Ethan Allen Interiors Inc (ETD) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the earnings release conference call. (Operator Instructions). I would now like to turn the conference over to your host, David Callen. Sir, you may begin.

Thank you, Shannon.

Good morning. I am David Callen, Ethan Allen's Vice President of Finance and Treasurer. Welcome to Ethan Allen's earnings conference call for our fiscal quarter ended September 30, 2012. This call is being webcast live on EthanAllen.com, where you will also find our press release which contains supporting details, including reconciliations of non-GAAP information referred to in our press release and on this call.

Our comments today will include forward-looking statements that are subject to risks, which may cause the actual results to be materially different than expected when making those statements. Please refer to our filings with the SEC for a complete review of those risks. The Company assumes no obligation to update or revise any forward-looking matters discussed during this call.

After our Chairman and CEO Farooq Kathwari provides his opening remarks, I will follow with details on the financial results. Farooq will then provide more details about our ongoing business initiatives before opening up the telephone lines for questions. With that, here is Farooq Kathwari.

Yes, thank you, Dave. I am pleased to provide a brief overview and, as Dave said, followed by him with more detailed financial information, and after that I will discuss our initiatives in greater detail and open for questions and comments.

As we reported, we had a good quarter. Our gross margins improved to 55.6% from 52.9% and our adjusted operating income was $19.6 million, a 43.9% increase from previous year. Our adjusted diluted net income per share was $0.38, compared to $0.25, an increase of 52%. Also important was that our retail division had an adjusted operating income of 1.8%.

Our sales increased by 1.4% over a 12.2% growth in the previous year. The previous year benefited from shipment of floor inventory to -- especially to our independent retail network. As you know, we eliminate any wholesale sales for the Company retail division undersold to the consumers.

During the last 18 months, we undertook a massive repositioning of our product lines, impacting efficiencies at all levels of our vertically integrated structure. We are pleased that, having substantially completed this transition, we see benefits in our gross and operating margins. We also continue to take steps to manage our operating expenses.

We maintained cash and equivalent [of] $100 million. Our inventories increased by $2.2 million since June 30, 2012, and $17 million since 9-30-2011. Almost all of the increase is at the wholesale finished goods inventory, reflecting increases due to the Ethan Allen Express to have a better service position on imported case goods and accessories, especially due to concerns of a potential dock strike on September 30 which now could potentially take place at the end of this year. We expect our inventories to come down by the end of December 2012, our second fiscal quarter.

We continue to make major progress in our initiatives to have relevant product, strengthen our interior design network, increase traffic through our aggressive advertising campaign, invest in technology at retail and manufacturing, and further refine our manufacturing and logistics. After Dave, I will discuss our initiatives in greater detail. Dave?

Thank you, Farooq.

Net sales for the quarter were $187.4 million, up 1.4% over the prior-year first quarter when sales grew 12.2%.

Our retail segment reported net sales of $149.1 million, an increase of 5.6% versus the prior-year quarter, including comparable design center net sales growth of 5%. This was on top of strong prior-year net sales growth by our retail division of 16.7%, including 14.9% comparable design center growth.

Our retail division written orders during the first quarter increased 9.1% over a strong 13.2% growth during the prior year's first quarter. Comparable design center written orders grew 8.2%.

The Company's retail division ended the quarter with 149 design centers, a net increase of three over this time last year. At September 30, 2012, our independent retailers operated 153 design centers, a net increase of six from the same time a year ago. This includes our retailer in China who operates 73 design centers, a net increase of 12 versus last year.

Our wholesale segment net sales for the quarter were $101.4 million, compared with $116.4 million in the prior-year quarter. The prior year's wholesale net sales included the shipment of new Elegance products for the floor displays in advance of the first phase of our product overhaul last year, which launched in September.

Our consolidated gross margin for the first quarter was 55.6%, up 270 basis points from 52.9% the prior-year quarter. Our retail division's net sales made up 79.5% of our consolidated net sales this quarter, up from 76.3% the prior year. This mix, along with operating improvements across our business, along with favorable pricing and product mix, drove the higher gross margin in the quarter.

Our operating expenses were well controlled. Excluding a $1.6 million loss on the sale of vacant real estate and the restructuring true-ups in both periods, operating expenses for the quarter grew less than 0.5% to $84.7 million.

As a result, our operating -- excuse me, our adjusted operating profit grew 43.9% to $19.6 million and 10.4% of net sales, up from $13.6 million and 7.4% of net sales in the prior-year first quarter.

