Furniture Fallout?

This is a partial transcript from "Your World with Neil Cavuto," April 21, 2004, that was edited for clarity.

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NEIL CAVUTO, HOST: Furniture maker Ethan Allen announcing that it will be closing two of its manufacturing plants in New York and Virginia. The resulting closures will be affecting about 500 workers. Here with us is Farooq Kathwari. Farooq is Ethan Allen’s chairman, president and CEO, whose quarterly earnings more than doubling on the day he comes to join us.

Farooq, good to have you.

FAROOQ KATHWARI, CHAIRMAN, PRESIDENT & CEO (ETH): Good to be here.

CAVUTO: People hear that kind of news and they say, well, maybe Farooq just sees the interest rates going up and he is preparing for the worst. The housing bubble has burst.

KATHWARI: Well, not really. I think the interest in the home decorating is just about starting. If you take a look at in the last three years, there have been a lot of construction in homes. But really, home decorating has not been there.

Now, on this question you also mentioned about our consolidating two plants, you know, we have about 10,000 people working at Ethan Allen, and still 4,000 of them in manufacturing in the United States. We have over the last few years taken steps to consolidate some of our smaller plants into larger plants.

For instance, this plant in New York, we consolidated into a larger plant in Vermont. We have two major plants in Vermont, which is actually where Ethan Allen started, and one in Maine. And we have three major plants right on the border of North Carolina and Virginia.

CAVUTO: So this was just removing duplication?

KATHWARI: It is.

CAVUTO: But, you know, what is to stop a prospective customer from hearing that and saying, you know, I’m going to order bedroom furniture from these guys and it it’s going to be delayed?

KATHWARI: Well, I don’t think so. Today we are in a great service position and, you know, we are doing well. We are doing well because our focus has been on providing solutions to the consumers. People just don’t want to buy a bed or a dresser. They want beautiful homes.

CAVUTO: Yes, but your stuff is considered higher end, anyway, right? I mean, you are not a slave to sales. In fact, you were telling me during the break you’re not going to be doing sales, right?

KATHWARI: Our focus is really on providing solutions. People don’t want just, as I said, a piece of lumber. They want a beautiful home. And solutions for us are products. As you know, we have a great product line from kids all the way up, from classics to contemporary.

CAVUTO: But would it be fair to say that your buyers, they are not necessarily recession-resistant, but they’re recession-resilient. In other words, if they can withstand, because they can afford a little more -- and your stuff isn’t cheap -- that they’ll say its worth it?

KATHWARI: We, of course, have had this discussion for years. Just in your waiting room, your folks working there are our customers. And you are our customers. Our customers range right from folks who are getting started to people who have made it. The reason is...

CAVUTO: We have Ethan Allen furniture in our green room?

KATHWARI: No, you don’t have Ethan Allen furniture. You have people who have Ethan Allen furniture.

CAVUTO: Oh. I thought you were saying you were upset with us because we didn’t.

KATHWARI: No, no, no. Well, that, too.

CAVUTO: I thought you were going to change that. All right.

KATHWARI: But you see, Neil, the fact is that today we are just getting started on the sole area of home decorating. So, even if interest rates increase a little bit, that is not going to have, I think, a major impact on us, whatsoever.

CAVUTO: What if they increase a point?

KATHWARI: I don’t think so.

CAVUTO: Is there a threshold level for you?

KATHWARI: Well, look at this: you know, we were doing well when the interest rates were 12 percent or 14 percent. Today they are at an historic low. And consumer confidence is important.

CAVUTO: Farooq Kathwari, always a pleasure. Thank you very much.

KATHWARI: Good to see you, Neil.

CAVUTO: Good point. The chairman, the CEO, the president, the big cheese over at Ethan Allen.

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