by Proxy war continues as election season kicks into high gear
DANBURY, Conn. — On Monday, Ethan Allen mailed out a letter seeking to persuade shareholders that its slate of board nominees and path forward are superior to those of activist investor Doug Bergeron and DGB. On Tuesday, Bergeron counter-punched with a 153-page presentation (available here as a PDF download) and by offering sitting Chairman Farooq Kathwari a chairman emeritus and special advisory role.
The boxing match continues. And by virtue of proxy card colors, we even have team colors: Bergeron’s is white; Ethan Allen’s is blue.
Rather than merely repeat Ethan Allen’s claims, we thought that because it is election season, we might fact-check Ethan Allen’s claims. You can read the letter in full here. Basically, it outlines Ethan Allen’s growth plan, celebrates how awesome its slate of nominees is, and takes a swipe or two at Bergeron’s own slate and lack of a explicit growth plan.
Let’s go to the judges’ table.
Claim No. 1: DGB has “no operating plan or capital allocation strategy.” DGB’s own letter dated Sept. 22, available here, presents three priorities: Reenergize the brand and product, build a modern omnichannel customer ecosystem, and turn operating and financial strengths into competitive advantages. Absent are any revenue or margin targets, a budget and estimates of expected returns. DGB states that Bergeron believes shareholder value could be tripled in three years, but there are no supporting numbers directly relevant to that claim. DGB’s letter to shareholders leads instead with a detailed diagnosis of the problem. There are at least two problems with this criticism. First, the EA board also fails to provide many specifics itself. Second, how is one activist shareholder supposed to invent revenue targets from outside the boardroom, without access to the company’s data? The EA board has 20 years of data, metrics and history from which to communicate a detailed map for the future. Where is it? Even the succession plan seemed elusive until DGB pressed the issue.
Claim No. 2: Stefanie Tsen Ward said Ethan Allen “shut its digital front door.” The quote is accurate; it comes from her video presentation. EA’s answer is mostly to trumpet a list of tools that it has launched. This doesn’t address DGB’s principal argument, which states that Ethan Allen has the lowest estimated website traffic among the premium peers analyzed, underinvests in paid search, and stopped disclosing online sales in 2022 after reporting e-commerce below 5% of revenue. Digital tools are not the same thing as digital results.
Claim No. 3: “Succession planning predates this contest.” This claim’s veracity depends on what counts as “planning.” DGB cited EA’s own Aug. 7 filing, in which Chairman Farooq Kathwari said that succession was “never raised” by EA’s board. DGB announced its own CEO search a month later. The EA board then announced its process on Sept. 21 in what, to me, was clearly a reaction to the DGB critique. The EA board committed to naming the next CEO no later than June 30 next year, when Kathwari’s contract ends. The board’s point about execution risk is reasonable.
Claim No. 4: There are “red flags” in DGB nominees’ records. Careful to disclaim that the description does not “establish individual causation,” the EA letter then presents “concerns” based on cherry-picked metrics and the resumes of the DGB board nominees. Let’s take a look at each one.
- Bergeron and Verifone: The stated “concern” about Verifone’s restatement of results from 2007, while accurate, is reaching pretty far back for “dirt” that never implicated Bergeron. The SEC settled the matter in 2009, a complaint attributed mainly to incorrect inventory adjustments by a former employee. Secondly, Bergeron’s resignation after disappointing results at Verifone in early 2013 is accurate, though how it is a “concern” is not mentioned. A note about the entire chart does say the records in general “raise questions about financial discipline, profitable growth and governance.”
- Anna Brockway and Chairish: The chart notes Chairish’s unaudited 2024 revenue, but with no context. Furthermore, a near-breakeven marketplace that sold at about 1.7 times revenue is more of a modest exit than an outright failure.
- Kristine Miller and Grove: Again, accurate figures describe Grove’s falling revenues, but without context. Grove has said that it prioritized liquidity and profitability over revenue growth. Separately, for Miller’s stint on Cable One’s board, the “concern” is the company’s stock price decline during her time there, citing accurate figures, but omitting the broader cable industry selloff during that period.
