Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Liberation Day, as we mentioned, was meant to mark the
Speaker 2: start of the US manufacturing comeback. It's been a rough
Speaker 2: ride for US retailers since, even with the Supreme Court
Speaker 2: striking down those tariffs earlier this year. Let's take a
Speaker 2: deeper dive into the impact on retail with Faru Kathwari.
Speaker 2: He is chairman, president and CEO of Ethan Allen, the
Speaker 2: furniture company. Faruke, thank you so much for joining us.
Speaker 3: It's a pleasure.
Speaker 2: So when it comes to the impact of tariffs on
Speaker 2: your company, you're in a bit of a unique position.
Speaker 2: You pointed out to me that you made a decision
Speaker 2: years ago to base most of your manufacturing in North America.
Speaker 2: You have five manufacturing plants in the US, three in
Speaker 2: two in Vermont, and three in North Carolina. Eighty percent
Speaker 2: of your furniture is made in North America, but you
Speaker 2: do have some overseas prisons as well. Has the tarraff's
Speaker 2: been needle moving for you at all?
Speaker 3: Not really, because of the fact as we mentioned it
Speaker 3: has it has created more of a positive perspective for us.
Speaker 3: Although interestingly, in North America, the only place where we
Speaker 3: do have some you might see some significant tariffs about
Speaker 3: twenty five percent in Mexico, now Mexico. When we went
Speaker 3: about twenty years back south of the border to Mexico
Speaker 3: to Honduras, it was under the North American Treaty, no tariffs,
Speaker 3: with all kinds of political issues and everything else. There
Speaker 3: are tariffs in Mexico, but for us, the impact is
Speaker 3: less because we operate and own the plants. So we
Speaker 3: today have manufacturing in Vermont. That's where we started. You know,
Speaker 3: we started ninety four years back. We're manufacturing in Vermont,
Speaker 3: and then went manufacturing from New Hampshire through all the
Speaker 3: way to California. But twenty years back we said no
Speaker 3: manufacturing was going away. We said what we do? We said, no,
Speaker 3: we will maintain manufacturing in North America, but we'll go
Speaker 3: to Mexico and Honduras. We operate, those operate, and in fact,
Speaker 3: it's interesting that today, twenty years later, a customer does
Speaker 3: not know if a piece of furniture is made in
Speaker 3: Vermont or made in Mexico or in Honduras. The level
Speaker 3: of quality everything is the same.
Speaker 2: Right.
Speaker 1: Well, I'm curious, I mean, so your business hasn't necessarily
Speaker 1: been affected by terrorists. But I have to imagine that
Speaker 1: your customers have in some form when you think about
Speaker 1: you know, costs on everything up, everything else going higher,
Speaker 1: and you know, I wonder how you're seeing that expressed
Speaker 1: when it comes to how much people are willing to
Speaker 1: reach into their wallets to you know, pay up for
Speaker 1: furniture here.
Speaker 3: No, that's absolutely the fact is that consumers are cautious.
Speaker 3: We have seen that even though we have had a
Speaker 3: i would say significant decline in people coming in, totally
Speaker 3: good news is that people who are coming in are more.
Speaker 1: Likely to buy.
Speaker 3: Now. We are, as I said, a vertically integrated company.
Speaker 3: We have one of the largest interior design network. We
Speaker 3: have our interior designers work with clients we also have
Speaker 3: and it took us years and years to do it.
Speaker 3: You know, I told me I got started when I
Speaker 3: was pretty young. At forty. I started running Ethan Allen
Speaker 3: forty years back. We have established one of the I
Speaker 3: would say efficient logistics network. We deliver our products to
Speaker 3: our clients at one delivered price with good service, whether
Speaker 3: you're living in Seattle, Miami, New York, anywhere. Now, it
Speaker 3: took us a lot of time to do that. That
Speaker 3: has given us an advantage.
Speaker 2: How have you had to change that the economics of
Speaker 2: that over the past couple of weeks, given that oil
Speaker 2: prices have jumped quite a bit and in the foreseeable future,
Speaker 2: it doesn't look like it's going to come back down
Speaker 2: right away. Are you still in the processes of figuring
Speaker 2: that out or have you made changes already?
Speaker 3: We are looking at it. Obviously, the impact of the
Speaker 3: oil prices. It has increased our fuel costs and our
Speaker 3: costs have gone up. But at this stage, because of
Speaker 3: the fact of a vertical integration and the efficiencies we have,
Speaker 3: we are impacted, but somewhat less. What we are impacted
Speaker 3: more is what was said earlier is that consumers are cautious.
Speaker 3: Our traffic is down and we are still fortunately in
Speaker 3: a much much better position than most, but still impacted.
Speaker 3: And I believe that if it was not the fact
Speaker 3: that we have a vertically integrated company, did not have
Speaker 3: the fact that we maintain one brand, you know, we
Speaker 3: don't sell a lot of different brands.
Speaker 2: You know, we were talking about our Age earlier. Katie,
Speaker 2: the CEO of our Age, had warned that what he's
Speaker 2: thing right now is the most dire housing market in decades,
Speaker 2: he said, global tensions, tariffs, and economic uncertainty, among other things. Yeah.
Speaker 1: Absolutely, I mean it is interesting how just frozen this
Speaker 1: housing market remained. But also to your question, there is
Speaker 1: news from Amazon that it's going to start charging at
Speaker 1: seller's huge it's shipping services at three point five percent
Speaker 1: fuel and logistics surcharge. There's certainly shipping and those fuel
Speaker 1: costs top of mind. But when it comes to Ethan Allen,
Speaker 1: I was taking a look at your most recent earnings
Speaker 1: call and we did hear from your CFO talking about
Speaker 1: how you have increased some retail prices by an average
Speaker 1: of five percent, and I wonder, you know if that's
Speaker 1: an action you anticipate maybe having to take again in
Speaker 1: the coming quarters.
Speaker 3: Well, we we're watching it very carefully. Obviously, we did
Speaker 3: take some relatively small price increase only because of the
Speaker 3: fact of our vertical integration are making products in North America.
Speaker 3: If that was not the case, we do have some
Speaker 3: products coming in like, for instance, rugs and accessories and lighting.
Speaker 3: It comes from all over especially Asia. We have one
Speaker 3: plant in Indonesia that has been impacted. However, overall because of
Speaker 3: the fact of our or vertical integration our efficiencies, we
Speaker 3: have not been We have been able to manage. Yes,
Speaker 3: it has impacted obviously our costs, some margins, but overall
Speaker 3: we've been able to not go out of the way
Speaker 3: and still operate well. Interesting thing is this that our
Speaker 3: business is holding up with less traffic coming into our
Speaker 3: design sentence.
Speaker 1: All right, f Ruke, Always wonderful to see you really
Speaker 1: appreciate the context here. That is f Ruke Carthwari. He
Speaker 1: is chairman, president and CEO of Ethan Allen