Ethan Allen Interiors, Inc.
Address:
Ethan Allen Drive
P.O. Box 1966
Danbury, Connecticut 06813-1966
U.S.A.
Telephone: (203) 743-8000
Fax: (203) 743-8298
Statistics:
Public Company
Incorporated: 1932 as Baumritter Corp.
Employees: 5,000
Sales: $437 million
Stock Exchanges: New York
SICs: 2273 Carpets and Rugs; 2511 Wood Household Furniture; 2512 Upholstered Wood Household Furniture; 5231 Paint, Glass and Wallpaper Stores; 5712 Furniture Stores; 5713 Floor Covering Stores; 5719 Miscellaneous Home Furnishing Stores
Company History:
Ethan Allen, Interiors, Inc. is the holding company for Ethan Allen, Inc., which manufactures and retails quality home furnishings, offering a full range of furniture and decorative accessories through 291 Ethan Allen Galleries (including 24 abroad), of which 58 were owned by the company itself in 1995. Ethan Allen products are available only through these dealers. In the early 1990s, Ethan Allen was North America's second largest furniture retailer and its eighth largest furniture manufacturer. In an industry characterized as highly fragmented, Ethan Allen maintained a national presence by branding its products and retail stores with the same name. The company was also distinguished by its vertical integration of operations, overseeing the design, manufacture, distribution, display, and marketing of Ethan Allen furnishings.
The history of Ethan Allen may be traced to the 1930s. In 1932, The Baumritter Corp., a housewares sales agency, was founded by two New Yorkers, Theodore Baumritter and his brother-in-law, Nathan S. Ancell. The worst year of the Great Depression was hardly an auspicious time for such an undertaking, and at the end of the year the partners were in the red by $3,000--more than they had put into the firm. According to a 1965 Home Furnishings Daily article, people out of work and struggling to make ends meet had little thought for the plaster gnomes, trellises, and garden swings manufactured by Baumritter.
"Looking back, I suppose 1935 was our crucial year," Ancell told Earl Lifshey in the interview for Home Furnishings Daily. Ancell continued, "we had managed to survive the depths of the Depression and began to make a little headway. But I could see no real future for the kind of drop-shipment jobbing business in which we were engaged. We were nothing but a middleman. I concluded--and Ted agreed completely--that if we were going to build our destiny we would have to control all the elements with which we were working."
Thus, in 1936, the partners bought a furniture factory, a bankrupt plant in Beecher Falls, Vermont, which a federal agency sold to them for $25,000. Ancell and Baumritter didn't realize at the time that the factory's machinery dated from 1917 and was belt-driven. Nevertheless, it wasn't long, Ancell continued, "before we fell hopelessly in love with Vermont and with what New England represents historically" and the partners remained committed to the idea of furniture manufacturing. Recognizing the market potential for Early American furniture, a style largely untapped in the industry, the partners put together a group of 28 pieces of Early American furniture, naming it for Ethan Allen, whose Green Mountain Boys fought to make Vermont the nation's fourteenth state. The furniture was first unveiled in 1939, but only to selected buyers who would be willing to display it properly in stores. This marked the beginning of the company's exclusive franchise policy.
Through their experiences, Ancell and Baumritter found that the typical furniture wholesale buyer focused primarily on price, while the typical customers, at the time, women, were more concerned with decorating techniques and customer service than price. The solution, they believed, was to offer correlated groupings of classic furniture from which a woman could select the specific pieces to solve her particular furnishing problem. Within the company's Early American decorating scheme, the customer could add to her furnishings and complete a room not just in a matter of months or a year, but several years later if she chose. By the mid-1960s, the Baumritter Corp. had a 1,600-piece line of Ethan Allen traditional Early American furniture: the biggest single group, by a very wide margin, of furniture made by any manufacturer in the world.
For Ancell, the company was selling "thoughts," not "things," an "environment--not furniture." He told Lifshey, "in this business we are dealing primarily with a series of very emotional products that are purchased and used in a very emotional manner primarily by the female of the species." Referring to the home as "the cornerstone and the hallmark of our civilization," Ancell suggested the female buyer looked for "protectiveness, for warmth, for orderliness" in her furnishings, and "it's at that point that she must have some place to go and some people with whom she can confidently talk and rely upon to safely guide and assist her in doing the job herself."
