Ethan Allen plans to close 12 retail stores
April 11, 2008 - United States Of America
Ethan Allen Interiors Inc updates progress on the plan to consolidate the operations of about twelve of its company owned retail Design Centers and two Retail Service Centers during the March and June quarters which was announced on January 10, 2008, and comments on business for the quarter ended March 31, 2008.
During the quarter ended March 31, 2008, four Design Centers were converted to smaller size Design Studios better suited to the smaller markets they serve. In addition, seven Design Centers and two retail Service Centers were closed and, for the most part, were consolidated into other existing operations resulting in a total pretax restructuring charge of about $4.0 million or $2.5 million after tax and $0.09 per diluted share.
Regarding the business update for the quarter ended March 31, 2008, Mr. Kathwari, Chairman and CEO, commented, "We saw the impact of the weak economy on our sales during the March quarter. Our sales of $235.9 million were 4.3% lower than the previous year quarter and earnings per diluted share is expected to be $0.29 to $0.30 including restructuring charges and $0.38 to $0.39 excluding them."
Mr. Kathwari further commented, "As indicated in our January conference call, we have taken aggressive steps to convert and consolidate certain existing Design Centers as mentioned above. We have also relocated several existing Design Centers to prominent locations and have substantially completed the installation of the branded Lifestyle presentations in nearly all of the 153 Company operated Design Centers.
During the quarter ended March 31, 2008, we opened four new Design Centers, all relocations. We expect to open an additional six or seven in our fourth quarter which will bring the total of new Design Centers opened during the fiscal year to about twenty, which is the largest number of new Design Centers opened in any recent year. All these initiatives have added costs to this fiscal year, especially in the third quarter ended March 31, 2008."
Mr. Kathwari further stated, "We expect that the added costs of all the above initiatives, which have impacted both gross margins and operating expenses, will be substantially reduced in our next fiscal year. In addition, starting from our next fiscal year we expect to have a substantial reduction in our capital expenditures related to the opening of new Design Centers.
We will discuss this in greater detail in our upcoming conference call on April 22nd at 8:30 a.m. During the quarter that will end June 30, 2008, we expect to consolidate the two remaining Design Centers located in New York City with the opening of the new flagship Design Center in Manhattan located at 3rd Avenue and 60th Street.
The company expects to take a $3 to $4 million pretax restructuring charge, or $1.9 to $2.5 million after tax, during the fourth quarter. The overall restructuring charges in the third and fourth fiscal quarters are anticipated to have diluted earnings per share impact of about $0.15 to $0.17 which is less thanthe previous estimate of $0.20 to $0.22 per diluted share."