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Bassett Announces Fiscal Third Quarter Results
Fiscal 2017 Third Quarter Highlights
- Consolidated sales were
$114.3 million for the third quarter of 2017 compared to$104.7 million for the third quarter of 2016, an increase of 9.1%. - Operating income for the quarter was
$7.3 million or 6.4% of sales as compared to$7.5 million or 7.2% of sales for the prior year quarter. Excluding the unusual items described below, adjusted operating income was$6.5 million or 5.7% of sales as compared to$6.1 million or 5.8% of sales for the prior year quarter. - Wholesale sales were
$61.8 million for the third quarter of 2017 compared to$58.3 million for the third quarter of 2016, an increase of 5.9%. Wholesale operating income for the quarter was$4.5 million or 7.2% of sales as compared to$5.6 million or 9.7% of sales for the prior year quarter. Wholesale operating profit for the third quarter of 2016 included$1.4 million for the settlement of the Polyurethane Foam Antitrust Litigation. - Company-owned store sales were
$67.4 million for the third quarter of 2017 compared to$61.2 million for the third quarter of 2016, an increase of 10%. This included a comparable store sales increase of 1.8% compared to the prior year quarter. Comparable store operating income was$1.2 million or 2.0% of sales for the current year quarter as compared to$1.5 million or 2.5% of sales for the prior year quarter. Included in the comparable store operating income for 2017 was a$0.5 million loss for expenses related to settling employment claims. Total retail operating income was$1.4 million or 2.0% of sales for the quarter as compared to$0.8 million or 1.3% of sales for the prior year quarter. Also included in the 2017 retail operating income was a$1.2 million gain on the sale of theLas Vegas store building which was closed during the quarter. Comparable store written sales for the quarter decreased 2.9%. - Revenue for Zenith was
$24.9 million for the third quarter of 2017 compared to$23.0 million for the third quarter of 2016, an 8.4% increase. Zenith's operating income for the quarter was$1.2 million or 4.7% of sales as compared to$0.7 million or 2.9% of sales for the prior year quarter. - Net income for the quarter was
$4.6 million or$0.43 per diluted share as compared to$4.2 million or$0.38 per diluted share for the prior year quarter.
"We were pleased to post a 9.1% consolidated sales increase for the quarter," commented
Wholesale Segment
Net sales for the wholesale segment were
"Strong performances in our Wood and Upholstery divisions were largely offset at the comparable wholesale operating profit level by spending to enhance our website and E-commerce capabilities and by a favorable adjustment made to our executive compensation accrual last
year," continued Spilman. "Nevertheless, the fundamentals around the domestic manufacturing and importing of our product line were solid. Domestic wood grew by 23% and profitability grew by 55% in the process. Thanks to a strong showing in our Juvenile division, imported wood sales declined at a smaller rate than experienced in recent quarters. We are also very encouraged by the initial retail sales of our newly-introduced Bella collection that hit the stores in August. As has been the case for several years, we grew upholstery sales and profitability again this quarter. Raw material price increases from our suppliers tempered profit gains in our domestic upholstery operations, however. We are watching this trend closely as we move forward. Retail sales of our Club Level by
"As mentioned, we are increasing our investments in our website and our E-commerce capabilities to continue to grow Bassett," added Spilman. "There are several components to this strategy that merit discussion. Simply increasing digital content is one component. This means more presentations of the imagery of our product assortment to further expose consumers to our designs and our custom furniture capabilities, primarily through a more aggressive consumer e-mail campaign. Secondly, technology enhancements on our website are being implemented to provide consumers with a faster and more interactive experience with our products and to allow them to visualize the myriad fabric and finish options that we offer. This is paying off in the average time spent on our website by consumers when engaging with this
technology and with a much increased likelihood that they will visit a
Retail Segment
Net sales for the 62 Company-owned Bassett Home Furnishings stores were
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 2.9% for the third quarter of 2017 as compared to the third quarter of 2016.