The policy of Baumritter Corp. was to reinvest every dollar of profit into the enterprise. By 1962 the company had 14 furniture factories in the East, and that year it acquired Kling Factories, Inc., which owned three furniture-making plants near Jamestown, New York. The Kling Colonial group of about 350 pieces and Viko line of about 150 steel-furniture pieces supplemented the Ethan Allen line. In addition to furniture, the company made lamps, painted wooden accessories, and decorative wall hangings.
By the mid-1960s there were around 700 Ethan Allen dealers in the United States, with others in Canada, Australia, France, Belgium, the Netherlands, and Switzerland. Baumritter management invoked a careful selection process before licensing a dealer for their furnishings. Potential store sites were carefully researched for sufficient levels of population, retail activity, average-income levels, and upper-income levels, and the prospective area would be studied not only on the ground but from the air. A dealer would be selected on the basis not only of financial considerations but understanding of the Ethan Allen program and willingness to dedicate himself to it. If selected, dealers then owned and operated the store themselves. The average store size at the time was 16,000 square feet, and about one-quarter of the dealers were accounting for three-quarters of sales volume.
In 1970 the company acquired the Volckman Furniture Manufacturing Co. of Morrison, Illinois, through an exchange of stock. This purchase added to the production of Ethan Allen upholstered living room furniture. Also in that year Ancell, the company's president, became chairperson, replacing Baumritter, who retired. In early 1972 the Baumritter Corp. changed its name to Ethan Allen Industries and moved its headquarters from New York City to Danbury, Connecticut.
That year, Ethan Allen began supplementing (and eventually phasing out) its regular franchised dealers with a network of 200 owner-managers of "showcase galleries." These outlets, concentrated in shopping centers of well-heeled suburban areas, were producing 72 percent of total sales volume, which rose to $70 million in 1971 from $43 million in 1965. The owner-managers invested $65,000 to $125,000 to build the stores but were not required to sign contracts with Ethan Allen or pay franchise fees and owned their inventory, unlike regular franchised dealers. By 1982 there were some 350 such galleries in the United States, of which 20 were owned by Ethan Allen itself.
In June 1972 Ancell announced plans to expand into furniture styles other than Early American, as well as into producing broadloom carpeting, oriental rugs, wallpaper, and draperies. Also during this time, the company, which had launched its first national print advertising campaign around 1951, developed its first series of nationwide television ads.
In 1979 Ethan Allen agreed to be acquired by Interco Inc., a St. Louis-based conglomerate. The transaction, which called for an exchange of stock originally valued at about $130 million and later at $150 million, was completed in 1980, with Ethan Allen continuing as an Interco subsidiary headed by Ancell. Over the next eight years annual sales grew from $230 million to $600 million.
Ancell was succeeded as president in 1985 and as chair and chief executive in 1988 by M. Farooq Kathwari, who had formed a joint venture with Ethan Allen to develop products in 1973 and had joined the company as a vice-president in 1980. Under Kathwari, Ethan Allen, Inc. became independent again, when a management group headed by Kathwari purchased the company from Interco for about $385 million in a leveraged buyout in 1989. Ethan Allen was made a wholly owned subsidiary under a company incorporated as the Green Mountain Holding Corp., which would become Ethan Allen Interiors, Inc. in the early 1990s. Ethan Allen Interiors then went public, completing its first public offering in March 1993 by raising $156.9 million through the sale of common stock. A secondary public offering completed in November 1993 raised nearly $40 million. In July 1994, J.K. Castle controlled 11.9 percent of Ethan Allen's common stock, and Kathwari held 10.5 percent. Long-term debt came to $144.5 million.
The dynamic Kathwari was quick to change the direction of the company. At the time, the Ethan Allen network included over 100 retailers across the United States, and little consistency was maintained in store projection, interior display, merchandise mix, and advertising. Kathwari worked quickly to change that, coordinating efforts to ensure that the entrepreneurs invested in new product programs, storefront renovations, and advertising techniques.
Kathwari also focused on innovating Ethan Allen's product line. In a 1991 New York Times interview, he declared, "sixty percent of our individual items were created in the last two years. We started that process six years ago, when our research showed us that consumers no longer were buying Early American furniture as their predominant style." The new styles included American Impressions, introduced in 1991, which included straight-line pieces made of solid cherry inspired by Shaker furniture and the designs of Frank Lloyd Wright. This line soon became the fastest growing new product in the company's history.
