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Bassett Announces Fiscal First Quarter Results

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Bassett Furniture Industries, Inc. (Nasdaq: BSET) reported a challenging first quarter for fiscal 2024, with a 19.6% drop in consolidated sales compared to the same period in 2023. The company faced operating and net losses due to reduced wholesale and retail orders. Despite record gross margins, profitability was hindered by high fixed costs. Inventory levels remained stable, and cost reduction strategies are being explored. The company plans to focus on expense reduction, value proposition enhancement, and product innovation to improve results in the future.
Positive
  • Record high gross margin of 55.3% achieved in the first quarter.
  • Consolidated sales dropped by 19.6% compared to the same period in 2023.
  • Operating losses of $2.4 million and a net loss of $1.2 million reported due to challenging sales environment.
  • Wholesale revenue declined by 22% for the period.
  • Total headcount in the wholesale segment reduced by 26% since the peak of the pandemic booms in 2022.
  • Retail organization is 44% leaner than February 2020.
  • Startup expenses for new stores in Tampa and Houston exceeded $700 thousand.
  • Plans to implement a new retail distribution model to reduce warehouse and delivery expenses by 200 basis points.
  • Focus on expense reduction strategies without compromising market share in the competitive furniture industry.
  • Exploration of new product additions to enhance the value proposition and increase unit velocity in stores.
  • No new corporately owned stores planned for 2024, with a focus on refurbishment of existing fleet.
  • Cash used in operations amounted to $7.7 million for the period.
  • Strong balance sheet maintained to support dividend and weather economic downturns.
Negative
  • Consolidated sales dropped by 19.6% compared to the same period in 2023.
  • Operating losses of $2.4 million reported due to challenging sales environment.
  • Retail posted a $1.6 million operating loss compared to a $1.5 million profit last year.
  • Startup expenses for new stores in Tampa and Houston exceeded $700 thousand.
  • Historic ocean freight lead times disrupted by geopolitical turmoil in the Middle East.
  • Approximately 60% of wholesale revenue derived from corporate and licensed Bassett Home Furnishings retail stores.

Bassett Furniture Industries, Inc.'s first-quarter results reflect a significant contraction in sales, with a 19.6% decline year-over-year. The operating loss of $2.4 million, compared to a profit in the previous year, underscores challenges in the current sales environment. Despite a record consolidated gross margin of 55.3%, the inability to cover fixed costs due to reduced sales volume is a concern. The reduction in total headcount and the implementation of a new retail distribution model signal a strategic shift towards cost efficiency. However, the timing and effectiveness of these measures in the backdrop of a weak housing market will be critical for future profitability.

The opening of new stores, despite the current losses, suggests a long-term growth strategy. Yet, the lack of profitability in the corporate retail sector, even with a record retail gross margin, raises questions about the sustainability of the expansion without addressing the underlying issues of high fixed costs and a potential mismatch between inventory levels and consumer demand.

The company's focus on Made-in-America products and the introduction of new lines may strengthen its brand proposition. However, geopolitical disruptions affecting supply chains could pose additional risks to product availability and cost. Investors should monitor how Bassett navigates these operational challenges and whether its strategies can effectively counteract the current headwinds faced by the home furnishings industry.

The furniture industry is experiencing a shift in consumer preferences away from home-related purchases, as indicated by Bassett's report. The company's strategic response includes a mix of product innovation and a focus on Made-in-America goods. The introduction of the Bassett Design Studio concept is a notable attempt to adapt to changing market dynamics by creating a smaller, more focused retail experience that may appeal to modern consumers.

However, the company's performance is also a reflection of broader economic factors, such as the weak housing market, which can directly impact furniture sales. The emphasis on custom upholstery and domestic manufacturing could resonate with a consumer base that is increasingly interested in personalized and locally sourced products. The success of these initiatives will depend on Bassett's ability to effectively communicate this value proposition and whether it aligns with consumer spending behavior in the post-pandemic landscape.

Additionally, the company's digital and omnichannel efforts, aimed at enhancing website conversion, are essential in an era where e-commerce is becoming increasingly important. The effectiveness of these initiatives in driving sales and improving the customer experience will be key to long-term growth and competitiveness in the market.

