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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: The furniture industry is on alert as it awaits the

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Speaker 2: results of President Trump's tariff investigation. Last month, the President

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Speaker 2: said he's conducting a probe into furniture coming into the US,

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Speaker 2: and the results may set the stage for industry specific levies.

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Speaker 2: Joining US now is Ferouk Katwari. Ethan Allen Chairman, President CEO.

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Speaker 2: Ethan Allen manufactures about seventy five percent of its furniture

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Speaker 2: in North America, about half in the US and FRUK.

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Speaker 2: That makes you fairly unique in that most publicly traded

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Speaker 2: furniture makers import almost everything. How are you setting up

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Speaker 2: for these potential new taxes?

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Speaker 3: Yes, but first of all, very good to see you again.

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Speaker 3: And yes, you know it has been a journey because

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Speaker 3: thirty years back, thirty years back.

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Speaker 1: Many acting was leaving the United States. We decided that

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Speaker 1: we will stay in North America. Not an easy.

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Speaker 3: Decision to make major investments when it appeared to be

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Speaker 3: easier to go off show. Well, it has given us

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Speaker 3: a good opportunity for a number of reasons. First is,

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Speaker 3: we had to make sure that we had the most

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Speaker 3: more efficient manufacturing in the United States. We had twenty

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Speaker 3: two manufacturing plants twenty years back that would not have worked.

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Speaker 3: So today we have manufacturing in Vermont, we have manufacturing

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Speaker 3: in North Carolina. Then we went to Mexico, went to Honduras.

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Speaker 3: And the other thing that we did was we've been

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Speaker 3: very fortunate to have great talent. We've got to treat

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Speaker 3: them well. And technology is important. Combining technology and good

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Speaker 3: people is important.

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Speaker 1: And the other thing we did was this, which was unique.

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Speaker 3: We said, we'll make exactly the same level of quality

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Speaker 3: in Mexico as we make in North Carolina. That's our

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Speaker 3: upholstery or wood products that we make in Vermont or Honduras.

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Speaker 1: You know, twenty years back fifteen yeth Vaco said crazy.

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Speaker 3: But today that has given us a great advantage and

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Speaker 3: given us an opportunity to service. Other thing that we did,

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Speaker 3: which is very unique. Twenty years back, about seventy eighty

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Speaker 3: percent of our products I'm talking of wood products, Appolstree

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Speaker 3: was always custom, was made. Was what stock Today, Almost

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Speaker 3: one hundred percent of our products made in North America's custom.

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Speaker 4: Well, can I ask you then about that twenty five

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Speaker 4: percent of your supply chain that is still coming not

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Speaker 4: from North America with those tariffs looming already some tariffs

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Speaker 4: being put on them. How are you thinking about it?

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Speaker 4: What are you planning to do with it? Do you

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Speaker 4: adjust or do you take the tariff hit?

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Speaker 1: Yeah, that's you know, that is an issue.

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Speaker 3: We have a lot of that is affecting what we

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Speaker 3: call non furniture products like finstant, accessory products, textile products, rugs,

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Speaker 3: some furniture also, and so we are looking at right

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Speaker 3: now a number of factors, which is fortunately we have

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Speaker 3: it at this stage not to make many changes. It's

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Speaker 3: a little bit early, but I think as we go forward,

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Speaker 3: we're looking at two things. One is sharing with our

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Speaker 3: partners overseas and then taking some price increases and we

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Speaker 3: go to see both of that in the next few months.

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Speaker 2: What kind of price increases are you thinking? I guess

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Speaker 2: you have to wait until you get official levy numbers.

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Speaker 1: But what can the market bear for uke?

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Speaker 3: Well, you know, it again depends on products, depends on

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Speaker 3: different countries, like for instance, in some countries tech the

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Speaker 3: duties are eight or ten percent. In some countries, like

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Speaker 3: I said, for India it is thirty percent. So I

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Speaker 3: think that we will have to make changes. Our partners

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Speaker 3: are sharing so most likely we'll have to make some

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Speaker 3: changes over a period of time, maybe even operates with

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Speaker 3: somewhat of a lower margins. We'll combine all of those

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Speaker 3: as we move forward.

