Bassett Furniture Industries
Jun 30, 2016
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Bassett Announces Fiscal Second Quarter Results

BASSETT, Va., June 30, 2016 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended May 28, 2016.

Fiscal 2016 Second Quarter Highlights

"The year over year sales growth that we have generated in 15 of the past 16 quarters stalled for our quarter ended May 28, 2016," commented Robert H. Spilman, Jr., Chairman and CEO.  "Although we saw decreases in our consolidated, wholesale, and retail sales for the quarter, we remain optimistic about our prospects for the future as we continue to open new stores, remodel older ones, and close the remaining handful of underperformers.  Against the backdrop of last year's 31% sales increase, sales fell 4.4%.  Operating income declined to $5.9 million compared to the $6.7 million that we produced last year.  Much of our efforts in the first half of the year have been pointed toward the large product rollout that we executed in preparation for this year's Memorial Day sales event and we were extremely pleased with the sales that our new products produced, as the net result for the 12-day promotional period produced comparable store written sales that were 24% higher compared to the 2015 promotional period.  Amidst the choppy sales environment that has characterized the past few months in our sector, we are encouraged by the performance of our new assortment and will focus on additional enhancements as the remainder of 2016 unfolds."

Wholesale Segment 

Net sales for the wholesale segment were $59.9 million for the second quarter of 2016 as compared to $66.7 million for the second quarter of 2015, a decrease of $6.8 million or 10%.  This decrease was driven by lower shipments to both the Bassett Home Furnishings store network and the open market (outside the Bassett Home Furnishings network). The decrease in sales to the Bassett Home Furnishings store network and the open market, was primarily due to general softness at retail.  In addition, sales to the open market were impacted by lower sales of the HGTV Home Collection brand that was discontinued in late 2015.  Gross margins for the wholesale segment increased to 33.8% for the second quarter of 2016 from 32.8% for the second quarter of 2015, driven largely by higher margins in the imported wood operation from favorable ocean freight and lower impact of discounting in 2016, as the Company was exiting the open market HGTV Home Collection brand in 2015.  In addition, gross margins in the upholstery operation improved due to improved pricing strategies coupled with favorable raw material costs. Wholesale SG&A for the second quarter of 2016 was $15.9 million as compared to $17.1 million for the prior year period. SG&A as a percentage of sales increased to 26.5% as compared to 25.6% for the second quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by reduced leverage of fixed costs from lower sales levels partially offset by lower bad debt costs and incentive compensation expenses.  Operating income was $4.3 million or 7.3% of sales as compared to $4.8 million or 7.2% of sales in the prior year.

"Both our wood and upholstery divisions suffered sales declines in the quarter," continued Spilman.  "Only our domestically produced Bench Made product range generated revenue growth.  In reviewing the quarter's results, it has been difficult to pinpoint specific macro factors that slowed our sales momentum.  Closer to home, however, we can cite the closure of three Bassett stores, the discontinuation of our open market HGTV product line, temporary disruptions in our imported motion supply chain, and the comparatively weak performance of our stores in the energy-related economy of Texas, as the primary contributors to our down quarter.  Despite this, we were able to hold our wholesale margins intact, albeit on less volume.  Our Grand Prairie, Texas upholstery facility was modestly profitable in its first full quarter of operation, further showcasing the portability of our cellular manufacturing model.  Once again, we are building on the success of our recent product launch with the upcoming additions of several new product collections that will hit our stores this fall."

Retail Segment

Net sales for the 58 Company-owned Bassett Home Furnishings stores were $61.9 million for the second quarter of 2016 as compared to $63.9 million for the second quarter of 2015, a decrease of $2.0 million or 3.1%. The decrease was due to a $2.2 million or 3.6% decrease in comparable store sales. 

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 decreased by 3.9% for the second quarter of 2016 as compared to the second quarter of 2015. 

The consolidated retail operating profit for the second quarter of 2016 was $0.4 million as compared to $2.0 million for the second quarter of 2015, a decline of $1.6 million.  The 56 comparable stores generated operating income of $1.2 million for the quarter, or 2.0% of sales, as compared to $2.3 million, or 3.7% of sales, for the prior year quarter. Gross margins for comparable stores were 49.4% for the second quarter of 2016 compared to 49.9% for the second quarter of 2015.  Lower gross margins were due primarily to increased discounting of clearance items in preparation for a significant product rollout for the Memorial Day holiday promotion. SG&A expenses for comparable stores decreased $0.3 million to $28.0 million or 47.4% of sales as compared to 46.2% of sales for the second quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by reduced leverage of fixed costs from lower sales levels. 

