* Sees $1.5 mln restructuring charges in Q4
* Q3 adj shr/loss $0.05 vs est $0.00
* Q3 net sales up 5 pct, in line with Street View
* Q3 gross margin 49 pct vs 47 pct year-ago
* Shares fall as much 14 pct
(Recasts, adds conference call details, analyst comment,
updates share movement)
By Shradhha Sharma
BANGALORE, April 28 Ethan Allen Interiors Inc
(ETH.N) reported a wider-than-expected quarterly loss, as it
struggled to reign in transition costs related to plant
closures, and said it sees another $1.5 million in related
costs in the fourth quarter, sending its shares down as much as
On a conference call with analysts, Chief Executive Farooq
Kathwari said the furniture retailer continues to incur
transition costs related to both its closed plants and for
ramping up production.
"While business continues to improve, we are still cautious
in our outlook, and will need to see another quarter of solid
retail activity to project a level of acceptable
profitability," CEO Kathwari said on the call.
Ethan Allen recorded a $2.1 million, or 5 cents a share,
charge related to the transition during the third quarter.
The restructuring relates to the consolidation of four
company plants and the ramp up of its upholstery plants and
transition to custom case goods, which also hurt second-quarter
gross margins by 7 cents a share.
"They did improve their results pretty drastically
year-over-year... but the street was looking for more of a
rebound in sales translating into the earnings line," Wall
Street Strategies analyst Brian Sozzi said.
"As we expected, Ethan Allen's transition to custom
casegoods manufacturing and a smaller distribution footprint
were the main culprits in the gross margin shortfall compared
Shares of the Danbury, Connecticut-based retailer touched a
low of $20.51, but recouped some of their losses later and were
trading down $2.12 at $21.61 Wednesday afternoon on the New
York Stock Exchange.
NARROWER Q3 LOSS
For the third-quarter ended March 31, the furniture
retailer posted a net loss of $855,000 or 3 cents a share, down
from a loss of $48.7 million, or $1.69 a share, a year earlier.
Excluding restructuring, impairments, transition charges,
Ethan Allen posted a loss of 5 cents a share.
"A year-over-year improvement is not enough. If you drill
into these numbers, they missed by about 260 basis points on
gross margins," analyst Sozzi said.
Ethan Allen saw a slight improvement in quarterly gross
margins to 49 percent, compared with 47 percent a year ago.
It also reported strong early 2010 orders. Consolidated
booked orders for the quarter jumped 20 percent to about $176
million, said in a statement.
"Our consolidated booked orders, if maintained, would
translate to annual sales of about 700 million, which would
provide us an opportunity to be profitable," CEO Kathwari said
on the call.
Net sales at the company rose 5 percent to $147.3 million.
[ID:nASA009YM] The upper-end retailer, which had retained its
full prices throughout most of the economic downturn, is now
offering more promotions to curtail share losses and appeal to
a wider range of shoppers.
Analysts on average, were expecting the company to break
even, and report net sales of $147.3 million, according to
Thomson Reuters I/B/E/S.
(Reporting by Shradhha Sharma in Bangalore; Editing by Jarshad