- Stephen Oblak and Wayfair: Another instance of accuracy and cherry-picking. Wayfair’s revenue did slip 11% in 2022, the year the EA letter chose because it was the “only full year Oblak was chief commercial officer.” This isn’t quite true, and EA’s own sales slipped 3.2% for fiscal 2023 during the thick of the post-pandemic slump. More importantly, what about the other 14 years Oblak was with Wayfair, when the platform grew from about $250 million in annual sales to more than $12 billion?
- Stefanie Tsen Ward and Neiman Marcus: This “concern” is rather inventive, because it’s an absence-of-evidence claim. The board is concerned that there is “no evidence of growth, margin or return measures for the operations she oversaw.” Right, because Neiman Marcus is privately held. Why not lead with the fact that Saks Global, which owns Neiman Marcus, filed for Chapter 11 in January this year, weighed down as it was by debt from its 2024 acquisition of Neiman Marcus? (She left Neiman Marcus in March 2025.)
Undercutting this catalog of “sins” is the double standard. After all, EA attributed its own drop in volume to, among other things, lower design center traffic and broader macroeconomic uncertainty. But, the results for companies represented by DGB’s nominees are counted as personal failures, even though most of the metrics used are for the same period of tough headwinds everyone in furniture faced?
Lastly, let’s take a look at the claims EA makes about itself.
First off, “record close rates and higher order values show progress.” Maybe, especially with enviably healthy gross margins. But, bigger checks from fewer diners still means an emptier restaurant. Net sales and written orders both are down.
A war chest of $188 million in cash and basically no debt. Another really interesting claim, because while accurate on June 30, since then the board declared a $3.00 special dividend worth about $76 million, and this was on top of a $0.25 special and $0.39 regular dividend. Where does that leave that war chest? About $100 million?
Marketing spend up 10%, with 15% more planned. EA’s 10-K shows this to be accurate; however, if advertising is roughly 3.4% of net sales, while up from the previous 2.9%, it is still short of the 5.1% DGB cites for EA’s peers. Even 15% more would take the spend only to about 3.9%.
Thus, the EA board letter is a mixed bag. It makes some valid points, but it seems to evade the big questions DGB has been asking, which are, “What, specifically, is your plan going forward to stop the sales melt, resume growth and meaningfully integrate digital and AI throughout the enterprise? How do you plan to much more substantially engage with consumers online? How, specifically, do you plan to deploy your substantial resources, cash and otherwise?”
In 2015, EA leadership told shareholders it was prepared to exceed $1 billion in sales. In 2018, the goal rose to $1.5 billion. Fiscal 2026 revenue was $580 million, or slightly more than half of the total exactly 20 years ago (54%).
So, who’s it going to be? Team White or Team Blue? Neither has a very detailed plan for growing this iconic brand, but for different reasons. Both have board slates that are impressive, albeit in different ways. And both ensure a change in leadership, though with different timelines. After a lot of point-counterpoint, it’s the shareholders’ turn to weigh in, which they will do at 11 a.m. on Nov. 4. On Election Day.
A postscript: The 153-page presentation DGB released on Tuesday does fill in some of the gaps the EA board letter identifies. For example, DGB says that EA could reach about $1 billion in revenue (range $950 million to $1.1 billion+) and about $125 million in operating income (range $110 million to $160 million) by fiscal 2032. This answers EA’s charge that DGB has no operating plan. Ironically, however, this means that after spending several pages mocking Kathwari’s 2015 stated goal of $1 billion in sales, the presentation sets the same threshold as its own target.
In addition, planning an interim CEO on Day 1 and therefore delaying a permanent pick is new. Earlier DGB said its own search was identifying candidates. Now it says that selection should wait until the new board has full access to the company. All five nominees would sit on a temporary Strategy & Transformation Committee.
