Bassett Announces Fiscal Fourth Quarter Results

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Bassett Announces Fiscal Fourth Quarter Results

BASSETT, Va., Jan. 18, 2018 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended November 25, 2017.

Fiscal 2017 Fourth Quarter Highlights

  • Consolidated sales were $118.2 million for the fourth quarter of 2017 compared to $113.9 million for the fourth quarter of 2016, an increase of 3.9%. 
  • Operating income for the quarter was $7.5 million or 6.3% of sales as compared to $9.0 million or 7.9% of sales for the prior year quarter. 
  • Wholesale sales were $63.2 million for the fourth quarter of 2017 compared to $62.6 million for the third quarter of 2016, an increase of 1.0%.  Wholesale operating income for the quarter was $4.0 million or 6.3% of sales as compared to $4.3 million or 6.9% of sales for the prior year quarter.
  • Company-owned store sales were $72.1 million for the fourth quarter of 2017 compared to $69.9 million for the fourth quarter of 2016, an increase of 3.2%.   This included a comparable store sales decrease of 1.7% compared to the prior year quarter. Comparable store operating income was $3.5 million or 5.5% of sales for the current year quarter as compared to $3.3 million or 5.0% of sales for the prior year quarter.  Total retail operating income was $2.1 million or 2.9% of sales for the quarter as compared to $2.9 million or 4.1% of sales for the prior year quarter.  Comparable store written sales for the quarter increased 2.7%.
  • Revenue for Zenith was $25.7 million for the fourth quarter of 2017 compared to $24.2 million for the fourth quarter of 2016, a 6.1% increase.  Zenith’s operating income for the quarter was $1.2 million or 4.8% of sales as compared to $1.4 million or 5.9% of sales for the prior year quarter.
  • Net income for the quarter was $5.0 million or $0.46 per diluted share as compared to $5.0 million or $0.47 per diluted share for the prior year quarter.

“We were pleased to finish our fourth quarter with a 4% gain in consolidated revenue, thus capping fiscal 2017 as a solid year for Bassett,” observed Rob Spilman, Chairman and CEO. “Despite the sales gain, however, quarterly operating income decreased to $7.5 million, or 17% less than last year. The opening of stores in Pittsburgh, Pennsylvania and Wichita, Kansas during the quarter ushered in a period of robust expansion for our corporate store network as we plan to open at least 10 new locations and reposition 2 to 3 others over the next 18 months. Indeed, we have already opened a second Phoenix store and have entered the Oklahoma City market since closing our fiscal year on November 25, 2017. Suffice it to say that this amount of new store startup activity produces detrimental short term effects on our profitability as witnessed in this most recent reporting period. Nevertheless, we strongly believe that expanding our store network is the best way for us to grow and coupled with other planned initiatives, these investments will make Bassett a larger and more profitable enterprise as a result. Furthermore, we believe that increasing our store count, which will benefit our wholesale, retail and logistics segments in the long run, is an appropriate use of our strong balance sheet.”

“A centerpiece of our store expansion strategy is the new “Generation 3” prototype that will debut in Frisco, Texas during the third quarter of 2018,” continued Spilman. “Two years in the making, the new store will showcase Bassett’s interior design and customizable home furnishings competencies through a technology laden fixturing package designed to easily navigate the many options that we offer to create personalized space for our consumers. We have engaged a group of experts to work with our internal team to architect the Generation 3 store and to unify the Bassett shopping experience from our website to our store to the ultimate delivery of our furniture and accessory offerings to the home. The corresponding foundational investments in systems and customer experience enhancements that we began in 2017 will accelerate in 2018 and will result in higher levels of SG&A spending for the next several quarters. The end result of these investments will:

  • elevate digital brand awareness through heightened social media outreach,
     
  • educate and inspire more consumers to experience the Bassett brand digitally or through our brick and mortar stores,
     
  • enhance in store collaboration through the introduction of an upholstery sectional configurator and 3-D room planning capabilities, and
     
  • deliver smarter, faster customer service that allows transactions to be tracked via mobile devices from purchase, to manufacture of the goods, to delivery to the home.

The fusion of our brick and mortar experience, our custom manufacturing platform, and our digital strategy will definitely sharpen in fiscal 2018. Although we acknowledge that there are accompanying operational costs with this vision and with our store expansion, we believe that charting this course now is prudent, exciting, and indeed necessary to provide Bassett its own space amidst the much discussed disruptive forces that in part define the U.S. retail landscape today.”

