Dive Brief:
- Farooq Kathwari, who has been Ethan Allen chairman and CEO for nearly 40 years, has been replaced on an interim basis by former Neiman Marcus Group executive Stefanie Tsen Ward. Kathwari is no longer with the furniture retailer.
- Ward will oversee day-to-day operations and a strategic reset while the board — shaken up by a shareholder vote at the company’s annual meeting last week and revamped further this week — searches for a permanent CEO, according to a Tuesday press release.
- Attempts to reach Kathwari for comment were unsuccessful as of press time. The CEO announcement comes a day after Ethan Allen reported declines in Q1 retail sales, wholesale, profits and margins.
Dive Insight:
Until his exit this week, Kathwari had been president of Ethan Allen since 1985, and chairman and CEO since 1988. A year after taking the helm, he led a group that acquired the furniture company, named after a Revolutionary War hero who helped found Vermont, and took it public in 1993.
In recent weeks, Kathwari has resisted pressure from activist investor Doug Bergeron to give up his post, but now he is gone, sooner than he intended.
Bergeron, on the board himself after last week’s vote, for months has agitated for major changes at Ethan Allen. In the midst of that, in September, Ethan Allen announced a CEO search, though the plan was to announce a new CEO as late as June 30, the day Kathwari’s contract was slated to end, and for him to remain a nonexecutive board member for a few months more.
But Bergeron interfered with that plan when three of his five board nominees were elected, and Kathwari failed to get reelected.
This week, Bergeron, who owns just over 5% of shares, got even further. While Ward had been nominated but not elected by shareholders, the restructured board has now appointed her and three others to join them. They include, in addition to Ward, Anna Brockway, Chairish co-founder and former Levi’s executive; Lindsay O’Reilly, who has had leadership roles at Barclays and JPMorgan Chase; and Adam Treanor, managing partner of Stone Bay Capital.
Also new to the board are Kristine Miller, former chief strategy officer of eBay and a 24-year Bain veteran, and Steve Oblak, whose roles include a previous stint as chief commercial officer of Wayfair. Maria Eugenia Casar and Tara Stacom were reelected, a signal that shareholders do want some continuity, according to Telsey Advisory Group analysts led by Cristina Fernández.
“All in, Ethan Allen's shareholders voted for change with the election of three new board members, but also for an orderly transition after supporting two of Ethan Allen's existing board members,” Fernández said in a research note following the vote. Fernández has also said that Ward would bring “meaningful experience with brands and retailers” as interim CEO.
In a statement Tuesday, Bergeron invoked Allen’s most famous military feat, leading his group, the Green Mountain Boys, to capture Fort Ticonderoga in New York, where he stole weapons from the British.
“More than 250 years ago, the man whose name this Company carries wrote of a spring morning at Fort Ticonderoga, ‘The sun seemed to rise that morning with a superior lustre,'” Bergeron said. “For the employees, customers and shareholders of Ethan Allen, a new day begins.”
The new leadership has its work cut out for it.
Ethan Allen on Monday reported further declines in the top and bottom lines in its first fiscal quarter. Net sales in the period tumbled 12% to $130 million, with retail sales down 11% and wholesale down over 9%. Retail and wholesale orders also edged down.
Consolidated gross margin shrank by 180 basis points to 59.6%, driven down by tariffs, higher designer floor sample sales and lower manufacturing production, partially offset by a change in the sales mix, reduced headcount and a higher average ticket price. Net income plummeted 84% to $1.7 million.
