Ethan Allen(US:ETD)2020-05-12 11:28Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2020 were $149.8 million, down from $177.8 million in the prior year quarter, reflecting a significant impact from lower order backlogs and COVID-19 [9][10] - Adjusted EPS decreased to $0.02 compared to $0.31 in the prior year [13] - Adjusted gross margin remained strong at 56%, despite lower net sales [13] Business Line Data and Key Metrics Changes - Wholesale segment net sales were $93.1 million, down from $108.4 million in the prior year quarter, with total wholesale orders decreasing by 21.9% [10][11] - Retail segment net sales were $115.7 million, down from $138.9 million in the prior year quarter, with retail orders initially growing by 13.6% in February before declining due to COVID-19 [12][13] Market Data and Key Metrics Changes - Orders from the North American retail network declined by 32%, while wholesale orders from China decreased by 25.7% due to local quarantines [11] - In April 2020, the company generated 35% of written orders compared to April 2019, despite almost all design centers being closed [7][19] Company Strategy and Development Direction - The company has temporarily suspended the regular quarterly cash dividend and share repurchase program as part of its COVID-19 action plan [16] - The membership model was paused to allow all customers to purchase products without membership fees during the crisis [38][51] - The company aims to leverage a combination of personal service and technology to enhance customer engagement and sales [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining liquidity, stating that cash on hand was $117 million with no debt maturities until December 2023 [17] - The company believes that the fundamentals remain strong and is positioned well to grow despite the challenges posed by the pandemic [22][45] Other Important Information - The company has maintained strong liquidity while repurchasing 3.8% of its outstanding shares for $14 million and paying $5.5 million in dividends prior to the suspension [8][15] - The company has implemented cost-saving measures, including furloughing approximately 70% of its global workforce and reducing salaries for senior management [16] Q&A Session Summary Question: Update on lease negotiations and store openings - Management reported good progress in lease negotiations with landlords, including some abatements and reductions [27] - Most design centers were closed by late March, with a gradual reopening starting in early May [30][31] Question: Scenarios for cash liquidity - Management ran conservative scenarios and is confident in liquidity to sustain operations for at least 12 months, even under worst-case conditions [33] Question: Changes in membership model strategy - The membership program was temporarily paused to allow all customers to benefit from premium services without membership fees [38][51] Question: Impact of the pandemic on contract business - Government contract business remains stable, with expectations of continued orders despite a slowdown [39] Question: Trends in average selling price and margins - Gross margins improved despite low volumes, with expectations for further operational efficiency and margin improvement [40][41] Question: Expense reductions and future outlook - Management indicated that expenses would be lower due to operational efficiencies and reduced travel, with a more accurate assessment expected at the end of the quarter [43] Question: Regional trends and consumer behavior - Urban areas are experiencing more significant challenges compared to suburban areas, with increased focus on home office needs [46][47]