The current economic climate, as reflected in Bassett's results, shows the impact of macroeconomic factors on consumer discretionary spending. The post-pandemic normalization of sales and the weak housing market are external pressures that affect furniture industry sales. Bassett's record gross margins, despite declining revenues, indicate a pricing power or cost management that might not be sustainable if sales continue to decline.

The company's efforts to reduce expenses by optimizing its retail distribution model could be seen as a response to these economic pressures. The leaner workforce and anticipated warehouse consolidations are measures to align operational costs with the current economic reality. However, the balance between cost-cutting and maintaining market share will be delicate, especially if consumer spending does not rebound as expected.

The long-term outlook depends on the broader economic recovery and consumer confidence, which are influenced by factors such as employment rates, inflation and overall economic growth. Bassett's ability to navigate these uncertain times will be important for its financial health and stock performance.

BASSETT, Va., April 03, 2024 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its first quarter ended March 2, 2024.

Fiscal 2024 First Quarter Highlights
(Dollars in millions)

  Sales Operating Income (Loss)
  1st Qtr Dollar% 1st Qtr% of 1st Qtr% of
   2024  2023  ChangeChange
  2024 Sales  2023 Sales
Consolidated (1) $86.6 $107.7  $(21.1)-19.6% $(2.4)-2.8% $2.7 2.5%
             
Wholesale $54.7 $69.9  $(15.2)-21.7% $6.8 12.4% $9.0 12.9%
             
Retail $53.8 $65.0  $(11.2)-17.2% $(1.6)-3.0% $1.5 2.3%
             
Corporate & Other (2) $1.9 $3.0  $(1.1)-36.7% $(7.6)N/A  $(7.8)N/A 
 
(1) Our consolidated results include certain intercompany eliminations. See Table 4, “Segment Information” below for an illustration of the effects of these items on our consolidated sales and operating income.
 
(2) Corporate and Other includes the operations of Noa Home Inc. along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments.
 

As we once again compared to the inflated sales of the pandemic period, our consolidated sales dropped by 19.6% (14 weeks vs. 13 weeks) in the first quarter of fiscal 2024 compared to the first quarter of 2023. We do expect easier comparisons starting with our second quarter of 2024. Wholesale and retail orders were more stable and fell by 6.3% and 3.4%, respectively (14 weeks vs. 13 weeks). The final two weeks of January proved to be especially damaging to written sales during the period as we lost the historically strong MLK holiday event due to storms across several regions of the country where we expect to write good business.

We produced an operating loss of $2.4 million and a net loss of $1.2 million in the challenging sales environment. Our consolidated gross margin of 55.3% was an all-time high but spending reductions were not enough to generate profitability at the reported level of sales. We continue to explore expense reduction strategies that will not be detrimental to gaining market share in the competitive furniture industry landscape. Inventory levels are stable and are appropriate for the current pace of business. Total headcount in our wholesale segment has been reduced by 26% since the peak of the pandemic booms in 2022. The corporate retail organization is 44% leaner than February 2020, the last month before the world changed. And the balance sheet is well built and provides stability as we focus on improving results in anticipation of a better macro-economic environment in the future.

Despite producing a record retail gross margin for the quarter, corporate retail posted a $1.6 million operating loss compared to a $1.5 million profit last year. We were excited to open new stores in Tampa and Houston. Startup expenses recorded on the income statement were in excess of $700 thousand. Our average ticket was $3,800 and 41% of sales came from design projects as we generally write a smaller percentage of design business around the holidays. We did not curtail retail marketing expenses for the quarter, although we are currently cutting back prior to picking up again in May for the Memorial Day promotion. On the digital front, we are continuing to optimize our tactics to build our omnichannel capabilities and enhance website conversion. Declining written and delivered sales obviously apply pressure to results through the deleveraging of SG&A expenses. On the expense side, we are at the early stages of implementing a new retail distribution model designed to reduce warehouse and delivery expenses by 200 basis points. The first phase of this plan will eliminate five facilities that are currently in use primarily in the mid-Atlantic region. After evaluation of the results, we plan to implement further warehouse consolidations in other regions. On the revenue front, we plan to sharpen the value proposition of a portion of our assortment with the addition of several new products that we believe will complement the wide array of customizable furniture that currently dominates our stores. We have already seen success in the small number of transactional products that we have begun to integrate into the line and we plan to unveil more pieces designed to increase unit velocity over the course of 2024.

