Investor Meeting

Feb 25, 2019

Slides

Are you ready? All right. We'll go ahead and get started with our meeting. Welcome to the Ethan Allen 2019 Investor Meeting. I'm pleased to have everybody here today on Corey Whiteley, Chief Financial Officer. We'll go ahead and get started. As a reminder, the presentation today will contain forward looking information and all the information should be taken in conjunction with the company's annual report on Form Ten K and any other reports filed with the Securities And Exchange Commission. With that, I'll turn it over to Fruk Cafore, our Chairman and Chief Executive Officer. Good morning and welcome to our investor conference, which is being webcasted. We are pleased several of our board members are here today and others are participating in the live webcast. Also with us are a number of our management associates. Our Retail Manufacturing And Logistics Management are in the field. Last 4 days of the month as you know are very important. And also, as you must have noticed, this morning, we filed an Eight K also a brief press release regarding the question that is always asked. Harvest business. As we reported, our written sales were up about 5% from January 1 to the President's Day weekend, and so far momentum is continuing. Now we have been profitable for 86 years. We have returned over $1,000,000,000 to our stockholders since our IPO in 1993. And investors close to over to $800,000,000 in capital expenditures. This fiscal year so far, to January 31, 37 months, and we've distributed $42,000,000 in dividends, a 73% increase from the previous year. Our focus is to grow our sales and as you know, our vertical integration provides an opportunity to increase our profitability During the last few years, the impact of globalization, commoditization and technology has impacted all businesses creating major disruptions and an We believe our focus on personal service is our competitive advantage. We believe there is a vacuum in many industries especially ours, differentiating offerings and personal service. We designed the products, sourced the materials, manufacture over 70% of our products in our workshops in North America. Operate a global retail network with the largest interior design professionals. We focus all of our operations keeping in view of our social responsibility within inside and outside. Craftsmanship lives with us. About 70% to 75% of our products are made in our own North American workshops. Complementary design service is keys to our business. We have 1200 designers in North America, regional network and 2000 worldwide. Premium in home delivery is very critical. It was late in the eighties. We decided to take over the logistics of our enterprise by delivering our products at one cost nationally. Today, we have a strong logistics network, which means not only great service, but it also is important for returns of the product and also on the issue of profitability. We have expanded our product offerings to design to reach a larger consumer base. Our objective is to expand our reach to more people. And if you go to our design centers, You will see products and offerings, and I would say this is an Ethan Allen, you may opt out more modern, more accessible, more affordable, scale for smaller spaces and many products available in 30 days or less and can be customized with options with as little or as much as the customer wants. These are these are the products that all have been introduced in the last year or so. You can see that it reflects in terms of style, the attitude, But one thing is consistent. The level of quality at all our products is similar. Great offerings, great prices. And in fact, if you take a look at our the prices, people are surprised that we are able to do this quality at the prices that we are doing. And again, this table consists of many options. It shares have options. Customization is part of our business. As little or as much as customers want. We were total home from art to lighting, to rugs, home textiles. Lot of we're right. Then this is an Ethan Allen that brings the whole world home. Effortless elegance, Louisville luxury curated looks, design influences from around the world. And here, you can see more options, more customization. And again, you can take it the way it is, or you can do customization and again with the help of our interior designers, that is possible. Great products, variety of styles, again, classics, but with a modern perspective. And this third one is just an Ethan alloy where everything is possible. Dramatic, iconic styles, detailed exceptional customer options. And this is products where you can now take it to the next level. In terms of design, in terms of prices. I sort of say somewhat jokingly, but not jokingly that they are not that we are to some degree able to do this like great automobile companies like BMW, Mercedes, and all you have been able to do They were at one time known for in the middle. I would say they're 5 Series. Then they decided, no, we got to reach consumers who are, you might say, the millennials or people who want something modern, smaller scale for the introducer 3 series. But then they also introduced the the 78. And not many brands can do that. The brand has to be desired and the brand has to be known you got to be maintaining quality. We have that opportunity. For many years, we attempted to open up different stores with different brands. That was the time everybody was doing it, but that is not we have the option and opportunity that is unique. That we can take our brand and make it available from, you might say, the 3 to the 7 or 8, and that's what we are looking at it. Another thing that's happened in our industry is that products of this nature of this level of quality and businesses that we're doing it, many of them are out of business. Modernization is taken