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Bassett Announces Fiscal Third Quarter Results
Source: Nasdaq GlobeNewswire / 28 Sep 2023 08:00:01 America/Chicago
BASSETT, Va., Sept. 28, 2023 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its third quarter ended August 26, 2023.
Fiscal 2023 Third Quarter Highlights
(Dollars in millions)Sales Operating Income (Loss) 3rd Qtr Dollar % 3rd Qtr % of 3rd Qtr % of 2023 2022 Change Change 2023 Sales 2022 Sales Consolidated(1) $ 87.2 $ 118.0 $ (30.8 ) -26.1 % $ (3.8 ) -4.4 % $ 10.7 9.1 % Wholesale $ 56.7 $ 79.0 $ (22.3 ) -28.2 % $ 6.3 11.1 % $ 10.0 12.7 % Retail $ 52.3 $ 70.9 $ (18.6 ) -26.2 % $ (3.0 ) -5.7 % $ 3.9 5.5 % Corporate & Other(2) $ 1.8 $ - $ 1.8 100.0 % $ (7.4 ) 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. for 2023 along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments. This represents a change in our segment presentation from prior year periods. Previously, those shared Corporate costs had been included in the Wholesale segment and the operations of Noa Home Inc. were included in the Retail segment. Prior period results have been restated to conform to the current presentation. Writing new business, both at wholesale and retail, proved very difficult in the twelve weeks between Memorial Day and the start of our Labor Day promotion in late August. Although we continue to see increased business around the important holiday events, day-to-day store traffic and wholesale order writing between the big events remain very challenging. We first began to see signs of a slowdown in the third quarter of 2022 and this year’s period represented another 4.6% decline in wholesale orders. Despite this softness, we continue to maintain a strong balance sheet while executing on the elements of our growth plans with the expectation of returning to profitability.
Wholesale margins of 11.2% were comparable to our second quarter margins despite an 8.5% sequential decline in wholesale revenue. Once again, we wrote down the value of certain slow-moving styles of our Club Level imported motion line, this time to the tune of $800 thousand. Recall that our Club Level inventory peaked at $22 million at the end of August 2022. At the most recent August close, our inventory was slightly over $11 million, or some 49% less than last year. Recognizing that we have some $6 million of excess and discontinued inventory, we still have several good selling styles in the Club Level line which produce good margins. Ultimately, we believe that $5 to $6 million of inventory will be sufficient to support this strategically important assortment.
A counter-balance to this situation is the steady performance of our domestic upholstery team that was able to improve margins over last year while dealing with a 31% decline in shipments. Their ability to drive efficiency and manage costs in such a demanding environment is impressive. Imported wood margins declined compared to last year but improved sequentially as compared to the second quarter on reduced shipments. The pandemic-related freight costs imbedded in our oldest import wood inventory is beginning to burn off, a trend which should accelerate and result in margin expansion in the coming months. Work schedules in our two domestic wood plants improved as the quarter wore on and continued on that path in the first weeks of the current quarter. It is hard to see the positive in a quarter where wholesale shipments declined by 28%, but we do have several trends that point to better results moving ahead.
Our retail results for the quarter constituted the primary basis for the Company’s overall operating loss. Things have changed dramatically from 2022, our best retail year ever. In short, for the period, we did not generate enough retail revenue to break even. Actually, retail gross margins were comparable to prior year amidst a 26% decline in sales, but we were unable to reduce our fixed and variable SG&A costs enough to maintain profitability with the reported level of sales. In the five weeks prior to this writing (which include the first four weeks of Q4), average weekly sales have improved markedly, but were aided by the expected Labor Day boost and by several new product introductions that coincided with the promotion. Although we cannot predict the longevity or the depth of the furniture industry’s current slump, we are once again focused on the disciplines of margin improvement, customer service, digital outreach, and store upgrades as we head toward 2024. Over the next four months, we also look forward to opening two new stores and re-opening an existing location that has been closed for remodeling.
August 10th marked the debut of our new bassettfurniture.com website. The project was three years in the making and included the complete re-architecture of our product data, which now serves as the foundation of the new platform. We believe that, over time, we will improve site traffic and enhance both e-commerce and store conversions as a result of this investment. We are already seeing that engagement has improved as consumers are spending more time on the new site with each visit compared to previous metrics with our old platform. The launch of the new website coincided with the mailing of our fall catalog and the styling of the merchandise and its corresponding imagery represents a fresh new style direction for Bassett and the sell-through of the new items is off to a good start.