There are currently no new corporately owned stores planned for 2024, although we are performing due diligence in several markets. Our attention is now focused on a refurbishment program for the existing fleet, which will begin in earnest this summer. Coming out of the pandemic, corporate retail posted 14 consecutive quarters of profitability; several quarters were at record levels, albeit admittedly fueled by an unsustainable tailwind of written business. The pendulum of consumer preferences has since swung dramatically away from purchases surrounding the home, not to mention several quarters of a weak housing market. While our gross margin was at record levels, we were not able to generate enough sales to overcome the burden of our fixed costs to post a profit for the quarter. With our lean organization, we are committed to returning to a consistently profitable corporate retail network, no matter what the economy throws at us.

Total wholesale revenue declined by 22% for the period (14 weeks vs 13 weeks). Despite the uncertainty of work schedules, our team produced a 200-basis point gross margin improvement for the quarter. Embedded in the wholesale results is the return to profitability of the Club Level motion assortment which has been a drag on the bottom line in recent quarters. We expect further improvement in the Club Level results in the upcoming months. 80% of the products that invoiced in the quarter were manufactured in the U.S. and were shipped from a domestic facility. We take pride in our Made-in-America positioning and heritage but balancing capacity with order backlogs has been an ongoing hurdle since the slowdown began. Our domestic wood operation began production of the contemporary-styled solid maple Parkway bedroom and the more popularly priced Origins dining program. These products hit our store floors during the quarter and the sell-through is encouraging. In upholstery, our facility in Newton, North Carolina produced the first pieces of our Premier Custom Upholstery in leather, which sold well at retail in the final weeks of the quarter. We are also now shipping some of the imported casegoods and accent furniture products that we introduced last fall. Our move into sourcing from India has added new artistic design elements to our line and we have been pleased with the initial response by our wholesale customers. Unfortunately, the historic ocean freight lead times that have existed for most of the past two decades have once again been disrupted, this time by the geopolitical turmoil in the Middle East that has affected traffic through the Suez Canal.

Approximately 60% of wholesale revenue was derived from the combination of our corporate and licensed Bassett Home Furnishings retail stores. Another 18% came from the Bassett Design Center (BDC) network that is currently comprised of nearly 100 independent furniture accounts with 150 locations. The Bassett footprint in a BDC typically runs from 3,000 to 5,000 square feet and is supported with space planning assistance, store fixtures and signage, point of purchase materials, and promotional events. Many of the business relationships with these dealers have been in place for twenty years or more. The heartbeat of this strategy is the emphasis placed on the display and promotion of our Premier Custom Upholstery and Bench Made dining and bedroom products, all of which are Made-In-America. Generally speaking, this template blossoms into a larger commitment to the Bassett brand on the part of the dealer, largely resulting from the high level of service and training provided by our field representatives. In an effort to expand the reach of our dedicated distribution universe, Bassett introduced the new Bassett Design Studio concept in January.

In short, the Design Studio is a smaller version of the BDC built almost entirely around the display of our Premier Custom Upholstery program. For a comparatively modest financial commitment, the dealer enjoys a product that is well proven at retail and a program that includes several of the store elements found in the BDC program complete with a compelling in-store technology package. We are confident that the return on investment for the retailer will be quite strong as our Premier Custom Upholstery display model has been successfully executed in the field for many years. Thus far, we have brought 17 Bassett Design Studio accounts into the fold. Our initial target is 100 accounts and we will make presentations on the Studio concept by featuring the 1,000 square foot footprint in our showroom at the Spring Furniture Market next week in High Point, North Carolina.

