Note 18 - Segment Information

9 Months Ended

Mar. 31, 2024

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 March 31, 2024, 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						Nine months ended
	March 31,						March 31,
	2024			2023			2024			2023
Net sales
Wholesale segment	$	89,825		$	114,195		$	279,882		$	335,093
Less: intersegment sales		(66,020	)		(78,802	)		(197,707	)		(237,430	)
Wholesale sales to external customers		23,805			35,393			82,175			97,663
Retail segment		122,616			150,923			395,414			506,344
Consolidated total	$	146,421		$	186,316		$	477,589		$	604,007
Income before income taxes
Wholesale segment	$	11,243		$	18,805		$	36,437		$	48,787
Retail segment		2,275			12,598			14,399			52,667
Elimination of intercompany profit (a)		1,807			(2,615	)		4,528			4,053
Operating income		15,325			28,788			55,364			105,507
Interest and other income, net		2,037			1,123			5,541			2,420
Interest and other financing costs		64			52			177			157
Consolidated total	$	17,298		$	29,859		$	60,728		$	107,770
Depreciation and amortization
Wholesale segment	$	1,590		$	1,583		$	4,819		$	4,749
Retail segment		2,439			2,395			7,217			6,924
Consolidated total	$	4,029		$	3,978		$	12,036		$	11,673
Capital expenditures
Wholesale segment	$	942		$	993		$	3,232		$	5,755
Retail segment		1,353			1,213			4,304			4,924
Consolidated total	$	2,295		$	2,206		$	7,536		$	10,679

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

(in thousands)	March 31,			June 30,
Total Assets	2024			2023
Wholesale segment	$	371,263		$	373,921
Retail segment		397,789			403,651
Inventory profit elimination (a)		(26,836	)		(32,119	)
Consolidated total	$	742,216		$	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.