Breaking Down Ethan Allen Interiors Inc. (ETD) Financial Health: Key Insights for Investors

You're looking at Ethan Allen Interiors Inc. (ETD) because the dividend yield is compelling, but you need to know if the underlying business can actually support it long-term, especially with a tricky housing market. Honestly, the fiscal year 2025 numbers tell a story of resilience, not growth: consolidated net sales hit $614.6 million, a 4.9% drop from the prior year, and diluted earnings per share (EPS) fell to $2.01 from $2.49. Still, the company's vertically integrated model is keeping the core strong, evidenced by a standout consolidated gross margin of 60.5%, which is defintely a quality signal in this sector. The big opportunity here is the balance sheet-they ended June 30, 2025, with $196.2 million in cash and investments and no debt, which is a huge buffer against economic uncertainty, but you must weigh that against the fact that the current regular quarterly cash dividend of $0.39 per share is eating up a large chunk of free cash flow. We need to break down how they keep that margin so high and what it means for the sustainability of that dividend payout.

Revenue Analysis

You need a clear picture of where Ethan Allen Interiors Inc. (ETD) makes its money, especially as the housing market cools. The direct takeaway is that while the company posted consolidated net sales of $614.6 million for the fiscal year (FY) 2025, this represents a year-over-year decline of 4.9% from FY 2024. This softness reflects broader consumer caution, but the company's vertical integration helps maintain strong gross margins.

The business model relies on two main segments, but one is defintely the powerhouse. The Retail segment is the primary engine, driving the vast majority of net sales by connecting directly with consumers through its network of design centers. The Wholesale segment, which handles manufacturing and sales to company-operated design centers, independent dealers, and contract customers, is the smaller, but still critical, supply side of the equation.

Here's the quick math on the segment contributions for FY 2025:

The Retail segment's $549.6 million in revenue shows it's the dominant force, but it still saw a 3.69% drop, which is a key indicator of lower consumer traffic and delivered unit volumes.

The overall 4.9% revenue decline for FY 2025 is a clear signal of the challenging environment. This drop is mostly due to lower delivered unit volumes and a reduced backlog (the pipeline of orders waiting to be fulfilled). Still, the company managed to partially offset this by increasing its average ticket prices, meaning customers who did buy spent more per transaction. One specific product line, Upholstery Furniture, brought in $300.8 million in revenue, though that was also down by 2.21% from the previous year.

A significant change occurred in the Wholesale segment, which saw a steeper decline of 6.31%. This was specifically hurt by a substantial decrease in contract sales, particularly in the government sector, which fell by 23.7%. That's a sharp contraction in a high-margin area, so management needs to address that channel. You can dive deeper into who is holding this stock and why they are sticking around by Exploring Ethan Allen Interiors Inc. (ETD) Investor Profile: Who's Buying and Why?

• Watch for a stabilization in written orders.
• The wholesale contract sales drop is a specific risk.
• Pricing power is keeping the average ticket high.

The latest quarterly data for the period ending September 30, 2025 (Q1 FY 2026) shows the trend continuing, with revenue at $146.98 million, a 4.8% decrease year-over-year. This suggests the near-term macro headwinds-like a stagnant housing market and general consumer uncertainty-are still very much in play. Your action item here is to track the next quarter's written order trends; that's the leading indicator for future revenue.

Profitability Metrics

You're looking at Ethan Allen Interiors Inc. (ETD) and wondering if their profits are holding up in this tough housing market. The short answer is yes, they are, but the overall trend shows contraction from their peak performance in fiscal year (FY) 2024. Their vertically integrated model-where they control manufacturing and retail-continues to deliver margins that smash the industry average, but the economic slowdown is defintely taking a slice off the top.