Our income tax rate for the first quarter was 36.4% versus 40.3% the prior-year quarter. The impact of valuation reserves against certain deferred tax assets had a much greater impact on the prior-year rate. We still carry tax valuation reserves against certain retail deferred tax assets, which we expect will cause our reported tax rate to fluctuate again this fiscal year. Our normalized tax rate for both reporting periods was 36.5%.

Our adjusted earnings per diluted share for the quarter was $0.38, up 52% over the prior year on 1.4% growth in net sales, again demonstrating the significant leverage opportunity of this vertically integrated business.

We ended the quarter with $100 million in cash and securities, having invested $8.3 million during the quarter in capital expansions, including the purchase of a retail property in Florida. We also paid $2.6 million in dividends to our shareholders and invested $2.2 million in inventory, of which $1.5 million came along with acquisitions during the quarter.

Depreciation and amortization during the quarter was $4.6 million and is expected to be approximately $19 million to $20 million for the full fiscal year.

Our adjusted EBITDA grew 29.9% to $24.1 million this quarter, which is a healthy 12.9% of net sales.

Our balance sheet is strong and well positioned to support our initiatives. Now, Farooq will review details of the many business initiatives in progress.

Thanks, Dave.

As we mentioned in our press release, our competitive advantage arises from providing products of finest craftsmanship with excellent price points, offering complementary design services by about 2,000 interior design professionals working in our retail division and our dedicated Ethan Allen licensees, giving free local delivery, enhancing our technology in all aspects of our business, and manufacturing about 70% of our products in our North American facilities.

Executing against all of these elements helps us achieve our mission of Luxury Made Affordable. You will see this tagline in our advertising and communications.

Some of the key updates on our initiatives are -- in our offerings, we had substantially completed by June 2012 introduction of new products to our design centers. Most of the costs associated with this transition were also absorbed during this period.

In July and August, we introduced the Ethan Allen Express program. The objective of this program was to increase our attainability. To us, attainability meant getting the message across that products of our quality and offering complementary personal service of design and home delivery have excellent price points. The other objective was to deliver faster. We are getting this message across, increasing traffic especially among younger demographics.

The interesting fact is that while we are selling our in-stock Express product, most consumers, even first-time buyers, prefer our custom-made offerings as our timeframe for custom is also excellent. As you know, almost all of our US manufacturing case goods and upholstery has been converted to custom during the last 30 months.

This month, we launched our newest offerings, called American Colors. We launched it to the consumers. This program is substantially from existing products now offered in many new colors. While it is early, the program is being well received.

We also introduced to our network a new program called Fresh Colors, focused on younger demographics. We plan to start marketing this in January/February of 2013.

We also continue to strengthen our interior design network by adding entrepreneurial interior designers. The great recession has given us an opportunity to add experienced designers, most of whom operated their own businesses. As Dave mentioned, at 9-30-12 we had 302 design centers, 149 operated by the Company and 153 operated by licensees. We had 293 design centers a year back.

I'm also pleased that we acquired new design centers, one in Jacksonville, Florida, the other in Indianapolis, Indiana. Jacksonville, Florida, was operated by Frank Watson, former CEO of Lord & Taylor for about -- he was with us for about 20 years, and I am very pleased he has -- that after he acquired his design center, he has joined the Company to head our initiative to develop Ethan Allen design studios.

John Durkott was President of Kittle's, a regional furniture entity headquartered in Indianapolis. Kittle's also operated one freestanding Ethan Allen design center, which we also acquired, and John Durkott, I'm also pleased, has joined the Company as Managing Director to supervise our Great Lakes regional operations from Minnesota to Michigan.

We have a number of new design centers under construction, including in Montreal, Canada, to open end of November this year and in Brussels, Belgium, to open in December.

We continue to invest in various mediums to get our message across, including national television and digital mediums. While we increased our overall exposure, our advertising spending remained about the same in the quarter as compared to the previous year.

We continue to invest in technology. Currently, we are in process of migrating our website from internal servers to what is called the cloud environment. We are also in the process of establishing international website capabilities. We'll launch our website by end of November in Canada with English and French versions. In December/January, we plan to launch our European website, initially in French and Dutch versions.

Our manufacturing has been stabilized and operating with greater efficiency. During the last three years, we made major consolidations, converted to custom, opened two new facilities in Mexico and Honduras.