We have now completed our first year of Noa Home ownership and we continue to use their perspective to provide insight for Bassett’s e-commerce journey and to build the future of the Noa brand. Advertising efficiency has been the recent focus at Noa as they have been able to reduce spending significantly while keeping their web traffic largely intact. A targeted entry into the U.S. market is imminent as is our expansion of their product offerings. Noa management is also evaluating the contributions of their global markets as they strive to further build North American penetration in Canada and the U.S.
Balancing investment in the business, returns to shareholders, and cash flow planning is particularly important in a tough sales climate. To date in 2023, the Company has returned approximately $8.5 million to shareholders in the form of dividends and share repurchases, including the 12.5% dividend increase, which was approved by our Board of Directors in July. Capital expenditures will likely come in between $17 and $19 million this year. Operating cash flow for the third quarter was $3.8 million. Our capital expenditure plan for 2024 is currently being formulated but will be significantly less than this year’s level of investment. We will continue to evaluate our capital allocation strategy closely as we better understand the implications of the current business landscape.
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 89 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 and a logistics business specializing in home furnishings. 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 third fiscal quarter of 2023, 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.
Table 1 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations - unaudited (In thousands, except for per share data) Quarter Ended Nine Months Ended August 26, 2023 August 27, 2022 August 26, 2023 August 27, 2022 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 $ 87,217 100.0 % $ 118,012 100.0 % $ 295,434 100.0 % $ 364,582 100.0 % Cost of furniture and accessories sold 42,173 48.4 % 57,240 48.5 % 140,360 47.5 % 180,479 49.5 % Gross profit 45,044 51.6 % 60,772 51.5 % 155,074 52.5 % 184,103 50.5 % Selling, general and administrative expenses 48,848 56.0 % 54,695 46.3 % 154,709 52.4 % 160,536 44.0 % Gain on sale of retail real estate - 0.0 % 4,595 3.9 % - 0.0 % 4,595 1.3 % Gain on revaluation of contingent consideration - 0.0 % - 0.0 % 1,013 0.3 % - 0.0 % Income (loss) from operations (3,804 ) -4.4 % 10,672 9.0 % 1,378 0.5 % 28,162 7.7 % Interest income 923 2.0 % 120 0.3 % 1,644 3.6 % 132 0.3 % Other loss, net (309 ) -0.4 % (714 ) -0.6 % (1,381 ) -0.5 % (1,982 ) -0.5 % Income (loss) from continuing operations before income taxes (3,190 ) -3.7 % 10,078 8.5 % 1,641 0.6 % 26,312 7.2 % Income tax expense (benefit) (599 ) -0.7 % 2,305 2.0 % 711 0.2 % 6,505 1.8 % Income (loss) from continuing operations (2,591 ) -3.0 % 7,773 6.6 % 930 0.3 % 19,807 5.4 % Discontinued operations: Income from operations of logistical services - - - 1,712 Gain on disposal (less adjustments) - (193 ) - 53,061 Income tax expense - (48 ) - 14,261 Income (loss) from discontinued operations - net of tax - (145 ) - 40,512 Net income (loss) $ (2,591 ) $ 7,628 $ 930 $ 60,319 Basic and diluted earnings (loss) per share: Income (loss) from continuing operations $ (0.30 ) $ 0.84 $ 0.11 $ 2.08 Income (loss) from discontinued operations - (0.02 ) - 4.26 Basic and diluted earnings (loss) per share $ (0.30 ) $ 0.82 $ 0.11 $ 6.34 Table 2 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) (Unaudited) Assets August 26, 2023 November 26, 2022 Current assets Cash and cash equivalents $ 48,012 $ 61,625 Short-term investments 17,743 17,715 Accounts receivable, net 15,339 17,838 Inventories, net 66,866 85,477 Recoverable income taxes 3,777 2,353 Other current assets 9,340 11,487 Total current assets 161,077 196,495 Property and equipment, net 84,247 77,001 Other long-term assets Deferred income taxes, net 5,117 5,528 Goodwill and other intangible assets 21,547 21,727 Right of use assets under operating leases 89,993 99,472 Other 7,050 6,050 Total long-term assets 123,707 132,777 