The consolidated
retail operating profit for the third quarter of 2017 was
Non-comparable stores generated sales of
"The third quarter in our corporate retail operation was relatively quiet as we prepared for a flurry of new store activity in the upcoming quarters," continued Spilman. "Our June price increase began to positively offset retail gross margins with a 70 basis point year over year improvement. Delivered retail comps increased 1.8% but written sales comped down 2.9% compared to last year's 7.9%
comparable store improvement. We suffered cannibalization in stores nearby our new
Logistical Services Segment
Revenue for Zenith was
About
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 third 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,
| Condensed Consolidated Statements of Income - unaudited | |||||||||||||||||||||||||||
| (In thousands, except for per share data) | |||||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
| Percent of | Percent of | Percent of | Percent of | ||||||||||||||||||||||||
| Amount | Amount | Amount | Amount | ||||||||||||||||||||||||
| Sales revenue: | |||||||||||||||||||||||||||
| Furniture and accessories | $ | 100,152 | $ | 91,465 | $ | 294,144 | $ | 276,857 | |||||||||||||||||||
| Logistics | 14,109 | 13,247 | 40,134 | 41,395 | |||||||||||||||||||||||
| Total sales revenue | 114,261 | 100.0 | % | 104,712 | 100.0 | % | 334,278 | 100.0 | % | 318,252 | 100.0 | % | |||||||||||||||
| Cost of furniture and accessories sold | 45,320 | 39.7 | % | 40,091 | 38.3 | % | 132,199 | 39.5 | % | 124,496 | 39.1 | % | |||||||||||||||
| Selling, general and administrative expenses excluding | |||||||||||||||||||||||||||
| new store pre-opening costs | 61,373 | 53.7 | % | 56,800 | 54.2 | % | 180,972 | 54.1 | % | 173,845 | 54.6 | % | |||||||||||||||
| New store pre-opening costs | 308 | 0.3 | % | 281 | 0.3 | % | 1,583 | 0.5 | % | 727 | 0.2 | % | |||||||||||||||
| Income from operations | 7,260 | 6.4 | % | 7,540 | 7.2 | % | 19,524 | 5.8 | % | 19,184 | 6.0 | % | |||||||||||||||
| Gain on sale of investment | - | 0.0 | % | - | 0.0 | % | 3,267 | 1.0 | % | - | 0.0 | % | |||||||||||||||
| Impairment of investment real estate | - | 0.0 | % | - | 0.0 | % | (1,084 | ) | -0.3 | % | - | 0.0 | % | ||||||||||||||
| Other loss, net | (583 | ) | -0.5 | % | (647 | ) | -0.6 | % | (1,994 | ) | -0.6 | % | (1,904 | ) | -0.6 | % | |||||||||||
| Income before income taxes | 6,677 | 5.8 | % | 6,893 | 6.6 | % | 19,713 | 5.9 | % | 17,280 | 5.4 | % | |||||||||||||||
| Income tax provision | 2,098 | 1.8 | % | 2,728 | 2.6 | % | 6,431 | 1.9 | % | 6,496 | 2.0 | % | |||||||||||||||
| Net income | $ | 4,579 | 4.0 | % | $ | 4,165 | 4.0 | % | $ | 13,282 | 4.0 | % | $ | 10,784 | 3.4 | % | |||||||||||
| Basic earnings per share | $ | 0.43 | $ | 0.39 | $ | 1.25 | $ | 1.00 | |||||||||||||||||||
| Diluted earnings per share | $ | 0.43 | $ | 0.38 | $ | 1.24 | $ | 0.99 | |||||||||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 36,497 | $ | 35,144 | ||||
| Short-term investments | 23,125 | 23,125 | ||||||
| Accounts receivable, net | 19,514 | 18,358 | ||||||
| Inventories, net | 57,748 | 53,215 | ||||||
| Other current assets | 8,808 | 10,727 | ||||||
| Total current assets | 145,692 | 140,569 | ||||||
| Property and equipment, net | 101,988 | 104,655 | ||||||
| Other long-term assets | ||||||||
| Deferred income taxes, net | 8,235 | 8,071 | ||||||
| 17,431 | 17,360 | |||||||
| Other | 6,410 | 7,612 | ||||||
| Total long-term assets | 32,076 | 33,043 | ||||||
