Quarterly report pursuant to Section 13 or 15(d)

Note 1 - Organization and Nature of Business

Note 1 - Organization and Nature of Business
3 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Nature of Operations [Text Block]


Organization and Nature of Business




Founded in 1932 and incorporated in Delaware in 1989, Ethan Allen Interiors Inc., through its wholly-owned subsidiary, Ethan Allen Global, Inc., and Ethan Allen Global, Inc.’s subsidiaries (collectively, “we,” “us,” “our,” “Ethan Allen” or the “Company”), is a leading interior design company, manufacturer and retailer in the home furnishings marketplace.


Nature of Business


We are a global luxury home fashion brand that is vertically integrated from design through delivery, which offers our customers stylish product offerings, artisanal quality, and personalized service. We provide complimentary interior design service to our clients and sell a full range of home furnishings through a retail network of approximately 300 design centers in the United States and abroad as well as online at ethanallen.com.


Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. As of  September 30, 2021, the Company operates 141 retail design centers with 136 located in the United States and five in Canada. Our 160 independently operated design centers are located in the United States, Asia, the Middle East and Europe. We also own and operate nine manufacturing facilities in the United States, Mexico and Honduras, including one sawmill, one rough mill and a lumberyard. Approximately 75% of our products are manufactured or assembled in these North American facilities. We also contract with various suppliers located in Europe, Asia, and various other countries that produce products that support our business.


Impact of the COVID-19 Pandemic Upon our Financial Condition and Results of Operations


We have been and continue to be impacted by the COVID-19 pandemic. All of our design centers are open and written orders taken at both the retail and wholesale segments have exceeded levels from a year prior as customers continue to allocate more discretionary spending to home furnishings. Demand for our products continues to outpace our production capacity and import receipts leading to an order backlog still at a record level. Our manufacturing capacity has increased by adding headcount as well as second shifts and weekend production shifts to our North American plants. 


However, we continue to experience ongoing logistical challenges that we, as well as the entire home furnishings industry, have faced resulting from COVID-19 related supply chain disruptions creating delays in order fulfillment and increasing order backlogs. Our focus on inventory and supply chain management are critical as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory shortage and obsolescence. The receipt of inventory and raw materials imported from certain geographic areas has been slowed. In addition, ocean freight capacity issues continue to persist worldwide due to the ongoing global COVID-19 pandemic, which has resulted in price increases per shipping container. While we continue to manage and evaluate our logistics providers, there is no indication that ocean freight container rates will return to pre-COVID-19 levels in the near-term. We are also experiencing a shortage of qualified labor in certain geographies, particularly with United States manufacturing plant production workers and at our distribution facilities. Outside suppliers that we rely on have also experienced shortages of qualified labor. While we continue to actively identify, recruit, develop and retain qualified talent, an ongoing shortage in certain geographies could result in increased costs from higher overtime and the need to hire temporary help to meet demand and higher wage rates from actions to attract and retain employees, as well as higher costs to purchase raw materials or services from such third parties, all of which would have negatively impact our results of operations.


Although we actively manage the impact of the ongoing COVID-19 pandemic, we are unable to predict the impact COVID-19 will have on our financial operations in the near- and long-term. We also continue to manage our global supply chain and manufacturing operations, which  may continue to be adversely impacted with respect to availability and pricing based on uncontrollable factors. The timing of any future actions in response to COVID-19 is dependent on the mitigation of the spread of the virus, status of government orders, directives and guidelines, recovery of the business environment, economic conditions, and consumer demand for our products.