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $63.2 million for the fourth quarter of 2017 as compared to $62.6 million for the fourth quarter of 2016, an increase of $0.6 million or 1.0%.  This increase was driven by an 8.7% increase in furniture shipments to the open market (outside the Bassett Home Furnishings network) partially offset by a 5.5% decrease in furniture shipments to the Bassett Home Furnishings network compared to the prior year period.  Wholesale shipments of accessories, a much smaller component of the Company’s wholesale revenues, increased 77% over the prior year quarter.  Gross margins for the wholesale segment were 34.1% for the fourth quarter of 2017 as compared to 35.5% for the prior year quarter.  This decrease was primarily driven by lower margins in the Bench Made operation from inefficiencies in starting up the production of the new solid oak line, imported wood operation resulting from higher container freight costs and domestic upholstery operation from higher material and labor costs.  Wholesale SG&A for the fourth quarter of 2017 was $17.6 million as compared to $17.9 million for the prior year period. SG&A as a percentage of sales decreased to 27.8% as compared to 28.6% for the fourth quarter of 2016. This decrease in SG&A as a percentage of sales was primarily driven by lower incentive compensation costs.  Operating income was $4.0 million or 6.3% of sales as compared to $4.3 million or 6.9% of sales in the prior year. 

“Wholesale sales increased 1% for the quarter and 4% for the year,” said Spilman. “The quarter was a mixed bag as sales to customers outside the store network grew nicely while shipments to the store network actually declined. The primary reasons for the retail shipment shortfall were the effects of hurricanes on the Houston and Puerto Rico stores and an overall written sales decrease in the licensed store network.”

“Trends in the wholesale segment that were prevalent during the year continued in the quarter,” added Spilman. “In the wood division, shipments of domestically produced products increased although at a less robust level than experienced earlier in the year. Our Bench Made product line grew by 40% in 2017. We encountered production inefficiencies in the startup of our new Bench Made Oak line that began shipping at year end and is about to be marketed in our stores. As has been the case for some time, shipments of imported wood products declined disproportionately in the quarter. We are heartened by the success of our Bella Collection that was new in 2017 and will expand the line this spring. More importantly, February will mark the unveiling of our new B Modern line in our stores, in print, and on the web. The modern style sensibility has increasingly permeated the industry over the past several years. Consumer research that we conducted in 2016 specifically found that our core consumer considers the absence of this styling to be a void in our assortment. Accordingly, we have been working to address this gap and have high hopes for the Presidents’ Day launch of B Modern. Domestic upholstery finished another year of growth in 2017. Shipments from our Newton, NC facility grew in absolute dollars about the same amount as from our new Grand Prairie, Texas factory. The new B Modern styling in wood will have accompaniment in the form of domestic upholstery that will provide a fresh point of view to our lineup. Rising material costs in upholstery were an issue in the quarter and we have made pricing adjustments to our line that are just now taking effect. Finally, our open market Club Level by Bassett division performed well in the period and is expected to continue to grow in 2018.”

“Subsequent to year end we acquired the Lane Venture outdoor furniture business for $15.6 million,” continued Spilman. “We are excited about our entry into this category and believe that Lane Venture will provide a foundation for us to become a significant participant in the field. We will operate Lane Venture as a stand-alone business and do not plan to market the product in the Bassett stores. We have our hands full at the moment in getting Lane Venture up and running with a new technology platform, a new manufacturing model, and in a newly leased facility. Once we begin to realize the fruits of these efforts, we plan a separately marketed and merchandised outdoor assortment for our stores under the Bassett Outdoor name. This will only occur after we are satisfied that we have begun to tap the full potential of the Lane Venture opportunity.”

Retail Segment

Net sales for the 60 Company-owned Bassett Home Furnishings stores were $72.1 million for the fourth quarter of 2017 as compared to $69.9 million for the fourth quarter of 2016, an increase of $2.2 million or 3.2%. The increase was due to a $3.3 million increase in non-comparable store sales partially offset by a $1.2 million or 1.7% decrease in comparable store sales.  Due to the flooding from Hurricane Harvey, the Company’s four stores in Houston were closed for almost two weeks.  Excluding those four stores, the comparable store sales decrease was 0.4% for the quarter.

While the Company does not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar value of sales orders taken, rather than delivered) as a key store performance indicator.  Written sales for comparable stores increased by 2.7% for the fourth quarter of 2017 as compared to the fourth quarter of 2016. 

