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Bassett Reports Fiscal Second Quarter Results and Launches Restructuring Plan

BASSETT, Va., July 10, 2024 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) reported today its results of operations for its second quarter ended June 1, 2024. The Company also announced a restructuring plan designed to improve long-term operational and financial performance.

Q2 Consolidated Business Highlights: [FY 24 vs. FY 23, unless otherwise specified]

  • Revenues decreased 17%.
  • When comparing to the first quarter of 2024, revenues increased 3.8%, normalizing the first quarter for the extra week due to our fiscal calendar.
  • Operating loss of $8.5 million which included asset impairment charges of $5.5 million and additional inventory valuation charges of $2.7 million.
  • Gross margin of 52.5%, which included the increased inventory valuation charges noted above. Excluding the inventory valuation charges, gross profit margin would have been 55.7% (see Table 5).
  • Loss per share of $0.82 vs. diluted earnings per share $0.24.
  • Generated $5.8 million of operating cash flow for the quarter.

Fiscal 2024 Second Quarter Overview
(Dollars in millions)

  Sales   Operating Income (Loss)
  2nd Qtr   Dollar %   2nd Qtr % of   2nd Qtr % of
    2024     2023     Change Change     2024   Sales     2023   Sales
Consolidated (1) $ 83.4   $ 100.5     $ (17.1 ) -17.0 %   $ (8.5 ) -10.2 %   $ 2.5   2.5 %
                       
Wholesale $ 52.6   $ 61.8     $ (9.2 ) -14.9 %   $ 5.7   10.8 %   $ 7.0   11.3 %
                       
Retail $ 50.5   $ 60.8     $ (10.3 ) -16.9 %   $ (2.2 ) -4.4 %   $ 0.8   1.3 %
                       
Corporate & Other (2) $ 1.1   $ 2.3     $ (1.2 ) -52.2 %   $ (6.9 ) N/A   $ (6.9 ) N/A


(1) Our consolidated results include certain intercompany eliminations as well as asset impairment charges of $5.5 million which are not allocated to our segment operating results. 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. along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments.
   

“Excluding the additional inventory valuation charges that we recorded, we were pleased with another quarter of strong gross margins, despite lower sales,” said Robert H. Spilman, Jr., Bassett Chairman and Chief Executive Officer. “The environment for housing remains challenging and consumers are choosing to invest in experiences over their homes, a change from the Covid period. We continue to be disciplined on expenses to improve operating efficiency.”

Restructuring Plan
The Company also announced a restructuring plan to more right-size its cost structure and to prepare it for topline growth. The comprehensive strategy builds on the strength of Bassett’s brand quality, design expertise and service, and focuses on driving revenue growth and profitability long-term. The five-point plan includes:

  • Drive organic growth through Bassett-branded retail locations, omni-channel capabilities, and enhanced customization positioning to expand dedicated distribution footprint.
  • Rationalize US wood manufacturing from two locations into one primary location, supported by a small satellite operation.
  • Optimize inventory and drop unproductive lines.
  • Improve overall cost structure and invest capital in refurbishment of current retail locations.
  • Close the Noa Home e-commerce business.

“Bassett Furniture has a long history of weathering economic cycles, such as the inflationary environment and slow housing market we’re experiencing in 2024 – factors that led to soft demand in our second quarter,” explained Spilman. “The business climate has remained difficult through the first six months of this year and may not improve in the near future. Accordingly, we are committed to returning to profitability by running a leaner operation, with priority focus on both our inventory position and the overall cost structure. We believe that our restructuring plan, expected to improve our bottom line between $5.5 million and $6.5 million on an annual basis, coupled with our solid balance sheet, puts us in a position to be a considerably stronger company when customer demand inevitably improves. I’m particularly pleased that our Board believes in our ability to improve operations and continue our strong cash generation by increasing our quarterly dividend by 11%.”

