Ethan Allen CEO Farooq Kathwari Talks Tariffs, Cautious Consumers

Summary

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Bloomberg Talks: Ethan Allen CEO Farooq Kathwari Talks Tariffs, Cautious Consumers

Date: April 2, 2026
Host: Bloomberg
Guest: Farooq Kathwari, Chairman, President and CEO, Ethan Allen

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Episode Overview

This episode features an in-depth interview with Farooq Kathwari, the longstanding CEO of Ethan Allen, one of America's iconic furniture makers. The conversation revolves around the recent changes in U.S. tariff policy, challenges facing American retail and manufacturing, the cautious behavior of consumers amid economic uncertainty, and how Ethan Allen has uniquely positioned itself through its vertical integration and North American manufacturing base.

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Key Discussion Points & Insights

1. Ethan Allen’s Manufacturing Strategy and Tariffs

• North American Focus:
  Kathwari highlights Ethan Allen’s long-standing commitment to basing most of its manufacturing within North America, operating five U.S. plants (two in Vermont, three in North Carolina), with 80% of products made domestically.
• Tariffs' Impact—Minimal:
  Despite broader impacts on manufacturing and retail, Kathwari notes tariffs have not significantly affected Ethan Allen due to its U.S.-based production. The only exception is some tariffs imposed on operations in Mexico, but these are mitigated by the company owning those plants directly.
  • Quote:

    "It has created a more of a positive perspective for us...In fact, it's interesting that today, 20 years later, a customer does not know if a piece of furniture is made in Vermont or made in Mexico or in Honduras. The level of quality. Everything is the same, right?" — Farooq Kathwari (01:27–02:52)

2. Cautious Consumer Behavior

• Reduced Foot Traffic, Higher Conversion:
  Kathwari observes that overall, fewer customers are visiting their stores, but those who do are more likely to make a purchase.
  • Quote:

    "Consumers are cautious. We have seen...a significant decline in people coming in. The only good news is that people who are coming in are more likely to buy." — Farooq Kathwari (03:14)

• Strong Logistics as a Buffer:
  Ethan Allen’s vertical integration and logistics (nationwide single-price delivery, strong designer-client relationships) cushion some negative impacts and provide a competitive edge.

3. Economic Pressures & Vertical Integration

• Rising Oil and Shipping Costs:
  The company is feeling the squeeze from increased fuel prices, but vertical integration and operational efficiencies have softened the blow relative to competitors.
  • Quote:

    "The impact of the oil prices...has increased our fuel costs and our costs have gone up. But at this stage, because of...the efficiencies we have, we are impacted, but somewhat less..." — Farooq Kathwari (04:27)

• Brands and Pricing Strategy:
  Selling under a single brand helps in managing costs and pricing stability.

4. Industry Comparison and Broader Retail Challenges

• Reference to Housing Market & Competition:
  The host references RH (Restoration Hardware), whose CEO called the current housing market "the most dire...in decades," highlighting tough times for home furnishing companies.
• Competing on Price Increases:
  With rising costs, Ethan Allen raised prices by an average of 5%. The company is cautious about further increases, monitoring costs closely.
  • Quote:

    "We did take some relatively small price increase only because of...our vertical integration...we have been able to not go out of the way and still operate well." — Farooq Kathwari (05:59)

5. Import Products & Margins

• Sourcing from Abroad:
  Some items, such as rugs, accessories, and lighting, are still imported and thus more directly affected by tariffs and supply chain costs. Nonetheless, efficient operations keep the company competitive.

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Notable Quotes & Memorable Moments

• On Tariffs & Quality Parity:

  "A customer does not know if a piece of furniture is made in Vermont or made in Mexico or in Honduras. The level of quality. Everything is the same, right?" — Farooq Kathwari (02:31)

• On Changing Consumer Behavior:

  "Consumers are cautious...people who are coming in are more likely to buy." — Farooq Kathwari (03:14)

• On Managing Through Efficiency:

  "If it was not the fact that we have a vertically integrated company...do not have the fact that we maintain one brand ... we don't sell a lot of different brands." — Farooq Kathwari (04:27)

• On Pricing Decisions:

  "We did take some relatively small price increase...we have been able to not go out of the way and still operate well." — Farooq Kathwari (05:59)

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Timestamps for Important Segments

• 00:31–01:27: Introduction & Overview of Ethan Allen's U.S. manufacturing footprint
• 01:27–02:52: Tariffs, Mexico operations, and quality parity
• 02:52–03:14: Cautious consumers and changing in-store dynamics
• 03:14–04:12: Logistics network and service differentiation
• 04:12–04:27: Impact of oil prices and cost structure
• 04:27–05:11: Vertical integration as a cost buffer
• 05:11–05:59: Industry context—housing market & price adjustments
• 05:59–06:51: Retail price increases, imports, and margin management

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Conclusion

Farooq Kathwari’s conversation provided an insightful look at how Ethan Allen’s decades-long investment in North American manufacturing and company-owned operations has insulated it from many of the shocks affecting the broader retail and furniture industries. While tariffs and economic uncertainty weigh heavily on competitors, Ethan Allen leverages strong logistics, vertical integration, and a stable brand to maintain profitability and customer satisfaction in a challenging market. The message is clear: strategic foresight, operational efficiency, and a direct relationship with customers can serve as significant competitive advantages in volatile times.