Total assets $ 369,031 $ 406,273 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 17,117 $ 20,359 Accrued compensation and benefits 9,524 12,921 Customer deposits 23,626 35,963 Current portion of operating lease obligations 19,608 18,819 Other current liabilities and accrued expenses 12,168 12,765 Total current liabilities 82,043 100,827 Long-term liabilities Post employment benefit obligations 10,668 9,954 Long-term portion of operating lease obligations 85,875 97,477 Other long-term liabilities 1,668 2,406 Total long-term liabilities 98,211 109,837 Stockholders’ equity Common stock 43,800 44,759 Retained earnings 145,031 150,800 Additional paid-in-capital - - Accumulated other comprehensive income (loss) (54 ) 50 Total stockholders' equity 188,777 195,609 Total liabilities and stockholders’ equity $ 369,031 $ 406,273 Table 3 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows - unaudited (In thousands) Nine Months Ended August 26, 2023 August 27, 2022 Operating activities: Net income $ 930 $ 60,319 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 7,502 8,732 Gain on sale of property and equipment - (4,603 ) Gain on revaluation of contingent consideration (1,013 ) - Deferred income taxes 473 (2,856 ) Other, net 1,781 1,425 Changes in operating assets and liabilities Accounts receivable 2,499 57 Inventories 18,611 (13,677 ) Other current and long-term assets (289 ) 2,961 Right of use assets under operating leases 13,668 15,881 Customer deposits (12,337 ) (11,181 ) Accounts payable and other liabilities (6,586 ) 1,227 Obligations under operating leases (14,990 ) (17,519 ) Net cash provided by (used in) operating activities 10,249 (12,295 ) Investing activities: Purchases of property and equipment (14,657 ) (17,266 ) Proceeds from sale of property and equipment - 8,226 Proceeds from disposal of discontinued operations, net 1,000 84,534 Other (1,664 ) (1,428 ) Net cash used in investing activities (15,321 ) 74,066 Financing activities: Cash dividends (4,406 ) (18,734 ) Other issuance of common stock 275 340 Repurchases of common stock (4,056 ) (10,263 ) Taxes paid related to net share settlement of equity awards (109 ) - Repayments of finance lease obligations (208 ) (618 ) Net cash used in financing activities (8,504 ) (29,275 ) Effect of exchange rate changes on cash and cash equivalents (37 ) - Change in cash and cash equivalents (13,613 ) 32,496 Cash and cash equivalents - beginning of period 61,625 34,374 Cash and cash equivalents - end of period $ 48,012 $ 66,870 Table 4 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Segment Information - unaudited (In thousands) Quarter Ended Nine Months Ended August 26, 2023 August 27, 2022 August 26, 2023 August 27, 2022 Sales Revenue Wholesale sales of furniture and accessories $ 56,660 $ 78,959 $ 188,318 $ 249,945 Less: Sales to retail segment (23,503 ) (31,833 ) (77,932 ) (95,976 ) Wholesale sales to external customers 33,157 47,126 110,386 153,969 Retail sales of furniture and accessories 52,264 70,886 178,004 210,613 Corporate & Other(1) 1,796 - 7,044 - Consolidated net sales of furniture and accessories $ 87,217 $ 118,012 $ 295,434 $ 364,582 Income from Operations Wholesale $ 6,340 $ 9,989 $ 22,339 $ 31,656 Retail (3,036 ) 3,889 (751 ) 13,804 Net expenses - Corporate and other(1) (7,420 ) (7,839 ) (22,140 ) (21,633 ) Inter-company elimination 312 38 917 (260 ) Gain on sale of real estate - 4,595 - 4,595 Gain on revaluation of contingent consideration - - 1,013 - Consolidated $ (3,804 ) $ 10,672 $ 1,378 $ 28,162 (1)Corporate and Other includes the operations of Noa Home Inc. for 2023 along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments. This represents a change in our segment presentation from prior year periods. Previously, those shared Corporate costs had been included in the Wholesale segment and the operations of Noa Home Inc. were included in the Retail segment. Prior period results have been restated to conform to the current presentation. J. Michael Daniel
Senior Vice President and
Chief Financial Officer
(276) 629-6614 – Investors
mdaniel@bassettfurniture.comPeter D. Morrison
Vice President of Communications
(276) 629-6450 – Media