Conference Call and Webcast
The Company will hold a conference call to discuss its quarterly results on July 11, 2024, at 9:00 am ET. The public is invited to listen to the conference call by webcast, accessible through the Company’s investor relations website, https://investors.bassettfurniture.com/. Participants can also listen to the conference call via https://edge.media-server.com/mmc/p/332ii2e5. A replay and transcript of the conference call will be available on demand on the investor relations site.

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ: BSET) is a leading manufacturer and marketer of high-quality home furnishings. With 88 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. For more information, visit the Company’s website at bassettfurniture.com. (BSET-E)

Forward-Looking Statements
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 2024, 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.

Contacts:
J. Michael Daniel
Senior Vice President and
Chief Financial Officer
(276) 629-6614 – Investors
mdaniel@bassettfurniture.com

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

 
Table 1
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations - unaudited
(In thousands, except for per share data)
                       
  Quarter Ended   Six Months
  June 1, 2024   May 27, 2023   June 1, 2024   May 27, 2023
    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 $ 83,410   100.0 %   $ 100,519   100.0 %   $ 169,964   100.0 %   $ 208,217   100.0 %
Cost of furniture and accessories sold   39,650   47.5 %     47,686   47.4 %     78,337   46.1 %     98,187   47.2 %
Gross profit   43,760   52.5 %     52,833   52.6 %     91,627   53.9 %     110,030   52.8 %
                       
Selling, general and administrative expenses   46,707   56.0 %     51,366   51.1 %     96,931   57.0 %     105,861   50.8 %
Asset impairment charges   5,515   6.6 %     -   0.0 %     5,515   3.2 %     -   0.0 %
Gain on revaluation of contingent consideration   -   0.0 %     1,013   1.0 %     -   0.0 %     1,013   0.5 %
Income (loss) from operations   (8,462 ) -10.1 %     2,480   2.5 %     (10,819 ) -6.4 %     5,182   2.5 %
                       
Interest income   627   0.8 %     569   0.6 %     1,383   0.8 %     721   0.3 %
Other loss, net   (276 ) -0.3 %     (505 ) -0.5 %     (380 ) -0.2 %     (1,072 ) -0.5 %
Income (loss) before income taxes   (8,111 ) -9.7 %     2,544   2.5 %     (9,816 ) -5.8 %     4,831   2.3 %
                       
Income tax expense (benefit)   (910 ) -1.1 %     468   0.5 %     (1,422 ) -0.8 %     1,310   0.6 %
Net income (loss)   (7,201 ) -8.6 %     2,076   2.1 %     (8,394 ) -4.9 %     3,521   1.7 %
                       
                       
Basic and diluted earnings (loss) per share $ (0.82 )     $ 0.24       $ (0.96 )     $ 0.40    
                       


Table 2
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
 
  (Unaudited)    
Assets June 1, 2024   November 25, 2023
Current assets      
Cash and cash equivalents $ 42,646     $ 52,407  
Short-term investments   17,814       17,775  
Accounts receivable, net   13,495       13,736  
Inventories, net   56,875       62,982  
Recoverable income taxes   2,896       2,574  
Other current assets   9,377       8,480  
Total current assets   143,103       157,954  
       
Property and equipment, net   79,802       83,981  
       
Other long-term assets      
Deferred income taxes, net   6,085       4,645  
Goodwill and other intangible assets   14,213       16,067  
Right of use assets under operating leases   94,748       100,888  
Other   7,313       6,889  
Total long-term assets   122,359       128,489  
Total assets $ 345,264     $ 370,424  
       
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 12,188     $ 16,338  
Accrued compensation and benefits   8,424       8,934  
Customer deposits   23,021       22,788  
Current portion of operating lease obligations   18,293       18,827  
Other accrued expenses   9,056       11,003  
Total current liabilities   70,982       77,890  
       
Long-term liabilities      
Post employment benefit obligations   10,758       10,207  
Long-term portion of operating lease obligations   90,646       97,357  
Other long-term liabilities   1,218       1,529  
Total long-term liabilities   102,622       109,093  
       
       
Stockholders’ equity      
Common stock   43,808       43,842  
Retained earnings   127,807       139,354  
Additional paid-in-capital   52       93  
Accumulated other comprehensive income (loss)   (7 )     152  
Total stockholders' equity   171,660       183,441  
Total liabilities and stockholders’ equity $ 345,264     $ 370,424  
       