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Transcript

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[Bloomberg Host]

Bloomberg Audio Studios podcasts Radio News Liberation Day, as we mentioned, was meant to mark the start of the US Manufacturing comeback. It's been a rough ride for US Retailers since even with the Supreme Court striking down those tariffs earlier this year. Let's take a deeper dive into the impact on retail with Farooq Kothari. He is chairman, president and CEO of Ethan Allen, the furniture company. Farouk, thank you so much for joining us.

[Farooq Kothari]

Well, it's a pleasure.

[Bloomberg Host]

So when it comes to the impact of tariffs on your company, you're in a bit of a unique position. You pointed out to me that you made a decision years ago to base most of your manufacturing in North America. You have five manufacturing plants in the U.S. three in two in Vermont and three in North Carolina. 80% of your furniture is made in North America. But you do have some overseas presence as well. Has the, has the tariffs been needle moving for you at all?

[Farooq Kothari]

Not really because of the fact, as we mentioned it, it has, it has created a more of a positive perspective for us. Although interestingly in North America, the only place where we do have some, you might say some significant tariffs, about 25% in Mexico. Now Mexico, when we went about 20 years back south of the border to Mexico, to Honduras, it was under the North American treaty, no tariffs. With all kinds of political issues and everything else. There are tariffs in Mexico, but, but for us, the impact is less because we operate and own the plants. So we today have manufacturing in Vermont. That's where we started. You know, we started 94 years back with manufacturing in Vermont and then went manufacturing from New Hampshire through all the way to California. But 20 years back we said no, manufacturing was going away. We said, what do we do? We said no, we will maintain manufacturing in North America, but we'll go to Mexico and Honduras. We operate those operations. And in fact, it's interesting that today, 20 years later, a a customer does not know if a piece of furniture is made in Vermont or made in Mexico or in Honduras. The level of quality. Everything is the same, right?

[Bloomberg Interviewer]

Well, I'm curious. I Mean, so your business hasn't necessarily been affected by tariffs, but I have to imagine that your customers have in some form when you think about, you know, costs on everything up, everything else going higher and, you know, I wonder how you're seeing that expressed when it comes to how much people are willing to reach into their wallets to, you know, pay up for furniture here.

[Farooq Kothari]

No, that's absolutely. The fact is that consumers are cautious. We have seen that even though we have had a, I would say a significant decline in people coming in. The only good news is that people who are coming in are more likely to buy. Now, we are, as I said, a vertically integrated company. We have one of the largest interior design network. We have our interior designers work with clients. We also have. And it took us years and years to do it. You know, I told me I got started when I was pretty young. At 44, I started running ethanol. And 40 years back, we have established one of the, I would say, efficient logistics network. We deliver our products to our clients at one delivered price with good service. Whether you're living in Seattle, Miami, New York, anywhere. Now, it took us a lot of time to do that. That has given us an advantage.

[Bloomberg Host]

How have you had to change that, the economics of that over the past couple of weeks, given that oil prices have jumped quite a bit and in the foreseeable future, it doesn't look like it's going to come back down right away. Are you still in the process figuring that out or have you made changes already?

[Farooq Kothari]

No, it is. We are looking at it. Obviously, the impact of the oil prices, it has increased our fuel costs and our costs have gone up. But at this stage, because of the fact of a vertical integration and the efficiencies we have, we are impacted, but somewhat less where we are impacted more is what was said earlier, is that consumers are cautious. Yeah, our traffic is down and we are still fortunately in a much, much better position than most, but still impacted. And I believe that if it was not the fact that we have a vertically integrated company, do not have the fact that we maintain one, one brand, you know, we don't sell a lot of different brands.

[Bloomberg Host]

You know, we were talking about RH earlier. Katie, the CEO of RH had warned that what he's seeing right now is the most dire housing market in decades. He cited global tensions, tariffs and economic uncertainty, among other things.

[Bloomberg Interviewer]

Yeah, absolutely. I mean, it is interesting how just frozen this housing market remains. But also to your question, there is news from Amazon that it's going to start charging its sellers Huge. Its shipping services at 3.5% fuel and logistics surcharge. So certainly shipping and those fuel costs, top of mind. But when it comes to Ethan Allen, I was taking a look at your most recent earnings call and we did hear from your CFO talking about how you have increased some retail prices by an average of 5%. And I wonder, you know, if that's an action you anticipate maybe having to take again in the coming quarters.

[Farooq Kothari]

Well, we are. We're watching it very carefully. Obviously we did take some relatively small price increase only because of the fact of our vertical integration. Are making products in North America. If that was not the case, we do have some products coming in, like for instance, rugs and accessories and lighting. It comes from all over, especially Asia. We have one plant in Indonesia that has been impacted. However, overall, because of the fact of our vertical integration, our efficiencies, we have not been able. We have been able to manage, yes, it has impacted obviously our costs, some margins, but overall, we've been able to not go out of the way and still operate well. Interesting thing is this, that our business is holding up. Yeah. With less traffic coming into our design centers.

[Bloomberg Interviewer]

All right, Farouk, always wonderful to see you. Really appreciate the context here. That is Farouk Karthwari. He is chairman, president and CEO of Ethan Allen.

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