Ethan Allen CEO Farooq Kathwari Talks Tariffs, Cautious Consumers
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Bloomberg Audio Studios. Podcasts, radio, news. Liberation Day, as we mentioned, was meant to mark the start of the U.S. manufacturing comeback. It's been a rough ride for U.S. 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 Farouk Kathwari. He is chairman, president and CEO of Ethan Allen, the furniture company. Farouk, 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 U.S., two in Vermont and three in North Carolina. Eighty percent of your furniture is made in North America. But you do have some overseas presence as well. Has the tariffs been needle moving for you at all?
Not really. Because of the fact, as we mentioned, it has created more of a positive perspective for us. Although, interestingly, in North America, the only place where we do have some significant tariffs are 25% in Mexico. Now, Mexico, when we went about 20 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 94 years back. with manufacturing in Vermont and then went manufacturing from New Hampshire through all the way to California.
But 20 years back, we said, no, manufacturing was going away. We said, what do we do? We said, no, we'll maintain manufacturing in North America, but we'll go to Mexico and Honduras.
What impact have tariffs had on Ethan Allen's operations?
We operate those. And in fact, it's interesting that today, 20 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 tariffs, but I have to imagine that your customers have in some form when you think about costs on everything up, everything else going higher. And I wonder how you're seeing that expressed when it comes to how much people are willing to reach into their wallets to 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, I would say, a significant decline in people coming in. The only 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 networks.
How has Ethan Allen adapted its manufacturing strategy in response to tariffs?
We have our interior designers work with clients. We also have, and it took us years and years to do it. For me, I got started when I was pretty young. I started running Ethan Allen 40 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 process of figuring that out or have you made changes already?
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