ETHAN ALLEN INTERIORS INC has recently released its 10-K report. The company describes itself as an interior design business and a manufacturer and retailer of home furnishings operating in the United States and internationally. It runs two segments, Wholesale and Retail, and sells furniture, upholstery, window treatments, décor, bedding, rugs, flooring, wall coverings, outdoor furnishings and related products under the Ethan Allen brand through design centers, independent retailers and ethanallen.com.
Item 7: Management’s Discussion and Analysis
Ethan Allen said fiscal 2026 was marked by lower sales, firmer gross margin and weaker operating income. Net sales fell 5.7% to $579.5 million from $614.6 million, while gross profit declined 4.7% to $354.8 million; operating income dropped 27.4% to $45.0 million and diluted EPS fell to $1.56 from $2.01.
The company said the sales decline reflected lower contract business, fewer delivered units and reduced incoming orders, partly offset by a higher average ticket price, new product introductions and designer floor sample sales. Wholesale net sales fell 7.9% to $330.7 million, while retail net sales declined 2.3% to $511.2 million.
Wholesale written orders were down 11.2% for the year. Ethan Allen said contract orders fell 49.5%, international retailer orders dropped 52.0%, orders from intersegment company-operated design centers declined 6.5%, and orders from the independent U.S. retail network decreased 7.4%.
The company’s contract business was especially weak: contract sales, including shipments to the GSA, fell 56.0%. Ethan Allen attributed that decline to fewer incoming orders tied to the change in presidential administration in 2025 and the U.S. government shutdown beginning in October 2025. Wholesale international sales were 0.9% of total wholesale net sales and fell 43.6%, mainly because of lower order volumes from China.
Retail written orders declined 6.1% year over year. Ethan Allen said the decrease reflected lower demand and design center traffic, along with stagnant housing activity, elevated interest rates and global unrest. Retail sales in the U.S. fell 2.4%, while Canadian design center sales rose 2.3%.
Gross margin improved to 61.2% from 60.5%, helped by a change in sales mix, lower inbound freight costs, reduced headcount and a higher average ticket price. Those gains were partly offset by incremental tariffs, lower clearance margins and higher manufacturing input costs. Ethan Allen said fiscal 2026 gross profit included a $5.0 million recovery of previously paid tariffs under the International Emergency Economic Powers Act.
Operating cash flow totaled $52.5 million, down from $61.7 million in fiscal 2025. Cash and investments rose to $187.5 million at June 30, 2026. The company said it remained debt-free.
Inventory ended the year at $148.5 million, up 5.4% from the prior year, as new product introductions and price increases lifted on-hand levels. Customer deposits from undelivered written orders were $62.7 million, down from $75.1 million a year earlier. Wholesale backlog was $44.3 million, down 9.3%.
Ethan Allen said it paid $46.3 million in dividends during fiscal 2026, including four quarterly dividends of $0.39 per share and a special dividend of $0.25 per share. It also repurchased 250,000 shares for $4.8 million.
At June 30, 2026, the company had 3,062 employees, down 4.6% from the prior year. That included 2,137 employees in wholesale and 925 in retail. Ethan Allen operated 141 retail design centers, including 136 in the U.S. and five in Canada, after opening four company-operated locations during fiscal 2026 in Colorado Springs, Concord, San Diego and Vancouver. As a result of these announcements, the company's shares have moved 0.92% on the market, and are now trading at a price of $21.91. Check out the company's full 10-K submission here.
