the press release.

Speaker #2: Our comments today may include forward-looking statement that are subject to risks and uncertainties that could cause actual results to differ materially. The most significant risk factors that could affect our future results are described in our most recent quarterly report on Form 10-Q.

Matt J. McNulty: Our comments today may include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. The most significant risk factors that could affect our future results are described in our most recent quarterly report on Form 10-Q. Please refer to our SEC filings for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. With that, I am pleased to now turn the call over to Mr. Kathwari.

Matt McNulty: Our comments today may include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. The most significant risk factors that could affect our future results are described in our most recent quarterly report on Form 10-Q. Please refer to our SEC filings for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. With that, I am pleased to now turn the call over to Mr. Kathwari.

Speaker #2: Please refer to our SEC filings for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call.

Speaker #2: With that, I'm pleased to now turn the call over to Mr. Kathwari.

Speaker #3: Well, thank you, Matt. As we reported, despite challenging economic environment and strong prior-year comparisons, we did well and reported strong margins and a robust balance sheet.

Farooq Kathwari: Well, thank you, Matt. As we reported, despite challenging economic environment and strong prior year comparisons, we did well and reported strong margins and a robust balance sheet. We have continued to strengthen various areas of our unique, vertically integrated enterprise, which includes having strong talent, continued strengthening our offerings, our North American-based manufacturing, our strong and repositioned retail network, our national and regional logistics, and implementing technology in various areas of our enterprise. We have also continued with a strong cash position and give very good cash dividends. We are positioned well, and after Matt provides a brief financial overview, I will discuss our initiatives to continue to grow our business. Matt?

Speaker #3: We have continued to strengthen various areas of our unique vertically integrated enterprise, which includes having strong talent, continued strengthening our American-based manufacturing, our strong and repositioned retail network, our national and regional logistics, and implementing technology in various areas of our enterprise.

Speaker #3: We have also continued with a strong cash position and give very good cash dividends. We are positioned well, and after Matt provides a brief financial overview, I will discuss our initiatives to continue to grow our business.

Speaker #3: Matt?

Speaker #2: Thank you, Mr. Kathwari. Fiscal 2026 consolidated net sales were $579 million, which included fourth quarter sales of $147 million. Quarterly sales benefited from a higher average ticket price and recent product introductions offset by lower contract sales a decline in delivered unit volume and fewer incoming orders.

Matt J. McNulty: Thank you, Mr. Kathwari. Fiscal 2026 consolidated net sales were $579 million, which included Q4 sales of $147 million. Quarterly sales benefited from a higher average ticket price and recent product introductions, offset by lower contract sales, a decline in delivered unit volume, and fewer incoming orders. Wholesale segment written orders declined 11.9% during the quarter, while our retail segment written orders decreased 10.8%, as the difficult prior year comparison, combined with lower traffic and macroeconomic uncertainty, created near-term pressure. The pace of written orders remained mostly consistent throughout the quarter, with May bringing in a slightly higher volume of orders due to the Memorial Day holiday. We were also pleased to see written order growth in our State Department business this past quarter. We ended the fiscal year with wholesale backlog of $44 million, down 9% from last year.

Matt McNulty: Thank you, Mr. Kathwari. Fiscal 2026 consolidated net sales were $579 million, which included Q4 sales of $147 million. Quarterly sales benefited from a higher average ticket price and recent product introductions, offset by lower contract sales, a decline in delivered unit volume, and fewer incoming orders. Wholesale segment written orders declined 11.9% during the quarter, while our retail segment written orders decreased 10.8%, as the difficult prior year comparison, combined with lower traffic and macroeconomic uncertainty, created near-term pressure. The pace of written orders remained mostly consistent throughout the quarter, with May bringing in a slightly higher volume of orders due to the Memorial Day holiday. We were also pleased to see written order growth in our State Department business this past quarter. We ended the fiscal year with wholesale backlog of $44 million, down 9% from last year.

Speaker #2: Wholesale segment written orders declined 11.9% during the quarter, while our retail segment written orders decreased 10.8% as a difficult prior-year comparison combined with lower traffic and macroeconomic uncertainty created near-term pressure.

Speaker #2: The pace of written orders remained mostly consistent throughout the quarter, with May bringing in a slightly higher volume of orders due to the Memorial Day holiday.

Speaker #2: We were also pleased to see written order growth in our State Department business this past quarter. We ended the fiscal year with wholesale backlog of $44 million, down 9% from last year.

