Bassett Announces Fiscal Third Quarter Results
09/29/2022 - 09:00 AM
BASSETT, Va., Sept. 29, 2022 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its third quarter ended August 27, 2022.
Fiscal 2022 Third Quarter Highlights of Continuing Operations (Dollars in millions)
Sales Operating Income 3rd Qtr Dollar % 3rd Qtr % of 3rd Qtr % of 2022 2021 Change Change 2022 Sales 2021 Sales Consolidated (1) $ 118.0 $ 104.9 $ 13.1 12.5 % $ 10.7 9.2 % $ 5.0 4.8 % Wholesale $ 79.0 $ 73.1 $ 5.9 8.3 % $ 1.6 2.0 % $ 4.5 6.2 % Retail $ 70.9 $ 58.6 $ 12.3 21.0 % $ 4.5 6.3 % $ 0.9 1.5 % (1) Our consolidated results include certain intercompany eliminations as well as a gain on the sale of real estate in Q3 2022 which is not included in our segment results. See Table 4, “Segment Information” below for an illustration of the effects of these items on our consolidated sales and operating income.
Consolidated revenue for our third quarter of 2022 came in at $118.0 million , a 12.5% increase compared to last year. Operating profit of $6.1 million improved by 22.1% , excluding the $4.6 million gain from the sale of our Southwest Freeway store in Houston, which brought the all-in income from operations to $10.7 million . Earnings per share of $0.82 was well ahead of $0.31 per share in 2021. We aggressively pursued our customer acquisition strategies while formulating business plans that take the uncertain business environment that clouds the outlook for 2023 into account. Nonetheless, we trust that the collective strength provided by our domestic manufacturing platform, international sourcing partnerships, dedicated distribution network, best in class logistics system, and burgeoning digital capabilities portend continued success for Bassett despite the challenges that currently exist for the U.S. economy.
Shipments from our wholesale segment grew by 8.1% with upholstery operations posting a 12.5% sales increase while wood operations grew a modest 1.3% . Said another way, shipments of domestically produced merchandise grew by 18.1% while imported product shipments declined by 15.7% . Significant for the period was the resurgent performance of our Newton, NC upholstery complex where combined shipments grew by 21.5% and divisional profitability returned to pre-covid levels. We are now producing goods with material costs that are fully reflected in the price for which they are invoiced as the rampant price increases that we have absorbed over the past two years have subsided. Further, we are excited by the early retail success of the new “Modern Casual” product range that hit stores in time for Labor Day, which we are counting on to help keep our production schedules on track moving forward. Fabric outages have improved significantly from the depths of the pandemic related chaos of 2021 and our lead times have markedly improved in the past few months. Shipments of our outdoor seating product continued its sizzling growth – this time at a rate of 30.3% . Amidst these strong performances is the problematic situation that we face with our imported Club Level product range. Recall that Club Level sales exploded in 2021 and that our inventory levels last year were such that we were out servicing our competition and enjoying robust shipments. Accordingly, we responded by ordering replenishment inventory at record levels into the teeth of the unprecedented ocean freight rate spiral. As sales of the product slowed at the beginning of April, incoming shipments, often months late due to Asian production delays, began to swell our inventory levels. Consequently, we have been aggressively discounting certain portions of our Club Level line and have suffered significant margin hits in so doing for the past four months. We expect this dynamic to persist for the next six months as we align inventory levels with current rates of sale. In the end, however, we remain committed to the long-term viability of the Club Level product line and value the open market account business that it will continue to provide. Also affecting our overall wholesale margins are the marketing spending levels that we have chosen to employ and, to a lesser extent, miscellaneous expenditures including the LIFO charges that have accompanied the inventory build that has characterized the twenty-one months since the end of covid dominated fiscal 2020. Overall inventory of $91.7 million at the end of the August quarter actually decreased for the first time since the pandemic build and should have peaked for the Bassett footprint for the foreseeable future. Returning our wholesale margins to their historical levels is an important element of successfully moving into 2023, although we do plan to continue our aggressive marketing spending as long as we can see corresponding upticks in business as a result.
Our corporate retail group extended their strong run of positive operating results, this time producing their “best ever” third quarter with $70.9 million of deliveries while providing $4.5 million of operating income to the cause. For the nine months, corporate retail revenue of $210.6 million represents an increase of 16.1% over 2021 and the $15.8 million of operating profit brought forth exceeds any full year bottom line performance to date. Delivered gross margins of 51.8% remained near our target range despite the headwinds that four store closings presented. Due to construction related supply chain issues, the opening of one of the contemplated replacement stores – this one in Dallas, was delayed from the original late August date until the new date in early November. In conjunction with the Dallas opening, we are remodeling two other Metroplex stores – Southlake and Frisco. There we are testing a “take with” strategy for certain accessory items and have designed a supporting fixturing package for all three Dallas area stores. Looking ahead to next year, we will incorporate these elements into the Austin, TX remodel project as well as into new stores that will open in Tampa, FL and in Houston. We are also considering another Florida location as well. In April, we opened a Regional Fulfillment Center (“RFC”) in Orlando to provide our stores and other customers with the ability to offer a two-week in-home delivery option to add a new selling opportunity to our incumbent design focused custom-made furniture business. We are excited to see the initial benefit of the quick ship capability and have subsequently opened another RFC in the Baltimore area to service the mid-Atlantic stores.