over, low quality, price factors. That gives us an opportunity because we can make these available even at a very, very you might say competitive and even affordable price for the level of quality that we have. And this, we are going to leverage as we move forward in in our messaging, both in our interior design centers and then also in our communications. This is quality. This is design. And, you and those of you who are here have seen our products where we are expanding and increasing our reach, which you might say, in a more relaxed model is casual, again, livable, relaxed, in spite by nature, transitional, mixed materials. And this is going to be introduced in April May of this year to our network. That you can see the attitude here. Great quality and prices represents a great value. And again, options in terms of finishes, this chair, you can take it the way it is, or it can be in a 1000 different fabrics. You can use it. So our manufacturing and I'll talk about that gives us an opportunity to do customization right here in North America. Also, we are living outdoor living is becoming important, while we have a program, but It's okay, but we are going to substantially increase our presence in what you might call the home and garden. And these products are being introduced actually also in April May to our clients. And as you can see, it reflects good design, good quality, availability is important, and today also, as you know, outdoor living in terms of even upholstery is becoming important. Different from wood to metal, very classic designs with a gain of the very modern perspective. You have, also Fireflies and outdoor Fireplaces are becoming important. So this is going to be marketed starting in the spring of this year from April onwards. But very important, what differentiates us is our in store, our in design center experience. We focus on interior design. Our objective is to combine personal service and technology. You those of you who went to our Danbury Design Center is very, very different than was 5 years back. In the 5 years back, you entered into a furniture store. Now we're entering into an interior design center. We're upfront that our interior designers, their workstations, the technology that they need and all the products they need to create beautiful homes is there. And on a plan basis, we are converging our design centers all over the country. Obviously, we're starting we started the process about, few years back. But we're accelerating it because this is working well, and it gets a message across what our business is. So our tools are there, where it's from rugs, our upholstery fabrics are the various different finishes that our consumers can utilize. The opportunity is to sell great products as they are, but give the people the option and opportunity to expand it. But our tier designers are tremendously important. 2000, I think, about 1500 or 1200 or so in our own retail network. And is they also determine how we run our business because for me, these 2000 or so into designers, especially the ones in North America are tremendously important. Our credibility, we could sell our products to others. We can even sell online a lot of product at different price points, but then I will always say, we've got to maintain the credibility with the consumers and our own entrepreneurs. Because these folks are entrepreneurs. They're professionals. They're dedicated. And I think as we move forward, we'll even further differentiate us from competition. Customerization is critical, but you got to also do it faster. 5 years back, if you delivered a custom sofa in 4 months, they thought it would have been pretty good. Today, they expect it in less than 4 weeks. Quick shift upholstery that you have seen in our design centers, we on the average, it is delivered in 15 to 18 days all over the United States. Something like that was not possible before, but technology and our the way we have established it is possible today. We're also being, as you know, repositioning our interior design network. Most of these design centers we acquired them from retiring retailers. 20 years back, we had practically none. We just had this Danbury Design Center. And maybe 2 or 3 others. Today, as you can see, almost 65% to 70% on North America, we are operating ourselves. And then we had to relocate most of these stores were opened in the 1950s 60s. So today, as you can see, 69% had been relocated in the last 15 years. Just to give a little idea of what's happening at Kokan. We just opened about a month or so back we built actually this one, we purchased this land sometime back and we purchased this in Denver, Colorado. This happens to be about grew 12,000 square feet, but average today is about 10,000 square feet versus 16,000 square feet. So as you can see, we have 140 our company operated in the United States and we've got 6 in Canada. Then we have 42 with our independent retail licensees, and the rest is international. Normally, New York is under construction right now, again, a retailer with us, as our family for about right, being close to 60 years retired last year second generation. We took it over, then we had to move it. And this is a real good location. Same thing in Iowa River Landing. This is in Cedar Rapids, Iowa. We are in the process of constructing it, moving it. We also are moving on in Tyson's corner. This is a premier premium location design center. We also are just in the process of all of these under construction in Ann Arbor, Michigan as well. Also, construction is in Western California and Rancho Mirage is under construction right now. Internationally, we continue to make progress And, as you know, China has been our major growth and also, of course, but also in the last year or so, they've been, they've been challenges in China. Having said this, they are actually opening the next 2 weeks. 