Speaker #2: Lower order volume, combined with improved lead times, led to a lower backlog. For the full year, our consolidated gross margin was 61.2%, comparable to 60.5% last year.

Matt J. McNulty: Lower order volume combined with improved lead times led to lower backlog. For the full year, our consolidated growth margin was 61.2%, comparable to 60.5% last year. Our adjusted gross margin of 59.7% in Q4 benefited from a change in sales mix, a higher average ticket, lower headcount, and reduced financing costs. The impact of tariffs, lower clearance margins, and higher manufacturing input costs contributed to our quarterly adjusted gross margin being lower than last year. Fiscal 2026 operating income was $45 million, with a margin of 7.8%. In Q4, our adjusted operating income was $11 million, with a margin of 7.4%, compared to 9.7% last year. Our current year operating margin was impacted by higher tariffs and fixed cost deleveraging from lower sales.

Matt McNulty: Lower order volume combined with improved lead times led to lower backlog. For the full year, our consolidated growth margin was 61.2%, comparable to 60.5% last year. Our adjusted gross margin of 59.7% in Q4 benefited from a change in sales mix, a higher average ticket, lower headcount, and reduced financing costs. The impact of tariffs, lower clearance margins, and higher manufacturing input costs contributed to our quarterly adjusted gross margin being lower than last year. Fiscal 2026 operating income was $45 million, with a margin of 7.8%. In Q4, our adjusted operating income was $11 million, with a margin of 7.4%, compared to 9.7% last year. Our current year operating margin was impacted by higher tariffs and fixed cost deleveraging from lower sales.

Speaker #2: Our adjusted gross margin of $59.7% in the fourth quarter benefited from a change in sales mix, a higher average ticket, lower headcount, and reduced financing costs.

Speaker #2: The impact of tariffs, lower clearance margins, and higher manufacturing input costs contributed to our quarterly adjusted gross margin being lower than last year. Fiscal 2026 operating income was $45 million, with a margin of 7.8%.

Speaker #2: In the fourth quarter, our adjusted operating income was $11 million, with a margin of 7.4%, compared to $9.7 million last year. Our current year operating margin was impacted by higher tariffs and fixed-cost deleveraging from lower sales.

Speaker #2: Headcount totaled 3,062 at fiscal year-end, a decrease of 5% from a year ago, with 5% decreases noted in both wholesale and retail. On a full-year basis, adjusted diluted EPS was $1.61.

Matt J. McNulty: Headcount totaled 3,062 at fiscal year-end, a decrease of 5% from a year ago, with 5% decreases noted in both wholesale and retail. On a full year basis, adjusted diluted EPS was $1.61. Q4 adjusted diluted EPS was $0.36. Our effective tax rate was 25% for the full year and 24.8% for the quarter, which vary from the 21% federal statutory rate, primarily due to state taxes. Turning to our liquidity. We remain debt-free with substantial liquidity and a robust balance sheet. During Q4, we generated $22 million in operating cash flow, which brought our full year total to $52 million. Included in our operating cash flow was $5 million in tariff refunds received. Strong operating cash flow, combined with disciplined capital management, helped grow our cash and investments to $187.5 million at fiscal year-end. We also continued our practice of paying cash dividends.

Matt McNulty: Headcount totaled 3,062 at fiscal year-end, a decrease of 5% from a year ago, with 5% decreases noted in both wholesale and retail. On a full year basis, adjusted diluted EPS was $1.61. Q4 adjusted diluted EPS was $0.36. Our effective tax rate was 25% for the full year and 24.8% for the quarter, which vary from the 21% federal statutory rate, primarily due to state taxes. Turning to our liquidity. We remain debt-free with substantial liquidity and a robust balance sheet. During Q4, we generated $22 million in operating cash flow, which brought our full year total to $52 million. Included in our operating cash flow was $5 million in tariff refunds received. Strong operating cash flow, combined with disciplined capital management, helped grow our cash and investments to $187.5 million at fiscal year-end.

Speaker #2: Fourth quarter adjusted diluted EPS was $36. Our effective tax rate was 25% for the full year, and 24.8% for the quarter, which vary from the 21% federal statutory rate primarily due to state taxes now turning to our liquidity.

Speaker #2: We remain debt-free, with substantial liquidity and a robust balance sheet. During the fourth quarter, we generated $22 million in operating cash flow, which brought our full-year total to $52 million.

Speaker #2: Included in our operating cash flow was $5 million in tariff refunds received. Strong operating cash flow, combined with disciplined capital management, helped grow our cash and investments to $187.5 million at fiscal year-end.