The consolidated retail operating profit for the fourth quarter of 2017 was $2.1 million as compared to $2.9 million for the fourth quarter of 2016, a decrease of $0.8 million.  The 54 comparable stores generated operating income of $3.5 million for the quarter, or 5.5% of sales, as compared to $3.3 million, or 5.0% of sales, for the prior year quarter. Gross margins for comparable stores were 52.5% for the fourth quarter of 2017 as compared to 50.5% for the fourth quarter of 2016.  This increase is primarily due to improved pricing strategies and product mix.  SG&A expenses for comparable stores increased $0.5 million to $30.0 million or 47.0% of sales as compared to 45.5% of sales for the fourth quarter of 2016. The increase in SG&A was primarily due to higher advertising costs along with increased payroll and benefits costs.

Non-comparable stores generated sales of $8.3 million with an operating loss of $1.4 million as compared to sales of $5 million and an operating loss of $0.4 million in the prior year quarter.  As part of the $1.4 million loss for the quarter period, the Company incurred $0.8 million in new store pre-opening costs, an increase of $0.4 million over the prior year.  As previously stated, the Company’s retail expansion is initially costly.  However, the Company believes that site selection and new store presentation will generally result in locations that operate at or above a retail break-even level within a reasonable period of time following store opening.

“In assessing the year for corporate retail, we take pride in the fact that our 1.9% delivered comparable store sales increase marked the seventh consecutive year of positive comps for our retail team,” observed Spilman. “The bar is definitely being raised each year and achieving comparable store growth is not getting easier. Our focus on this metric serves as a catalyst to drive the intensity and the innovation that are the hallmarks of our retail organization. With our aforementioned store expansion plans in 2018 as a backdrop, it is noteworthy that over the past 3 years we have opened 11 stores, only to close another 12 over the same period of time. We also purchased another store from a previously existing licensee.  Upgrading our real estate portfolio has been an integral part of our retail strategy as we have consciously moved away from older locations that were mostly taken over from former licensees as a result of the Great Recession. The key point here is that although our retail volume has grown by $52 million since the end of fiscal 2014, our store count has not grown. Therefore, our growth has come from opening more productive stores and improving our comparable store performance. The most exciting element in all of this is that the great majority of these closings are behind us and we look forward to adding stores in the future without having to simultaneously close a similar number of locations. As a result, we are excited to finally be in position to generate retail and wholesale growth by increasing our store count.”

Logistical Services Segment

Revenue for Zenith was $25.7 million for the fourth quarter of 2017 as compared to $24.2 million for 2016, an increase of $1.5 million or 6.1%.  Revenues to both Bassett and non-Bassett customers were higher quarter over quarter.  Zenith’s operating expenses for the fourth quarter of 2017 were $24.5 million or 95.2% of revenue as compared to $22.8 million or 94.1% for the fourth quarter of 2016.  This resulted in operating profit of $1.2 million or 4.8% of sales for the current quarter as compared to $1.4 million or 5.9% of sales for the prior year quarter.  This decrease is primarily due to the start-up of several new local home delivery hubs to support the growth of new Bassett stores.  

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 92 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. The most significant growth opportunity for Bassett continues to be the Company’s dedicated retail store program. Bassett’s retail strategy includes stylish, custom-built furniture that is ready for delivery in the home within 30 days. The stores also feature 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,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the fourth fiscal quarter of 2017, 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; 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.

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - unaudited
(In thousands, except for per share data)
                       
                       
  Quarter Ended   Year Ended
  November 25, 2017   November 26, 2016   November 25, 2017   November 26, 2016
    Percent of     Percent of     Percent of     Percent of
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales
                       
Sales revenue:                      
Furniture and accessories $   103,953       $   100,339       $   398,097       $   377,196    
Logistics     14,272           13,447           54,406           54,842    
Total sales revenue     118,225   100.0 %       113,786   100.0 %       452,503   100.0 %       432,038   100.0 %
                       
Cost of furniture and accessories sold     45,380   38.4 %       43,023   37.8 %       177,579   39.2 %       167,519   38.8 %
                       
Selling, general and administrative expenses excluding                      
new store pre-opening costs     64,521   54.6 %       61,333   53.9 %       245,493   54.3 %       235,178   54.4 %
New store pre-opening costs     830   0.7 %       421   0.4 %       2,413   0.5 %       1,148   0.3 %
Income from operations     7,494   6.3 %       9,009   7.9 %       27,018   6.0 %       28,193   6.5 %
                       