1 of the main it is our partner, Marcor, in China, a flagship design center in Wuhan, China. And our presence is about 15,000 square feet. And Dan Grove is actually going there for the grand opening in a couple of weeks. Next week, along with opening a design center studio in Cambodia, and he's also going to go to the grand opening here. He really has a great time visiting all these grand openings. Plus he's also visiting a number of U. S. Embassies. I'll talk about that in which we have the State Department Program. So on, as shown internationally, we the China was also impacted with this possible tariffs. It impacted the consumers over there, but also on but also the Chinese economy has been softer is something that, of course, you all know you have been reading about it. Our marketing focus is to expand to get the message across a lot of offerings. Get the message across an interior design company, focus on our quality, craftsmanship, service, value, our social responsibility. And the main channels that we are using are direct mail, the digital, television in some key markets. And grassroots, major, major grassroots efforts, and I'll talk more about that. In March, in fact, we decided to give you a copy of our March attraction mail, in which, which is really talking about what I was referring to earlier, the three stories in style, getting a message across and you'll be able to see that projected in our design centers in all our communications, the fact that we can differentiate, we have the opportunity of reaching a larger consumer base with the 3 attitudes that we have developed. In everything we do, we talk about our social responsibility. In terms of in everywhere, for instance, in our operations in Silao, Mexico and Honduras, we operate similar environmental and safety as we have in Vermont, not needed, but we believe that the right thing to do, and it had tremendous benefits. We have the lowest turnover. Because it takes about 1 year or plus to train one person to be an upholstral. So you don't want turnover. So creating that is important. So craftsmanship is critical. We are known for that. And complimentary design service home delivery as I talked about earlier. This is a message that's getting across in this. This is our, March, direct mail, In March, April, May, we'll be sending it out close to, close to 5,000,000 direct mail to our clients. I think this is again, I'm just using my terminology. Ladies and gentlemen, you may not know, just the three series. We've got to make sure it gets the message gets across that we are strong in this. Then this is the second attitude that brings the whole world home to Ethan Allen. More options, classic designs with a modern perspective, and this one where everything is possible. It's even more options. Even at higher end. This is where people may have to go to interior design places to buy, but we provide that opportunity for clients. And as I mentioned in key markets, we're utilizing local broadcast as TV. Last year, we spent a fair amount of national television this year. That is not the case. And that's why all the questions is going to be about our advertising. Last year, we spent a fair amount of money on advertising. I'll talk about it this year. It's going to be still strong. But not as much as we spent last year because we're not going to have that major national television campaign that we had last year. In our 3rd fourth quarter of last year. Now what I would like to do is this, we have a whole team working on technology. And in our marketing because today, technology and every element is taking over. So I like to have Cory because Cory really started in technology, and I put him in finance, but he's got a road background in technology and asked him to talk a little bit about the technology. Yeah. Thank you, actual customers are we are upgrading our CRM system, which houses all of our consumer data under the integrated Salesforce Marketing System. This system will allow us to better target existing customers and prospective customers to generate additional traffic and sales as well as to make our advertising expenditures work harder. Now connecting with the CRM or our customer relations management system is a data management platform, a social studio, and our marketing cloud. This integrated marketing system provides the ability to harness customer data from any source based on attributes, browsing behaviors and purchase history, to build personalized messaging to effectively drive awareness and frictionless experiences With that, our digital marketing campaigns target and reach consumers in every part of the funnel, building awareness, placing the brand and their consideration set, messaging for conversion and focusing on loyalty with the repeat purchase cycle. Over the past couple of years, we've invested about 1,600,000 in developing and expansive library of photo realistic three d models of our products and related three d software applications. Including our 360 degree product viewer on ethanallen.com, our newly launched 3 d room planner, and the Ethan Allen in home augmented reality app. The AR app includes over 3000 3 d digital assets that are off to scale showing how Ethan Allen products look and fit in the home. Augmented reality or AR superimposes a digitally generated image over a user's real world view. With the Ethan Allen in home app, a customer can visualize products in their own home using an iOS or Android phone or tablet. Augmented reality is a unique way to engage customers and contributes to better purchasing decisions. It's also the perfect complement to working with our designers and is transitioning the retail experience for our clients. The 3 d room planner is a tool for our designers that enables them to enhance the customer experience in the design center. The application allows the 2 d to 3 d rendering