Ethan Allen Named One Of America’s Best Retailers By Newsweek

The Ethan Allen Furniture Store in Johnstown, Colorado. Ethan Allen is a manufacturer and retailer ... [+] of fine furniture.

What do Boot Barn, Wegmans, Von Maur and Ethan Allen have in common? Newsweek ranked all in the top ten of America’s Best Retailers 2023 across 39 retail categories. Ethan Allen scored 92.48 on a 100-point scale, not far behind top-ranked Boot Barn at 95.59 and ahead of Wegmans and Von Maur both at 92.01.

The survey was conducted by Statista among 9,000 consumers, measuring each retailer’s products, customer service, atmosphere, accessibility and store layout. Those values were combined to make up 50% of the retailer’s final score, and the other 50% was based on consumers’ likelihood to recommend the brand.

Given the scale weighted toward consumers’ likelihood to recommend the retailer to others, Ethan Allen’s position as a truly exceptional retailer overall and within the Home Goods category suggests it is the most loved American furniture brand and the one more Americans aspire to own.

Creating consumer aspiration is essential for any brand that plays at the upper reaches of the retail pricing pyramid, and the Newsweek survey proves Ethan Allen has achieved aspirational status.

However, RH is the name on everyone’s lips when talking about aspirational luxury furniture brands. RH CEO Gary Friedman has planted his flag on the “luxury mountain” with the aspiration to reach its summit and rank among peers Chanel, Cartier, Louis Vuitton, Loro Piana, Harry Winston and Hermes.

While Friedman shouts from the rooftops about his luxury aspirations, Ethan Allen has quietly become the luxury furniture retail brand of choice among affluent consumers, despite RH being more than four-times larger than Ethan Allen – $3.6 billion last year versus Ethan Allen at $791 million in fiscal 2023.

Ethan Allen ranked above RH in brand awareness and consideration to purchase in a survey conducted by The Affluent Consumer Research Company with which I am affiliated.

Among 250 affluent luxury consumers surveyed in the U.S. (average income $438k; 72% with investible assets $1 million or more), Ethan Allen’s brand awareness was 50% versus 34% for RH and consideration to purchase was 32% for Ethan Allen and 21% for RH.

These are highly-engaged buyers in the luxury home furniture market, with 49% saying they are spending more on furniture than in 2022 and 21% spending the same. Note: RH did not respond to my request for comment.

Ethan Allen chairman and CEO Farooq Kathwari resists comparing his company to RH. “We have a very different business model,” he shared with me, adding, “We are vertically integrated. We make the products, we design the products and we sell them through our people. RH does a good job overall, but their model is to grow the business very, very fast.”

As much as he credits Ethan Allen’s success to vertical integration over its 90 years and his 35-year run as its leader, the fact that he compares Ethan Allen to none may be the most important reason why Ethan Allen has reached the heights as a luxury brand.

Professor Jean-Noël Kapferer describes being incomparable as a critical pillar in the luxury market. “The luxury strategy is about building incomparability into all aspects of the brand,” he wrote. “Luxury brands are aggregators of value inherited from tradition, heritage, DNA, visions, cultural references. This is how they will make themselves comparable to none.”

Kathwari has built incomparability into the Ethan Allen brand by keeping his eye firmly fixed on the company, its operations, the customers, and especially its people who bring its tradition, heritage, vision and mission to life.

Kathwari’s hands-on leadership style gives him visibility across the entire company. Every week, he receives 50 reports from people throughout the company, not just reciting facts and figures, but sharing what he calls “wow stories” which are the “most important reports I get and read every Sunday,” he said.

The wow stories tell of people’s accomplishments regarding talent, marketing, service, technology and social responsibility – the five pillars on which the business is based. And he makes it a habit to respond to many of them personally.

Even as the company has grown to over 4,000 employees, including ten manufacturing facilities in the U.S., Mexico and Honduros – 75% of products are manufactured or assembled in the U.S. – and 172 retail design centers in North America, plus independently operated design centers in the U.S., Asia, the Middle East and Europe, Kathwari has maintained his entrepreneurial spirit that keeps the company moving forward and changing with the times.

On his leadership philosophy, Kathwari said, “I’ve always believed that an innovative culture is built on core values that never change. When you control your core values the ‘how’ can evolve with the times.”

Recent accomplishments include:

The company has modernized its product offerings under the theme of “Classics with a Modern Perspective” in recognition of today’s more sophisticated customer.

“Just five years back, people’s tastes in Florida were different from those in California. But now everybody agrees that what’s good taste is good taste everywhere,” he said.

And the company delivers exceptional quality and value for the money by controlling all aspects of its manufacturing and distribution.

It is repositioning all 172 design centers to Interior Design Destinations. The company just unveiled the new model at its flagship destination in Danbury, CT with the rest of its fleet to follow.

In addition, the company has moved about 80% of its existing North American centers to new locations to keep up with shifts in local shopping patterns. “Many of the stores that we had were established in the 50s in the 60s. So we had to put them in the right place, and that process continues.”

Emphasizing interior design service underscores its commitment to personalized customer service and employee development. Unlike other furniture stores that may offer design services as a sideline, Ethan Allen has built its business around professional interior design service.

“Our retail network is operated mostly by people who were interior designers, including Amy Franks, who runs the whole retail operation.” The company’s investment in 3D technology has been a big assist to the company’s interior design services, allowing designers to work anywhere the client is and deliver even higher-level design services.

As important as the company’s environmental responsibility policies are, it puts emphasis on its broader commitment to social responsibility with a focus on helping its people.

“ESG isn’t just doing something for Wall Street. You’ve got to make sure that you do the right things, and that includes helping your people do a good job,” he said.

For example, the company has made a real difference in the quality of life for its employees and their families in its Mexican upholstery manufacturing plant. The company provides free transportation, two low-cost meals per day to employees and onsite medical clinic and pharmacy. Plus, it gives their children in need of sight correction eyeglasses so they can do better in school.

Ethan Allen has been a two-time winner in the Great Places to Work Mexico certification and, for the fourth year in a row, honored for environmental and social responsibility by the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility..

Having just competed its fiscal fourth quarter, the company reported net sales were down 18% for the quarter ended June 30, though full-year sales declined only by 3%. But during both the quarter and the year, gross margins rose above 60%.

Kathwari said the company will continue moving forward in an “entrepreneurial and disciplined” fashion to engage customers and reward stockholders, who were paid $46.4 million in dividends during fiscal 2023.

As much as Kathwari shies away from direct comparisons with RH, it’s hard not to, especially considering Ethan Allen stock, trading at around $35, is such a bargain compared with RH’s at about $400 per share. Ethan Allen also ranks number 37 on Forbes Best Small Cap Companies list, while RH dropped off its Best Mid-Cap Companies list this year.

“Long before Restoration Hardware reinvented itself as RH, Ethan Allen made just as dramatic a transition going from a home furnishings retailer more identified with Early American furniture — and a war hero of the era, no less — into a contemporary-focused seller with staffs of interior designers in modern retail formats that made it easy for shoppers to buy from,” observed Warren Shoulberg, who’s been covering the home furnishings industry since 2000.

“And more recently, it has been the antithesis of RH,” he continued. “Instead of opening ever larger stores, Ethan Allen has shrunk its physical footprint into a compact format where one-on-one design consultations rather than wandering around hundreds of floor models made for a more efficient and satisfying buying experience. It’s no wonder consumers have responded as they have.”