Gain on sale of investments     954   0.8 %       -   0.0 %       4,221   0.9 %       -   0.0 %
Impairment of investment real estate     -   0.0 %       -   0.0 %       (1,084 ) -0.2 %       -   0.0 %
Income from Continued Dumping & Subsidy Offset Act     94   0.1 %       240   0.2 %       94   0.0 %       240   0.1 %
Other loss, net     (379 ) -0.3 %       (752 ) -0.7 %       (2,373 ) -0.5 %       (2,656 ) -0.6 %
Income before income taxes     8,163   6.9 %       8,497   7.5 %       27,876   6.2 %       25,777   6.0 %
                       
Income tax provision     3,189   2.7 %       3,452   3.0 %       9,620   2.1 %       9,948   2.3 %
Net income $   4,974   4.2 %   $   5,045   4.4 %   $   18,256   4.0 %   $   15,829   3.7 %
                       
Basic earnings per share $   0.46       $   0.47       $   1.71       $   1.47    
                       
Diluted earnings per share $   0.46       $   0.47       $   1.70       $   1.46    
                       
                       

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)    
Assets   November 25, 2017   November 26, 2016
Current assets        
Cash and cash equivalents    $   53,949     $   35,144  
Short-term investments       23,125         23,125  
Accounts receivable, net       19,640         18,358  
Inventories, net       54,476         53,215  
Other current assets        8,192         10,727  
Total current assets       159,382         140,569  
         
Property and equipment, net       103,244         104,655  
         
Other long-term assets        
Deferred income taxes, net       8,393         8,071  
Goodwill and other intangible assets       17,351         17,360  
Other       5,378         7,612  
Total long-term assets       31,122         33,043  
Total assets   $   293,748     $   278,267  
         
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable   $   21,760     $   21,281  
Accrued compensation and benefits       14,670         13,602  
Customer deposits       27,107         25,181  
Dividends payable       3,759         3,218  
Current portion of long-term debt       3,405         3,290  
Other accrued liabilities       12,655         10,441  
Total current liabilities       83,356         77,013  
         
Long-term liabilities        
Post employment benefit obligations       13,326         12,760  
Long-term debt       329         3,821  
Other long-term liabilities       5,277         3,968  
Total long-term liabilities       18,932         20,549  
         
         
Stockholders’ equity        
Common stock       53,690         53,615  
Retained earnings       139,378         129,388  
Additional paid-in-capital       962         255  
Accumulated other comprehensive loss       (2,570 )       (2,553 )
Total stockholders' equity       191,460         180,705  
Total liabilities and stockholders’ equity   $   293,748     $   278,267  
         
         

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
         
    Year Ended
    November 25, 2017   November 26, 2016
Operating activities:        
Net income   $   18,256     $   15,829  
Adjustments to reconcile net income to net cash provided by        
(used in) operating activities:        
Depreciation and amortization       13,312         12,249  
Provision for asset impairment charge       1,084         -  
Gain on sale of property and equipment       (1,190 )       (128 )
Gain on sale of investments       (4,221 )       -  
Tenant improvement allowances received from lessors       1,643         914  
Deferred income taxes       (302 )       5,324  
Collateral deposited with insurance carrier       -         (300 )
Other, net       1,345         1,183  
Changes in operating assets and liabilities         
Accounts receivable       (1,225 )       3,228  
Inventories       (918 )       6,681  
Other current and long-term assets        2,536         (3,629 )
Customer deposits       1,926         1,182  
Accounts payable and accrued liabilities       4,138         (3,471 )
Net cash provided by operating activities       36,384         39,062  
         
Investing activities:        
Purchases of property and equipment       (15,500 )       (21,501 )
Proceeds from sale of retail  real estate and property and equipment       4,474         667  
Proceeds from sale of investments       5,546         -  
Acquisition of retail licensee store       (655 )       -  
Net cash used in investing activities       (6,135 )       (20,834 )
         
