🔒CT furniture maker Ethan Allen declares $76M special dividend as proxy fight escalates

The proxy fight at Danbury-based Ethan Allen Interiors is escalating after the furniture maker declared a roughly $76 million special dividend and activist investor Douglas Bergeron criticized the payout as a move that fails to address his concerns about the company's leadership, strategy and performance.

Ethan Allen announced Wednesday that its board approved a special cash dividend of $3 per share, payable Sept. 17 to shareholders of record as of Sept. 3. The company said the payout will return capital to shareholders while allowing it to continue investing in new design centers, technology, marketing, manufacturing and other areas.

The announcement comes two weeks after Bergeron, who beneficially owns 5% of Ethan Allen's outstanding shares, launched a proxy fight seeking to replace the company's board at its 2026 annual meeting.

Bergeron responded by arguing the special dividend was an attempt to shift shareholders' attention away from his campaign for changes at the company.

Ethan Allen did not characterize the dividend as a response to Bergeron's campaign. The company pointed to its cash generation and debt-free balance sheet and said it has returned more than $402 million to shareholders through cash dividends over the past decade.

The competing statements also highlight disagreements over Ethan Allen's investments in marketing and growth.

Bergeron has accused the company of underinvesting in marketing, digital capabilities and customer acquisition. Ethan Allen said marketing spending increased 13% in each of the past two years, including investments in paid search and social media.

Bergeron countered that those increases came after years of lower spending. He said Ethan Allen's advertising spending remains below levels recorded from 2006 through 2021 and is about half the level of premium furniture competitors as a percentage of sales.

Ethan Allen also said it has invested more than $59 million in capital expenditures over the past five years, including $11 million in fiscal 2026. The company said its product assortment has nearly doubled during that period.

Bergeron questioned the results of those investments, arguing they have not produced sufficient growth. He also disputed the company's characterization of its expansion plans, saying some new design centers appear to be relocations of existing locations.

The dispute follows a difficult fiscal year for Ethan Allen. Net sales fell 5.7% to $579.5 million in fiscal 2026, while net income declined 22.7% to $39.9 million.

The company generated $52 million in cash from operations during the year, paid $46 million in dividends and repurchased 250,000 shares during its fiscal fourth quarter. It ended the fiscal year without debt.

Bergeron also renewed his criticism of Ethan Allen's corporate governance and succession planning under Chairman, President and CEO Farooq Kathwari, 82, who has led the company for 38 years.

Bergeron said Ethan Allen's counsel informed his counsel this week that the company's board had reduced its size from six to five directors in January. He criticized the move, arguing Ethan Allen instead needs additional directors with experience in retail, furniture, luxury goods and e-commerce.

Bergeron has nominated himself along with former Chairish President Anna Brockway, former eBay Chief Strategy Officer Kristine Miller, former Wayfair Chief Commercial Officer Steve Oblak, former Barclays Group Chief Internal Auditor Lindsay O'Reilly and former Neiman Marcus Chief Integrated Retail and Customer Officer Stefanie Tsen Ward.

Bergeron also said Kathwari beneficially owns about 8.4% of Ethan Allen's outstanding shares and that Kathwari, his family and related entities stand to receive more than $6 million from the special dividend.

Ethan Allen said it plans to file proxy materials to solicit shareholder votes ahead of its 2026 annual meeting. Bergeron's group plans to file competing proxy materials.

Ethan Allen operates 171 retail design centers in North America, including 141 company-operated locations and 30 independently owned and operated locations. It manufactures about 75% of its furniture at 11 North American plants.