Speaker #2: We also continued our practice of paying cash dividends. In May, we paid a regular quarterly cash dividend of $10 million, or $0.39 per share, which brought our total dividends paid to $46 million for the year.

Matt McNulty: We also continued our practice of paying cash dividends. In May, we paid a regular quarterly cash dividend of $10 million or $0.39 per share, which brought our total dividends paid to $46 million for the year. We are also pleased that yesterday our board approved a special and regular quarterly cash dividend, both payable in August. This marks the 6th consecutive year in which Ethan Allen has declared and paid a special cash dividend. Reflecting confidence in the business and our strong liquidity position, we also returned value to shareholders through the repurchase of 250,000 shares of our stock for $5 million. A total of 1.8 million shares remain authorized for future repurchase under our existing program. Before concluding, I'd like to provide an update on the current tariff environment, which has impacted our business.

Matt J. McNulty: In May, we paid a regular quarterly cash dividend of $10 million or $0.39 per share, which brought our total dividends paid to $46 million for the year. We are also pleased that yesterday our board approved a special and regular quarterly cash dividend, both payable in August. This marks the 6th consecutive year in which Ethan Allen has declared and paid a special cash dividend. Reflecting confidence in the business and our strong liquidity position, we also returned value to shareholders through the repurchase of 250,000 shares of our stock for $5 million. A total of 1.8 million shares remain authorized for future repurchase under our existing program. Before concluding, I'd like to provide an update on the current tariff environment, which has impacted our business.

Speaker #2: We are also pleased that yesterday our board approved a special and regular quarterly cash dividend, both payable in August. This marks the sixth consecutive year in which Ethan Allen has declared and paid a special cash dividend.

Speaker #2: Reflecting confidence in the business and our strong liquidity position, we also returned value to shareholders through the repurchase of 250,000 shares of our stock for $5 million.

Speaker #2: A total of $1.8 million shares remain authorized for future repurchase under existing program. Before concluding, I'd like to provide an update on the current tariff environment, which has impacted our business.

Speaker #2: Most recently, new tariffs under Section 301 of the Trade Act became effective on July 24, at a rate of either 10% or 12.5%, depending on the country of origin.

Matt J. McNulty: Most recently, new tariffs under Section 301 of the Trade Act became effective on 24 July at a rate of either 10% or 12.5%, depending on the country of origin. These new tariffs replaced the previously issued Section 122 tariffs, which expired on 24 July and had imposed a 10% global rate. Our current exposure is concentrated on the 25% tariff that took effect last October under Section 232, which is on upholstered wood products produced and exported out of Mexico. Our remaining exposure is primarily from the newly issued Section 301 tariffs, which apply a 10% tariff on products we manufacture in Honduras, as well as our imports from Indonesia, India, and other countries. Based on our operating levels, we estimate our total tariff exposure to be approximately $15 million.

Matt McNulty: Most recently, new tariffs under Section 301 of the Trade Act became effective on 24 July at a rate of either 10% or 12.5%, depending on the country of origin. These new tariffs replaced the previously issued Section 122 tariffs, which expired on 24 July and had imposed a 10% global rate. Our current exposure is concentrated on the 25% tariff that took effect last October under Section 232, which is on upholstered wood products produced and exported out of Mexico. Our remaining exposure is primarily from the newly issued Section 301 tariffs, which apply a 10% tariff on products we manufacture in Honduras, as well as our imports from Indonesia, India, and other countries. Based on our operating levels, we estimate our total tariff exposure to be approximately $15 million.

Speaker #2: These new tariffs replaced the previously issued Section 122 tariffs, which expired on July 24 and had imposed a 10% global rate. Our current exposure is concentrated on the 25% tariff that took effect last October under Section 232, which is on upholstered wood products produced and exported out of Mexico.

Speaker #2: Our remaining exposure is primarily from the newly issued Section 301 tariffs, which apply a 10% tariff on products we manufacture in Honduras, as well as our imports from Indonesia, India, and other countries.

Speaker #2: Based on our operating levels, we estimate our total tariff exposure to be approximately $15 million. In addition, as noted last quarter, the U.S. Supreme Court invalidated certain IEPA tariffs introduced in 2025 and required monetary refunds to be issued.

