1
00:00:02,520 --> 00:00:07,040
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:07,840 --> 00:00:10,319
Speaker 2: Liberation Day, as we mentioned, was meant to mark the

3
00:00:10,360 --> 00:00:13,040
Speaker 2: start of the US manufacturing comeback. It's been a rough

4
00:00:13,119 --> 00:00:16,040
Speaker 2: ride for US retailers since, even with the Supreme Court

5
00:00:16,040 --> 00:00:19,040
Speaker 2: striking down those tariffs earlier this year. Let's take a

6
00:00:19,079 --> 00:00:22,240
Speaker 2: deeper dive into the impact on retail with Faru Kathwari.

7
00:00:22,360 --> 00:00:25,759
Speaker 2: He is chairman, president and CEO of Ethan Allen, the

8
00:00:25,760 --> 00:00:29,280
Speaker 2: furniture company. Faruke, thank you so much for joining us.

9
00:00:29,600 --> 00:00:30,320
Speaker 3: It's a pleasure.

10
00:00:30,880 --> 00:00:33,400
Speaker 2: So when it comes to the impact of tariffs on

11
00:00:33,520 --> 00:00:36,040
Speaker 2: your company, you're in a bit of a unique position.

12
00:00:36,120 --> 00:00:38,199
Speaker 2: You pointed out to me that you made a decision

13
00:00:38,640 --> 00:00:42,640
Speaker 2: years ago to base most of your manufacturing in North America.

14
00:00:42,680 --> 00:00:45,720
Speaker 2: You have five manufacturing plants in the US, three in

15
00:00:46,040 --> 00:00:48,640
Speaker 2: two in Vermont, and three in North Carolina. Eighty percent

16
00:00:48,680 --> 00:00:51,440
Speaker 2: of your furniture is made in North America, but you

17
00:00:51,520 --> 00:00:56,000
Speaker 2: do have some overseas prisons as well. Has the tarraff's

18
00:00:56,040 --> 00:00:58,200
Speaker 2: been needle moving for you at all?

19
00:00:59,320 --> 00:01:03,160
Speaker 3: Not really, because of the fact as we mentioned it

20
00:01:03,720 --> 00:01:08,959
Speaker 3: has it has created more of a positive perspective for us.

21
00:01:09,000 --> 00:01:14,240
Speaker 3: Although interestingly, in North America, the only place where we

22
00:01:14,280 --> 00:01:18,440
Speaker 3: do have some you might see some significant tariffs about

23
00:01:18,440 --> 00:01:21,840
Speaker 3: twenty five percent in Mexico, now Mexico. When we went

24
00:01:21,840 --> 00:01:25,240
Speaker 3: about twenty years back south of the border to Mexico

25
00:01:25,400 --> 00:01:30,640
Speaker 3: to Honduras, it was under the North American Treaty, no tariffs,

26
00:01:31,120 --> 00:01:34,120
Speaker 3: with all kinds of political issues and everything else. There

27
00:01:34,160 --> 00:01:37,400
Speaker 3: are tariffs in Mexico, but for us, the impact is

28
00:01:37,520 --> 00:01:41,360
Speaker 3: less because we operate and own the plants. So we

29
00:01:41,400 --> 00:01:45,080
Speaker 3: today have manufacturing in Vermont. That's where we started. You know,

30
00:01:45,160 --> 00:01:49,160
Speaker 3: we started ninety four years back. We're manufacturing in Vermont,

31
00:01:49,200 --> 00:01:53,720
Speaker 3: and then went manufacturing from New Hampshire through all the

32
00:01:53,760 --> 00:01:56,760
Speaker 3: way to California. But twenty years back we said no

33
00:01:57,280 --> 00:02:01,360
Speaker 3: manufacturing was going away. We said what we do? We said, no,

34
00:02:01,520 --> 00:02:04,680
Speaker 3: we will maintain manufacturing in North America, but we'll go

35
00:02:04,720 --> 00:02:08,760
Speaker 3: to Mexico and Honduras. We operate, those operate, and in fact,

36
00:02:09,240 --> 00:02:13,359
Speaker 3: it's interesting that today, twenty years later, a customer does

37
00:02:13,400 --> 00:02:16,680
Speaker 3: not know if a piece of furniture is made in

38
00:02:17,360 --> 00:02:21,600
Speaker 3: Vermont or made in Mexico or in Honduras. The level

39
00:02:21,639 --> 00:02:23,320
Speaker 3: of quality everything is the same.