| Total assets | $ | 279,756 | $ | 278,267 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 19,047 | $ | 21,281 | ||||
| Accrued compensation and benefits | 13,584 | 13,602 | ||||||
| Customer deposits | 20,757 | 25,181 | ||||||
| Dividends payable | - | 3,218 | ||||||
| Current portion of long-term debt | 3,373 | 3,290 | ||||||
| Other accrued liabilities | 13,554 | 10,441 | ||||||
| Total current liabilities | 70,315 | 77,013 | ||||||
| Long-term liabilities | ||||||||
| Post employment benefit obligations | 13,776 | 12,760 | ||||||
| Long-term debt | 527 | 3,821 | ||||||
| Other long-term liabilities | 4,412 | 3,968 | ||||||
| Total long-term liabilities | 18,715 | 20,549 | ||||||
| Stockholders' equity | ||||||||
| Common stock | 53,677 | 53,615 | ||||||
| Retained earnings | 139,345 | 129,388 | ||||||
| Additional paid-in-capital | 626 | 255 | ||||||
| Accumulated other comprehensive loss | (2,922 | ) | (2,553 | ) | ||||
| Total stockholders' equity | 190,726 | 180,705 | ||||||
| Total liabilities and stockholders' equity | $ | 279,756 | $ | 278,267 | ||||
| Consolidated Statements of Cash Flows - unaudited | ||||||||
| (In thousands) | ||||||||
| Nine Months Ended | ||||||||
| Operating activities: | ||||||||
| Net income | $ | 13,282 | $ | 10,784 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| (used in) operating activities: | ||||||||
| Depreciation and amortization | 10,060 | 8,866 | ||||||
| Provision for asset impairment charge | 1,084 | - | ||||||
| Gain on sale of property and equipment | (1,278 | ) | (165 | ) | ||||
| Gain on sale of investment | (3,267 | ) | - | |||||
| Tenant improvement allowances received from lessors | 1,165 | 590 | ||||||
| Deferred income taxes | 195 | 4,360 | ||||||
| Other, net | 516 | 421 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | (1,018 | ) | 2,334 | |||||
| Inventories | (4,190 | ) | 6,483 | |||||
| Other current and long-term assets | 1,919 | (4,721 | ) | |||||
| Customer deposits | (4,424 | ) | (3,867 | ) | ||||
| Accounts payable and accrued liabilities | 654 | (6,120 | ) | |||||
| Net cash provided by operating activities | 14,698 | 18,965 | ||||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (10,817 | ) | (18,955 | ) | ||||
| Proceeds from sale of retail real estate and property and equipment | 4,474 | 632 | ||||||
| Proceeds from sale of investment | 3,592 | - | ||||||
| Acquisition of retail licensee store | (655 | ) | - | |||||
| Other | 223 | - | ||||||
| Net cash used in investing activities | (3,183 | ) | (18,323 | ) | ||||
| Financing activities: | ||||||||
| Cash dividends | (6,544 | ) | (5,238 | ) | ||||
| Proceeds from the exercise of stock options | 310 | 114 | ||||||
| Other issuance of common stock | 83 | 182 | ||||||
| Repurchases of common stock | (83 | ) | (3,989 | ) | ||||
| Taxes paid related to net share settlement of equity awards | (641 | ) | (77 | ) | ||||
| Repayments of notes payable | (3,287 | ) | (7,235 | ) | ||||
| Proceeds from equipment loans | - | 7,384 | ||||||
| Net cash used in financing activities | (10,162 | ) | (8,859 | ) | ||||
| Change in cash and cash equivalents | 1,353 | (8,217 | ) | |||||
| Cash and cash equivalents - beginning of period | 35,144 | 36,268 | ||||||
| . | . | |||||||
| Cash and cash equivalents - end of period | $ | 36,497 | $ | 28,051 | ||||
| Segment Information - unaudited | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||
| Wholesale | $ | 61,757 | $ | 58,303 | $ | 186,025 | $ | 177,785 | ||||||||