Matt J. McNulty: In addition, as noted last quarter, the US Supreme Court invalidated certain IEPA tariffs introduced in 2025 and required monetary refunds to be issued. By following the refund claim process, we were refunded $5 million during the just-completed Q4, which we presented as a reduction to cost of goods sold. This refund benefited our growth in operating margins by 340 basis points and represent nearly all of the previously paid IEPA tariffs. As I finish my prepared remarks, we remain confident in our long-term strategy as the interior design destination operating a vertically integrated enterprise, supported by strong North American manufacturing and logistics. Our margins, net income, and cash held up well despite lower sales. We remain disciplined in how we are managing expenses and are well-positioned heading into the new fiscal year. With that, I will now turn the call back over to Mr. Kathwari.

Matt McNulty: In addition, as noted last quarter, the US Supreme Court invalidated certain IEPA tariffs introduced in 2025 and required monetary refunds to be issued. By following the refund claim process, we were refunded $5 million during the just-completed Q4, which we presented as a reduction to cost of goods sold. This refund benefited our growth in operating margins by 340 basis points and represent nearly all of the previously paid IEPA tariffs. As I finish my prepared remarks, we remain confident in our long-term strategy as the interior design destination operating a vertically integrated enterprise, supported by strong North American manufacturing and logistics.

Speaker #2: By following the refund claim process, we were refunded $5 million during the just-completed fourth quarter, which represented as a reduction to cost of goods sold.

Speaker #2: This refund benefited our gross and operating margins by 340 basis points and represents nearly all of the previously paid IEPA tariffs. As I finish my prepared remarks, we remain confident in our long-term strategy as the interior design destination operating a vertically integrated enterprise, supported by strong North American manufacturing and logistics.

Speaker #2: Our margins net income and cash held up well despite lower sales. We remain disciplined in how we are managing expenses and are well-positioned heading into the new fiscal year.

Matt McNulty: Our margins, net income, and cash held up well despite lower sales. We remain disciplined in how we are managing expenses and are well-positioned heading into the new fiscal year. With that, I will now turn the call back over to Mr. Kathwari.

Speaker #2: With that, I will now turn the call back over to Mr. Kathwari.

Speaker #1: Thanks, Matt. As we continue to implement strategies to further strengthen and grow our business, we have been able to improve our operating efficiency and run a strong and lean enterprise.

Farooq Kathwari: Thanks, Matt. As we continue to implement strategies to further strengthen and grow our business, we have been able to improve our operating efficiency and run a strong and lean enterprise. The main areas of our focus to grow our business and manage our operations include: continue to strengthen our talent in our vertically integrated enterprise in various areas, including our retail network, merchandising, marketing, manufacturing, logistics, and technology. Continue to be the interior design destination. Today, we have approximately 500 interior designers that are able to provide complimentary interior design services and help clients create custom furniture for their homes, all free of charge. Combining good service and technology is critical in this area. Strengthening our products under the design umbrella of classics with a modern design. Combining technology with strong talent continues to be our strong focus.

Speaker #1: The main areas of our focus to grow our business and manage our operations include: continue to strengthen our talent in our vertically integrated enterprise in various areas, including our retail network, merchandising, marketing, manufacturing, logistics, and technology; continue to be the interior design destination; today, we have approximately 500 interior designers that are able to provide complementary interior design services and help clients create custom furniture for their homes all free of charge; combining good service and technology is critical to this in this area; strengthening our products under the design umbrella of classics with a modern design; combining technology with strong talent continues to be our strong focus; expanding and enhancing our retail network, including strengthening of our interior design centers; today, we have 170 one design centers in North America, and in the last few years, many have been relocated, made smaller, and combining strong talent with technology.

Farooq Kathwari: Expanding and enhancing our retail network, including strengthening of our Design Centers. Today, we have 171 Design Centers in North America, and in the last few years, many have been relocated, made smaller, and combining strong talent with technology. Further implement initiatives to make our North American manufacturing more efficient. Today, most of our furniture is made in our North American facilities in Vermont, North Carolina, Mexico, and Honduras. Almost all our furniture made in our plants in North America is custom on receipt of orders. Delivering our products with personal service to our clients at one delivered price across North America is unique and a great strength. Finally, we maintain a strong cash balance and provide good dividends. We just announced a regular cash dividend of $0.39 and a special cash dividend of $0.25, both payable on 26 August 2026.

Speaker #1: Further implement initiatives to make our North American manufacturing more efficient; today, most of our furniture is made in our North American facilities in Vermont, North Carolina, Mexico, and Honduras.

Speaker #1: Almost all of all our furniture made in our plants in North America is custom on receipt of orders. Delivering our products with personal service to our clients at one delivered price across North America is unique and a great strength.

