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