in high definition. A designer can also work with a client not only in the design center, but also remotely with an online customer to create photo realistic room settings the customer can visualize how their room will look easing the path to purchase. Combining technology with personal service starts online with our live chat tool on infinerallen.com. Over 600 of our Ethanol And Design Professionals connect online client activity with the brick and mortar design services. About 75% of sales derived from chats move offline into our design center channel. So very effective in starting the process and then continuing in our brick and mortar, taking online brick and mortar and combining them together. Okay. Thanks, Corey. But as you can understand, it's a very integrated team that does it from a technology to a marketing team, and is very, very important in terms of reaching more customers today. Considering with that, I was talking about, our local marketing. One of the major focus that we have is grassroots marketing with our 1200 interior design is really our 1200 ambassadors. Giving them the tools to reach clients in the local market is critical. And that's where a lot of our focus is in terms of having designer showrooms, special events, all of that is taking place all of the country and we accelerate it as we go forward. I also mentioned that in addition to our main focus on Ethanol and as you know, we only market our products for our Ethanol Network. We have intended to go and sell our products to others. But as I said, my our focus is to be to the right and to make sure that we also treat all our clients and our own internal entrepreneurs with with the the the the dignity and also make sure that they see a future. However, where we have found the opportunities is when the department of state where we have had, as you know, we've done well and I'll talk briefly about it. We have also, been involved with hospitality, some in some real estate, elite communities and others. The GSA Department of State is a 5 year program first year and a half, as you know, is public that we had to be involved and go and compete with the company that was for a fair part of last year under bankruptcy. And they were they had made a lot of products inventory and they were selling it and actually bidding on it at prices that were pretty low. And we decided that we'll We'll bid and we'll be we won most of them, but the result was that it did impact on sales and profitability for that program. And now starting late December, and onwards, we have been able to bid and we are getting the fair amount of the business and margin that are much, much higher than we did last year. It is a brand that is known in preferred, Dan said, in addition to, going to these grand openings, he would be using a number of embassies. And in fact, we run out of our associates which is also, right now, we're coming back from Armenia and Georgia, and we just had discussion with somebody in Tajikistan, all of this interestingly had, American products supplied their companies that are no longer doing a lot of business. So they came to us we are working with them to establish Ethan, galleries in the whole of Central Asia and other countries as well. Thank you. You've also heard about our involvement with the Margarital Wheel Program. The main one right now is in Orlando. It's Powton Vacation Homes and a hotel, which we've just finished as hotel to own bedrooms. And for the Powton Homes, we've got $17,000 per home, So approximately $17,000,000 of opportunity. And we're also in the process of discussing future locations with the market retail hotels in the country. We also have some contract. We will expand it. We have a master sleeper program with Disney where all the sleepers are at this stage to have a master program with us. I also want to talk about manufacturing. You know, we are a vertically integrated company. And it is it also has an impact on our, financials We keep we have a great operating leverage and business increases, but on the other hand, operating margins are impacted if we don't keep our manufacturing busy. So it's a balancing act that we have to do. A lot of lot of folks in English, hardly anybody has as much as we do, the business is slow, somebody else's problem. We've got to keep our people busy. And if they're not busy, it impacts on our profitability. Source. As you will see on our as you've seen in the past, the vertical integration has a tremendous opportunity for growth, but we've got increased sales. So we have, at this stage, operations in 4 major areas. Vermont is where, of course, where Ethanolen started, We have a strong good manufacturing from the sawmill to manufacturing. Our big major area in our upholstery is in North Carolina where we have 3 major plants. Then we opened up at 40,000 square foot plant, but previously they didn't fill out Mexico is now 600,000 square feet or 1000 people. Which is a upholstery plan that went to Honduras to establish a good plan from 0 to 500 people right now. So we are well set between in North America. Our focus is to manufacture, to have it under controls or 9th, I would say 70% or 70% of our products are made in our own workshops in North America. These are the plans that I mentioned in Vermont, in, North Carolina. We'll also have a plant in, Pacific, New Jersey that does our some of our excellent products. Technology is critically important. We have invested a great deal all of it for all these years. As you know, the good thing is we own all the facilities, all our manufacturing is owned by us. So where we've had investing is in technologies. And and that has an impact of in terms of making it efficient and better quality. So just in the last three years, it's $11,000,000. It was all just new equipment. And a lot of this, in fact, we're also able to purchase from companies