For the full fiscal year 2025, which ended June 30, 2025, Ethan Allen Interiors Inc. reported consolidated net sales of $614.6 million. Here's the quick math on their core profitability:

• Gross Profit Margin: 60.5%
• Adjusted Operating Margin: 10.2%
• Net Profit Margin: 8.4%

Margin Trends and Operational Efficiency

The real story here is the trend. In FY 2025, every key margin metric was lower than the previous year. The Gross Margin of 60.5% was down slightly from 60.8% in FY 2024. This small dip suggests that while cost of goods sold (COGS) is still tightly managed, the company is facing some pressure, perhaps from higher input costs or targeted promotional activity to move inventory.

The drop in operating and net margins is more pronounced. The Adjusted Operating Margin fell to 10.2% in FY 2025, a notable decline from the 12.1% reported in FY 2024. This tells you that selling, general, and administrative (SG&A) expenses are growing faster than sales, or that the company is losing operating leverage as revenue shrinks. Consolidated net income fell to $51.6 million, which translated to a Net Profit Margin of 8.4%, down from 9.9% in FY 2024. That's a 19% drop in net income year-over-year, so it's not just a minor headwind; it's a clear contraction in profitability.

Outperforming the Retail Pack

To be fair, Ethan Allen Interiors Inc.'s profitability ratios are still exceptionally strong compared to most furniture retailers. General furniture retail typically sees average gross margins in the 35% to 45% range, and net margins often hover between 3% and 6%. The company's 60.5% Gross Margin is more in line with luxury or vertically integrated models, and their 8.4% Net Profit Margin is a significant premium over the average.

The ability to manufacture roughly 75% of their furniture in North American facilities is the structural advantage, or economic moat, that keeps their gross margin so high. This vertical integration shields them from some of the supply chain volatility and import tariffs that hammer competitors. Still, even a premium player like Williams-Sonoma (a competitor in the home furnishings space) is guiding for a much higher operating margin of 17.8% to 18.1% for their full FY 2025. This comparison shows that while Ethan Allen Interiors Inc. is a margin leader in its direct peer group, there are still opportunities for greater operating efficiency, or perhaps a different product mix, to close that gap.

You can dig deeper into who is betting on this model by Exploring Ethan Allen Interiors Inc. (ETD) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You want to know how Ethan Allen Interiors Inc. (ETD) funds its operations and growth, and the short answer is: almost entirely through equity and cash flow, not traditional debt. The company operates with a remarkably conservative capital structure, which is a major financial strength in the volatile home furnishings sector.

As of the end of its fiscal year 2025 (June 30, 2025), Ethan Allen Interiors Inc. reported having no outstanding debt on its primary credit facility, a position it has maintained throughout fiscal years 2024 and 2025. This is a rare and powerful statement in a capital-intensive retail environment. The company's total shareholders' equity stood at approximately $482.3 million at June 30, 2025, which is the core of its financing base.

Here's the quick math on its leverage, even when factoring in non-traditional liabilities:

• Debt-to-Equity (D/E) Ratio: The D/E ratio for Ethan Allen Interiors Inc. in FY 2025 was approximately 0.26.
• Industry Comparison: This is exceptionally low. The median D/E ratio for the Home Furniture, Furnishings, And Equipment Stores industry in 2024 was around 1.65, and a general guideline suggests furniture retailers should stay below 1.5.
• Takeaway: Ethan Allen Interiors Inc. is significantly less leveraged than its peers.

What this ratio hides is that the company's balance sheet does carry liabilities, but they are primarily operational, not interest-bearing debt. For instance, at June 30, 2025, the company had long-term operating lease liabilities of $96.263 million, which are now included in the total debt calculation for the D/E ratio due to new accounting standards (ASC 842). This is the cost of doing business-renting its retail and manufacturing footprint-not borrowing money from a bank. The company's strong solvency is defintely a key point for investors to consider, as detailed further in Breaking Down Ethan Allen Interiors Inc. (ETD) Financial Health: Key Insights for Investors.

The company's financing strategy is clear: use internally generated cash flow to fund growth and shareholder returns. They generated $61.7 million in cash from operating activities in fiscal 2025 and ended the year with $196.2 million in total cash and investments. This capital is used to pay substantial dividends, totaling $50.1 million in cash dividends during fiscal 2025, including a special dividend. Their access to external capital is purely for contingency, maintaining a total borrowing base availability of $121.0 million under their credit facility as of March 31, 2025, with no drawn balance. This approach makes them highly resilient to interest rate fluctuations and economic downturns.

