DANBURY, CT - Ethan Allen Interiors Inc. said its profit for the first quarter ended Sept. 30 rose 11% compared to last year and said orders improved in October.

Sales were relatively flat for the fiscal first quarter, dropping from $190.7 million to $190.4 million, a decrease of 0.2%. The home furnishings producer and retailer said written sales decreased 9.3%, due to the timing of its marketing strategy, but the company sees increased trends in written orders in the second quarter and expects the improvement to continue, especially in October and November of this year, with December's sales mainly confined to accents.

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"Beginning in fiscal 2017, we will be well positioned to begin an accelerated growth phase, towards sales of $1 billion," remarked CEO Farooq Kathwari. That would represent an increase of 25%. He also is expecting increased margins going forward.

Ethan Allen CEO Farooq Kathwari is fighting off activist investor Thomas Sandell, who believes the company should be reorganized in a private-equity buyout.

Chief Executive Farooq Kathwari has increased direct mail initiatives, virtually doubling the size of some of its recent magazines, in one case reaching 76 pages. The magazine was supplemented by a marketing mix of TV, print and electronic media in a campaign to continue through the end of the year. It has also instituted other changes in recent years including the renovation of its design centers and improved delivery times.

Kathwari's marketing plan has four phases. Its first phase concentrated on more "casual" furniture. The company's second and third phases concentrate on "classics and romantics." Its final phase four will have the most direct impact on the millenials, says Kathwari. He added that phase four's effect won't be seen until after the fiscal third quarter, which ends March, 2016.

Hedge Fund Sandell Asset Management launched a proxy fight this summer to elect new directors to six of Ethan Allen's eight board seats. All of the seats come up for election at the Nov. 24 annual meeting. Kathwari was vague in the company's earnings conference call Tuesday regarding the directors the company is backing, but Sandell's fight may produce significant changes at Ethan Allen.

According to financial research firm FactSet, Sandell has engaged in 35 activist campaigns and started nine proxy fights since the fund was founded in 1997. Most were settled to include at least one Sandell nominee.

 

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