Speaker #1: And finally, we maintain a strong cash balance and provide good dividends. We just announced a regular cash dividend of $0.39 and a special cash dividend of $0.25, both payable on August 26, 2026.

Farooq Kathwari: Finally, we maintain a strong cash balance and provide good dividends. We just announced a regular cash dividend of $0.39 and a special cash dividend of $0.25, both payable on 26 August 2026. With this, I'd like to open it up for any questions or comments.

Speaker #1: With this, I'd like to open it up for any questions or comments.

Farooq Kathwari: With this, I'd like to open it up for any questions or comments.

Speaker #3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator 3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Brad Thomas with KeyBanc Capital Markets. Please proceed with your question.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Brad Thomas with KeyBanc Capital Markets. Please proceed with your question.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #3: One moment, please, while we pull for questions. Our first question comes from the line of Brad Thomas with KeyBank Capital Markets. Please proceed with your question.

Speaker #1: Yeah. Hello, Brad. How are you?

Farooq Kathwari: Yeah. Hello, Brad. How are you?

Speaker #4: Hey, Fruk. It's actually Taylor Zick on for Brad today. I think thanks for taking our questions. Fruk, I just Fruk, I just kind of wanted to ask about, you know, the retail written orders during the quarter.

Taylor Zick: Hey, Farooq. It's actually Taylor Zick on for Brad today.

Farooq Kathwari: Oh, okay.

Taylor Zick: Thanks for taking our questions.

Farooq Kathwari: All right, Taylor.

Taylor Zick: Farooq, I just kind of wanted to ask about the retail written orders during the quarter. We are down 11%, which is deceleration from Q3, but on a two-year stack, it seemed to improve a bit. Matt, I know you said you had higher volumes in May as well, but can you kind of just give us a bit more color on what you saw during the quarter?

Speaker #4: You know, we're down 11%, which is, you know, deceleration from 3Q. But, you know, on a two-year stack, it seemed to improve a bit.

Speaker #4: And, and Matt, I know you said you had higher volumes in May as well. But can you kind of just give us a bit more color on what you saw during the quarter?

Speaker #1: Yes, Taylor, you know, of course, in the quarter we did see consumers somewhat being concerned and holding back. With that in mind, I mean, overall, our written orders during the quarter were down about close to 11%—10.8%.

Farooq Kathwari: Yes, Taylor. Of course, in the quarter, we did see consumers somewhat being concerned and holding back. With that in mind, overall, our written orders during the quarter were down about close to 11%, 10.8%. However, we still maintain relatively good orders coming in, and our designers remain motivated, but it does reflect somewhat of a softer economy.

Speaker #1: And however, we still maintain relatively good orders coming in. And our designers remain motivated. But it does reflect somewhat of a the of a softer economy.

Speaker #4: Gotcha. And then maybe kind of if I can ask about the tariff refunds as well. You know, Matt, you had noted about $5 million in tariff refunds IEPA tariff refunds.

Taylor Zick: Then maybe if I can ask about the tariff refunds as well. Matt, you had noted about $5 million in tariff refunds, IEPA tariff refunds. Sounds like it is most of what you expect to receive and may have been aimed at those share repurchases. I guess, one, do you expect any incremental refunds here? Then, how do you think the industry is using these refunds? Have you seen them get incrementally promotional as they have these dollars now?

Speaker #4: Sounds like it's most of what you expect to receive in in in may have been aimed at those share repurchases. But I guess one, do you expect any incremental refunds here?

Speaker #4: And then, how do you think the industry is using these refunds? Do you have you seen them get you know, incrementally promotional as they they they have these dollars now?

Speaker #2: Yeah, that's a great question, Taylor. This is Matt. So that is the $5 million refund we got in in this past quarter was substantially all of what we were expecting.

Matt J. McNulty: Yeah, that's a great question, Taylor. This is Matt. That is the $5 million refund we got in this past quarter was substantially all of what we were expecting. There may be a little bit more, but this is substantially all that we anticipate to collect, and it all related to the IEPA tariff that we previously paid earlier in the fiscal 2026 year. As for part 2 of your question, what do other companies do? It's a mixed bag. You've seen some of the bigger company headlines out there, Walmarts of the world, looking to potentially roll back prices, as they say. Others, FedEx and UPS, are returning it because they can directly attribute it to surcharges. It's too early to tell what everyone's doing, but that's what I've seen in the market so far.

