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(Bloomberg) — Ethan Allen Interiors Inc. Chief Executive Officer Farooq Kathwari, responding to an activist investor’s proxy challenge this week, said the furniture store is focusing on long-term retail sales over short-term digital sales.
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Kathwari, in an exclusive interview on Bloomberg TV Friday, said the company has been focusing on its showrooms and providing in-person and interior design services to its customers over online and other sales channels.
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“We felt we could’ve done that, our sales would have gone up, but we felt that was not the right thing to do,” given the company’s long-standing relationships with its large number of interior designers, Kathwari said.
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The CEO acknowledged that “the business on the website is less.” But he argues that the company encourages customers to meet with their interior designers at stores when they browse on its website because “sales are three to five times more when the customer interacts with the interior designer,” he said.
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Kathwari’s interview was the first time he or the company publicly responded since the activist launched a proxy campaign.
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DGB Investments founder Douglas Bergeron announced on Wednesday that he has built a stake in Ethan Allen and is seeking to replace the company’s entire board of directors. Bergeron said that Ethan Allen has a strong foundation but has failed to grow due to an outdated strategy and an over-tenured management and board.
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Bergeron, who previously served as CEO and chairman of payment processing company VeriFone, added that the company’s strategy failed to focus on digital initiatives despite online sales growing in the furniture industry. He is nominating himself and five other former executives at companies such as eBay Inc. and Wayfair Inc. as directors.
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Last week, Ethan Allen reported a 5.7% year-over-year decline in net sales for the fiscal year ended June 30. The Danbury, Connecticut-based company offers free interior design services to clients and sells a range of home furnishings, including dressers, sofas and wall decor.
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Shares of Ethan Allen, which have fallen 19% over the past year, rose 0.6% to $23.63 at 1:40 p.m. Friday in New York trading, giving the company a market value of $602 million.
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Bergeron, the activist who holds an about 5% stake in the company, argued in a Bloomberg TV interview that Ethan Allen should also replace Kathwari, who is in his 80s and has held that position since 1988.
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Kathwari said he found Bergeron’s comments to be “amazing and wrong,” adding that he is very active, does mountain climbing and looks younger than his age.
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“The fact is, if I believe that I don’t have the energy or the ability or the mind to run a business, then I should not be doing it,” he said. “Our board has never raised the issue.”
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Bergeron said Kathwari’s interview Friday was “dismissive, defensive and detached from reality.”
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