Ethan Allen Interiors Inc. (NYSE:ETH) Q1 2019 Earnings Conference Call Transcript

Oct 24, 2018 • 05:00 pm ET

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Ethan Allen Interiors Inc. (NYSE:ETH) Q1 2019 Earnings Conference Call Transcript

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Q & A
Executive
Farooq Kathwari

some other countries in Southeast Asia.

Operator
Operator

Brad Thomas, KeyBanc Capital.

Analyst
Unidentified Participant

This is actually Andrew on for Brad. We were hoping you would comment a little bit more on the cadence of the business in the quarter and how you feel about the business in recent months.

Executive
Farooq Kathwari

Well, as I mentioned earlier that our business was progressively increased in the months starting -- in July, we had a decrease (ph) of 8.9%, August increased 4.1% and in September increase 5.2%. So we did see growth as we went into the last quarter as our advertising -- strong advertising programs, a lot of it was spent at the latter half of August and September, and we started seeing the results. And now of course, it's a little bit early for this quarter. We'll see how the month ends. We have strong programs, and we're looking forward at this stage of continuing our positive trends.

Analyst
Unidentified Participant

Great, great. And then could you remind us -- we know you touched a little bit on this with the prior questions. We know you're operating a lot of stores in China. Do you mind sharing any comments regarding the health of the consumer in that region?

Executive
Farooq Kathwari

It's a good question. In China, overall, as we read that the Chinese consumer is also becoming cautious. On the second and on other hand, the competition for home furnishings and other areas is increasing considerably. So there is more competition and it is more competitiveness -- competitive in terms of their pricing, what they have to do. But overall, while there is some caution, I would say still it is the question of major growth, not as much as what they did the previous year.

Operator
Operator

Jeremy Hamblin, Dougherty.

Analyst
Jeremy Hamblin

Want to come back to the commentary about the kind of struggling competitor going out of business here as it relates to the government contract. Corey, can you quantify what the basis point impact was to margin on the quarter? Both from a consolidated basis but then also specific to just the wholesale business?

Executive
Farooq Kathwari

Jeremy, that's a tough question but he can. But Corey, can we give specifics? I mean, what information can we give?

Executive
Corey Whitely

Yeah. We don't really break out the gross margin by the product lines to that degree but it did have an impact on our wholesale margins with the GO -- the going out of business, the Chapter 11. I would say around 50 basis points probably on the -- close to 50 or 40 basis points on the consolidated gross margin line was the impact from the lower wholesale margin.

Analyst
Jeremy Hamblin

Okay. I ask because wholesale margins were down 70 basis points overall despite the fact that you had 5% growth in that segment. So I would say most companies would probably provide some color if there was an unusual circumstance.

Executive
Corey Whitely

That was on the wholesale margin line, Jeremy. It was also raw material cost increases that had an impact on that as well as the low pricing