Matt McNulty: Yeah, that's a great question, Taylor. This is Matt. That is the $5 million refund we got in this past quarter was substantially all of what we were expecting. There may be a little bit more, but this is substantially all that we anticipate to collect, and it all related to the IEPA tariff that we previously paid earlier in the fiscal 2026 year. As for part 2 of your question, what do other companies do? It's a mixed bag. You've seen some of the bigger company headlines out there, Walmarts of the world, looking to potentially roll back prices, as they say. Others, FedEx and UPS, are returning it because they can directly attribute it to surcharges. It's too early to tell what everyone's doing, but that's what I've seen in the market so far.

Speaker #2: There there may be a little bit more, but this is substantially all that we anticipate to collect. And it all related to the IEPA tariffs that we previously paid earlier in the fiscal 2026 year.

Speaker #2: As for part two of your question, what do other companies do? It's it's a mixed bag. You you've seen some of the bigger company headlines out there: Walmart.

Speaker #2: So the world is looking to potentially roll back prices, as they say. Others—FedEx and UPS—are returning it because they can directly attribute it to surcharges.

Speaker #2: So, it's too early to tell what everyone's doing, but that's what I've seen in the market so far. The refunds did all come back relatively recently, in June.

Matt J. McNulty: The refunds did all come back relatively recently in June, so it's still pretty early from a timing perspective.

Matt McNulty: The refunds did all come back relatively recently in June, so it's still pretty early from a timing perspective.

Speaker #2: So so it's still a pretty early in from a time timing perspective.

Speaker #1: And also, I would like to add that, you know, in our case, we we do make most of our products in our own facilities in North America.

Farooq Kathwari: Also, I would like to add that, in our case, we do make most of our products in our own facilities in North America. We were less impacted. We are somewhat impacted with our operations in Mexico, but less in the rest of the world because of the fact of our manufacturing right here in the United States as well.

Speaker #1: So we were less impacted. Some we are somewhat impacted with our operations in Mexico, but not as but less in the rest of the world because of the fact of our manufacturing right here in the United States as well.

Speaker #4: Yeah, of course. And then maybe if I can squeeze one last question in here. Maybe on the wholesale segment. You know, that that segment had been pressured over the last year or so with, you know, lower contracts sales, state department, and some independence.

Taylor Zick: Yeah, of course. Maybe if I can squeeze one last question in here. Maybe on the wholesale segment. That segment had been pressured over the last year or so with lower contract sales, State Department, and some independents, I think you've noted. I think, Farooq, you also said that the, if I heard it correctly, the State Department was positive in the quarter. I guess, how are you thinking about that segment's ability to kind of return to growth here in your next fiscal year as we lap some of these headwinds?

Speaker #4: I think you've noted. But I think, Fruk, you also said that this if I heard it correctly, the state department was was positive in the quarter.

Speaker #4: So, I guess, how are you thinking about that segment's ability to kind of return to growth here in your next fiscal year as we lap some of these headwinds?

Speaker #1: Yeah, Taylor, we did see in our three quarters in our fiscal year that the State Department was down quite a bit. It reflected the initiatives that have been taken by the government relating to reducing the State Department buying products.

Farooq Kathwari: Yeah, Taylor Zick, we did see in our three quarters in our fiscal year that the U.S. Department of State was down quite a bit. It's reflected the initiatives that have been taken by the government relating to reducing the U.S. Department of State buying products. We saw that. In Q4, we did see that, and even this fiscal year just starting now, we have seen some increases, which has been good, and of course, that will have some impact in our deliveries in this fiscal Q1 in this new year. Our contract is still there. The government is thinking of perhaps sending new bids for contracts. We haven't heard as yet. Good news is, after really restraining their teams all over the world to reduce buying, in Q4, we saw that they were starting to get back, and we saw that increase.

Speaker #1: We saw that. But in the fourth quarter, we did see that, and even this fiscal year just starting now, we have seen some increases.

Speaker #1: Which has been good. And of course, that has we that will have some impact in our deliveries in this fiscal first first year quarter.

Speaker #1: This is the new year, but our contract is still in place. The government is considering perhaps sending out a new bid for contracts. We haven't heard anything yet.

Speaker #1: But good news is, after really restraining the the their their teams all over the world to reduce buying in the fourth quarter, we saw that they were starting to get back.

Farooq Kathwari: Good news is, after really restraining their teams all over the world to reduce buying, in Q4, we saw that they were starting to get back, and we saw that increase.

Speaker #1: And we saw that increase.

