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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.