We used $7.7 million of cash in operations for the period as we made the typical upfront payments to satisfy annual service contracts and also incurred an extra monthly payroll and rent outlay due to the fiscal calendar’s extra week. Nevertheless, as we try to mention every quarter, we continue to maintain a strong balance sheet to weather downturns like the one we are in now while supporting the dividend. Meanwhile, we will pursue product innovation, store refurbishment, enhanced technology, and improved operating results in the current climate as we look ahead to a better home furnishings landscape in the future.

Robert H. Spilman, Jr., Chairman and CEO

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 88 company- and licensee-owned stores at the time of this release, Bassett has leveraged its strong brand name in furniture into a network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. Bassett’s retail strategy includes stylish, custom-built furniture that features the latest on-trend furniture styles, free in-home design visits, and coordinated decorating accessories. Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally. For more information, visit the Company’s website at bassettfurniture.com. (BSET-E)

Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results or changes in operations for periods beyond the end of the first fiscal quarter of 2024, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Bassett claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. In many cases, Bassett cannot predict what factors would cause actual results to differ materially from those indicated in the forward-looking statements. Expectations included in the forward-looking statements are based on preliminary information as well as certain assumptions which management believes to be reasonable at this time. The following important factors affect Bassett and could cause actual results to differ materially from those indicated in the forward-looking statements: the effects of national and global economic or other conditions and future events on the retail demand for home furnishings and the ability of Bassett’s customers and consumers to obtain credit; the success of marketing, logistics, retail and other initiatives; and the economic, competitive, governmental and other factors identified in Bassett’s filings with the Securities and Exchange Commission. Any forward-looking statement that Bassett makes speaks only as of the date of such statement, and Bassett undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indication of future performance, unless expressed as such, and should only be viewed as historical data.

J. Michael Daniel
Senior Vice President and Chief Financial Officer
(276) 629-6614 – Investors
mdaniel@bassettfurniture.com

Peter D. Morrison
Vice President of Communications
(276) 629-6450 – Media

 
Table 1
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations – unaudited
(In thousands, except for per share data)
       
  Quarter Ended
  March 2, 2024 February 25, 2023
   Percent of  Percent of
  AmountNet Sales AmountNet Sales
       
Net sales of furniture and accessories $86,554 100.0% $107,698 100.0%
Cost of furniture and accessories sold  38,687 44.7%  50,501 46.9%
Gross profit  47,867 55.3%  57,197 53.1%
       
Selling, general and administrative expenses  50,224 58.0%  54,495 50.6%
Income (loss) from operations  (2,357)-2.7%  2,702 2.5%
       
Interest income  756 1.6%  152 0.3%
Other loss, net  (104)-0.1%  (567)-0.5%
Income (loss) before income taxes  (1,705)-2.0%  2,287 2.1%
       
Income tax expense (benefit)  (512)-0.6%  842 0.8%
Net income (loss)  (1,193)-1.4%  1,445 1.3%
       
       
Basic and diluted earnings (loss) per share $(0.14)  $0.16  


Table 2
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
 
  (Unaudited)  
Assets March 2, 2024 November 25, 2023
Current assets    
Cash and cash equivalents $40,609  $52,407 
Short-term investments  17,775   17,775 
Accounts receivable, net  13,942   13,736 
Inventories, net  62,957   62,982 
Recoverable income taxes  2,206   2,574 
Other current assets  12,016   8,480 
Total current assets  149,505   157,954 
     
Property and equipment, net  83,590   83,981 
     
Other long-term assets    
Deferred income taxes, net  5,567   4,645 
Goodwill and other intangible assets  16,069   16,067 
Right of use assets under operating leases  99,390   100,888 
Other  7,324   6,889 
Total long-term assets  128,350   128,489 
Total assets $361,445  $370,424 
     
Liabilities and Stockholders’ Equity    
Current liabilities    
Accounts payable $14,635  $16,338 
Accrued compensation and benefits  7,679   8,934 
Customer deposits  22,763   22,788 
Current portion of operating lease obligations  17,530   18,827 
Other accrued expenses  10,678   11,003 
Total current liabilities  73,285   77,890 
     