A second contemporary line, American Dimensions, was introduced in 1992, accenting geometric shapes. After that came Country Crossings, featuring rustic-looking maple furniture; Legacy, based on Italian architecture styles; and the ultra-contemporary Radius, offering sleek styles recalling those of the 1960s. In addition, a choice of 2,000 fabrics was offered for upholstery. Seventy percent of the company's 1994 furniture revenues were expected to come from the new styles launched since 1991.
Perhaps more notably, Ethan Allen was transformed from strictly a furniture retailer into a total home furnishings source, offering textiles, wall decor, bedding, lamps, and other decorative items to its customers.
In addition, two factories were closed, others were retooled for new styles, and plants were added to produce such home furnishings as pillows, bedspreads, mirrors, and clocks. Quality control was improved and the company's 300 delivery vans were replaced by larger, less fuel-thirsty vehicles. Moreover, annual week-long courses for salespersons were given at "Ethan Allen College," established at company headquarters. And Kathwari cracked down on its dealers, many of whom had not been observing the requirement to sell Ethan Allen products exclusively.
An aggressive advertising campaign was launched in the fall of 1991 to attract younger customers conditioned to think of Ethan Allen as the choice of their parents. By mid-1992 only one-eighth of displayed Ethan Allen furniture was Early American. Classical yet contemporary storefronts began to replace the familiar white-column facades. Prices fell, with queen-size beds, for example, dropping from an average price of $1,000 to $700 or $800. The new approach was apparently paying off; in 1993 sales grew by 9.5 percent, and between July 1993 and April 1994 sales were up 20 percent in stores open a year or more. Moreover, for fiscal 1994, the company's net sales rose 13.8 percent to reach $437 million.
A new advertising campaign for 1994 featured nationwide television commercials with the theme "Everyone's at home with Ethan Allen." In an interview, the company's vice-president of advertising remarked, "The tag line invites a broader group of consumers to respond to our advertising, from older, empty-nesters to young people starting out. It says, 'Find your place within our spectrum of styles and price points'." The TV spots were to be supplemented with print ads and radio commercials featuring consumers varying widely in life styles and attitudes. A concurrent $45 million marketing program included a new logo, advertising, direct mail, merchandising, store displays, and signs. The target market was people between 25 and 54 with household incomes over $35,000.
These moves would, in part, help combat the heavy load of debt the company assumed in becoming an independent, which resulted in four years of red ink. In going public, Ethan Allen offered 48 percent of the common stock at $18 a share. By February 1994 the company's common stock was selling at $32 a share, but it had dipped as low as $19.50 during the year. At the close of 1994 the company turned its credit-card operations over to GE Capital Corp. under a long-term agreement.
In 1993 Ethan Allen owned 20 manufacturing plants, an assembly plant, three sawmills, eight distribution warehouses, and two home delivery centers. Ninety-two percent of its products were built in its own factories. The company offered a full range of home furnishings in what it considered the four most important style categories of the 1990s: formal, American country, casual contemporary, and classic elegance. Each collection included case goods such as bedroom and dining room furniture, upholstered furniture, and such accessories as carpeting, draperies, and lamps. A choice of 2,000 fabrics was available for upholstered furniture.
Principal Subsidiaries: Ethan Allen, Inc.
Further Reading:
Barmash, Isadore, "New Lines and New Life for Furniture Maker," New York Times, October 6, 1991.
Elliott, Stuart, "Advertising," New York Times, January 10, 1994, p. D7.
"Ethan Allen Breaks with Tradition," Business Week, June 10, 1972, p. 22.
"Ethan Allen Tries to Shed Its Colonial Past," New York Times, November 28, 1992, pp. 33, 41.
Lifshey, Earl, The Baumritter Story, New York: Baumritter Corp., 1965.
Marcial, Gene G., "Fresh Looks and New Fans for Ethan Allen, Business Week, August 2, 1993, p. 78.
Power, William, "Ethan Allen Sets Table in Bid to Slash Debt," Wall Street Journal, January 29, 1993, p. C2.
Roush, Chris, "Rearranging the Furniture at Ethan Allen," Business Week, July 11, 1994, p. 102.
Singer, Penny, "The Changing Face of Furniture Making," New York Times, November 6, 1994.
Stangenes, Sharon, "A Revolutionary Look," Chicago Tribune, July 26, 1992, Sec. 15, p. 3.
"Tradition with a Twist," Sales and Marketing Management, April 1994, p. 24.
Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.