To begin our fourth quarter, on September 6th, we announced the acquisition of Montreal- based online furniture retailer, Noa Home Inc. Founded in 2016, Noa sells furniture, mattresses and accessory items online in four markets – Australia, Singapore, the UK, and Canada. Net revenue for their most current fiscal year was C$19.1 million . We have been enthusiastically collaborating with the Noa team over the past few months to identify and implement the synergies that do exist today and can be capitalized upon in the future between our two organizations. First on the list is to provide the capital to improve their in-stock positioning on their best-selling items. Next is to enter a 3PL warehouse in western Canada to open up the entire country for Noa distribution as they have heretofore only serviced Ontario and Quebec. We are simultaneously developing Bassett made upholstery products that can complement their existing best seller lineup and have entered initial production orders to ship to Noa warehouses. Once we make sure that we have begun to maximize the opportunity in their existing markets, we will start the planning process to introduce the Noa experience to the U.S. market sometime in 2023.
High inflation, rising mortgage rates, and a slowdown in the housing market have certainly taken a toll on the equity values of publicly traded furniture companies this year. We are definitely in the mode of “focusing on what we can control” as there are currently forces at work greater than Bassett in a macro sense. To that end, we invested in a robust marketing program for the recent three-week Labor Day promotion and the results were quite gratifying as our corporate retail stores recorded sales volumes better than both 2020 and 2021, which were, of course, very strong. We do believe that although our customer is being more judicious with their disposable income today than two years ago, their personal balance sheets are strong. So, there will be folks in the marketplace and we have to win them over. Meanwhile, Bassett has the financial strength to weather a downturn and an integrated strategy designed to provide multiple paths for growth in the future.
Robert H. Spilman, Jr., Chairman and CEO
About Bassett Furniture Industries, Inc.
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 third fiscal quarter of 2022, 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 (including, without limitation, the effects on revenue, supply and demand resulting from the duration and extent of the COVID-19 pandemic) 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.
Table 1 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income - unaudited (In thousands, except for per share data) Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Percent of Percent of Percent of Percent of Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales Net sales of furniture and accessories $ 118,012 100.0 % $ 104,870 100.0 % $ 364,582 100.0 % $ 316,522 100.0 % Cost of furniture and accessories sold 57,240 48.5 % 52,263 49.8 % 180,479 49.5 % 153,426 48.5 % Gross profit 60,772 51.5 % 52,607 50.2 % 184,103 50.5 % 163,096 51.5 % Selling, general and administrative expenses 54,695 46.3 % 47,631 45.4 % 160,536 44.0 % 145,473 46.0 % Gain on sale of retail real estate 4,595 3.9 % - 0.0 % 4,595 1.3 % - 0.0 % Income from operations 10,672 9.0 % 4,976 4.7 % 28,162 7.7 % 17,623 5.6 % Other income (loss), net (594 ) -0.5 % (268 ) -0.3 % (1,850 ) -0.5 % (828 ) -0.3 % Income from continuing operations before income taxes 10,078 8.5 % 4,708 4.5 % 26,312 7.2 % 16,795 5.3 % Income tax expense 2,305 2.0 % 1,267 1.2 % 6,505 1.8 % 4,579 1.4 % Income from continuing operations 7,773 6.6 % 3,441 3.3 % 19,807 5.4 % 12,216 3.9 % Discontinued operations: Income from operations of logistical services - (565 ) 1,712 1,079 Gain on disposal (193 ) - 53,061 - Income tax expense (48 ) (140 ) 14,261 294 Income (loss) from discontinued operations (145 ) (425 ) 40,512 785 Net income $ 7,628 $ 3,016 $ 60,319 $ 13,001 Basic earnings per share: Income from continuing operations $ 0.84 $ 0.35 $ 2.08 $ 1.24 Income (loss) from discontinued operations (0.02 ) (0.04 ) 4.26 0.08 Basic earnings per share $ 0.82 $ 0.31 $ 6.34 $ 1.32 Diluted earnings per share: Income from continuing operations $ 0.84 $ 0.35 $ 2.08 $ 1.24 Income (loss) from discontinued operations (0.02 ) (0.04 ) 4.26 0.08 Diluted earnings per share $ 0.82 $ 0.31 $ 6.34 $ 1.32