Liquidity and Solvency

You're looking at Ethan Allen Interiors Inc. (ETD)'s balance sheet to figure out if they can cover their short-term bills, and honestly, the picture is solid. Liquidity is the company's ability to meet its near-term obligations, and for FY 2025, the numbers show a comfortable position, but with a typical retail caveat: inventory matters a lot. This company is defintely not struggling to pay its bills.

The standard measure, the Current Ratio (Current Assets divided by Current Liabilities), stood at a strong 1.9 for the fiscal year ending June 2025. This means Ethan Allen Interiors Inc. has $1.90 in current assets for every dollar of current liabilities. That's well above the safe threshold of 1.0, and it suggests a healthy buffer. But you also need to look at the Quick Ratio (or Acid-Test Ratio), which strips out inventory-a less liquid asset-to show the true cash-like position.

• Current Ratio: 1.9 (Strong liquidity buffer)
• Quick Ratio: 0.82 (Inventory is key to short-term coverage)
• Working Capital: $141.8 million (Ample operational cushion)

The Quick Ratio for Ethan Allen Interiors Inc. was 0.82 in FY 2025. Here's the quick math: the drop from 1.9 to 0.82 shows that a significant portion of their current assets is tied up in inventory-furniture, fabric, and raw materials. This is normal for a vertically integrated retailer and manufacturer like ETD, but it's a key risk. If demand slows, that inventory takes longer to turn into cash. Still, with $141.8 million in working capital, the company has an ample operational cushion before needing to liquidate long-term assets.

Cash Flow: The Real Liquidity Test

Liquidity isn't just about what's on the balance sheet; it's about cash generation. Ethan Allen Interiors Inc.'s cash flow statement for FY 2025 shows a mixed, but still positive, trend. Cash Flow from Operating Activities (CFO) was $61.7 million. This is the cash generated from the core business, and it's what pays the bills. The Cash Flow to Current Liabilities ratio was 40.3% for FY 2025, which means the company generated over 40 cents in operating cash for every dollar of short-term debt, a solid figure that's better than many peers in the Consumer Discretionary sector.

Looking at how they used that cash:

The Investing Cash Flow (CFI) shows a net outflow of about $11.27 million for Capital Expenditures (CapEx), which is a healthy sign of reinvestment in their manufacturing and retail infrastructure. The Financing Cash Flow (CFF) is a net outflow, largely due to their generous dividend policy. With a dividend payout ratio of 97.3% and a Debt-to-Equity ratio of just 0.26, the company is prioritizing shareholder returns while keeping debt low, which is a key solvency strength. The low debt level makes their overall financial structure quite stable.

The biggest strength here is the low leverage combined with positive cash flow. The main liquidity concern is managing that large inventory balance effectively in a slowing home furnishings market. For a deeper dive into who is betting on these strengths, you might want to read Exploring Ethan Allen Interiors Inc. (ETD) Investor Profile: Who's Buying and Why?.

Next Step: Portfolio Manager: Model a 10% and 20% inventory markdown scenario to stress-test the Quick Ratio and assess the impact on FY2026 Free Cash Flow by the end of next week.

Valuation Analysis

You're looking at Ethan Allen Interiors Inc. (ETD) right now and wondering if the recent stock dip makes it a value play or a warning sign. The direct takeaway is that while the stock trades at a seemingly attractive valuation multiple, its high dividend payout ratio and recent price action suggest investors should be cautious, not aggressive.

The company's stock has been under pressure, hitting a new 52-week low of $21.76 as of mid-November 2025, which is a significant drop from its 52-week high of $32.61. This decline reflects a broader market concern about the home furnishings sector, especially with the stock delivering a negative return of approximately -24.26% over the past year. That's a sharp correction.

Is Ethan Allen Interiors Inc. (ETD) Overvalued or Undervalued?

