“We Shouldn’t Have to Worry, But….”: Ethan Allen Stock (NYSE:ETD) Slips on Blunted Edge

The picture these days is oddly mixed for upscale furniture retail stock Ethan Allen (ETD). On the one hand, it has a huge advantage in this era of high tariffs on everything that is not American. But on the other hand, that edge is blunted by an unfortunate fact of the market. These factors are combining, and forming a brackish mixture that is not exactly palatable to shareholders. Shareholders sent shares of Ethan Allen up fractionally in Thursday afternoon’s trading.

Decades ago, Ethan Allen made a decision that, at the time, some thought preposterous: to make virtually all of its fine home furnishings in North America. Given current economic conditions, that should have been a godsend, hailed as a shining jewel of prescience. But it is not having the impact that Ethan Allen would have liked.

Ethan Allen CEO, Farooq Kathwari, noted “People say we shouldn’t have to worry. But if customers aren’t going to come in, it’s going to affect everybody.” And that in a nutshell describes the blunted edge that Ethan Allen is working with right now. The problem is that Ethan Allen’s highly-upscale furniture is pretty much unobtainium to typical shoppers, who are pinching pennies and downsizing in the face of economic uncertainty. Throw in some sluggish housing market numbers as housing is equally unobtainium, and the picture only worsens for Ethan Allen.

The Third Quarter Numbers Showed the Problem

In fact, it was a little under a month ago when Ethan Allen rolled out its third quarter numbers, showing a “low, single-digit decline in Q3 net sales and a much steeper drop-off in net income.” Essentially, yes, the company was saving a bundle on tariffs it had no need to pay. But Ethan Allen’s high-end furnishings proved little interest to consumers, and that cost it a large part of what market there was left.

Ethan Allen lost in both wholesale and retail orders, with wholesale down 11.2% and retail down even harder at 13%. About the only high point of Ethan Allen’s third quarter earnings was consolidated gross margin, which only slipped a fraction of a percent, down to 61.2% instead of the 61.3% in the year-ago period. Positive operating cash flow did help, as did a near absence of outstanding debt. But without people carrying paid-for furniture out the door, it was little more than a metaphorical finger in the dike.

Is ETD Stock a Good Buy Right Now?

Turning to Wall Street, analysts have a Hold consensus rating on ETD stock based on one Hold assigned in the past three months by Telsey Advisory analyst Christina Fernandez, who has a four-star rating on TipRanks, as indicated by the graphic below. After an 8.29% loss in its share price over the past year, the average ETD price target of $30 per share implies 14.33% downside risk.

See more ETD analyst ratings

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