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Note 19 - Segment Information | 12 Months Ended
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Jun. 30, 2023
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] |
(19) | 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. We evaluate performance of the respective segments based upon sales and operating income. The accounting policies of the operating segments are the same as those described in Note 3, Summary of Significant Accounting Policies. Wholesale Segment. The wholesale segment is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, marketing, sale and distribution of our broad range of home furnishings and accents. 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 third-party contract business customers and accounted for 16.3% of net sales during fiscal 2023 compared to 15.6% in the prior year period. Our ten largest customers were all within our wholesale segment and accounted for 21% of sales within our wholesale segment during fiscal 2023 and 18% of wholesale sales during fiscal 2022. These customers were nine independent retailers and the United States government GSA, which individually represented 7% of our consolidated net sales in fiscal 2023. Our wholesale segment’s net sales include sales to our retail segment, which are eliminated in consolidation. Within the wholesale segment, we record revenue information according to each respective product line (i.e. case goods, upholstery and home accents). Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale net sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities. The wholesale segment’s product line revenue, expressed as a percentage of net sales during fiscal 2023, is comprised of 49% upholstered products, 33% case goods and the remaining 18% home accents and other. Our independent retailers are required to enter into license agreements with us, which authorize the use of certain Ethan Allen trademarks and require adherence to certain standards of operation, including a requirement to fulfill related warranty service agreements. We are not subject to any territorial or exclusive retailer agreements in North America. The geographic distribution of manufacturing and distribution locations is disclosed under Item 2, Properties, contained in Part I of this Annual Report on Form 10-K. Retail Segment. The retail segment sells home furnishings and accents to clients through a network of 139 Company-operated design centers and accounted for 83.7% of net sales during fiscal 2023 compared to 84.4% in the prior year period. Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of town centers, lifestyle centers, and suburban shopping malls, and average approximately 14,100 square feet in size. Over the past 10 years, 47% of our design centers are new or have been relocated as we continually evaluate our retail footprint. Other initiatives include regularly updating presentations and floor plans, strengthening the qualifications of our designers through training and certifications and combining technology with personal service in our design centers, which has also allowed us to reduce the size of our design centers. In the past five years, we have either opened or relocated a total of 18 new design centers with an average size of 8,100 square feet. These smaller footprint design centers reflect our shift from destination and shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities. During fiscal 2023, we strategically relocated two design centers (Skokie, Illinois and San Jose, California), to premier shopping destinations with more bright, open, modern layout designs and closed two design centers (Watermill, New York and Buckhead, Georgia). The geographic distribution of our retail design center locations is disclosed under Item 2, Properties, contained in Part I of this Annual Report on Form 10-K. Retail segment revenue is generated upon the sale and delivery of our products to our retail customers through our network of 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. We measure the performance of our design centers primarily based on net sales and operating income on a comparable period basis. The frequency of our promotional events as well as the timing of the end of those events can affect the comparability of net sales during a given period. Due to the nature of the business in which the retail segment operates, there are no customer concentration risks. The retail segment’s product line revenue, expressed as a percentage of net sales during fiscal 2023, is comprised of 51% upholstered products, 29% case goods and the remaining 20% home accents and other. 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 financing costs, interest and other income (expense), net and income taxes. Sales are attributed to countries on the basis of the customer's location. Information for each of the last three fiscal years is provided below (in thousands):
