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Profile: M. Farooq Kathwari

Published by The New York Sun on 2005-02-07

Quiet-spoken and quietly self-confident, Farooq Kathwari -- chairman, president and chief executive officer of Ethan Allen Inc. -- is not one to boast about anything, not even about the profitability of his 73-year-old furniture and home furnishings corporation, which has 313 independent and company-operated stores around America and dozens more in 21 locations around the world.

Neither is he likely to suggest satisfaction that, in a $60 billion-a-year industry, scores of his competitors have fallen by the wayside -- especially in the recessionary times of the last three years -- while Ethan Allen has gone from strength to strength.

About the only prideful comment coming from Mr. Kathwari is what he said yesterday to The New York Sun: "Ethan Allen is in a better position today than it has ever been."

Indeed it is. The company -- whose stock (ETH) is traded on the New York Stock Exchange -- has a market capitalization of $1.4 billion. (Its stock closed at $36.50 yesterday, with trading of 160,200 shares.) Its retail sales of $1.2 billion in 2004 produced pretax profits of $170 million. Ethan Allen gave its shareholders $110 million in extra dividends. The Danbury, Connecticut-based company, which has been averaging annual growth of at least 15% over the last five years, has no debt.

And an operating cash flow of at least $100 million annually enables Mr. Kathwari to engage in bold expansion at a time when the rest of the industry is contracting.
In the last dozen years, some 20,000 furniture stores have gone out of business in America alone. Mr. Kathwari will allow that "our industry is in a great stage of confusion and transition."

That's because new distribution channels and specialty retailing have hurt traditional manufacturers who relied on old-fashioned production and marketing techniques; cheaply produced furniture from the Orient flooded American stores, and many domestic manufacturers simply weren't able to cope with these imports. Many also remained mired in moribund designs, vainly trying to cater to a constituency of consumers that had long moved on to more modernism in their choice of home furnishings.

But Mr. Kathwari understood long ago that the furniture business could not remain fastened to tradition. Ethan Allen's colonial designs had remained unchanged since 1932 when its factory in Beecher Falls, Vermont, started mass-producing furniture that sold at $39 a piece. Neither had the trademark facades of its stores -- each having a distinctive colonial spire -- changed in the 50 years preceding his becoming the company's president.

Mr. Kathwari set about engendering dramatic changes in Ethan Allen's products as well as the architecture of its stores. The idea was to inject a contemporary sensibility into the company's brand. That meant changing the Ethan Allen look from what Mr. Kathwari characterizes as "a colonial to a classic and contemporary aesthetic."

"What customers see as our signature style today is quite different from the way the Ethan Allen brand was seen in years gone by," he said. "You have to be a leader in style and decorating. What does that mean? That means innovation. It means understanding consumer tastes and shaping your products to cater to those tastes. That means being a brand leader."

Being a brand leader, in turn, means a relentless emphasis on re-invention, a word that Mr. Kathwari institutionalized at Ethan Allen since he became president 20 years ago.

"There are no sacred cows at Ethan Allen," he said. "We are constantly re-assessing, constantly re-examining our products."

That work is done by some 3,000 consultants and by 4,000 other company employees at the company's 12 manufacturing plants in America. It is done by associates in various parts of the world with whom Mr. Kathwari continually keeps in touch by e-mail, telephone and through frenetic travel.

The re-invention is done, most of all, by Mr. Kathwari himself. He acknowledged yesterday that he possesses "an inborn instinct for opportunity."

"When an opportunity for innovation and growth comes along, I seize it," he said. "I am always focused on doing my best. That means hard work, lots of hard work."

And so, new stores are opening in China, Korea, Japan, Taiwan, the Philippines, and other parts of Asia; in Europe; and, of course, all across America. New product lines are being added.

"We have created a brand that's not only known but is preferred," he said.

"Our objective is to double our business," Mr. Kathwari told The Sun yesterday after a lunch in his honor at the Asia Society on Park Avenue and 71st Street.

Lest that sound excessively ambitious, it should recalled that Farooq Kathwari has succeeded at virtually everything that he's done since his student days in Kashmir in the early '60s. As an English literature and political science major at college in that disputed Himalayan territory that's claimed by both India and Pakistan, he was captain of the cricket team.

Indeed, he still talks of those halcyon days and asserts that captaining a cricket team of 11 often disputatious players taught him more about leadership than anything that he subsequently learned while picking up a MBA at New York University, and while working in senior positions at Bear Stearns and Rothschild's.

He also talks with fond remembrance of his grandfather, the late Gulam Mohidin, who was a grand old man -- imposing in looks, charming in manner and a true connoisseur of fine objects and Oriental rugs. To this day, Mr. Mohidin's company makes the most exclusive Kashmiri carpets, which continue to be exported to the best stores all over Europe and America.

