Last week, furniture investors were shocked to see Hooker Furniture (NASDAQ:HOFT) report worse-than-expected earnings for its fiscal fourth quarter. Tomorrow, the next home furnisher in line to report earnings, Ethan Allen (NYSE:ETH), is set to cushion that blow.

Ethan Allen is coming off of a fabulous fiscal Q1 2006, in which it blasted past analyst estimates and reported $0.57 per share in profits before restructuring costs ($0.49 per diluted share after costs), against a Wall Street consensus of $0.54 per share (pre-costs).

Even better for its investors, analysts have again set the bar low for Ethan Allen tomorrow. Their expectations of $0.65 in profits per share will require the company to best last year's performance by only a penny to meet expectations. Anything beyond that will be gravy.

Judging from the company's comments in last quarter's earnings release, Ethan Allen looks well-positioned to exceed expectations tomorrow. Although CEO Farooq Kathwari noted that the company was seeing orders for its products slow in this fiscal second quarter, and termed himself "cautiously aware" of the risk that high raw materials and energy costs may hurt his company's profitability, he nonetheless confirmed Ethan Allen's ability to meet analyst estimates in both the short and long term. When he made similar comments back in September, the firm ended up turning in the aforementioned first-quarter results a month later.

I suspect, therefore, that Ethan Allen investors will be pleased with tomorrow's results. Whichever way the earnings news plays out, however, there is one line item that they should pay close attention to. Last quarter, Ethan Allen posted its first year-over-year increase in inventories since December 2002. Mind you, the increase was not greater than the increase in sales (7% vs. 9%). Perhaps more importantly, finished goods grew less quickly than did raw materials (3% vs. 7%), and levels of work-in-progress actually declined -- suggesting excellent inventory management at this shop.

Nonetheless, the first inventory growth in three years deserves mention. It may portend nothing more alarming than continued outperformance of Ethan Allen's peers in revenue growth, as the company adds raw materials to fuel further sales. Whether the change is for good or ill, however, it's worth watching.

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Fool contributor Rich Smith owns shares of Hooker Furniture (a Motley Fool Hidden Gems recommendation.) The Fool has a disclosure policy .