|  | Fiscal Year Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Net sales |  |  |  |  |  |  |  |  |  |  |  |
Wholesale segment |  | $ | 449,591 |  |  | $ | 483,842 |  |  | $ | 413,076 |
Less: intersegment sales |  |  | (320,764 | ) |  |  | (355,964 | ) |  |  | (282,878 | )
Wholesale sales to external customers |  |  | 128,827 |  |  |  | 127,878 |  |  |  | 130,198 |
Retail segment |  |  | 662,555 |  |  |  | 689,884 |  |  |  | 554,971 |
Consolidated total |  | $ | 791,382 |  |  | $ | 817,762 |  |  | $ | 685,169 |
Income before income taxes |  |  |  |  |  |  |  |  |  |  |  |
Wholesale segment |  | $ | 68,792 |  |  | $ | 63,930 |  |  | $ | 52,281 |
Retail segment |  |  | 67,256 |  |  |  | 80,496 |  |  |  | 28,824 |
Elimination of intercompany profit(a) |  |  | 1,148 |  |  |  | (6,176 | ) |  |  | (3,820 | )
Operating income |  |  | 137,196 |  |  |  | 138,250 |  |  |  | 77,285 |
Interest and other income (expense), net |  |  | 4,042 |  |  |  | 72 |  |  |  | (393 | )
Interest expense and other financing costs |  |  | 213 |  |  |  | 201 |  |  |  | 481 |
Consolidated total |  | $ | 141,025 |  |  | $ | 138,121 |  |  | $ | 76,411 |
Depreciation and amortization |  |  |  |  |  |  |  |  |  |  |  |
Wholesale segment |  | $ | 6,328 |  |  | $ | 6,439 |  |  | $ | 6,714 |
Retail segment |  |  | 9,286 |  |  |  | 9,548 |  |  |  | 9,671 |
Consolidated total |  | $ | 15,614 |  |  | $ | 15,987 |  |  | $ | 16,385 |
Capital expenditures |  |  |  |  |  |  |  |  |  |  |  |
Wholesale segment |  | $ | 6,787 |  |  | $ | 8,125 |  |  | $ | 5,618 |
Retail segment |  |  | 7,098 |  |  |  | 5,262 |  |  |  | 6,411 |
Consolidated total |  | $ | 13,885 |  |  | $ | 13,387 |  |  | $ | 12,029 |
(a) | Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.
|  | June 30, |
(in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Total Assets |  |  |  |  |  |  |  |  |  |  |  |
Wholesale segment |  | $ | 373,921 |  |  | $ | 341,466 |  |  | $ | 298,332 |
Retail segment |  |  | 403,651 |  |  |  | 412,176 |  |  |  | 412,066 |
Inventory profit elimination(a) |  |  | (32,119 | ) |  |  | (33,747 | ) |  |  | (27,153 | )
Consolidated total |  | $ | 745,453 |  |  | $ | 719,895 |  |  | $ | 683,245 |
(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.
Geographic Information Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment sales to customers through our Company-operated design centers in Canada. The following table sets forth consolidated net sales by geographic area for each of the past three fiscal years:
|  | Fiscal Year Ended June 30, |
Sales by Country |  | 2022 |  |  | 2022 |  |  | 2021 |
United States |  |  | 97.0 | % |  |  | 96.0 | % |  |  | 94.9 | %
All Others |  |  | 3.0 | % |  |  | 4.0 | % |  |  | 5.1 | %
The following table sets forth long-lived assets by geographic area at June 30 (in thousands):
|  | 2023 |  |  | 2022 |  |  | 2021 |
United States |  | $ | 301,951 |  |  | $ | 295,747 |  |  | $ | 311,529 |
Mexico |  |  | 20,695 |  |  |  | 15,085 |  |  |  | 15,381 |
Honduras |  |  | 10,686 |  |  |  | 9,967 |  |  |  | 8,347 |
Canada |  |  | 4,696 |  |  |  | 3,513 |  |  |  | 4,919 |
Total long-lived assets(1) |  | $ | 338,028 |  |  | $ | 324,312 |  |  | $ | 340,176 |
(1) | Long-lived assets consist of property, plant and equipment and operating lease right-of-use assets and exclude goodwill, intangible assets, deferred income taxes and other assets.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 22 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-22 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-15 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 31 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-31 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-42 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 40 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-40 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//280/tableOfContent Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 26 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-26 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 34 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-34 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 41 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-41 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 + Details
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