Long-term liabilities    
Post employment benefit obligations  10,678   10,207 
Long-term portion of operating lease obligations  95,312   97,357 
Other long-term liabilities  1,532   1,529 
Total long-term liabilities  107,522   109,093 
     
     
Stockholders’ equity    
Common stock  43,883   43,842 
Retained earnings  136,588   139,354 
Additional paid-in-capital  175   93 
Accumulated other comprehensive income (loss)  (8)  152 
Total stockholders' equity  180,638   183,441 
Total liabilities and stockholders’ equity $361,445  $370,424 


Table 3
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – unaudited
(In thousands)
     
  Three Months
  March 2, 2024 February 25, 2023
Operating activities:    
Net income (loss) $(1,193) $1,445 
Adjustments to reconcile net income (loss) to net cash provided by (used in)    
operating activities:    
Depreciation and amortization  2,664   2,340 
Deferred income taxes  (922)  132 
Other, net  302   852 
Changes in operating assets and liabilities:    
Accounts receivable  (206)  (470)
Inventories  25   6,466 
Other current and long-term assets  (3,167)  30 
Right of use assets under operating leases  4,375   4,587 
Customer deposits  (24)  (4,923)
Accounts payable and other liabilities  (3,374)  (4,596)
Obligations under operating leases  (6,219)  (5,300)
Net cash provided by (used in) operating activities  (7,739)  563 
     
Investing activities:    
Purchases of property and equipment  (2,076)  (3,341)
Other  (270)  (563)
Net cash used in investing activities  (2,346)  (3,904)
     
Financing activities:    
Cash dividends  (1,573)  (1,421)
Other issuance of common stock  86   80 
Repurchases of common stock     (1,844)
Taxes paid related to net share settlement of equity awards  (161)  (109)
Repayments of finance lease obligations  (74)  (69)
Net cash used in financing activities  (1,722)  (3,363)
Effect of exchange rate changes on cash and cash equivalents  9   (29)
Change in cash and cash equivalents  (11,798)  (6,733)
Cash and cash equivalents – beginning of period  52,407   61,625 
     
Cash and cash equivalents – end of period $40,609  $54,892 


Table 4
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information – unaudited
(In thousands)
 
  Quarter Ended
  March 2, 2024 February 25, 2023
Sales Revenue      
Wholesale sales of furniture and accessories $54,700  $69,884 
Less: Sales to retail segment (23,762) (30,099)
Wholesale sales to external customers 30,938  39,785 
Retail sales of furniture and accessories 53,754  64,962 
Corporate & Other (1) 1,862  2,951 
Consolidated net sales of furniture and accessories $86,554  $107,698 
       
       
Income (Loss) from Operations      
Wholesale $6,760  $8,994 
Retail (1,612) 1,530 
Net expenses – Corporate and other (1) (7,595) (7,771)
Inter-company elimination 90  (51)
Consolidated $(2,357) $2,702 
       
(1) Corporate and Other includes the operations of Noa Home Inc. along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments.

Consolidated sales dropped by 19.6% in the first quarter of fiscal 2024 compared to the first quarter of 2023.

Bassett Furniture Industries reported an operating loss of $2.4 million in the first quarter of fiscal 2024.

Total wholesale revenue declined by 22% for the period in the first quarter.

The company plans to implement a new retail distribution model to reduce warehouse and delivery expenses by 200 basis points.

The corporate retail organization is 44% leaner than February 2020, the last month before significant changes occurred.

The company used $7.7 million of cash in operations for the period.

The company plans to focus on product innovation, store refurbishment, enhanced technology, and improved operating results in the current climate.
Bassett Furniture Industries Inc.

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About BSET

bassett furniture industries, inc. is a leading manufacturer and marketer of high quality, mid-priced home furnishings. with more than 90 company- and licensee-owned stores, bassett has leveraged its strong brand name in furniture into a network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. as part of a licensing program with hgtv home, bassett offers custom-built furniture that is ready for delivery in the home within 30 days. the stores also feature the latest on-trend furniture styles, more than 1,000 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. bassett is also growing its traditional wholesale business with more than 500 accounts on the open market, across the united states and internationally.