Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The furniture industry is on alert as it awaits the
Speaker 2: results of President Trump's tariff investigation. Last month, the President
Speaker 2: said he's conducting a probe into furniture coming into the US,
Speaker 2: and the results may set the stage for industry specific levies.
Speaker 2: Joining US now is Ferouk Katwari. Ethan Allen Chairman, President CEO.
Speaker 2: Ethan Allen manufactures about seventy five percent of its furniture
Speaker 2: in North America, about half in the US and FRUK.
Speaker 2: That makes you fairly unique in that most publicly traded
Speaker 2: furniture makers import almost everything. How are you setting up
Speaker 2: for these potential new taxes?
Speaker 3: Yes, but first of all, very good to see you again.
Speaker 3: And yes, you know it has been a journey because
Speaker 3: thirty years back, thirty years back.
Speaker 1: Many acting was leaving the United States. We decided that
Speaker 1: we will stay in North America. Not an easy.
Speaker 3: Decision to make major investments when it appeared to be
Speaker 3: easier to go off show. Well, it has given us
Speaker 3: a good opportunity for a number of reasons. First is,
Speaker 3: we had to make sure that we had the most
Speaker 3: more efficient manufacturing in the United States. We had twenty
Speaker 3: two manufacturing plants twenty years back that would not have worked.
Speaker 3: So today we have manufacturing in Vermont, we have manufacturing
Speaker 3: in North Carolina. Then we went to Mexico, went to Honduras.
Speaker 3: And the other thing that we did was we've been
Speaker 3: very fortunate to have great talent. We've got to treat
Speaker 3: them well. And technology is important. Combining technology and good
Speaker 3: people is important.
Speaker 1: And the other thing we did was this, which was unique.
Speaker 3: We said, we'll make exactly the same level of quality
Speaker 3: in Mexico as we make in North Carolina. That's our
Speaker 3: upholstery or wood products that we make in Vermont or Honduras.
Speaker 1: You know, twenty years back fifteen yeth Vaco said crazy.
Speaker 3: But today that has given us a great advantage and
Speaker 3: given us an opportunity to service. Other thing that we did,
Speaker 3: which is very unique. Twenty years back, about seventy eighty
Speaker 3: percent of our products I'm talking of wood products, Appolstree
Speaker 3: was always custom, was made. Was what stock Today, Almost
Speaker 3: one hundred percent of our products made in North America's custom.
Speaker 4: Well, can I ask you then about that twenty five
Speaker 4: percent of your supply chain that is still coming not
Speaker 4: from North America with those tariffs looming already some tariffs
Speaker 4: being put on them. How are you thinking about it?
Speaker 4: What are you planning to do with it? Do you
Speaker 4: adjust or do you take the tariff hit?
Speaker 1: Yeah, that's you know, that is an issue.
Speaker 3: We have a lot of that is affecting what we
Speaker 3: call non furniture products like finstant, accessory products, textile products, rugs,
Speaker 3: some furniture also, and so we are looking at right
Speaker 3: now a number of factors, which is fortunately we have
Speaker 3: it at this stage not to make many changes. It's
Speaker 3: a little bit early, but I think as we go forward,
Speaker 3: we're looking at two things. One is sharing with our
Speaker 3: partners overseas and then taking some price increases and we
Speaker 3: go to see both of that in the next few months.
Speaker 2: What kind of price increases are you thinking? I guess
Speaker 2: you have to wait until you get official levy numbers.
Speaker 1: But what can the market bear for uke?
Speaker 3: Well, you know, it again depends on products, depends on
Speaker 3: different countries, like for instance, in some countries tech the
Speaker 3: duties are eight or ten percent. In some countries, like
Speaker 3: I said, for India it is thirty percent. So I
Speaker 3: think that we will have to make changes. Our partners
Speaker 3: are sharing so most likely we'll have to make some
Speaker 3: changes over a period of time, maybe even operates with
Speaker 3: somewhat of a lower margins. We'll combine all of those
Speaker 3: as we move forward.
Speaker 2: Hey, for the housing market has been incredibly slow, and
Speaker 2: it's obviously something that is talked about on shows like
Speaker 2: this and in the White House as well. How is
Speaker 2: that affecting furniture sales? I mean, when people don't buy
Speaker 2: a new house, do they decide to use extra cash
Speaker 2: to upgrade, you know, a couch or a dining room table,
Speaker 2: or do you need people to buy new homes before
Speaker 2: they get new furniture.
Speaker 3: Well, that's a very important issue because what we have
Speaker 3: seen is a drop in traffic.
Speaker 1: Less people are coming in.
Speaker 3: I would say close to twenty to thirty percent decrease
Speaker 3: in traffic. But the good news is that the ones
Speaker 3: are coming in are buying and our business is up.
Speaker 3: Interestingly in the last few months. It is up because
Speaker 3: of the effect of our setup. You know, we are
Speaker 3: the largest interior design network. Our interior designers have built
Speaker 3: great relationships our clients work with them long term associations.
Speaker 3: So our business with existing clients has increased. While I
Speaker 3: would say newer clients and even the ones some existing
Speaker 3: are holding back, but overall businesses somewhat up. Yet, the
Speaker 3: fact is that traffic is down, and I believe that
Speaker 3: as we go forward, we will see what we need
Speaker 3: to do.
Speaker 1: But it is because of a unique structure.
Speaker 3: The relationships that our interior designers have with our clients
Speaker 3: is really what is making it.
Speaker 1: Happen for us.
Speaker 4: If you started this interview talking about the talent you
Speaker 4: need for these manufacturing plants, and the latest jobs report,
Speaker 4: we've seen four consecutive monthly declines of manufacturing jobs here
Speaker 4: in America. There's also some tension when it comes to
Speaker 4: immigration and the difficulty in finding labor, especially specialized labor
Speaker 4: for some of these jobs. You also mentioned investing in technology.
Speaker 4: Are you looking at trying to be less reliant on
Speaker 4: this immigrant labor base. How are you thinking about getting
Speaker 4: the necessary people to work in your manufacturing facilities, especially
Speaker 4: in America.
Speaker 3: Yeah, it's a very very important issue. You know, we
Speaker 3: are in state of Vermont, major manufacturing. We're in North Carolina.
Speaker 3: What has happened so far is look at in the
Speaker 3: last five years, are manufacturing headcount in the United States
Speaker 3: is down by over thirty five percent due to technology.
Speaker 3: Technology has been a critical factor in taking care of
Speaker 3: this issue of having less labor, and especially, as you said,
Speaker 3: even people coming from overseas. So we are continuously having
Speaker 3: less headcount but a lot of technology. Now that's a
Speaker 3: tremendously important Other factor in the United States, people don't
Speaker 3: talk about it is the issue of medical costs. Medical
Speaker 3: costs are a tremendously major factor. One of the reasons
Speaker 3: we have been able to manage is with a thirty
Speaker 3: five percent reduction in headcount, has reduced a headcount, I
Speaker 3: mean our medical costs, but our medical costs in the
Speaker 3: United States the disaster and you know, the folks in
Speaker 3: Washington don't talk about it. We can have a case
Speaker 3: where we can pay seven hundred thousand dollars on one case.
Speaker 3: No such thing in say Mexico or Honduras are overseas.
Speaker 3: So I think our government, our leadership should spend a
Speaker 3: lot of time on medical costs.
Speaker 1: Yes, I think that having less.
Speaker 3: Labor, which is a chair challenge, but technology has become
Speaker 3: a major factor in taking care of that issue.
Speaker 4: So fascinating. Thank you for joining us this morning. That
Speaker 4: is for Rukathwari of Ethan Allen