that are no longer in existence, so we can get it at good values. In addition to our products, a lot of our accent products are made up offshore, whether it is in some in Indonesia, some here is still in China, India, Italy. And We also are very strong in making sure that our standards of safety and social responsibility are met otherwise we don't do business with Logistics is critical in our business. And as I mentioned earlier, we operate a wholesale network which goes from our manufacturing to our international distribution centers and from there to our regional service centers. We have approximately a 1,000,000 square feet of distribution centers. Now keep in mind, we would require for our volume most likely at least twice or three times the size if we didn't do as much custom. That product, we don't have warehouse. That product is made in fact all are upholstery which represents close to 50 5 percent of our total business is made 1 at a time. No finish with inventory. Big difference. And that and then our good products also, in but almost half of that is custom. Again, we make it when we get to order. We have to make sure we have the parts and inventory. That has an implication on inventories and also has an implication on our logistics. From our national distribution, it goes through our 28 Retail Division Service Centers. We go from our manufacturing to our national distribution centers and from there to our retail, and then it is delivered, it might say, white glove service to our consumers. Now I briefly have been mentioning about social responsibility, All this information we have available to you that we have focused on sustainability. 2010 implemented American finishing the lines and environmental management standards. And you can see in terms of the amount we have reduced carbon footprint by 34%. Electrical usage retention, 10% water usage were 21%. Recycling is up 13%. Reenerhouse gas are down 27%. Landfill rates are down 15%. This if we have not been doing this for the last 15, 20, 30 years, it will not be possible. So this is a great focus across our enterprise. Like for instance, we shrink smart we used to have products, we used to buy cartons, and we used to, whether the product was 50% besides the 60% we use at Falcon, but today it's our all our packaging is customized. And that reduces a tremendous amount of waste. It reduces the amount of space we have in our trucks. Reduces the space in our distribution centers and work centers and also is important and is good for environmental and sustainability. So again, switching to LED, we have relaunched 90% for the hydrogen center. It has a tremendous impact in terms of, less energy and also these bulbs last a long time. So to focus on our code of conduct in all areas, whether it is, we, as I said, we, we have a strong focus on social responsibility. We have a senior executive, that's the main job and to make sure we take a look at all the companies we're dealing with. You don't want to try labor. We want to make sure that the people are not using involuntary labor, health and safety, certainly in our own operations is important. For instance, when we went to Mexico, I found that, you know, those folks had to travel 2, 3 hours to get to our plans. So we now operate 27 buses. We bring them in. Good for our profitability because we get people who are not spending 3 hours traveling. Similarly, we also run the health clinics. Even in North Carolina, in Mexico, in Honduras. And so all of those are very, very important in terms of maintaining people we talked about in international labor standards. Rigorous implementation is tremendously important. We audit we use outside companies like Elevate And Intertek comprehensive non harassment and non discrimination policies in all our organizations. And just in terms of our stockholder, you know, obviously, people are more interested in what we have done recently, but I like to show that we have paid over $400,000,000 in dividends including of course the strong bond of $41,000,000 else in the last 7 months. We've also purchased a lot of shares. 42 percent of our company we repurchased. I was just mentioning that when I took the company private, and JB Morgan, I do to when I meet Jamie Dimon, I do remind him that we had taken the company private with 90% debt up to 18% interest. And I know how we survived, but you know, we did and we then for the next 12, 15 years, 15 years or so, generated $2,000,000,000 of free cash. Are we able to do this then come at a greater session? That we are still in the process of fighting this, but So we have purchased a lot of shares or $600,000,000 of shares. Capital expenditures have been important. Keep in mind, we own all our properties. So all our expenses to create degree has been to improve what we have. I mentioned also the 73% increase in dividends in the last 7 months, including a $1 special dividend that we gave. Now 6 months financials, you are familiar with it. I wanted to just briefly, Corey wanted to give us some information for me. Yeah. I just want to say that you're a little bit more than this, you're you're familiar with it. So let's see. I asked Cody to give you a little bit information about our Yes. I mean, for 6 months, our gross margin was at 34.6%. Versus 54.8% the previous year. And, we had our operating income as 7.3% was a 7.8% and the previous year was impacted to some degree by our business with the State Department toward lower shipments. And in the past, we have been operating at much higher operating margins, which we have an opportunity. Cash flow has been good, continue to pay dividends. And I think that as you move forward, you will see that, but I also want to briefly talk about this opportunity scenario. Some of these areas you've been listening to them and seeing it for a long time. That we believe this is an opportunity. This