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Bassett Announces Fiscal Second Quarter Results

BASSETT, Va., June 29, 2023 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its second quarter ended May 27, 2023.

Fiscal 2023 Second Quarter Highlights
(Dollars in millions)

    Sales   Operating Income (Loss)
    2nd Qtr   Dollar %   2nd Qtr % of   2nd Qtr % of
      2023     2022   Change Change   2023   Sales     2022   Sales
  Consolidated (1) $ 100.5   $ 128.7   $ (28.2 ) -21.9 %   $ 2.5   2.5 %   $ 11.0   8.5 %
  Wholesale $ 61.8   $ 87.5   $ (25.7 ) -29.4 %   $ 7.0   11.3 %   $ 11.5   13.1 %
  Retail $ 60.8   $ 75.6   $ (14.8 ) -19.6 %   $ 0.8   1.3 %   $ 7.3   9.7 %
  Corporate & Other (2) $ 2.3   $ -   $ 2.3   100.0 %   $ (6.9 ) N/A   $ (7.5 ) 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.

While our operating results were challenged by industry-wide soft demand, we successfully managed our balance sheet and maintained profitability during the second quarter. We are uncertain as to when the current sales environment will markedly improve, but we believe that our dedicated distribution strategy, domestic manufacturing platform, forthcoming e-commerce enhancements, and strong financial position will enable us to steadily grow revenue and shareholder returns as time goes on.

Consolidated revenue declined by 22% compared to last year but was 4.9% greater than the comparable period in 2019. Wholesale orders declined by 18% on a year-over-year basis. Operating cash flow of $5.8 million was fueled by an 11% reduction in total inventory. Operating income of $2.5 million included a $1.0 million valuation adjustment associated with contingent consideration as part of last year’s acquisition of e-commerce retailer Noa Home. Operating income was negatively impacted by a $1.1 million write-down of our Club Level motion product. A significant portion of the existing inventory has been slow moving and includes the high freight costs from mid-2022. We expect better margins in these products over the remainder of 2023.

Wholesale operating income of 11.3% of sales was hampered by the inventory adjustment mentioned above. Excluding this charge, wholesale operating margins would have been flat. Margins in our Newton, NC upholstery facility improved as we were able to recognize a greater portion of previously implemented price increases in current period sales partially offset by de-leverage of fixed costs due to lower sales volumes. This was offset by lower margins in our wood operations. Continuing the trend that was discussed at the end of the first quarter, manufacturing headcounts are now 20% below last year’s levels. Work schedules were considerably reduced during the period, although we have partially restored work hours recently in light of Memorial Day sales and new products sold during the High Point Furniture Market. In the end, our ability to return our wholesale margins to pre-pandemic levels is essential to our future success. The high freight costs from 2022 that have plagued our Club Level results have also hampered our import wood margins and, to a lesser extent, our outdoor performance. As our inventory of these items turns over, we will experience a margin boost based on today’s lower freight costs. New wood product introductions are crucial to improving plant fixed cost absorption and we plan to introduce an opening price point dining collection this fall to bolster our factory work schedules. We have already successfully added a new layer of modern casual styling to our domestic solid wood Bench Made assortment. Four new tables and seven dining chairs were responsible for the strongest wood product introduction that we have had for several seasons. This product will be featured with the drop of our consumer catalog in August before the Labor Day event in our stores and Bassett Design Centers (BDC). Our BDC network continues to grow and represents an increasingly important element of our portfolio with 101 individual accounts comprising 156 furniture floors that have space dedicated to the prescribed Bassett footprint.

Retail results were significantly behind last year’s record quarter but remained profitable. The closing sale associated with our northeast clearance center also negatively affected results in our retail segment. While store foot traffic declined during the quarter, our average sales ticket rose slightly. The interior design expertise embedded within our retail culture produced makeover sales that represented 47% of total written retail volume. The investment in our new flagship store in Tampa is well underway with an anticipated opening in time for Labor Day. On the same schedule is the dramatic remodel of our Austin store. Both of these locations will feature expanded design centers, new hospitality areas, home entertainment rooms, large outdoor furniture displays, and expanded assortments of accessories that will complement our “whole home” design offering.

Our organization is excited about the culmination of the work and investment that we have put into the launch of our new website that will take place before the end of our August quarter. Accompanying the installment of the new web platform has been the addition of new product data software that will permeate all of our new product development, engineering, marketing, and digital representation of our products on the website itself. This important project is a cornerstone of our growth strategy, and we believe that the expansion of our e-commerce business is crucial to our omni-channel future. Our new site is designed to increase traffic, reduce bounce and exit rates, increase virtual appointments, improve conversion rates and provide our customers with more payment options at checkout. Our most successful stores drive the highest level of e-commerce sales and these locations eagerly await the launch of this robust site. Our Bassett licensed stores as well as our open market dealer partners will also derive the benefit of increased digital commerce as they will fulfill the home delivery portion of these sales in their designated areas. And, for the first time, our partnership with logistics partner J.B. Hunt will give us nationwide home delivery capabilities for e-commerce orders.