Financing activities:         
Cash dividends        (7,725 )       (6,311 )
Proceeds from the exercise of stock options       310         114  
Other issuance of common stock       168         182  
Repurchases of common stock       (83 )       (6,393 )
Taxes paid related to net share settlement of equity awards       (641 )       (77 )
Repayments of notes payable       (3,473 )       (14,251 )
Proceeds from equipment loans       -         7,384  
Net cash used in financing activities       (11,444 )       (19,352 )
Change in cash and cash equivalents       18,805         (1,124 )
Cash and cash equivalents - beginning of period       35,144         36,268  
    .   .
Cash and cash equivalents - end of period   $   53,949     $   35,144  
         
         

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
                 
    Quarter Ended   Year Ended
    November 25, 2017   November 26, 2016   November 25, 2017   November 26, 2016
Net Sales                
Wholesale   $   63,168     $   62,561     $   249,193     $   240,346  
Retail - Company-owned stores       72,125         69,913         268,264         254,667  
Logistical services       25,693         24,227         97,578         95,707  
Inter-company eliminations:                
    Furniture and accessories       (31,340 )       (32,135 )       (119,360 )       (117,817 )
    Logistical services       (11,421 )       (10,780 )       (43,172 )       (40,865 )
Consolidated   $   118,225     $   113,786     $   452,503     $   432,038  
                 
Operating Income                
Wholesale   $   3,979     $   4,292     $   19,121     $   18,672  
Retail       2,113         2,868         3,490         4,333  
Logistical services       1,226         1,432         2,962         3,511  
Inter-company elimination       176         417         1,445         1,677  
Consolidated   $   7,494     $   9,009     $   27,018     $   28,193  
                 
                 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES   
Rollforward of BHF Store Count  
           
             
    November 26,       November 25,
    2016 Opened* Closed* Transfers 2017
             
Company-owned stores     59   5   (5 )   1     60
Licensee-owned stores     31   1   (1 )   (1 )   30
             
  Total     90   6   (6 )   -      90
             
* Does not include openings and closures due to relocation of existing stores within a market.  
             
             

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
Supplemental Retail Information--unaudited  
(In thousands)  
                         
  54  Comparable Stores   52  Comparable Stores  
  Quarter Ended   Quarter Ended   Year Ended   Year Ended  
  November 25, 2017   November 26, 2016   November 25, 2017   November 26, 2016  
    Percent of     Percent of     Percent of     Percent of  
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales  
                         
Net sales $   63,868   100.0 %   $   64,947   100.0 %   $   233,823   100.0 %   $   229,530   100.0 %  
                         
Cost of sales     30,343   47.5 %       32,156   49.5 %       114,277   48.9 %       114,427   49.9 %  
                         
Gross profit     33,525   52.5 %       32,791   50.5 %       119,546   51.1 %       115,103   50.1 %  
                         
Selling, general and administrative expense*     30,011   47.0 %       29,533   45.5 %       112,428   48.1 %       108,328   47.2 %  
                         
Income from operations $   3,514   5.5 %   $   3,258   5.0 %   $   7,118   3.0 %   $   6,775   3.0 %  
                         
                         
  All Other Stores   All Other Stores  
  Quarter Ended   Quarter Ended   Year Ended   Year Ended  
  November 25, 2017   November 26, 2016   November 25, 2017   November 26, 2016  
    Percent of     Percent of     Percent of     Percent of  
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales  
                         
Net sales $   8,257   100.0 %   $   4,966   100.0 %   $   34,441   100.0 %   $   25,137   100.0 %  
                         
Cost of sales     4,492   54.4 %       2,618   52.7 %       18,186   52.8 %       13,781   54.8 %  
                         
Gross profit     3,765   45.6 %       2,348   47.3 %       16,255   47.2 %       11,356   45.2 %  
                         
Selling, general and administrative expense     4,336   52.5 %       2,317   46.7 %       17,470   50.7 %       12,650   50.3 %  
Pre-opening store costs**     830   10.1 %       421   8.5 %       2,413   7.0 %       1,148   4.6 %  
                         
Loss from operations $   (1,401 ) -17.0 %   $   (390 ) -8.0 %   $   (3,628 ) -10.6 %   $   (2,442 ) -9.7 %  
                         
 *Comparable store SG&A includes retail corporate overhead and administrative costs.                
**Pre-opening store costs include the accrual for straight-line rent recorded during the period between               
   date of possesion and store opening  date, employee payroll and training costs prior to store opening               
   and other various expenses incurred prior to store opening.                      
                       
                       

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

Jay S. Moore
Director of Communications
(276) 629-6450 – Media

 

 

 

 

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Source: Bassett Furniture Industries, Incorporated

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