is where the focus is. That is at a $900,000,000 to a $1,000,000,000, which is not that far from where we are. We have an opportunity of doing an operating income of about close to 11%, 12%. Keep in mind, before that, we had even higher, but at that time, regions have as much retail sales. Most of sales used to be wholesale sales. When you combine the retail sales, our gross margins improve, operating margins are somewhat lower, but we have that opportunity and that is really where our focus is to and you can see the leverage of, EPS at $99,000,000,000 you're talking of, of $2071 in the 1,000,000,003,030 sense. I believe that with all the things that we have done, our next opportunity is to have between A and A and B in the relatively short period of time. That's our that's where our So with that, I thought what we'll do is we'll open it up for any questions that you might have. Corey, how do we do in the post on the webcast? How do they? How do they get on? Okay. He said there was a two way on that. All right. And if you could please identify yourselves so that the folks on the webcast can hear who's asking. Yeah, please. Hi, Christina Fernandez from Telsey Advisory Group. I wanted to see if you can expand on marketing, which is, you know, it's a big topic. You mentioned today more efforts on grassroots marketing. Perhaps you can share a couple of details about how, you know, what plans or what would the interior design designers do to be able to make that more of an effort. And also perhaps some comments on social media influencers, how are you using marketing on that Thanks. Yeah, I think this is a very, very important question and the more we look into this opportunities of getting us more visible at the social, at the local level is important. So what we are doing is we are looking and providing tools to our designers that they can utilize in the local markets. And we are using, in fact, many of our these 1200 designers are the influences. We're dealing with the tools to influence, to be as an influencer in their markets. They are doing it in terms of using the digital. They have, but all of them has their own social media sites that they utilize. And our objective over here is to provide them with the tools. And Bridgette, you want to, Bridgette Pascal. She is the vice president of a lot. She's really deeply involved with that very important Yeah. Please elaborate on that. Absolutely. No, I'd love to. Thank you. So our designers there, obviously, it's all relationship based with their clients, and it's also relationship base with their community. So they do a lot of, social networking. They have Instagram handles. They love Pinterest. It's very hyper hyper local at the design center level. They have, events in their design centers where or even out in the community where they're sharing their trade and, giving information on, trends and, and inspiration. So they're very proud what they do in their communities. And we like to give them everything that they need, whether it's, you know, branded images or assistance with any of the new social medias and tips and and tricks and and trends. So we're constantly communicating with them and showing them what new and, and they're communicating back and showing us sometimes with new since we've been bringing a lot of the younger designers on board and they've been sharing their information with us. So local grassroots is key. It's important. They love being in their communities and, we've seen a lot of positive interaction and benefit from it. Well, I'll also say, Christina, that Every week, actually it was last Sunday or yesterday, about 60 of our management associates send a report I mean, most of them do a report to me, but they send a report. And they talk of 5 things. And this relates to also the question that you're asked. First thing they talk about every they have to give reports on what has they done to move talent to motivate people. Second thing is what they have done in marketing, especially local marketing from the field. 3rd, they talk about what they have done in improving service. 4th, they talk about what they have done in incorporating technology. And 3rd, we'll talk about what they have done in social responsibilities every week, 52 weeks a year. Now they also gave what we then utilized. We call it internally a WAVO event. So the designers give information of what they have done to our customer, whether in the design center or outside or through the grassroots medium and every week, we get at least 100 plus of those. And in fact, then they have posted for everybody else to see because you've got to create that culture. And then I have a follow-up on the marketing book from a financial perspective. So last year, you spent a lot of marketing, if my numbers are right about 5.7% of sales or so. This year is going to be less. So with those savings, should we expect those to flow through the bottom line or would you reinvest some of those savings in other parts of the business? The last year, now you're talking about the third quarter, right? The last in the 3rd quarter, we spent 7.6% on advertising. We spent about the same in the 4th quarter, reflecting the last those two quarters, we used a very strong national television advertising. So this year, we will have strong advertising because we have been running the past quarters of about 4% or so. So within the next two quarters, at this time, for planning purposes, we will do about 5% not 7.6%. Bobby Griffin with Raymond James. For today, we talked a lot about widening out the product portfolio, different styling, more modern, more price points, Can all that be accomplished though in a 10,000 square foot store on average, or is there an opportunity that we might see some larger stores going forward as you continue to relocate the portfolio. I think that's a very, very good