Ethan Allen Interiors, Inc. (ETH)

Ethan Allen Needs to knock on the Wood, Ethan Allen Interiors is a vertically integrated firm in home furnishings and accessories, with a dozen furniture factories, including saw mills. The company operates through its wholesale and retail segments. The company’s wholesale segment engages in designing, manufacturing, domestic and offshore sourcing, sale, and distribution of a range to a of home furnishings network of its stores. The company’s retail segment, on the other hand, sells home furnishings to consumers through a network of company-owned interior design centers.

The industry, in which the company operates, itself is facing a down turn. Furniture companies have pared their profit forecasts in recent weeks as the cooling U.S. housing market, higher borrowing costs, and other economic factors lead consumers to pull back from big-ticket purchases. Moreover, new home sales and existing home sales have been declining from the past four quarters. Furthermore, home equity is expected to fall by 40% in 2007. These factors will have their effects on the future home furnishing sales.

Considering the growing uneasiness in the industry, Ethan Allen Interiors has been trying to speed up the process of filling customer orders, but again the faster turnover has reduced the visibility of future sales. With consumer confidence going down, along with the company’s declining sales, Ethan has shut down two of its manufacturing facilities. Owing to these conditions and the fact that consumers are directing their discretionary dollars elsewhere, there is no scope for the company’s stock to perform well at least in fiscal 2007.