ETHAN ALLEN INTERIORS INC Segments Disclosure

(20)	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 (the “CODM”) who is our Chairman of the Board, President and Chief Executive Officer, evaluates the operating results and performance of the business.

 

Wholesale Segment. The wholesale segment is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, marketing, sale and distribution of our broad range of home furnishings and accents. Wholesale revenue is recorded upon the shipment of our products to our retail network of independently operated design centers, Company-operated design centers, and other third-party contract business clients. Our wholesale segment’s net sales to Company-operated design centers are eliminated in consolidation.

 

Retail Segment. The retail segment sells home furnishings and accents to clients through 142 Company-operated design centers. Ethan Allen design centers are typically located in retail settings as freestanding destinations or as part of town centers, lifestyle centers, and suburban shopping malls, and average approximately 14,000 square feet in size. The geographic distribution of our retail design center locations is disclosed under Item 2, Properties, contained in Part I of this Annual Report on Form 10-K.

 

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 revenue from independent third-party transactions.

 

We evaluate the performance of our two segments based upon net sales and operating income in order to allocate resources. Segment operating income is based on operating income before interest and other financing costs, interest and other income, net and income tax expense. The CODM assesses performance by regularly reviewing each segment’s significant expense categories which include selling expenses and cost of sales, general and administrative expenses, and advertising expenses. The accounting policies of the operating segments are the same as those described in Note 3, Summary of Significant Accounting Policies. 

 

The following tables present net sales and operating income by segment (in thousands):

 

		Fiscal Year Ended June 30, 2025
		Wholesale				Retail				Intersegment Eliminations				Consolidated
Net sales		$	359,057			$	523,142			$	(267,550	)		$	614,649
Less significant expense categories:
Selling expenses and cost of sales			267,556				396,156				(262,768	)			400,944
General and administrative expenses			33,260				100,411				-				133,671
Advertising expenses			10,797				6,906				-				17,703
Restructuring expenses			455				(112	)			-				343
Operating income			46,989				19,781				(4,782	)			61,988
Interest and other income, net			7,214				61				-				7,275
Interest and other financing costs			243				-				-				243
Income before income taxes		$	53,960			$	19,842			$	(4,782	)		$	69,020

 

		Fiscal Year Ended June 30, 2024
		Wholesale				Retail				Intersegment Eliminations				Consolidated
Net sales		$	371,087			$	540,550			$	(265,416	)		$	646,221
Less significant expense categories:
Selling expenses and cost of sales			280,504				409,065				(269,996	)			419,573
General and administrative expenses			31,058				101,309				-				132,367
Advertising expenses			8,433				7,934				-				16,367
Restructuring expenses			2,385				(2,462	)			-				(77	)
Operating income			48,707				24,704				4,580				77,991
Interest and other income, net			7,562				138				-				7,700
Interest and other financing costs			245				-				-				245
Income before income taxes		$	56,024			$	24,842			$	4,580			$	85,446

 

		Fiscal Year Ended June 30, 2023
		Wholesale				Retail				Intersegment Eliminations				Consolidated
Net sales		$	449,591			$	662,555			$	(320,764	)		$	791,382
Less significant expense categories:
Selling expenses and cost of sales			337,034				492,153				(321,912	)			507,275
General and administrative expenses			34,204				99,260				-				133,464
Advertising expenses			9,371				7,796				-				17,167
Restructuring expenses			190				(3,910	)			-				(3,720	)
Operating income			68,792				67,256				1,148				137,196
Interest and other income, net			3,939				103				-				4,042
Interest and other financing costs			213				-				-				213
Income before income taxes		$	72,518			$	67,359			$	1,148			$	141,025

 

The following table presents additional information by segment (in thousands):

 

		Fiscal Year Ended June 30,
		2025				2024				2023
Depreciation and amortization
Wholesale segment		$	6,232			$	6,336			$	6,328
Retail segment			9,291				9,620				9,286
Consolidated total		$	15,523			$	15,956			$	15,614
Capital expenditures
Wholesale segment		$	6,337			$	4,240			$	6,787
Retail segment			4,931				5,366				7,098
Consolidated total		$	11,268			$	9,606			$	13,885
Total Assets
Wholesale segment		$	375,126			$	379,693			$	373,921
Retail segment			393,918				392,243				403,651
Inventory profit elimination (1)			(31,945	)			(27,019	)			(32,119	)
Consolidated total		$	737,099			$	744,917			$	745,453

 

(1)	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.

 

Geographic Information

 

International net sales are comprised of our wholesale segment sales to non-U.S. independent retailers and our retail segment sales to clients through our Company-operated design centers in Canada. Sales are attributed to countries on the basis of the client's location.

 

The following table sets forth consolidated net sales by geographic area for each of the past three fiscal years:

 

		Fiscal Year Ended June 30,
Sales by Country		2025				2024				2023
U.S.			97.3	%			96.7	%			97.0	%
All Others			2.7	%			3.3	%			3.0	%

 

The following table sets forth long-lived assets by geographic area at June 30 (in thousands):

 

		2025				2024				2023
U.S.		$	287,379			$	296,849			$	301,951
Mexico			17,627				17,986				20,695
Honduras			10,773				11,245				10,686
Canada			3,632				3,420				4,696
Total long-lived assets(1)		$	319,411			$	329,500			$	338,028

 

(1)	Long-lived assets consist of property, plant and equipment and operating lease right-of-use assets and exclude goodwill, intangible assets, deferred income taxes and other assets.