question. If you are in a business, of selling a product of the commodity, you need large stores. And if you have sales for people who are selling it, and not with an interior design background in these larger stores because of our business model. In fact, we had 15,000, 16,000 square foot stores, but today, the opportunity of selling in a smaller space is tremendously important for lots of reasons. If you didn't have the tools today, you went to the design center, and you saw that at every design interior design station, they had a stream and their tablets Today they can show products and designs which only 10 years back you had to show on the floor. And if you are a product if you're seller of our products, at a commodity and they cannot develop designs. They cannot show you other options. You have to show it, not in our case. That's a great advantage and that's why we have been able to relocate as many of these stores. For instance, I just mentioned Tyson's Corner, Tysons Corner. Jag, it's about 10,000 feet. We have done beef and bag. Jag, what's this? 10,000 against what 20 or what was that? 18,000. This is a key key market in Dysons Corner and Washington area We've gone from 18 to 10, but a much stronger area and location. I guess as a follow-up, how should we think about store growth opportunities in absolute numbers over the next couple of years? Are you comfortable with the size of the portfolio today? Is there opportunities that 3, 5 stores a year going forward? Should we think about that? I think what you've got to think about it is that we got to do a lot more volume from what we have. The day is gone gone when you thought that the more stores you have from how you're going to get more business. You can get more expenses. So our focus is because we go to continue to relocate stores. Phrases right now, we just had to make a decision in Green Bay, Wisconsin. We'll have this for about maybe 70 years. We have some independent family. 60, 50, 60s is okay. To make a tough decision because we are 1 in Milwaukee, the one that we are looking at in Madison, Wisconsin. So putting them in the right places becomes more important. In some cases, where we had 2 locations closed by. 1 is more important than 2. So we're not going to have a lot of new stores, but we're going to have stores in the right locations and we got a lot more business because that's also important for our designers and our profitability. Any more questions, comments? Well, while you're thinking, and eating, which is good. We've gone through such tremendous changes, not just for our home furnishings. We talked about everything in retail. When you take a look at the chaos that has taken place in brick and mortar, menusate yourself. How are you going to increase your sales? How are you going to be better? I think that for us, our focus on providing great offerings, reaching a larger consumer base with professional interior designers, controlling the quality of the products and then we've got to get the message out even more. We've got to get more people into our design centers you see today, traffic is down because people are window shopping on the internet. We used to have 3000 designers 12, 15 years back, 3000. Half of them were basically they're helping people with Linda shop. So good thing is they're more productive, but On the other hand, we need to get them to our design centers. Our businesses model is not just for them to sell online. We do have we have increased our online business by, I think, and average about 50% a year, still small, but 50% increasing every year. What we want, Corey talked about chat they chat and then they come to our design centers. So when you look at our online, you think that somehow we should be doing lot more, but When we bring them into our design centers and work with our designers, that's what we prefer. And that's where the opportunity is. Yes, please. Thanks, Ruth. Biller Watt with Stifel. Wondering if you could talk a little bit about your international markets. Canada in China had been a challenge, but perhaps some of that is short term due to some of these international trade discussions? Yes. It's just an important question because we have a great, great partner. As I said, the adjusted process of opening up a great, big, huge maybe around 1, it'll be 150,000 square foot store in Wuhan. This is the largest presence of Ethan Allen there, 15,000 square feet, they've invested a great deal, but they're also finding in China that, somewhat consumers are somewhat cautious There is a lot more competition than they had 4 or 5 years back. So, the business has been impacted. This was also impacted in China with some attitudes about America with this trade war going on. People who are somewhat in the back of their mind were even thinking that, what, how does it affect American products? Now all of those factors affected our business, but I think that, we have a great partner who's investing wants to show to be our business. So I think that after this period in the last 6, 9 months of going down the chances are they will go up. Then with other partners, smaller, but opening up, whether we opened up design centers in Korea, in Bangkok, which, as I just mentioned, Cambodia, we have a number of them in the Middle East. And the Middle East was, we've got the Middle East that had also been effective. Business middle east has been tough. We have a live center in Kuwait in Saudi Arabia and Doha Cutter in Dubai all the screens and job. So those were impacted, but what we hear is, that now they are starting to go back up from the bottom. Christina. Yeah. Go ahead, Christina. Hi. So I have a couple of follow ups. On the Margarita bill opportunity, you talked about it $17,000,000 over 3 years. I think it's the same number you gave last year. So where are you on that 3 year period and being able to capitalize on that opportunity? Then, Corey, how much have you received in Margaretville so far? 3,000,000? What's the number? We're right now on the total market readable program, probably right at $3,500,000. Okay. We have 2 new hotels. 