On the topic of e-commerce, we continued our drive to profitability for our Noa Home division by reducing the loss from the first quarter by 83%. The Noa team pivoted to a less aggressive stance on digital advertising, reducing costs substantially while managing to hold onto most of the sales that they generated last year as a private company. We have begun to cross-pollinate the best thinking from the Bassett and Noa marketing teams as envisioned with the acquisition of Noa late last year. On tap for Noa is a broadened product assortment for North America and a test of limited geography in the U. S. market later this fall.

Combined outdoor furniture sales were behind last year but grew by 68% in relation to the same period in 2019. The growth reflects the addition of the Bassett Outdoor line and products manufactured in our Alabama aluminum facility along with organic growth in our legacy Lane Venture brand. The investment in the upgrades to the Alabama complex is almost complete and features a finished goods warehouse and a re-engineered plant layout to improve efficiency. In May, we debuted the Bassett Outdoor contract line at the HD Expo Show in Las Vegas targeting the hospitality segment. Also, we are excited to open our new Lane Venture showroom in Atlanta to coincide with the first Casual Furniture Market in Atlanta after the industry’s move there after many years of hosting the show in Chicago. Through a collaboration with Celerie Kemble, a nationally recognized interior designer, we plan to introduce several new and more design-oriented collections that will complement our existing outdoor offerings. To help with the expansion of our outdoor furniture sales effort, we have hired several specialists in the contract field as well as augmenting the Lane Venture residential sales team to further penetrate geographic sales territories.

Although we have addressed reduction in demand with cost rationalization in manufacturing, we have not significantly curtailed spending regarding growth initiatives. In areas such as new store development, website development, outdoor marketing costs, digital imagery creation and certain other marketing costs, we have elected to spend generally in sync with our original internal budgets in the interest of generating long term growth. We will continue to monitor this dynamic as the year unfolds. Meanwhile, we will conservatively manage our working capital, maintain or increase our dividend, and continue to repurchase our common stock when deemed appropriate.

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 91 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 (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 second 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.

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

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

Table 1
Condensed Consolidated Statements of Income - unaudited
(In thousands, except for per share data)
  Quarter Ended   Six Months Ended
  May 27, 2023   May 28, 2022   May 27, 2023   May 28, 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 $ 100,519 100.0 %   $ 128,706   100.0 %   $ 208,217   100.0 %   $ 246,570   100.0 %
Cost of furniture and accessories sold   47,686 47.4 %     62,767   48.8 %     98,187   47.2 %     123,239   50.0 %
Gross profit   52,833 52.6 %     65,939   51.2 %     110,030   52.8 %     123,331   50.0 %
Selling, general and administrative expenses   51,366 51.1 %     54,927   42.7 %     105,861   50.8 %     105,841   42.9 %
Gain on revaluation of contingent consideration   1,013 1.0 %     -   0.0 %     1,013   0.5 %     -   0.0 %
Income from operations   2,480 2.5 %     11,012   8.6 %     5,182   2.5 %     17,490   7.1 %
Other income (loss), net   64 0.1 %     (627 ) -0.5 %     (351 ) -0.2 %     (1,256 ) -0.5 %
Income from continuing operations before income taxes   2,544 2.5 %     10,385   8.1 %     4,831   2.3 %     16,234   6.6 %
Income tax expense   468 0.5 %     2,642   2.1 %     1,310   0.6 %     4,200   1.7 %
Income from continuing operations   2,076 2.1 %     7,743   6.0 %     3,521   1.7 %     12,034   4.9 %
Discontinued operations:                      
Income from operations of logistical services   -       -         -         1,712    
Gain on disposal   -       53,254         -         53,254    
Income tax expense   -       13,879         -         14,309    
Income from discontinued operations - net of tax   -       39,375         -         40,657    
Net income $ 2,076     $ 47,118       $ 3,521       $ 52,691    
Basic earnings per share:                      
Income from continuing operations $ 0.24     $ 0.81       $ 0.40       $ 1.25    
Income from discontinued operations   -       4.14         -         4.22    
Basic and diluted earnings per share $ 0.24     $ 4.95       $ 0.40       $ 5.47    
Diluted earnings per share:                      
Income from continuing operations $ 0.24     $ 0.81       $ 0.40       $ 1.25    
Income (loss) from discontinued operations   -       4.13         -         4.22    
Diluted earnings per share $ 0.24     $ 4.94       $ 0.40       $ 5.47    