When we look at the core valuation multiples, Ethan Allen Interiors Inc. (ETD) appears inexpensive compared to historical averages, but that doesn't tell the whole story. The trailing Price-to-Earnings (P/E) ratio sits at about 12.00, with a forward P/E of 13.96. For a furniture retailer, these numbers look fair, but they are based on earnings that are currently declining. Here's the quick math on the enterprise side:

• Trailing P/E: 12.00
• Price-to-Book (P/B): 1.19
• Enterprise Value-to-EBITDA (EV/EBITDA): 8.04

The Price-to-Book ratio of 1.19 is particularly compelling, suggesting the market is valuing the company only slightly above its net tangible assets. Still, the low EV/EBITDA of 8.04 indicates the business is cheap relative to its operating cash flow (earnings before interest, taxes, depreciation, and amortization), which is a sign of potential undervaluation if you believe the earnings slump is temporary.

Stock Trend and Dividend Sustainability

The stock price trend over the last 12 months is defintely a risk factor, not an opportunity. Shares are trading at the low end of their range, reflecting the market's reaction to recent earnings misses and a challenging consumer environment. The latest reported closing price is around $22.20 as of November 20, 2025.

The dividend is a major part of the investment thesis for many, but it carries a high risk. The annual dividend is approximately $1.81 per share, which translates to a substantial dividend yield of over 8.08%. However, the payout ratio is precariously high, hovering between 83% and 97.83% of earnings. What this estimate hides is that a payout ratio near 100% is not sustainable if earnings continue to fall. In fiscal 2025, the company paid out $50.1 million in total cash dividends. That's a huge commitment that could be threatened by a prolonged economic slowdown.

For a deeper dive into who is buying and selling this stock, you should read Exploring Ethan Allen Interiors Inc. (ETD) Investor Profile: Who's Buying and Why?

Analyst Consensus and Price Target

Wall Street analysts are not exactly bullish right now. The consensus on the stock valuation is a 'Reduce' or 'Hold' rating, not a 'Buy.' Out of the four analysts covering the stock, three have a 'Hold' rating, and one has a 'Sell' rating. The average 12-month consensus price target is set at $28.00, suggesting a potential upside of about 26% from the current low price. This target implies a belief that the company will rebound to a more normalized valuation, but the current rating is a clear signal to temper expectations.

Finance: Track Q2 2026 written order trends closely to gauge the speed of a potential rebound.

Risk Factors

You're looking at Ethan Allen Interiors Inc. (ETD) because of its strong brand and vertical integration, but even a company with a debt-free balance sheet faces significant headwinds right now. The direct takeaway is this: the primary risks are external-a soft housing market and persistent inflation-which are squeezing margins and slowing top-line growth, despite management's sharp focus on operational efficiency.

The biggest external risk is the macroeconomic environment. Higher interest rates have defintely cooled the housing market, which directly impacts demand for new home furnishings. This is the core challenge. For the fiscal year 2025, consolidated net sales dropped to $614.6 million, a 4.9% decline from the prior year, largely due to lower delivered unit volumes and reduced design center traffic. This isn't an execution problem; it's a cyclical one.

Inflation is the other major external pressure. While Ethan Allen Interiors Inc. has managed to maintain a strong gross margin of 60.5% for FY 2025, this is still a slight dip from 60.8% in the previous year. The cost of everything-from raw materials to freight-is a constant battle, and it limits the company's pricing power because they have to compete with more aggressive online and budget retailers. Honestly, that margin pressure is the main financial risk.

Here's the quick math on the financial slowdown:

• Consolidated Net Sales: $614.6 million (FY 2025)
• Adjusted Diluted EPS: $2.04 (FY 2025, down from $2.49)
• Net Profit Margin: 7.8% (FY 2025, down from 10%)
• Cash from Operating Activities: $61.7 million (FY 2025, down from $80.2 million)

The operational and strategic risks are more about managing this slowdown. The wholesale segment's written orders decreased by 6.8% in the fourth quarter of fiscal 2025, and the wholesale backlog was down to $48.9 million at June 30, 2025, an 8.7% drop year-over-year. A shrinking backlog means less guaranteed revenue in the near term. This is a clear signal that the slowdown is hitting their B2B and larger-scale orders, too.