14,000,000 to go. All right. Yes. Okay. Yes. Go ahead, And then one more one thing that seemed new to me today was the outdoor living where you talked about expanding meaningfully that assortment. Can you give us a sense perhaps on SKUs, how many more or force base where that could make a difference in your design centers? Yes, you know, I'll just tell you this that in fact, I had Craig Stiles who gave a presentations, Craig, of course, been in Season Allen for a long, long time at the senior merchants and is now responsible for our furniture merchandising. And He talks about the fact that the opportunities we have in expanding that is major. We introduced this, I'm just using my, my terminology, the attitude, the pre attitude that we said in January, that let's make let's promote it. And if you get it, take a look at, a program that we call start something amazing. And we in which we basically focus on those, the objective of reaching in or you might say the newer customer, the younger customer it has been a major impact. So it is not just a question of products. We're going to see some products, more introductions. We are also looking at products that we can make right here in the United States. We have a tremendous opportunity in Vermont We have a sawmill. We have we have access to, forests and lumber. So you're going to see us utilizing our American facilities much more fully than we've done in the past. I'll be Griffin again with Raymond James. So can you give us an update on the Amazon partnership and is there any plans to expand the number of SKUs on Amazon. And I guess lastly, will the new relact modern collection? And we saw, will that be offered on Amazon to maybe address a little bit younger of a consumer that could be interested in that product? Thank you. Yeah, you know, with Amazon, we have, we have sort of downplayed it. A number of reasons. First is that they have been very aggressive in developing a lot of products themselves. Secondly, our model is different than more or less what they do in the doing degree successfully. That is they buy the product, they sell the product. We don't do that. We want customer to experience Ethan Allen in terms of our deliveries, of our designers. So because of that, we have been very sort of a low key and not very aggressive. Our focus really is even the folks on Amazon who come there we believe they end up coming to Ethan Allen site and chatting with our designers and coming to our designers. And that's what we really want because I think our business model really is to reach customers ourselves and not to sort of commoditize our business by these external websites. Hi. Joe Feldman, Telsey Advisory Group. Are you seeing anything new or different on the competitive front? And, you know, if there's a need to promote more or if people are not valuing the quality as much as they used to. Well, you know, I mentioned by saying that, commoditization, I said globalization, commoditization, and the technology. That has affected every business. In our case, what we've done is it has commoditized by having folks sell furniture as a commodity. And that has resulted in a lot of, a lot of people who are making better quality using some service, a lot of them can't make it. Nothing in furniture. It's something in every category. Now that creates an opportunity. Because the more commoditization creates an opportunity these customers are looking for an experience. And experience of service and experience of quality. And if you meet with the clients that come in, they get surprised. We just have to get more people So I think we've gone through a stage in my view of commoditization in the last, what, 10, 10 years or so. You see the effect on the toys, Toys R Us, and you're seeing the effect on even JCPenney set up, you're not gonna have furniture. All these masks folks have been replaced by commodity sellers who are selling the product in the commodity. And in fact, Walmart is getting into furniture. Right? So and what it does is trace competition, but here we always had competition. But what the positive thing for us is that better quality and service. There's not much there's not much competition. That gives us an opportunity, but that's why our focus is on that. Actually, could I follow-up on another one? Since you've changed the front and the feeling of the source, have you seen a difference in maybe usage of the design, interior designers or any change in behavior of customers and how that's helped to drive sales. It has, but you'll see what's happened is continuously, which is a challenge. That traffic is down because of the fact people today are seen a lot of vendor shopping and shopping online. We, in fact, are increasing our business on online chatting, we, you know, we had this last week somebody purchased, I think, $70,000 on of our design centers just on chatting with our designers. Think of that because you would not imagine that could take place. That's a high number. Generally, it is 5000 or 10000, but still we want them to come in experience. Because our designers take the customer and turn them into a client. That's our difference. All right. Well, I think that I'm very, very glad that we had this opportunity. And I know that lots and lots of folks are listening of seeing it on, webcast. A number of our board members are on this. So this is very important because I believe that this meeting is important because it really positions. It gives us the opportunity to discuss the position that we have done for a long time we are more ready today than we were even the last year. So thanks very much for coming and participating.