Speaker #4: That's great. All right. I'll pass it along. Thanks so much.

Taylor Zick: That's great. All right, I'll pass it along. Thanks so much.

Farooq Kathwari: All right, Taylor Zick. Take care.

Speaker #1: All right, Taylor. Take care.

Speaker #3: Thank you. Our next question comes from the line of Christina Fernandez with Tulse Advisory Group. Please proceed with your question.

Operator 3: Thank you. Our next question comes from the line of Cristina Fernandez with Telsey Advisory Group. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Cristina Fernandez with Telsey Advisory Group. Please proceed with your question.

Speaker #1: Hello, Christina. How are you?

Farooq Kathwari: Hello, Cristina. How are you?

Speaker #5: Good. Hi. Good afternoon. Fruk and Matt. I I wanted to follow up on Taylor's question on the tariff refund. How are you planning on using it?

Cristina Fernández: Good. Hi, good afternoon, Farooq and Matt. I wanted to follow up on Taylor's question on the tariff refund. How are you planning on using it? Was that tied to the special dividend or not? Do you expect to reinvest it in the business, or are there any specific uses for that $5 million you received?

Speaker #5: Was that tied to the special dividend, or not? And do you expect to reinvest it in the business, or are there any specific uses for that $5 million you received?

Speaker #1: Well, you know, it is, of course, a relatively small amount relative to the total amount of cash that we have. So we've just put it in our cash.

Farooq Kathwari: Well, it is, of course, a relatively small amount relative with the total amount of cash that we have. We've just put it in our cash, I think that it is going to remain as part of our cash, we want to maintain a healthy cash balance. The $4 million is important, but not tremendously that much of a major factor. We want to continue to have strong cash, we continue also to see that we continue to do our regular and special dividends.

Speaker #1: And I think that, you know, it it it really is it is going to remain as part of our cash. And and we want to maintain a healthy cash balance.

Speaker #1: So the $4 million was, you know, is important, but not a tremendously that much of a major factor. But we want to continue to have strong cash.

Speaker #1: And then we continue also to see that we continue to do our regular and special dividends.

Speaker #5: In as you start fiscal year 2027, I wanted to see if you can provide a bit more detail into some of the initiatives to drive growth that you mentioned.

Cristina Fernández: As you start fiscal year 2027, I wanted to see if you can provide a bit more detail into some of the initiatives to drive growth that you mentioned. I was particularly interested in products, marketing, and real estate. Is there any specific programs that you're working on that you can talk about? I guess, what could be new or different for fiscal year 2027? Thanks.

Speaker #5: I was particularly interested in products and marketing and real estate. Is there any specific programs that you're working on that you can talk about or, I guess, what could be new or different for fiscal year 27?

Speaker #5: Thanks.

Speaker #1: Yes. That's a good question. Christina, our focus remains to make sure that we have we strengthen the various areas of our enterprise. The good news is, in the last two years, even last year, we spent a fair amount of time in making sure that our design centers project well.

Farooq Kathwari: Yes, that's a good question, Cristina. Our focus remains to make sure that we strengthen the various areas of our enterprise. The good news is, in the last two years, even last year, we spent a fair amount of time in making sure that our Design Centers project well. We have made them smaller. We made a great amount of investment. Good news is, coming into this fiscal year, most of that has been done. The second is our interior design network. Our interior design network is critical to our business. We want to make sure they do well. I think that going forward to this fiscal year, we are positioned well. Now, obviously, we need to get increased traffic.

Speaker #1: We have we have made them smaller. We made a great amount of investment. So but good news is, coming into this fiscal year, most of that has been done.

Speaker #1: The second is our interior design network. Our interior design network is critical to our business, and we want to make sure they do well.

Speaker #1: So I think that going forward to this fiscal year, we are positioned well. Now, obviously, we need to get increased traffic. We need to get more people coming in.

Farooq Kathwari: We need to get more people coming in, but we are very well-positioned in the projection of our Design Centers, our interior designers, and thirdly, we have also been introducing very strong new products to make sure that we have strong offerings. Combining strong offerings, our interior design network, finally, technology is critical. Our interior designers are using more and more technology in working with our clients. When you combine all of those things, it gives us an opportunity to continue the progress. Obviously, of course, we are looking at the economy and consumer confidence and all those factors. We are keeping those in mind, but we are well-positioned going into this fiscal year.

Speaker #1: But we are very well positioned in the projection of our design centers. Our interior designers and then final and also thirdly, we have also been introducing very strong new products to make sure that we have a strong offerings.