| Retail - Company-owned stores | 67,402 | 61,216 | 196,139 | 184,754 | ||||||||||||
| Logistical services | 24,925 | 22,991 | 71,885 | 71,480 | ||||||||||||
| Inter-company eliminations: | ||||||||||||||||
| Furniture and accessories | (29,007 | ) | (28,054 | ) | (88,020 | ) | (85,682 | ) | ||||||||
| Logistical services | (10,816 | ) | (9,744 | ) | (31,751 | ) | (30,085 | ) | ||||||||
| Consolidated | $ | 114,261 | $ | 104,712 | $ | 334,278 | $ | 318,252 | ||||||||
| Operating Income | ||||||||||||||||
| Wholesale | $ | 4,466 | $ | 5,648 | $ | 15,142 | $ | 14,380 | ||||||||
| Retail | 1,353 | 768 | 1,377 | 1,465 | ||||||||||||
| Logistical services | 1,164 | 674 | 1,736 | 2,079 | ||||||||||||
| Inter-company elimination | 277 | 450 | 1,269 | 1,260 | ||||||||||||
| Consolidated | $ | 7,260 | $ | 7,540 | $ | 19,524 | $ | 19,184 | ||||||||
| Rollforward of BHF Store Count | ||||||||||||
| 2016 | Opened* | Closed* | Transfers | 2017 | ||||||||
| Company-owned stores | 59 | 3 | (1 | ) | 1 | 62 | ||||||
| Licensee-owned stores | 31 | 1 | (1 | ) | (1 | ) | 30 | |||||
| Total | 90 | 4 | (2 | ) | - | 92 | ||||||
| * Does not include openings and closures due to relocation of existing stores within a market. | ||||||||||||
| Supplemental Retail Information--unaudited | ||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| 55 Comparable Stores | 55 Comparable Stores | |||||||||||||||||||||||||
| Quarter Ended | Quarter Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Percent of | Percent of | Percent of | Percent of | |||||||||||||||||||||||
| Amount | Amount | Amount | Amount | |||||||||||||||||||||||
| Net sales | $ | 60,137 | 100.0 | % | $ | 59,071 | 100.0 | % | $ | 180,584 | 100.0 | % | $ | 175,005 | 100.0 | % | ||||||||||
| Cost of sales | 29,301 | 48.7 | % | 29,342 | 49.7 | % | 89,578 | 49.6 | % | 87,678 | 50.1 | % | ||||||||||||||
| Gross profit | 30,836 | 51.3 | % | 29,729 | 50.3 | % | 91,006 | 50.4 | % | 87,327 | 49.9 | % | ||||||||||||||
| Selling, general and administrative expense* | 29,622 | 49.3 | % | 28,259 | 47.8 | % | 87,355 | 48.4 | % | 83,643 | 47.8 | % | ||||||||||||||
| Income from operations | $ | 1,214 | 2.0 | % | $ | 1,470 | 2.5 | % | $ | 3,651 | 2.0 | % | $ | 3,684 | 2.1 | % | ||||||||||
| All Other Stores | All Other Stores | |||||||||||||||||||||||||
| Quarter Ended | Quarter Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Percent of | Percent of | Percent of | Percent of | |||||||||||||||||||||||
| Amount | Amount | Amount | Amount | |||||||||||||||||||||||
| Net sales | $ | 7,265 | 100.0 | % | $ | 2,145 | 100.0 | % | $ | 15,555 | 100.0 | % | $ | 9,749 | 100.0 | % | ||||||||||
| Cost of sales | 3,796 | 52.3 | % | 1,136 | 53.0 | % | 8,050 | 51.8 | % | 5,756 | 59.0 | % | ||||||||||||||
| Gross profit | 3,469 | 47.7 | % | 1,009 | 47.0 | % | 7,505 | 48.2 | % | 3,993 | 41.0 | % | ||||||||||||||
| Selling, general and administrative expense | 3,022 | 41.6 | % | 1,430 | 66.7 | % | 8,196 | 52.7 | % | 5,485 | 56.3 | % | ||||||||||||||
| Pre-opening store costs** | 308 | 4.2 | % | 281 | 13.1 | % | 1,583 | 10.2 | % | 727 | 7.5 | % | ||||||||||||||
| Loss from operations | $ | 139 | 1.9 | % | $ | (702 | ) | -32.8 | % | $ | (2,274 | ) | -14.7 | % | $ | (2,219 | ) | -22.8 | % | |||||||
| *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. | ||||||||||||||||||||||||||
Source:J. Michael Daniel Senior Vice President and Chief Financial Officer (276) 629-6614 - InvestorsJay S. Moore Director of Communications (276) 629-6450 - Media
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