We started celebrating Ethan Allen's 80th year about three weeks back in Vermont, where our first manufacturing was established, and last week we were joined by over 700 associates in two conferences, our retail conference and our interior design conferences. Both were well received.

As I mentioned in the press release, the economy remains challenging. Many uncertainties exist and hard to predict from quarter to quarter. However, we are well positioned and remain cautiously optimistic.

With that, I'd like to open it for any questions and comments.

(Operator Instructions). Budd Bugatch, Raymond James.

Good morning, Budd.

Budd, are you there?

Can you hear me?

Yes, I can hear you now, Budd.

Okay. Again, good morning, Farooq, and good morning, David, and congratulations on the quarter.

Thank you (multiple speakers)

Also on some of the initiatives. Particularly on retail, talk to me or talk to us about what retail profitability looks like going forward. It's nice to see that I think it's from the first quarter and so, fourth quarter of 2008 for the first operating profit of retail. So give us a feel for what you see going forward.

Well, Budd, you're right. It's very gratifying to see that we are starting to move the other direction, although the retail always, as you know, contributed to the consolidated margins in a major way all along this period. But good to see the operating margins.

You know, as you can see, when we delivered $149 million in the retail division, we were able to operate at about 2% operating margin. We do more, we have a leverage. We do less, it goes the other way. So I think at this stage, I believe we have the opportunity, as long as the economy remains as reasonably stable, of doing about $150 million plus of business a quarter.

Okay. Also, talk a little bit more about the international opportunities. Are there any other continents which you're looking at right now?

We are. As you know, we're very fortunate. We have done well certainly with China, with our partner there, who we also recognized last week, along with about 40 of our Ethan Allen licensees working with us 30-plus years, 30 to 60 years. So it was great to have them all there.

We are starting -- obviously Canada, Montreal, is important because once we go to Montreal, everything has to be changed in French, which is what we are doing, and now to Brussels. We are also -- the Brussels is going to give us a gateway to Europe. We've also established logistics in Antwerp and we have also gotten on board a Managing Director for Europe who has joined us, along with Arne Borrey, who you met, who is the Vice President of International. So our objective is to now start expanding in Europe in somewhat of a manner that makes sense, meaning we have our own operation, our own logistics.

We also are expanding in the Middle East. In February, we are going to open through a licensee, a very good licensee, our first in Saudi Arabia, in Jeddah. As you know, we are already in Dubai, in Kuwait, and Oman. And in fact, in Amman, Jordan, interestingly, they are opening the second Ethan Allen design center is under construction. But then after that, we are just in the process of completing a joint venture in India and we will -- our objective is to enter India next year.

Okay, and just to make sure I understand, the Brussels store, that's Company-owned, right?

It is, yes.

How about Montreal? Is that, also?

It is, yes.

Okay, all right. The other ones, though, will be licensee or joint ventures?

Well, in Saudi Arabia, it is a licensee. In India, our objective is for a joint venture, operate one or two or three ourselves, and then license the rest. And that's the objective in Europe, also.

Okay. And no issue in India with the FDI?

Yes, that's what we were waiting for. We were -- we have (laughter) eight years. I know India quite well, and so we have lots of very, very interesting parties who wanted to work with us, but we want to have control, and we didn't want to do it until the FDI was passed and now they have passed it.

Okay. And my last question is, I think Richard has said 100 stores in China. Is that -- I thought by the end of this year, but --

Yes, approximately. That's our intention. As you know, they've done a great job and they're growing well.

Okay. Congratulations. Best of luck on the rest of the year.

Thank you, Budd.

Brad Thomas, KeyBanc Capital Markets.

Hi, good morning, Brad.

Hey, good morning, Farooq. Good morning, David. Congrats on a great quarter here.

I wanted to just ask a little bit about the written orders. We've had kind of an interesting trend over the last three quarters, up 8% in your third quarter, up just a little under 1% last quarter, and then up again 8% this quarter. You know, as you step back and kind of look at the trends, maybe you can help us understand a little bit more of what caused that volatility and what your level of confidence is in the current run rate that we're seeing right now?

You know, when we -- this quarter, we steadily increased our -- first month, that is, July, was somewhat flat. August, we started an increase, and September, it went up quite a bit in September to come to the total of 9.1% increase and 8.2% in comps written.

It also -- it's hard to really pin down the reasons, as you can take a look at it. You mentioned that our -- in the last quarter, we were up 2.3%. You also have to keep in mind what we're comparing with. Our third quarter, we were up 11%, and the second quarter, we were up 10.3%, so when you take a look at the fiscal year -- I mean, you can go by the years. In fiscal year ended 12 -- 6-30-12, we were up 8.9%. The previous year, we were up 7.7%.