Speaker #1: So, combining strong offerings, our interior design network, and then finally, technology is critical. Our interior designers are using more and more technology in working with our clients.

Speaker #1: So, when you combine all of those things, it gives us an opportunity to continue the progress. And obviously, of course, we are looking at the economy and consumer confidence and all those factors.

Speaker #1: We are keeping those in mind. But we are well positioned going into this fiscal year.

Speaker #5: In the last question, maybe for Matt, on capex — should we think about fiscal year '27, the spend being very similar to fiscal year '26? And are there any other, I guess, investments to keep in mind?

Operator 2: The last question, maybe for Matt. On CapEx, should we think about fiscal year 2027, the spend being very similar to fiscal year 2026? Are there any other, I guess, investments to keep in mind?

Cristina Fernández: The last question, maybe for Matt. On CapEx, should we think about fiscal year 2027, the spend being very similar to fiscal year 2026? Are there any other, I guess, investments to keep in mind?

Speaker #1: I can answer that. I think that, at this stage, our objective would be to continue very similar to what we've done in this last fiscal year.

Farooq Kathwari: I can answer that. I think that at this stage, our objective would be to continue very similar to what we've done in this last fiscal year.

Speaker #5: Thank you.

Cristina Fernández: Thank you.

Speaker #1: All right. Christina, thanks very much.

Farooq Kathwari: All right. Cristina, thanks very much.

Operator 3: Thank you.

Operator: Thank you.

Speaker #3: Thank you.

Speaker #1: Any other comments or questions?

Farooq Kathwari: Any other comments or questions?

Speaker #3: And it looks like we have reached the end of the question-and-answer session. Therefore, I will turn it back over to Mr. Fruk or Mr. Kathwari for closing remarks.

Operator 3: It looks like we have reached the end of the question and answer session. Therefore, I will turn it back over to Mr. Farooq Kathwari for closing remarks.

Operator: It looks like we have reached the end of the question and answer session. Therefore, I will turn it back over to Mr. Farooq Kathwari for closing remarks.

Speaker #1: All right. Thanks very much. Glad to have you all on. We these are somewhat of a challenging times. But the good news is, we are positioned well.

Farooq Kathwari: All right. Thanks very much. Glad to have you all on. These are somewhat of challenging times, but the good news is we are positioned well. I ask about close to 40 of our team members every week to write a report on five subjects. First is talent. We want to make sure we have strong talent. The good news is we have strong talent across our vertically integrated network. Last week, I was in Vermont and North Carolina, where we are manufacturing. Good to see those two operations. We want to make sure that we have strong marketing. Marketing, we are providing a lot of marketing, both internal marketing, external marketing, and using technology in marketing is important. Overall, the use of technology, whether it is in manufacturing or in retail, is critical.

Speaker #1: We, well, we—I ask about close to 40 of our team members every week to write a report on five subjects. First is talent.

Speaker #1: We want to make sure we have strong talent. And the good news is, we have strong talent. Across our vertically integrated network. Last week, I was in Vermont and North Carolina where we are manufacturing.

Speaker #1: And good to see of that those two operations. Then we want to make sure that we have strong marketing. And marketing, we are providing a lot of marketing.

Speaker #1: We are, in a sensible way, marketing—both internal marketing and external marketing. Using technology in marketing is important. And then, overall, the use of technology, whether it's in manufacturing or in retail, is critical.

Speaker #1: And we're going to continue to do that. Our interior designers are more productive. We have less interior designers than we have had in the last year or in the last five or ten years.

Farooq Kathwari: We're going to continue to do that. Our interior designers are more productive. We have less interior designers than we've had in the last year or in the last five or 10 years. It is because of the fact of having strong interior designers and technology. Finally, social responsibility is critical. We'll continue to make sure that we are socially responsible. I want to thank you all for participating, and if there's any more questions, comments, please let us know. Thank you very much.

Speaker #1: It is because of the fact that we have strong interior designers and technology. And finally, social responsibility is critical. So we'll continue to make sure that we are socially responsible.

Speaker #1: I want to thank you all for participating. If there are any more questions or comments, please let us know. Thank you very much.

Speaker #3: Thank you. And this concludes today's conference. And you may disconnect your lines at this time. We thank you for your participation.

Operator 3: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Speaker #1: Thank you.

Farooq Kathwari: Thank you. Hello?

Q4 2026 Ethan Allen Interiors Inc Earnings Call

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