Table 2 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) (Unaudited) Assets August 27, 2022 November 27, 2021 Current assets Cash and cash equivalents $ 66,870 $ 34,374 Short-term investments 17,715 17,715 Accounts receivable, net 20,950 20,567 Inventories, net 91,681 78,004 Recoverable income taxes 5,427 8,379 Current assets of discontinued operations held for sale - 11,064 Other current assets 11,104 10,181 Total current assets 213,747 180,284 Property and equipment, net 75,513 69,168 Other long-term assets Deferred income taxes, net 6,045 3,189 Goodwill and other intangible assets 14,313 14,354 Right of use assets under operating leases 86,809 95,955 Long-term assets of discontinued operations held for sale - 52,757 Other 6,260 5,953 Total long-term assets 113,427 172,208 Total assets $ 402,687 $ 421,660 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 24,189 $ 23,988 Accrued compensation and benefits 12,809 12,639 Customer deposits 40,311 51,492 Current portion of operating lease obligations 19,969 20,235 Current liabilities of discontinued operations held for sale - 16,095 Other current liabilities and accrued expenses 12,746 9,770 Total current liabilities 110,024 134,219 Long-term liabilities Post employment benefit obligations 13,016 12,968 Long-term portion of operating lease obligations 84,102 94,845 Long-term liabilities of discontinued operations held for sale - 16,210 Other long-term liabilities 606 686 Total long-term liabilities 97,724 124,709 Stockholders’ equity Common stock 46,064 48,811 Retained earnings 150,553 115,631 Additional paid-in-capital - 113 Accumulated other comprehensive loss (1,678 ) (1,823 ) Total stockholders' equity 194,939 162,732 Total liabilities and stockholders’ equity $ 402,687 $ 421,660
Table 3 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows - unaudited (In thousands) Nine Months Ended August 27, 2022 August 28, 2021 Operating activities: Net income $ 60,319 $ 13,001 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 8,732 10,458 Gain on disposal of discontinued operations (53,061 ) - Gain on sale of property and equipment (4,603 ) (68 ) Deferred income taxes (2,856 ) 1,053 Other, net 1,425 478 Changes in operating assets and liabilities Accounts receivable 57 (4,329 ) Inventories (13,677 ) (18,941 ) Other current and long-term assets 2,961 (100 ) Right of use assets under operating leases 15,881 18,857 Customer deposits (11,181 ) 11,341 Accounts payable and other liabilities 1,227 2,750 Obligations under operating leases (17,519 ) (20,823 ) Net cash provided by (used in) operating activities (12,295 ) 13,677 Investing activities: Purchases of property and equipment (17,266 ) (7,141 ) Proceeds from sale of property and equipment 8,226 101 Proceeds from disposal of discontinued operations, net 84,534 - Other (1,428 ) (1,173 ) Net cash provided by (used in) investing activities 74,066 (8,213 ) Financing activities: Cash dividends (18,734 ) (6,321 ) Proceeds from the exercise of stock options - 42 Other issuance of common stock 340 266 Repurchases of common stock (10,263 ) (5,566 ) Taxes paid related to net share settlement of equity awards - (219 ) Repayments of finance lease obligations (618 ) (854 ) Net cash used in financing activities (29,275 ) (12,652 ) Change in cash and cash equivalents 32,496 (7,188 ) Cash and cash equivalents - beginning of period 34,374 45,799 Cash and cash equivalents - end of period $ 66,870 $ 38,611
Table 4 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Segment Information - unaudited (In thousands) Quarter Ended Nine Months Ended August 27, 2022 August 28, 2021 August 27, 2022 August 28, 2021 Sales Revenue Wholesale sales of furniture and accessories $ 78,959 $ 73,073 $ 249,945 $ 219,371 Less: Sales to retail segment (31,833) (26,779) (95,976) (84,303) Wholesale sales to external customers 47,126 46,294 153,969 135,068 Retail sales of furniture and accessories 70,886 58,576 210,613 181,454 Consolidated net sales of furniture and accessories $ 118,012 $ 104,870 $ 364,582 $ 316,522 Operating Income Wholesale $ 1,611 $ 4,466 $ 8,430 $ 14,622 Retail 4,529 917 15,754 3,663 Inter-company elimination (63) (407) (617) (662) Gain on sale of real estate 4,595 - 4,595 - Consolidated $ 10,672 $ 4,976 $ 28,162 $ 17,623
J. Michael Daniel Senior Vice President and Chief Financial Officer (276) 629-6614 – Investors
Peter D. Morrison Vice President of Communications