So on an annual basis, 7% to 8% or so we have been maintaining so far, but going forward, you know, it's an open question. But we are positioned well. Advertising is strong. We've got very strong interior designers, while the economy remains somewhat of a concern.

Yes, got you. And then, just following up on Budd's question about the retail profitability, a very nice improvement from the first quarter of last year in the retail segment. Was there anything that you did, beyond just improvements in the revenues, in terms of maybe were there any store closures of underperforming stores or anything in terms of the lease rates? Anything else that really helped the profitability beyond revenue (multiple speakers)

I think the main thing was that we increased our gross margins because our gross margins were impacted at the retail by the liquidations of all these floor samples, so our gross margins are retail is what -- was the major contribution.

And the second is our focus on managing our operating expenses.

Got you. And then, we've talked about this over the last several quarters, but as we move forward through this fiscal year and we anniversary the promotions that you did last year, would you expect things to play out in a similar way where we continue to see nice improvements in gross margins as we anniversary some of the promotions that you did last year?

Well, the gross margins are impacted -- being a vertically integrated company, our gross margins are impacted how our manufacturing backlogs are. Our gross margins impacted also the retail network. So if our business holds up, which is what we expect, then I think the kind of gross margins you see are possible.

Also keep in mind that our gross margins, in addition to our efficiencies, in addition to the impact in the retail gross margins, are also benefiting to some degree with a higher proportion of retail to total business. We've got also to keep that in mind, although that was, in this time, somewhat of a smaller impact. Most of the impact was improvement in gross margins, first at the retail level and then, second, at the wholesale level.

Got you. Thank you very much, Farooq.

All right. Thanks, Brad.

John Baugh, Stifel Nicolaus.

Good morning, John.

Good morning, Farooq and David. Congratulations as well. Could we talk about those gross margins?

You mentioned price and mix. I wonder if you could clarify the price number roughly.

And then on the mix, I've been thinking that perhaps if Ethan Allen Express was starting to take hold, we'd see -- and I understand that with a higher retail, your gross margins go up on the weighting. I get that. But in terms of the product mix, Ethan Allen Express, I would think, everything equal, would be a lower ticket and a lower margin, and yet you're seeing a mix improvement. And you've referenced that it's increasing traffic, but people still want to do custom, so kind of curious about that dynamic.

Yes, John. That really is -- yes, we are operating somewhat of a lower margin on the Express on the wholesale side, while the opportunity at the retail is about the same. So the retail margins are more or less the same across the board. We take the hit at the wholesale side.

But on the other hand, the good news is that most people, they come in who are interested in fast deliveries. Well, some buy it right away. Others say, well, how long does it take to get it? We are now shipping within four to five weeks custom upholstery and case goods.

End of the day, when they come in and work also with our designers -- and having interior designers makes a big difference. If we didn't have that, the chances are we'd be selling a lot of what we show.

And the other factor is that we have also been using this opportunity of financing. We've been giving an option -- for instance, some of this last month, we gave an option of -- or this month, we give an option of 10% off our -- a 48-months interest-free rate promotion, or financing. And more and more people are starting to use the 48 months. That also -- not at this stage, not material. As it gets material, we'll let you know.

The cost of the financing goes into our selling expenses, not to our gross margin. So to some degree, a little bit gross margin is positively impacted when we sell more through financing. Not material right now, but I have told Dave to keep a watch on it. Watch it, and if it gets a little material, let everybody know.

Okay, so help me with Express. Has it been out long enough to truly measure? What is your service position? So if I walk and I'm looking at five SKUs, can I get all five of those SKUs delivered within two weeks in 90%-plus of the cases? Just help me a little bit with where that program is.

90%-plus, you're going to get it within two weeks. That the product is in stock, and in fact, we made more stocks than we are selling, which will, of course, equal out. But at this stage, it's being shipped within two days after receiving an order.

Wow, great. And then, help me with China. We talked a little bit about the store count. How is that influencing sales, profits, inventory? Any financials on the influence of China on the overall numbers.

Very positive. They are placing orders from our stock or for custom. In fact, anything they buy in case goods. And 60% of what we sell in China, the Ethan Allen program, is shipped from our North American facilities, mostly US.