40
00:02:23,600 --> 00:02:23,840
Speaker 2: Right.

41
00:02:24,520 --> 00:02:27,360
Speaker 1: Well, I'm curious, I mean, so your business hasn't necessarily

42
00:02:27,400 --> 00:02:29,560
Speaker 1: been affected by terrorists. But I have to imagine that

43
00:02:29,919 --> 00:02:32,440
Speaker 1: your customers have in some form when you think about

44
00:02:32,480 --> 00:02:35,920
Speaker 1: you know, costs on everything up, everything else going higher,

45
00:02:35,960 --> 00:02:39,680
Speaker 1: and you know, I wonder how you're seeing that expressed

46
00:02:40,400 --> 00:02:42,560
Speaker 1: when it comes to how much people are willing to

47
00:02:42,639 --> 00:02:45,080
Speaker 1: reach into their wallets to you know, pay up for

48
00:02:45,160 --> 00:02:45,880
Speaker 1: furniture here.

49
00:02:46,120 --> 00:02:49,639
Speaker 3: No, that's absolutely the fact is that consumers are cautious.

50
00:02:49,960 --> 00:02:54,120
Speaker 3: We have seen that even though we have had a

51
00:02:54,520 --> 00:02:57,720
Speaker 3: i would say significant decline in people coming in, totally

52
00:02:57,720 --> 00:03:00,400
Speaker 3: good news is that people who are coming in are more.

53
00:03:00,320 --> 00:03:01,359
Speaker 1: Likely to buy.

54
00:03:01,639 --> 00:03:04,680
Speaker 3: Now. We are, as I said, a vertically integrated company.

55
00:03:05,240 --> 00:03:08,799
Speaker 3: We have one of the largest interior design network. We

56
00:03:08,880 --> 00:03:14,240
Speaker 3: have our interior designers work with clients we also have

57
00:03:14,680 --> 00:03:16,320
Speaker 3: and it took us years and years to do it.

58
00:03:16,400 --> 00:03:19,840
Speaker 3: You know, I told me I got started when I

59
00:03:19,880 --> 00:03:22,639
Speaker 3: was pretty young. At forty. I started running Ethan Allen

60
00:03:22,720 --> 00:03:25,799
Speaker 3: forty years back. We have established one of the I

61
00:03:25,840 --> 00:03:30,200
Speaker 3: would say efficient logistics network. We deliver our products to

62
00:03:30,280 --> 00:03:35,360
Speaker 3: our clients at one delivered price with good service, whether

63
00:03:35,360 --> 00:03:40,200
Speaker 3: you're living in Seattle, Miami, New York, anywhere. Now, it

64
00:03:40,200 --> 00:03:42,360
Speaker 3: took us a lot of time to do that. That

65
00:03:42,360 --> 00:03:43,720
Speaker 3: has given us an advantage.

66
00:03:43,840 --> 00:03:47,080
Speaker 2: How have you had to change that the economics of

67
00:03:47,080 --> 00:03:49,880
Speaker 2: that over the past couple of weeks, given that oil

68
00:03:49,920 --> 00:03:53,040
Speaker 2: prices have jumped quite a bit and in the foreseeable future,

69
00:03:53,040 --> 00:03:54,600
Speaker 2: it doesn't look like it's going to come back down

70
00:03:54,680 --> 00:03:57,440
Speaker 2: right away. Are you still in the processes of figuring

71
00:03:57,440 --> 00:03:59,360
Speaker 2: that out or have you made changes already?

72
00:04:01,000 --> 00:04:04,920
Speaker 3: We are looking at it. Obviously, the impact of the

73
00:04:04,920 --> 00:04:08,480
Speaker 3: oil prices. It has increased our fuel costs and our

74
00:04:08,520 --> 00:04:11,440
Speaker 3: costs have gone up. But at this stage, because of

75
00:04:11,480 --> 00:04:14,880
Speaker 3: the fact of a vertical integration and the efficiencies we have,

76
00:04:15,240 --> 00:04:18,480
Speaker 3: we are impacted, but somewhat less. What we are impacted

77
00:04:18,520 --> 00:04:22,560
Speaker 3: more is what was said earlier is that consumers are cautious.

