Episode summary
Ethan Allen's CEO Based His Business Model on a Cricket Team | At Barron's
At Barron's
· · 23 min · Hosts: Andy Serwer · Guests: Farooq Kathwari
Summary
Farooq Kathwari says Ethan Allen’s core business has been rebuilt around a vertically integrated, made-to-order model rather than the old stocked, colonial-furniture format. He says the company now makes about 75% of its products in Vermont, North Carolina, Mexico and Honduras, and that close to 80% of what it sells is custom-made after an order, which lets Ethan Allen offer thousands of fabric choices and deliver in six or seven weeks.
He argues that the brand has stayed premium by relying on quality, service, and credibility instead of discounting. Kathwari says Ethan Allen’s retail footprint has been cut roughly in half, with showrooms shrunk from about 30,000 square feet to around 10,000 square feet, because designers can now sell online as well as in person. He says the company’s disciplined model produces about $600 million in annual revenue run rate, 60% gross margins, 10% to 15% operating margins, and one of the market’s highest dividends.
Kathwari also describes the company’s financial strength and his own path to control of the business, including taking it public again and eliminating debt for the last 20 to 25 years. He says his leadership approach comes from cricket: one team, one program, strong training, and weekly reporting on talent, service, marketing, technology, and social responsibility.
Key takeaways
- Kathwari says Ethan Allen’s made-to-order model now covers close to 80% of products, reducing stock risk and supporting customization.
- He says Ethan Allen’s store network has been cut sharply, with smaller showrooms replacing large legacy locations as technology takes more of the selling role.
- Kathwari says the company has no debt, about $190 million of cash, and pays a dividend of roughly 7% to 8%.
- He says manufacturing concentrated in the U.S., Mexico, and Honduras helped the company navigate tariff and supply-chain pressure.
- Kathwari’s leadership system is built around cricket principles and five weekly management priorities: talent, service, marketing, technology, and social responsibility.
Notable quotes
“I decided my business model will be based on a cricket team. We have one team, one program”
“close to 80% of the product that we make is custom when we receive an order as against 80% used to be made in for stock”
“Today we needed 30,000 square ft because you have to show today our interior designers can show products right online”
“Our margins gross margin is 60%. Our operating margins are anywhere from 10 to 15%”
How the episode opens
I decided my business model will be based on a cricket team. We have one team, one program. When I took over Ethan Allen, we own we also operated four or five different other businesses. I said, "It's not a cricket. How can how can I be captain of five different teams?"
Hello, Farooq. How are you doing? — What a pleasure. Good to have you here.
Farukqari got his start as the captain of a cricket team. Since becoming the CEO of Ethan Allen in 1988, he's used some of the lessons he learned on the field to modernize the 94 year old furniture brand. From the Baron Studio to the flagship Ethan Allen Design Center in Manhattan, which is a lot smaller than it used to be, I talked to Cthari about the changes he's driven over his four decades of leadership at the company.
Ethan Allen Interiors. People know this name. They know the brand.
But why don't you give us a quick update on what the company is like today.
All right. Well, just a little background. Ethan Allen was started by two entrepreneurs from New York who in 1934 went to Vermont established manufacturing and that's how the company started early American colonial and it was known for that and 1940s50s60s also established Ethan Allen galleries with independent dealers all over the country
And but I got involved what 40 years back or so and then we had the opportunity of transforming it to what it is today — Right and so today you make and sell furniture and around the United States is that sort of the business model at this point
Well the business model is that we're a vertically integrated company — We have manufacturing as I mentioned earlier we we have 20 manufacturing operations from New Hampshire to Midwest Mid-Atlantic to the West — Mhm.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- business model
- retail furniture
- leadership
- consumer demand
- sports branding
Companies and tickers mentioned
- Ethan Allen Interiors
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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