"Comparable store delivered sales decreased by 3.6% compared to last year's 17% increase resulting in a $1.6 million decline in retail operating profit," said Spilman.  "Over 70% of our comparable store decline was attributable to our twelve Texas stores where local economies have been impacted by volatility in oil prices.  Our Houston market was particularly hard hit with a sales decline in excess of 20%. On the other hand, store sales have been strong since the end of the quarter.  We are especially pleased with the strides we have made in staffing our stores and with our recruitment strategies in general.  In keeping with our ongoing store portfolio improvement program, three underperforming stores with expiring leases were closed during the period, resulting in losses of $(0.4) million.  We also incurred preopening expenses from our new Sterling, Virginia store that opened at the end of the quarter.  Looking ahead, we are under construction with a new store in Hunt Valley, Maryland and have three more signed leases for units that are set to open at the end of fiscal 2016 or at the beginning of next year."

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With 90 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 affordable 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.  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 second fiscal quarter of 2016, 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 Six Months Ended
 May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015
  Percent of  Percent of  Percent of  Percent of
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales
             
Sales revenue:           
Furniture and accessories$92,990   $99,467   $185,392   $189,015  
Logistics 13,677    12,086    28,148    15,345  
Total sales revenue 106,667  100.0%  111,553  100.0%  213,540  100.0%  204,360  100.0%
             
Cost of furniture and accessories sold 42,419  39.8%  46,921  42.1%  84,405  39.5%  88,851  43.5%
            
Selling, general and administrative expenses excluding           
new store pre-opening costs 58,088  54.5%  57,425  51.5%  117,045  54.8%  104,900  51.3%
New store pre-opening costs 307  0.3%  44   0.0%  446  0.2%  44  0.0%
Lease exit costs -  0.0%  -  0.0%  -  0.0%  419  0.2%
Asset impairment charges  -  0.0%  -  0.0%  -  0.0%  106  0.1%
Management restructuring costs -  0.0%  449  0.4%  -  0.0%  449  0.2%
Income from operations 5,853  5.5%  6,714  6.0%  11,644  5.5%  9,591  4.7%
            
Remeasurement gain on acquisition of affiliate  -  0.0%  -  0.0%  -  0.0%  7,212  3.5%
Income from Continued Dumping & Subsidy Offset Act -  0.0%  1,066  1.0%  -  0.0%  1,066  0.5%
Other loss, net (600) -0.6%  (597) -0.5%  (1,257) -0.6%  (1,220) -0.6%
Income before income taxes 5,253  4.9%   7,183  6.4%  10,387  4.9%  16,649  8.1%
            
Income tax provision  1,868  1.8%  2,654  2.4%  3,768  1.8%  6,164   3.0%
Net income$3,385  3.2% $4,529  4.1% $6,619  3.1% $10,485  5.1%
            
Basic earnings per share$0.31   $0.42   $0.61   $0.99  
            
Diluted earnings per share$0.31   $0.42   $0.61   $0.98  


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
  (Unaudited)  
Assets May 28, 2016 November 28, 2015
Current assets    
Cash and cash equivalents $29,726   $36,268 
Short-term investments  23,125   23,125 
Accounts receivable, net  18,987   21,197 
Inventories, net  54,834   59,896 
Other current assets  8,249   6,798 
Total current assets  134,921   147,284  
     
Property and equipment, net  104,075   96,104 
     
Other long-term assets    
Deferred income taxes, net  12,205   13,471 
Goodwill and other intangible assets  17,521   17,682 
Other  7,525   8,002 
Total long-term assets  37,251   39,155 
Total assets $276,247  $282,543 
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable $20,198  $20,916 
Accrued compensation and benefits  11,614   14,345 
Customer deposits  20,132   23,999 
Dividends payable  -   2,184 
Current portion of long-term debt  6,438   5,273 
Other accrued liabilities  10,907   13,133 
Total current liabilities  69,289   79,850 
     
Long-term liabilities    
Post employment benefit obligations  12,654   12,694 
Long-term debt  9,220   8,500 
Other long-term liabilities  4,151   4,133 
Total long-term liabilities  26,025   25,327 
     
Stockholders' equity    
Common stock  54,525   54,580 
Retained earnings  125,563   120,904 
Additional paid-in-capital  3,409   4,560 
Accumulated other comprehensive loss  (2,564)  (2,678)
Total stockholders' equity  180,933   177,366 
Total liabilities and stockholders' equity $276,247  $282,543 


