Quarterly report pursuant to Section 13 or 15(d)

Note 17 - Segment Information

v3.23.3
Note 17 - Segment Information
 3 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

(17)

Segment Information

 

Ethan Allen conducts business globally and has strategically aligned its business into two reportable segments: Wholesale and Retail. These two segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. Our operating segments are aligned with how the Company, including our chief operating decision maker, manages the business. This vertical structure enables us to offer our complete line of home furnishings and accents more effectively while controlling quality and cost. We evaluate performance of the respective segments based upon sales and operating income.

 

Wholesale Segment. The wholesale segment is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, merchandising, marketing and distribution of our broad range of home furnishings and accents. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation, and sales to our independent retailers and other third parties. Wholesale revenue is generated upon the sale and shipment of our products to our retail network of independently operated design centers, Company-operated design centers and other contract customers.

 

Retail Segment. The retail segment sells home furnishings and accents to clients through a network of Company-operated design centers. Retail revenue is generated upon the retail sale and delivery of our products to our retail customers through our network of retail home delivery centers. Retail profitability reflects (i) the retail gross margin, which represents the difference between the retail net sales price and the cost of goods, purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities. As of September 30, 2023, the Company operated 141 design centers within our retail segment.

 

Intersegment. We account for intersegment sales transactions between our segments consistent with independent third-party transactions, that is, at current market prices. As a result, the manufacturing profit related to sales to our retail segment is included within our wholesale segment. Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third-party transactions. Segment operating income is based on profit or loss from operations before interest and other income, net, interest and other financing costs, and income taxes. Sales are attributed to countries on the basis of the customer's location.

 

Segment information is provided below (in thousands):

 

   

Three months ended

  
   

September 30,

  
   

2023

    

2022

  

Net sales

                

Wholesale segment

   $ 99,430     $ 114,651  

Less: intersegment sales

     (69,139 )     (83,779 )

Wholesale sales to external customers

     30,291       30,872  

Retail segment

     133,601       183,658  

Consolidated total

   $ 163,892     $ 214,530  
                 

Income before income taxes

                

Wholesale segment

   $ 14,371     $ 15,413  

Retail segment

     5,162       21,989  

Elimination of intercompany profit (a)

     (1,182 )     2,248  

Operating income

     18,351       39,650  

Interest and other income, net

     1,785       396  

Interest and other financing costs

     61       55  

Consolidated total

   $ 20,075     $ 39,991  
                 

Depreciation and amortization

                

Wholesale segment

   $ 1,602     $ 1,591  

Retail segment

     2,345       2,266  

Consolidated total

   $ 3,947     $ 3,857  
                 

Capital expenditures

                

Wholesale segment

   $ 1,456     $ 2,061  

Retail segment

     2,241       1,118  

Consolidated total

   $ 3,697     $ 3,179  

 

 

(a)

Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.

 

(in thousands)

  

September 30,

    

June 30,

  

Total Assets

  

2023

    

2023

  

Wholesale segment

   $ 362,535     $ 373,921  

Retail segment

     410,142       403,651  

Inventory profit elimination (a)

     (33,114 )     (32,119 )

Consolidated total

   $ 739,563     $ 745,453  

 

 

(a)

Represents the wholesale profit contained in the retail segment inventory that has not yet been realized. These profits are realized when the related inventory is sold.