Ethan Allen Recommendation

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Ethan Allen Interiors Inc. Stock Pitch:

Ethan Allen Interiors Inc. Stock Pitch Anna Manges Finance 320


Recommendation Buy, 4%, Ethan Allen Interiors Inc. , target price by end of semester: $30/share Anna Manges - Finance 320 2

Company Overview:

Company Overview High-quality manufacturer of home furniture, 70% made in USA Full-service design centers that offer professional interior decorator assistance to customers Independently-owned retailers as well as company-owned locations FINANCIAL MEASURES OF ETH Market Capitalization: 811.78 M P/E Ratio: 15.01, Industry: 18.4 EPS: 1.87 Beta: 1.92 Currently Trading at $28.13/share Anna Manges - Finance 320 3

Key Message:

Key Message The brick-and-mortar American furniture industry has suffered because of price competition from products made in Asia. Ethan Allen Interiors Inc. is able to overcome this major problem by differentiating itself from the competition on quality , not price. Ethan Allen also has embraced new technology that enhance its image as an industry innovator. Furthermore, its commitment to making furniture in America enhances Ethan Allen’s image as a stylish, elegant, and quality furniture brand. Anna Manges - Finance 320 4

Macro-Economic Drivers:

Macro-Economic Drivers Consumer credit industry Housing Market Positive scenario: Looser credit -> increased consumer spending -> increased spending on furnishings Housing market boom -> increased spending on furnishing new houses Negative scenario: Tighter credit -> decreased consumer spending -> decreased spending on furnishings Housing market decline -> less spending on new home furnishings Anna Manges - Finance 320 5

Industry Drivers:

Industry Drivers US trade policies Asian furniture manufacturing Positive scenario: US maintains a favorable relationship with Latin American supplier countries Asian furniture manufacturing industry either decreases in popularity or increases prices Negative scenario: US does not maintain its relationship with Latin American countries and importing raw materials becomes more difficult Asian furniture manufacturing industry continues to grow Anna Manges - Finance 320 6

Company-Specific Drivers:

Company-Specific Drivers Consolidation of manufacturing locations Price of American lumber Use of in-store iPads and online room planning technology Positive scenario: Consolidating leads to more efficiency and higher quality products $ of American lumber ↓ Technology investment helps customers make purchases and enhances Ethan Allen’s image Negative scenario: Consolidation of manufacturing locations leads to distribution disruptions in event of a natural disaster affecting that location $ of US lumber ↑ Technology investment is an added cost that consumers don’t need Anna Manges - Finance 320 7

Key Takeaways:

Key Takeaways Buy Ethan Allen stock American-made brand image differentiates it from competitors Housing market recovery leads to more demand for furnishings Ethan Allen’s consolidated distribution and manufacturing facilities allows it to be more lean and profitable Anna Manges - Finance 320 8

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