Vibhuti Patel, an assistant editor at Newsweek International and an Indian who now lives in New York, says she remembers the time when Bloomingdales' buyers were regular visitors in the Kashmiri capital of Srinagar. The hard-eyed buyers came to place their customized orders -- "paler colors, pastels in classic designs, styles that would be more in keeping with Western color schemes" -- with Mr. Kathwari's uncle and his father-in-law, and first cousins, who ran the business after Mr. Mohidin.

"The Kathwaris' tiny factory still employs the most gifted rug weavers in Kashmir," Ms. Patel said yesterday. "But what a long way Farooq has come from that remote valley and a family-run enterprise that is generations old! His grandfather, the shrewdest of businessmen, would have been justly proud of his achievements in the New World."

The assembling of those achievements began in earnest in 1973, when Ethan Allen formed a joint venture with Mr. Kathwari to develop home furnishings products. In 1980, the joint venture company merged with Ethan Allen and Mr. Kathwari joined the company as a vice president. In 1981, he was promoted to senior vice president and was elected a director of the company. He became executive vice president in buyout of Ethan Allen from Interco and in 1993, he organized an initial public offering of the company's 1983, and president in 1985. In 1988 Ethan Allen made him chairman and CEO.

In 1989, Mr. Kathwari led a management common stock.

"Whatever I do, I do with passion," Mr. Kathwari said yesterday. "At every stage of my career, I have focused on doing my best. I don't take myself seriously, but I take my work very seriously."

That element of seriousness is particularly applied to his colleagues. Mr. Kathwari is a huge believer in developing teams of decision-makers.

"All the associates at our scores of stores in America and around the world are CEOs in their own right," he said. "I believe in a collaborative, cooperative approach, making sure that we are all going in the right direction. I have set about creating an entrepreneurial participant culture in Ethan Allen. From our sawmills to manufacturing plants to distribution centers to our in-house advertising unit, I have tried to infuse our organization with a forward-thinking entrepreneurial culture."
Translation: Mr. Kathwari helps set clear priorities and then ensures that they are implemented.

"My overriding goal is always to be that cricket captain," he said. "I want to help people become better at what they do. I'm not a control freak. I believe in treating my team members with dignity."

There's little doubt that his approach works. This reporter got an opportunity some time back to observe Mr. Kathwari mingle with colleagues at the inauguration of a renovated Ethan Allen store near Atlanta. The scene was like a Southern revival meeting, with dozens of employees trying to hug him, get his attention, and even ask for his autograph. It's a fair bet that there aren't too many CEOs out there who elicit that kind of outpouring of sentiment from their employees.

Part of that sentiment surely flows from the recognition that, under Mr. Kathwari's leadership, Ethan Allen has undergone a dramatic repositioning to increase the company's consumer reach and market share. Elements include the creation of a new corporate identity, the redesign of over 90% of its products, the renovation of its network of stores, and the retooling of its manufacturing and distribution operations, according to company literature.

But part of that special relationship that Mr. Kathwari enjoys with his colleagues surely stems from the regularity with which he stays in touch with them. Yesterday morning, for example, he sent off several hundred e-mails asking for ideas concerning the development of new products. By the time he returned home to Westchester, his laptop had recorded several dozen responses. Again, not too many CEOs would stay so closely in touch with their workforce.

"It helps that Ethan Allen is in only one business -- home furnishings," Mr. Kathwari said. "I'm not distracted. I can focus on what it takes to strengthen the company. A company is only as good as the people who work for it. Motivating people, as much as establishing financial goals, is part of my job description."

The job also involves evangelizing in behalf of Ethan Allen. Mr. Kathwari chairs several nonprofit organizations including the Kashmir Study Group -- which attempts to fashion a peaceful solution for the long troubled land -- and of Refugees International. He's a life member of the prestigious Council on Foreign Relations, a trustee of the World Conference on Religion and Peace, a director of the Henry L. Stimson Center, and of the Institute for the Study of Diplomacy at Georgetown University. The American Jewish Committee gave him its "National Human Relations Award"; and the Anti-Defamation League gave him its "Humanitarian Award."

Mr. Kathwari has special words for America. "I did it my way," he says of his success, "and I did it for America. I am profoundly moved by the history of this country -- I can actually visualize myself having lived here 200 years ago in Ethan Allen's time. America gave me the opportunity to be what I am."

These are feelings that he will convey to President George W. Bush on Friday, when Mr. Kathwari attends a White House event. Appropriately enough, it's a musical tribute to another American president whom Mr. Kathwari of Srinagar, Danbury, Westchester and New York also admires, Abraham Lincoln.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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