So when they place an order, we make it, whether it's upholstery or whether it is case goods. It gets into line as it will -- as it does as anybody else who orders it. Any retailer anywhere in the world who orders it, today it gets in line and into our backlog, and we ship it. So it's very positive.

What is their typical sales per store versus a US store?

You know, John, it ranges from 5,000-square-foot stores to 50,000 square foot, so it's hard to really give any generalization of what they do there.

I would assume it's lower.

Well, I don't know, really. It's a good question. I'll try to find out some information, but it varies across the board based on -- because it's such a variety of stores that they have and locations that they have and sizes they have. But it's a good question. I'll try to get some answers, if I can, for next quarter.

Okay, and then my last question is simply the media or ad spend going forward. Is the plan to keep that in dollars flat or percentage of revenue flat? Any help there. Thank you.

John, at this stage, more or less it is going to remain percentage flat, which means it possibly will increase some in dollars.

However, we continue to look at more creative ways of spending our money, and this is what we did this quarter. We thought we were going to spend 15% more this past quarter -- I mean, this quarter just ended, but we didn't. We were able to use it more efficiently, and that's what we are continuously looking at, how do we make it more efficient.

So I don't see us at this stage spending a lot more. On the other hand, if we see the opportunities that we are ready -- that we can get more traffic, which increases more business, then you're going to see it increase, but at a percentage of sales. So percentage is important, as you mentioned.

Barry Vogel, Barry Vogel & Associates.

Good morning, Farooq; good morning, David.

Good morning, Barry.

Considering you did a phenomenal job in gross margins at 55.6% and considering that you're giving us a hint that if retail continues as a relatively decent portion of mix, retail should be profitable, which obviously would be very helpful for gross margins, I'm curious why didn't you buy any shares, considering you're doing so well fundamentally and the outlook for housing is better? The economy is healing. We've come through very difficult times. You're in much better shape than most of your competitors. Was there any reason you didn't buy any shares because I know they were selling in the low 20s at some point?

At this stage, Barry, I was focused on business. I was focused on making sure we do all those things right.

You know, when the opportunity is right, we will buy the shares, but that was not my focus at this time. And also, as I said, I want to keep at least $100 million in the bank.

You have a $100 million pillow as well?

Yes, that's for the time. Keep in mind, half of that is customer deposits. And you know, as I said all along, I take that seriously. I want to keep that money, I want to make sure that we don't jeopardize our customers and their deposits.

Okay. And David, could you tell us what capital expenditures looked like this year, including any expenditures for acquisitions of stores, et cetera?

Yes, we are still committed to about a $20 million total CapEx for the year.

Thank you very much. You guys did a great job, no question about it.

Thanks, Barry, always good to hear from you.

Thank you.

Todd Schwartzman, Sidoti & Company.

Hi, good morning, Farooq; good morning, David.

Good morning, Todd.

What was the capacity utilization for the quarter, Farooq?

You know, Todd, as you know, based on -- we have a lot of facilities. We've got a lot of opportunities of doubling the business, but of course we've had to put in more people and all of that.

At this time, we say about -- close to 80%. And that number doesn't change, Todd.

Okay. So your gross margin was up, what, 270 basis points from a year ago?

Yes.

You went through some of the -- all of the factors, the mix, pricing, manufacturing efficiency. You know, of that 270, can you put some numbers to it, maybe allocating in basis points how much we attribute to each of those factors?

[I'd argue] very, very rough, and Dave and I don't have those numbers, but I will give you my just gut feeling. About 70% due to improvement at retail gross margins, 30% at wholesale. Don't hold me to it, but those are approximate numbers, and I think we were pretty close.

Okay. Just going back, my model dates back to 2001. There's obviously the Company is dramatically changed from a decade ago. But how far back do you have to go to see a 55.5% gross margin?

This is -- we don't -- this is record. We never had 55.5% gross margin.

Right, okay. On the traffic, I'm particularly interested in the younger consumers, not just what Express may be bringing in, but just overall. Can you quantify what you're seeing and maybe specify what age group are you defining that? Under 40, under 35? Maybe just kind of some sense of what the delta was there in traffic amongst the newer consumers that you're trying to court?

Todd, it's a little bit too early. As you see, it's only a couple of months.

But just initial reaction is that we are starting to also attract newer demographics in the ages of 30 and up. As you know, during the recession we intentionally said that our advertising would focus on the higher demographic, both in income and age, and that worked.

But now we are expanding it in our direct mail, in our advertising. We just started this last quarter and started investing a fair amount of money in digital advertising, in search engines, which, of course, are very, very important for that age.