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
 
 Six Months Ended
 May 28, 2016
 May 30, 2015
Operating activities: 
Net income $6,619  $10,485 
Adjustments to reconcile net income to net cash provided by 
(used in) operating activities: 
Depreciation and amortization  5,611   4,729 
Equity in undistributed income of investments and unconsolidated 
affiliated companies  -   (220)
Non-cash asset impairment charges  -   106 
Non-cash portion of lease exit costs  -   419 
Remeasurement gain on acquisition of affiliate  -   (7,212)
Tenant improvement allowances received from lessors  590   330 
Deferred income taxes  1,198   4,212 
Excess tax benefits from stock-based compensation  41   1,032 
Other, net  697   1,018 
Changes in operating assets and liabilities 
Accounts receivable  2,436   (1,490)
Inventories  5,062   (5,706)
Other current and long-term assets  (1,451)  (2,121)
Customer deposits  (3,867)  763 
Accounts payable and accrued liabilities  (5,926)  3,882 
Net cash provided by operating activities  11,010   10,227 
 
Investing activities: 
Purchases of property and equipment   (14,116)  (7,942)
Proceeds from sale of retail  real estate and property and equipment  577    2,952 
Cash paid for business acquisition, net of cash acquired  -   (7,323)
Capital contribution to affiliate  -   (1,345)
Net cash used in investing activities  (13,539)  (13,658)
 
Financing activities: 
Cash dividends  (4,145)  -3,777 
Proceeds from the exercise of stock options  114   2,993 
Other issuance of common stock  176   171 
Repurchases of common stock  (1,930)  (255)
Repayments of notes payable  (4,920)  (1,214)
Proceeds from equipment loans  6,692   1,307 
Net cash used in financing activities  (4,013)  (775)
Change in cash and cash equivalents  (6,542)  (4,206)
Cash and cash equivalents - beginning of period  36,268   26,673 
Cash and cash equivalents - end of period $29,726  $22,467 


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)
         
  Quarter Ended Six Months Ended
  May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015
Net Sales        
Wholesale $59,906  $66,705  $ 119,482  $125,510 
Retail - Company-owned stores  61,943    63,921   123,538   121,104 
Logistical services  23,810   21,958   48,489   27,957 
Inter-company eliminations:        
Furniture and accessories  (28,859)  (31,159)  (57,628)  (57,600)
Logistical services  (10,133)  (9,872)   (20,341)  (12,611)
Consolidated $106,667  $111,553  $213,540  $204,360 
         
Operating Income        
Wholesale $4,334  $4,796  $8,732  $7,723 
Retail  381   1,971   697   1,929 
Logistical services  661   1,027   1,405    1,019 
Inter-company elimination  477   (631)  810   (106)
Lease exit costs  -   -   -   (419)
Asset impairment charges  -   -   -   (106)
Management restructuring costs  -   (449)  -   (449)
Consolidated $5,853  $6,714  $11,644  $ 9,591 


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Rollforward of BHF Store Count
     
 
  November 28,  May 28,
  2015 Opened*Closed*2016
      
Company-owned stores 601 (3)58
Licensee-owned stores 33- (1)32
      
Total 931 (4)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)
            
 56  Comparable Stores 56  Comparable Stores
 Quarter Ended Quarter Ended Six Months Ended Six Months Ended
 May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015
  Percent of  Percent of  Percent of  Percent of
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales
            
Net sales$59,003  100.0% $61,192  100.0% $117,054  100.0% $115,965  100.0%
            
Cost of sales 29,834  50.6%  30,633  50.1%  58,977  50.4%  57,773  49.8%
            
Gross profit 29,169  49.4%  30,559  49.9%  58,077  49.6%  58,192  50.2%
            
Selling, general and administrative expense* 27,963  47.4%   28,269  46.2%  55,736   47.6%  55,616  48.0%
            
Income from operations$1,206  2.0%  $2,290  3.7% $ 2,341  2.0% $2,576  2.2%
            
            
 All Other Stores All Other Stores
 Quarter Ended Quarter Ended Six Months Ended Six Months Ended
 May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015
  Percent of  Percent of  Percent of  Percent of
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales
            
Net sales$2,940  100.0% $2,729  100.0% $ 6,484  100.0% $5,139  100.0%
            
Cost of sales 1,807  61.5%   1,531  56.1%  3,979  61.4%   2,791  54.3%
            
Gross profit 1,133  38.5%  1,198  43.9%  2,505  38.6%   2,348  45.7%
            
Selling, general and administrative expense 1,651  56.2%  1,473  54.0%  3,703  57.1%  2,951  57.4%
Pre-opening store costs** 307   10.4%  44  1.6%  446   6.9%  44  0.9%
            
Loss from operations$(825) -28.1% $(319) -11.7% $(1,644) -25.4% $(647) -12.6%
            
*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 possession 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

Source: Bassett Furniture Industries, Inc.

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