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The furniture industry is on alert as it awaits the results of President Trump's tariff investigation. Last month, the President said he's conducting a probe into furniture coming into the US, and the results may set the stage for industry specific levies. Joining US now is Ferouk Katwari. Ethan Allen Chairman, President CEO. Ethan Allen manufactures about seventy five percent of its furniture in North America, about half in the US and FRUK.
That makes you fairly unique in that most publicly traded furniture makers import almost everything. How are you setting up for these potential new taxes?
Yes, but first of all, very good to see you again. And yes, you know it has been a journey because thirty years back, thirty years back.
Many acting was leaving the United States. We decided that we will stay in North America. Not an easy.
Decision to make major investments when it appeared to be easier to go off show. Well, it has given us a good opportunity for a number of reasons. First is, we had to make sure that we had the most more efficient manufacturing in the United States. We had twenty two manufacturing plants twenty years back that would not have worked. So today we have manufacturing in Vermont, we have manufacturing in North Carolina. Then we went to Mexico, went to Honduras.
And the other thing that we did was we've been very fortunate to have great talent. We've got to treat them well. And technology is important. Combining technology and good people is important.
And the other thing we did was this, which was unique.
We said, we'll make exactly the same level of quality in Mexico as we make in North Carolina. That's our upholstery or wood products that we make in Vermont or Honduras.
You know, twenty years back fifteen yeth Vaco said crazy.
But today that has given us a great advantage and given us an opportunity to service. Other thing that we did, which is very unique. Twenty years back, about seventy eighty percent of our products I'm talking of wood products, Appolstree was always custom, was made. Was what stock Today, Almost one hundred percent of our products made in North America's custom.
Well, can I ask you then about that twenty five percent of your supply chain that is still coming not from North America with those tariffs looming already some tariffs being put on them. How are you thinking about it? What are you planning to do with it? Do you adjust or do you take the tariff hit?
Yeah, that's you know, that is an issue.
We have a lot of that is affecting what we call non furniture products like finstant, accessory products, textile products, rugs, some furniture also, and so we are looking at right now a number of factors, which is fortunately we have it at this stage not to make many changes. It's a little bit early, but I think as we go forward, we're looking at two things. One is sharing with our partners overseas and then taking some price increases and we go to see both of that in the next few months.
What kind of price increases are you thinking? I guess you have to wait until you get official levy numbers.
But what can the market bear for uke?
Well, you know, it again depends on products, depends on different countries, like for instance, in some countries tech the duties are eight or ten percent. In some countries, like I said, for India it is thirty percent. So I think that we will have to make changes. Our partners are sharing so most likely we'll have to make some changes over a period of time, maybe even operates with somewhat of a lower margins. We'll combine all of those as we move forward.
Hey, for the housing market has been incredibly slow, and it's obviously something that is talked about on shows like this and in the White House as well. How is that affecting furniture sales? I mean, when people don't buy a new house, do they decide to use extra cash to upgrade, you know, a couch or a dining room table, or do you need people to buy new homes before they get new furniture.
Well, that's a very important issue because what we have seen is a drop in traffic.
Less people are coming in.
I would say close to twenty to thirty percent decrease in traffic. But the good news is that the ones are coming in are buying and our business is up. Interestingly in the last few months. It is up because of the effect of our setup. You know, we are the largest interior design network. Our interior designers have built great relationships our clients work with them long term associations.
So our business with existing clients has increased. While I would say newer clients and even the ones some existing are holding back, but overall businesses somewhat up. Yet, the fact is that traffic is down, and I believe that as we go forward, we will see what we need to do.
But it is because of a unique structure.
The relationships that our interior designers have with our clients is really what is making it.
Happen for us.
If you started this interview talking about the talent you need for these manufacturing plants, and the latest jobs report, we've seen four consecutive monthly declines of manufacturing jobs here in America. There's also some tension when it comes to immigration and the difficulty in finding labor, especially specialized labor for some of these jobs. You also mentioned investing in technology. Are you looking at trying to be less reliant on
this immigrant labor base. How are you thinking about getting the necessary people to work in your manufacturing facilities, especially in America.
Yeah, it's a very very important issue. You know, we are in state of Vermont, major manufacturing. We're in North Carolina. What has happened so far is look at in the last five years, are manufacturing headcount in the United States is down by over thirty five percent due to technology. Technology has been a critical factor in taking care of this issue of having less labor, and especially, as you said, even people coming from overseas. So we are continuously having
less headcount but a lot of technology. Now that's a tremendously important Other factor in the United States, people don't talk about it is the issue of medical costs. Medical costs are a tremendously major factor. One of the reasons we have been able to manage is with a thirty five percent reduction in headcount, has reduced a headcount, I mean our medical costs, but our medical costs in the United States the disaster and you know, the folks in
Washington don't talk about it. We can have a case where we can pay seven hundred thousand dollars on one case. No such thing in say Mexico or Honduras are overseas. So I think our government, our leadership should spend a lot of time on medical costs.
Yes, I think that having less.
Labor, which is a chair challenge, but technology has become a major factor in taking care of that issue.
So fascinating. Thank you for joining us this morning. That is for Rukathwari of Ethan Allen