So we will -- we are attracting now 30s and up, and then keep in mind this new program that is going to be introduced in January/February of next year called Fresh Colors. This continues with this American Colors theme that is color, but this is product which is smaller in scale to be used by young -- I'm talking of children from 4, 5 years and up, but also by adults because it's smaller in scale with a lot of color. That also will give us an opportunity to get and to market to younger people in their 30s with young children, and that's good for the children as well as the parents.

So that will continue our marketing and exposure to reach a younger population.

So unlike American Colors, are you saying that the Fresh Colors will be largely new products?

Absolutely, yes.

100% new products?

I don't know 100%, but at least, I think, 80%.

Okay. So how are you -- if they are for use by young kids as well as adults, how are you -- will you have but one marketing campaign or will you have different messages, depending on the ultimate targeted end user? How are you going to market the line?

Initially, we will market it to two age groups, two younger age groups, from 6 to 11 and 12 to 16. That's our television advertising. Other mediums are being drilled for that purpose.

Then the use of that will be -- the use of the products for adults will be, you might say, the second stage. Yet, of course, we will show the application of that in many of our communications to our interior design network so they are able to understand and utilize it. But initially, it will be, you might say, 3, 4 to 16, then we will expand it to others.

Okay. In the first quarter, your ad spending, did you -- I realize that the total was relatively flat, you mentioned. Was there a change in mix? Did you cut back specifically on TV during the election season and are you doing so now? And does that revert to a more normal mix as you get past this current quarter?

Yes, we did increase substantially our direct mail during the month of July and August and we did not run television on July and August.

We have gone back to television in October, this month, and we will substantially go back in television right after this election is over, and hopefully all that money being spent is finished. So our television campaign this quarter is going to start substantially from November 7.

Okay.

In the first quarter, you're right. We did cut it back and had spent more money on direct mail, which, by the way, was absorbed more by the retail division than the wholesale. Despite that, the retail division had a good profitability.

Okay. And lastly, can you give an update on the Honduras plant?

Yes, the Honduras plant is -- you know, we acquired it last December. By April, we were starting to receive chair parts and assemble them, which we have continued, and we have now over 100 associates and we are now -- we have put in there a state-of-the-art finishing facilities because all these colors that we have.

Honduras, as well as Mexico, is completely focused on developing custom product. You know, it's five, six days away from the US, from our distribution centers.

Our objective is that by early January/February, it will be equipped completely to make more products, even case goods. Right now, it is making chairs, but by our third quarter we will be producing more products there. We are absorbing some overhead, some costs, and as you'll notice, we have not shown them separately, but we are now absorbing them and going forward, although we are still absorbing more costs at this stage than the amount of volume that's being spent. But we are making great progress there, and especially a tremendous amount of progress in Mexico.

Very good. Thank you very much.

Thanks, Todd.

[Matt McNow], Goldman Sachs.

Hello. The Company has mentioned over the summer that sales were particularly event or mailer driven, with substantial volumes coming during the very last few days of the month. Has this pattern abated somewhat, and are you able to balance the volumes out in a little bit more of a normal fashion through the month at this point?

No, not really. It's amazing how people wait to the last minute. You know, 30% of the business is done in the last week of the month because people -- well, there is also a reason for it. You know, the first couple of weeks, three weeks, our interior designers work with clients.

Our business is not people coming in and buying it as a commodity, and so then they could've bought it. Our people work with them. They make house calls. They work on projects. And it takes them a couple of weeks to work on projects, and by the end of the week -- end of the month, they're ready to close. And we have seen that continue.

Okay, and could you provide an update on how October looks? I think last call you spoke about July trends. How does October look from a sales standpoint relative to August and September?

You know, it's still very, very early, although, you know, hopefully people are back to their homes, back working. There's still somewhat a distraction with all this election campaign going on. And as I also said to your first question, we will know October in the last week of October.

Sure, and my last question, could you provide a quantification on the impact to inventory investment from Ethan Allen Express? Thank you.

I think it's approximately close to $6 million, $7 million as a total investment of inventory in Express.

All right, thanks.

Thank you.

(Operator Instructions). Jeffrey Matthews, Ram Partners.

Yes, please, good morning.

Mr. Matthews, your line is open. Please check your mute button.

They're maybe not there.

(Operator Instructions). I'm showing no further questions at this time.

All right, Shannon, thanks very much and thank you for being on the call. Any questions, please let us know. Thanks very much.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.