To be fair, management has a clear mitigation strategy, and it's working to keep the company profitable. They're leaning hard on their vertical integration (controlling manufacturing from design to delivery) and their domestic footprint, which manufactures about 75% of their furniture in North American facilities (US, Mexico, and Honduras). This shields them from the worst of global supply chain volatility and some tariffs. For example, their Honduras facility offers tariff insulation, paying 10% compared to the 15%+ faced by many competitors. They also reduced headcount by 5.7% in FY 2025, showing a commitment to cost controls and operational efficiency.

The company's strategic response centers on five key areas: talent, service, marketing, technology, and social responsibility. They are also investing in their retail network, opening four new design centers in fiscal 2025 in places like Middleton, WI, and Watchung, NJ. This blend of cost control and targeted investment is how they plan to weather the storm. You can read more about the shareholder base that supports this strategy in Exploring Ethan Allen Interiors Inc. (ETD) Investor Profile: Who's Buying and Why?

Here is a quick look at the core risks and the company's counter-strategy:

Finance: Keep a close eye on the gross margin trend in the next two quarters. If it drops below 60%, the cost control measures aren't working hard enough against inflation.

Growth Opportunities

You're looking at Ethan Allen Interiors Inc. (ETD) and seeing a company that just finished a tough year, but the real story is in the foundation they've built for the rebound. The direct takeaway is that while Fiscal Year (FY) 2025 revenue was down, their strategic focus on operational efficiency and vertical integration positions them for a stronger earnings recovery than the broader industry.

For FY 2025 (ended June 30, 2025), the company reported annual revenue of $614.6 million, a 4.9% decrease from the prior year, reflecting the industry's headwinds from inflation and a sluggish housing market. Net income also saw a dip to $51.6 million, translating to an Earnings Per Share (EPS) of $2.01. But here's the quick math: analysts are forecasting revenue to grow by 1.9% per annum on average over the next two years, with next year's EPS expected to climb by 11.21% to approximately $2.58 per share. That's a solid earnings bounce-back.

Strategic Levers for Future Growth

Ethan Allen Interiors Inc. isn't waiting for the economy to fix itself; they are driving growth through a set of clear, internal initiatives. Their CEO has been explicit about five key areas of focus: talent, service, marketing, technology, and social responsibility. These aren't just buzzwords; they translate into concrete operational improvements.

For instance, their commitment to efficiency is tangible. They reduced their consolidated headcount by 5.7% year-over-year at the end of FY 2025, which is part of a larger 32.2% reduction since 2019. This disciplined cost management is a primary driver of their ability to maintain strong margins even on lower sales. Also, they are actively expanding their market reach by strengthening their retail network and opening new retail design centers.

• Strengthen retail network and product offerings.
• Invest in technology to streamline operations.
• Benefit from potential interest rate cuts boosting consumer confidence.

Competitive Edge and Financial Strength

The company's most powerful advantage in the volatile home furnishings sector is its vertically integrated enterprise (a business model where a company controls multiple stages of its supply chain). They manufacture about 75% of their furniture in their own North American facilities. This control gives them a significant edge in quality, speed, and cost management, especially when compared to competitors heavily reliant on overseas sourcing.

Plus, their balance sheet is defintely a fortress. As of June 30, 2025, they had no outstanding debt and held a robust total of $196.2 million in cash and investments. This financial stability allows them to weather economic downturns, fund their strategic initiatives, and consistently return capital to shareholders via dividends. Their ability to maintain a strong gross margin-like the 59.9% reported in the fourth quarter of FY 2025-underscores the effectiveness of this model. You can see how this operational philosophy aligns with their core principles here: Mission Statement, Vision, & Core Values of Ethan Allen Interiors Inc. (ETD).