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Note 18 - Segment Information
3 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

(18)

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, manages the business. This vertical structure enables us to offer our complete line of home furnishings and accents more effectively while controlling quality and cost. We evaluate performance of the respective segments based upon sales and operating income.

 

Wholesale Segment. The wholesale segment is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, merchandising, marketing and distribution of our broad range of home furnishings and accents. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation, and sales to our independent retailers and other third parties. Wholesale revenue is generated upon the sale and shipment of our products to our retail network of independently operated design centers, Company-operated design centers and other contract customers.

 

Retail Segment. The retail segment sells home furnishings and accents to clients through a network of Company-operated design centers. Retail revenue is generated upon the retail sale and delivery of our products to our retail customers through our network of retail home delivery centers. Retail profitability reflects (i) the retail gross margin, which represents the difference between the retail net sales price and the cost of goods, purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities. As of December 31, 2023, the Company operated 141 design centers within our retail segment.

 

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 our revenue from independent third-party transactions. Segment operating income is based on profit or loss from operations before interest and other income, net, interest and other financing costs, and income taxes. Sales are attributed to countries on the basis of the customer's location.

 

 

Segment information is provided below (in thousands):

 

   

Three months ended

   

Six months ended

 
   

December 31,

   

December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Net sales

                               

Wholesale segment

  $ 90,627     $ 106,247     $ 190,057     $ 220,898  

Less: intersegment sales

    (62,548 )     (74,849 )     (131,687 )     (158,628 )

Wholesale sales to external customers

    28,079       31,398       58,370       62,270  

Retail segment

    139,197       171,763       272,798       355,421  

Consolidated total

  $ 167,276     $ 203,161     $ 331,168     $ 417,691  
                                 

Income before income taxes

                               

Wholesale segment

  $ 10,823     $ 14,569     $ 25,194     $ 29,982  

Retail segment

    6,962       18,080       12,124       40,069  

Elimination of intercompany profit (a)

    3,903       4,420       2,721       6,668  

Operating income

    21,688       37,069       40,039       76,719  

Interest and other income, net

    1,719       901       3,504       1,297  

Interest and other financing costs

    52       50       113       105  

Consolidated total

  $ 23,355     $ 37,920     $ 43,430     $ 77,911  
                                 

Depreciation and amortization

                               

Wholesale segment

  $ 1,627     $ 1,575     $ 3,229     $ 3,166  

Retail segment

    2,433       2,263       4,778       4,529  

Consolidated total

  $ 4,060     $ 3,838     $ 8,007     $ 7,695  
                                 

Capital expenditures

                               

Wholesale segment

  $ 834     $ 2,701     $ 2,290     $ 4,762  

Retail segment

    710       2,593       2,951       3,711  

Consolidated total

  $ 1,544     $ 5,294     $ 5,241     $ 8,473  

 

 

(a)

Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.

 

(in thousands)

 

December 31,

   

June 30,

 

Total Assets

 

2023

   

2023

 

Wholesale segment

  $ 358,396     $ 373,921  

Retail segment

    392,311       403,651  

Inventory profit elimination (a)

    (28,532 )     (32,119 )

Consolidated total

  $ 722,175     $ 745,453  

 

 

(a)

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.