Telsey Advisory Group has lowered its 12-month price target on Ethan Allen Interiors Inc. to $27.00 from $28.00 and kept a Market Perform rating after the company reported mixed results for the second quarter of fiscal 2026.
The quarter showed divergent trends between profitability and top-line performance. Ethan Allen recorded earnings per share of $0.44, beating Telsey’s $0.38 estimate. The stronger EPS was supported by an operating margin of 9.0%, which topped the 7.6% margin Telsey had projected. Despite these margin gains, total sales for the quarter fell 4.7%, a steeper decline than the 2.9% drop that had been forecast.
InvestingPro data highlights that the company continues to post robust gross profit margins, recorded at 60.7% in the quarter, and that ETD is trading below its Fair Value, implying potential upside for valuation-sensitive investors despite current headwinds.
Order activity showed pronounced weakness. Retail written orders decreased 18% year-over-year as the company compared against a period that included a heavy promotional environment - a 25% off promotion in the prior comparable quarter. The sequential pace of order deterioration accelerated through the quarter: October orders were down by low single digits, November declined in the low teens, and December dropped by more than 20%.
Wholesale demand also softened, with wholesale orders down 19% year-over-year. Telsey notes that part of the wholesale decline reflected fewer orders from the State Department contract, an impact linked to the recent government shutdown. Store-level metrics were under pressure as well, with foot traffic into Ethan Allen design centers falling 11% during the quarter despite a 25% year-over-year increase in marketing spend.
On the positive side, management and the analyst observed that January orders have begun trending higher year-over-year, although those comparisons are against easier prior-year levels. The company implemented a 5% blended price increase in October aimed at offsetting tariff-related costs. That program combined direct price adjustments, cost-sharing with vendors, and supplier diversification as levers to protect margins.
InvestingPro also flags Ethan Allen's broader financial profile: the firm carries a GOOD overall score and has a 30-year history of paying a dividend, which currently yields 7.5%.
Additional detail on the quarter shows revenue of $149.9 million, missing the estimated $152.25 million - a revenue shortfall of about 1.54%. The EPS beat of $0.44 versus the $0.38 estimate represents an outperformance versus expectations of roughly 15.79% on that metric. Market reaction to these mixed signals has been uneven as investors weigh the company’s margin resilience against the sales and order declines.
Context for investors - The report highlights a company that managed to protect profitability in the quarter through price actions and cost strategies, even as demand softened in both retail and wholesale channels. Key near-term indicators to monitor include order trends, marketing effectiveness given higher spend, and the longer-term durability of the company’s dividend yield and margin structure.