78
00:04:23,000 --> 00:04:27,039
Speaker 3: Our traffic is down and we are still fortunately in

79
00:04:27,080 --> 00:04:30,520
Speaker 3: a much much better position than most, but still impacted.

80
00:04:30,720 --> 00:04:34,000
Speaker 3: And I believe that if it was not the fact

81
00:04:34,080 --> 00:04:37,240
Speaker 3: that we have a vertically integrated company, did not have

82
00:04:37,320 --> 00:04:40,919
Speaker 3: the fact that we maintain one brand, you know, we

83
00:04:41,000 --> 00:04:42,400
Speaker 3: don't sell a lot of different brands.

84
00:04:43,360 --> 00:04:45,280
Speaker 2: You know, we were talking about our Age earlier. Katie,

85
00:04:45,440 --> 00:04:48,159
Speaker 2: the CEO of our Age, had warned that what he's

86
00:04:48,160 --> 00:04:50,679
Speaker 2: thing right now is the most dire housing market in decades,

87
00:04:51,040 --> 00:04:54,960
Speaker 2: he said, global tensions, tariffs, and economic uncertainty, among other things. Yeah.

88
00:04:55,000 --> 00:04:58,640
Speaker 1: Absolutely, I mean it is interesting how just frozen this

89
00:04:58,720 --> 00:05:01,320
Speaker 1: housing market remained. But also to your question, there is

90
00:05:01,680 --> 00:05:04,160
Speaker 1: news from Amazon that it's going to start charging at

91
00:05:04,200 --> 00:05:08,360
Speaker 1: seller's huge it's shipping services at three point five percent

92
00:05:08,400 --> 00:05:12,640
Speaker 1: fuel and logistics surcharge. There's certainly shipping and those fuel

93
00:05:12,680 --> 00:05:15,200
Speaker 1: costs top of mind. But when it comes to Ethan Allen,

94
00:05:15,360 --> 00:05:17,840
Speaker 1: I was taking a look at your most recent earnings

95
00:05:17,880 --> 00:05:20,599
Speaker 1: call and we did hear from your CFO talking about

96
00:05:20,600 --> 00:05:23,799
Speaker 1: how you have increased some retail prices by an average

97
00:05:23,839 --> 00:05:26,440
Speaker 1: of five percent, and I wonder, you know if that's

98
00:05:26,440 --> 00:05:29,680
Speaker 1: an action you anticipate maybe having to take again in

99
00:05:29,720 --> 00:05:30,560
Speaker 1: the coming quarters.

100
00:05:30,839 --> 00:05:33,680
Speaker 3: Well, we we're watching it very carefully. Obviously, we did

101
00:05:33,720 --> 00:05:37,240
Speaker 3: take some relatively small price increase only because of the

102
00:05:37,400 --> 00:05:43,039
Speaker 3: fact of our vertical integration are making products in North America.

103
00:05:43,120 --> 00:05:45,840
Speaker 3: If that was not the case, we do have some

104
00:05:45,880 --> 00:05:50,760
Speaker 3: products coming in like, for instance, rugs and accessories and lighting.

105
00:05:50,960 --> 00:05:54,040
Speaker 3: It comes from all over especially Asia. We have one

106
00:05:54,040 --> 00:05:58,800
Speaker 3: plant in Indonesia that has been impacted. However, overall because of

107
00:05:58,800 --> 00:06:03,240
Speaker 3: the fact of our or vertical integration our efficiencies, we

108
00:06:03,360 --> 00:06:06,760
Speaker 3: have not been We have been able to manage. Yes,

109
00:06:06,800 --> 00:06:11,480
Speaker 3: it has impacted obviously our costs, some margins, but overall

110
00:06:11,640 --> 00:06:14,240
Speaker 3: we've been able to not go out of the way

111
00:06:14,520 --> 00:06:18,160
Speaker 3: and still operate well. Interesting thing is this that our

112
00:06:18,200 --> 00:06:21,960
Speaker 3: business is holding up with less traffic coming into our

113
00:06:21,960 --> 00:06:22,760
Speaker 3: design sentence.

114
00:06:23,440 --> 00:06:25,800
Speaker 1: All right, f Ruke, Always wonderful to see you really

115
00:06:25,880 --> 00:06:29,520
Speaker 1: appreciate the context here. That is f Ruke Carthwari. He

116
00:06:29,640 --> 00:06:32,719
Speaker 1: is chairman, president and CEO of Ethan Allen