Selling Service at Ethan Allen

Ethan Allen (ETH - commentary - Cramer's Take) chief executive Farooq Kathwari is working furiously to keep any dust from settling on the high-end home furnishings chain.

Thursday found Kathwari at the New York Stock Exchange for the company's 75th birthday party. Though the celebration came a day after Ethan Allen reported a 6.7% decline in sales and a 13% drop in profit from the year-ago period, Kathwari was telling anyone who would listen that the recent numbers don't tell the whole story.

"We have reinvented ourselves," Kathwari said in an interview with TheStreet.com. "A business that's [this old] can survive only if it reinvents itself."

Ethan Allen started out in 1932 as a Colonial-style housewares manufacturer. But today the furniture chain has taken on a more contemporary look, while wholesaling and retailing its pieces worldwide. The Danbury, Conn., company now boasts about 310 stores, more than half of which are "design centers," staffed with consultants offering up so-called furnishing solutions.

And though analysts worry about rising raw material costs, increasing competition from lower-cost competitors and the housing market's slowdown, Kathwari sees opportunity.

"Service is the new luxury," said Kathwari, who joined the company as CEO in 1988. "And our business is based on providing solutions, from taking the concept of an idea to its final delivery."

Tom Smith, an equity analyst at Standard & Poor's, agreed it is a concept that distinguishes Ethan Allen from rivals, such as La-Z-Boy (LZB - commentary - Cramer's Take) and Furniture Brands (FBN - commentary - Cramer's Take). Williams-Sonoma (WSM - commentary - Cramer's Take) recently joined the mix, adding Williams-Sonoma Home, a higher-end home furnishings unit.

Ethan Allen "has worked hard to create a brand identity," said Smith, who has a hold rating on the stock. "They're design centers, not just stores -- so then you're giving people an additional service."

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Farnoosh Torabi joined TheStreet.com TV in July 2006 as the site's first official video correspondent. Previously, Farnoosh was a business producer and on-air reporter for NY1 News, Time Warner's 24-hour news channel in New York City. Farnoosh is a regular columnist for AM New York and has written for Money, Time, New York Daily News and Newsday. Farnoosh is a graduate of Pennsylvania State University, with a degree in Finance and International Business and holds a M.A. from the Columbia School of Journalism.