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Speaker 2: Hey, for the housing market has been incredibly slow, and

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Speaker 2: it's obviously something that is talked about on shows like

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Speaker 2: this and in the White House as well. How is

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Speaker 2: that affecting furniture sales? I mean, when people don't buy

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Speaker 2: a new house, do they decide to use extra cash

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Speaker 2: to upgrade, you know, a couch or a dining room table,

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Speaker 2: or do you need people to buy new homes before

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Speaker 2: they get new furniture.

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Speaker 3: Well, that's a very important issue because what we have

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Speaker 3: seen is a drop in traffic.

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Speaker 1: Less people are coming in.

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Speaker 3: I would say close to twenty to thirty percent decrease

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Speaker 3: in traffic. But the good news is that the ones

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Speaker 3: are coming in are buying and our business is up.

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Speaker 3: Interestingly in the last few months. It is up because

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Speaker 3: of the effect of our setup. You know, we are

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Speaker 3: the largest interior design network. Our interior designers have built

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Speaker 3: great relationships our clients work with them long term associations.

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Speaker 3: So our business with existing clients has increased. While I

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Speaker 3: would say newer clients and even the ones some existing

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Speaker 3: are holding back, but overall businesses somewhat up. Yet, the

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Speaker 3: fact is that traffic is down, and I believe that

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Speaker 3: as we go forward, we will see what we need

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Speaker 3: to do.

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Speaker 1: But it is because of a unique structure.

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Speaker 3: The relationships that our interior designers have with our clients

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Speaker 3: is really what is making it.

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Speaker 1: Happen for us.

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Speaker 4: If you started this interview talking about the talent you

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Speaker 4: need for these manufacturing plants, and the latest jobs report,

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Speaker 4: we've seen four consecutive monthly declines of manufacturing jobs here

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Speaker 4: in America. There's also some tension when it comes to

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Speaker 4: immigration and the difficulty in finding labor, especially specialized labor

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Speaker 4: for some of these jobs. You also mentioned investing in technology.

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Speaker 4: Are you looking at trying to be less reliant on

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Speaker 4: this immigrant labor base. How are you thinking about getting

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Speaker 4: the necessary people to work in your manufacturing facilities, especially

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Speaker 4: in America.

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Speaker 3: Yeah, it's a very very important issue. You know, we

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Speaker 3: are in state of Vermont, major manufacturing. We're in North Carolina.

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Speaker 3: What has happened so far is look at in the

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Speaker 3: last five years, are manufacturing headcount in the United States

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Speaker 3: is down by over thirty five percent due to technology.

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Speaker 3: Technology has been a critical factor in taking care of

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Speaker 3: this issue of having less labor, and especially, as you said,

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Speaker 3: even people coming from overseas. So we are continuously having

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Speaker 3: less headcount but a lot of technology. Now that's a

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Speaker 3: tremendously important Other factor in the United States, people don't

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Speaker 3: talk about it is the issue of medical costs. Medical

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Speaker 3: costs are a tremendously major factor. One of the reasons

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Speaker 3: we have been able to manage is with a thirty

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Speaker 3: five percent reduction in headcount, has reduced a headcount, I

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Speaker 3: mean our medical costs, but our medical costs in the

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Speaker 3: United States the disaster and you know, the folks in

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Speaker 3: Washington don't talk about it. We can have a case

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Speaker 3: where we can pay seven hundred thousand dollars on one case.

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Speaker 3: No such thing in say Mexico or Honduras are overseas.

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Speaker 3: So I think our government, our leadership should spend a

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Speaker 3: lot of time on medical costs.

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Speaker 1: Yes, I think that having less.

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Speaker 3: Labor, which is a chair challenge, but technology has become

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Speaker 3: a major factor in taking care of that issue.

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Speaker 4: So fascinating. Thank you for joining us this morning. That

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Speaker 4: is for Rukathwari of Ethan Allen