Table 2
Condensed Consolidated Balance Sheets
(In thousands)
Assets   May 27, 2023   November 26, 2022
Current assets        
Cash and cash equivalents   $ 54,603     $ 61,625  
Short-term investments     17,725       17,715  
Accounts receivable, net     14,833       17,838  
Inventories, net     70,332       85,477  
Recoverable income taxes     3,091       2,353  
Other current assets     8,795       11,487  
Total current assets     169,379       196,495  
Property and equipment, net     79,543       77,001  
Other long-term assets        
Deferred income taxes, net     5,189       5,528  
Goodwill and other intangible assets     21,532       21,727  
Right of use assets under operating leases     92,505       99,472  
Other     6,177       6,050  
Total long-term assets     125,403       132,777  
Total assets   $ 374,325     $ 406,273  
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable   $ 16,212     $ 20,359  
Accrued compensation and benefits     9,024       12,921  
Customer deposits     23,941       35,963  
Current portion of operating lease obligations     19,012       18,819  
Other current liabilities and accrued expenses     11,500       12,765  
Total current liabilities     79,689       100,827  
Long-term liabilities        
Post employment benefit obligations     10,452       9,954  
Long-term portion of operating lease obligations     89,167       97,477  
Other long-term liabilities     1,832       2,406  
Total long-term liabilities     101,451       109,837  
Stockholders’ equity        
Common stock     43,900       44,759  
Retained earnings     149,393       150,800  
Additional paid-in-capital     -       -  
Accumulated other comprehensive income (loss)     (108 )     50  
Total stockholders' equity     193,185       195,609  
Total liabilities and stockholders’ equity   $ 374,325     $ 406,273  

Table 3
Consolidated Statements of Cash Flows - unaudited
(In thousands)
    Six Months Ended
    May 27, 2023   May 28, 2022
Operating activities:        
Net income   $ 3,521     $ 52,691  
Adjustments to reconcile net income to net cash provided by (used in)        
operating activities:        
Depreciation and amortization     4,909       6,065  
Gain on disposal of discontinued operations     -       (53,254 )
Gain on revaluation of contingent consideration     (1,013 )     -  
Deferred income taxes     392       (3,796 )
Other, net     1,388       915  
Changes in operating assets and liabilities        
Accounts receivable     3,005       (1,829 )
Inventories     15,145       (14,861 )
Other current and long-term assets     953       6,421  
Right of use assets under operating leases     9,105       11,153  
Customer deposits     (12,022 )     (5,101 )
Accounts payable and other liabilities     (8,715 )     4,891  
Obligations under operating leases     (10,255 )     (12,241 )
Net cash provided by (used in) operating activities     6,413       (8,946 )
Investing activities:        
Purchases of property and equipment     (7,405 )     (12,638 )
Proceeds from sale of property and equipment     -       9  
Proceeds from disposal of discontined operations, net     1,000       85,521  
Other     (637 )     (538 )
Net cash used in investing activities     (7,042 )     72,354  
Financing activities:        
Cash dividends     (2,832 )     (17,170 )
Other issuance of common stock     177       177  
Repurchases of common stock     (3,450 )     (8,642 )
Taxes paid related to net share settlement of equity awards     (109 )     -  
Repayments of finance lease obligations     (137 )     (537 )
Net cash used in financing activities     (6,351 )     (26,172 )
Effect of exchange rate changes on cash and cash equivalents     (42 )     -  
Change in cash and cash equivalents     (7,022 )     37,236  
Cash and cash equivalents - beginning of period     61,625       34,374  
Cash and cash equivalents - end of period   $ 54,603     $ 71,610  

Table 4    
Segment Information - unaudited    
(In thousands)    
    Quarter Ended       Six Months Ended       
    May 27, 2023     May 28, 2022     May 27, 2023     May 28, 2022    
Sales Revenue                        
Wholesale sales of furniture and accessories $ 61,774     $ 87,501     $ 131,658     $ 170,986    
Less: Sales to retail segment (24,330 )   (34,415 )   (54,429 )   (64,143 )  
Wholesale sales to external customers 37,444     53,086     77,229     106,843    
Retail sales of furniture and accessories 60,778     75,620     125,740     139,727    
Corporate & Other (1) 2,297     -     5,248     -    
Consolidated net sales of furniture and accessories $ 100,519     $ 128,706     $ 208,217     $ 246,570    
Income from Operations                        
Wholesale $ 7,005     $ 11,465     $ 15,999     $ 21,667    
Retail 755     7,293     2,285     9,915    
Net expenses - Corporate and other (1) (6,949 )   (7,549 )   (14,720 )   (13,794 )  
Inter-company elimination 656     (197 )   605     (298 )  
Gain on revaluation of contingent consideration 1,013     -     1,013     -    
Consolidated $ 2,480     $ 11,012     $ 5,182     $ 17,490    
(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.                        



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Source: Bassett Furniture Industries, Incorporated