Table 3
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
       
  Six Months
  June 1, 2024   May 27, 2023
Operating activities:      
Net income (loss) $ (8,394 )   $ 3,521  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation and amortization   5,291       4,909  
Non-cash asset impairment charges   5,515       -  
Gain on revaluation of contingent consideration   -       (1,013 )
Inventory valuation charges   3,879       2,475  
Deferred income taxes   (1,440 )     392  
Other, net   689       1,388  
Changes in operating assets and liabilities:      
Accounts receivable   241       3,005  
Inventories   2,228       15,145  
Other current and long-term assets   (1,217 )     953  
Right of use assets under operating leases   8,707       9,105  
Customer deposits   233       (12,022 )
Accounts payable and other liabilities   (6,930 )     (8,715 )
Obligations under operating leases   (10,721 )     (10,255 )
Net cash provided by (used in) operating activities   (1,919 )     8,888  
       
Investing activities:      
Purchases of property and equipment   (3,683 )     (7,405 )
Proceeds from disposal of discontinued operations, net   -       1,000  
Other   (383 )     (637 )
Net cash used in investing activities   (4,066 )     (7,042 )
       
Financing activities:      
Cash dividends   (3,153 )     (2,832 )
Other issuance of common stock   179       177  
Repurchases of common stock   (489 )     (3,450 )
Taxes paid related to net share settlement of equity awards   (161 )     (109 )
Repayments of finance lease obligations   (153 )     (137 )
Net cash used in financing activities   (3,777 )     (6,351 )
Effect of exchange rate changes on cash and cash equivalents   1       (42 )
Change in cash and cash equivalents   (9,761 )     (4,547 )
Cash and cash equivalents - beginning of period   52,407       61,625  
       
Cash and cash equivalents - end of period $ 42,646     $ 57,078  
       


Table 4
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)
       
  Quarter Ended   Six Months
  June 1, 2024   May 27, 2023   June 1, 2024   May 27, 2023
Sales Revenue              
Wholesale sales of furniture and accessories $ 52,609     $ 61,774     $ 107,310     $ 131,658  
Less: Sales to retail segment   (20,751 )     (24,330 )     (44,514 )     (54,429 )
Wholesale sales to external customers   31,858       37,444       62,796       77,229  
Retail sales of furniture and accessories   50,468       60,778       104,222       125,740  
Corporate & Other - Noa Home (1)   1,084       2,297       2,946       5,248  
Consolidated net sales of furniture and accessories $ 83,410     $ 100,519     $ 169,964     $ 208,217  
               
               
Income (Loss) before Income Taxes          
Income (Loss) from Operations            
Wholesale $ 5,687     $ 7,005     $ 12,446     $ 15,999  
Retail   (2,222 )     755       (3,834 )     2,285  
Net expenses - Corporate and other (1)   (6,942 )     (6,949 )     (14,537 )     (14,720 )
Inter-company elimination   530       656       621       605  
Asset impairment charges   (5,515 )     -       (5,515 )     -  
Gain on revaluation of contingent consideration   -       1,013       -       1,013  
Consolidated income (loss) from operations   (8,462 )     2,480       (10,819 )     5,182  
               
Interest income   627       569       1,383       721  
Other loss, net   (276 )     (505 )     (380 )     (1,072 )
Consolidated income (loss) before income taxes $ (8,111 )   $ 2,544     $ (9,816 )   $ 4,831  
               


(1) Corporate and Other includes the operations of Noa Home Inc. along with the shared Corporate costs that are benefiting both the Wholesale and Retail segments.
   


Table 5
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Adjusted Gross Profit
(In thousands)
                       
  Quarter Ended   Six Months Ended
  June 1, 2024   May 27, 2023   June 1, 2024   May 27, 2023
    Percent of     Percent of     Percent of     Percent of
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales
                       
Gross profit as reported $ 43,760   52.5 %   $ 52,833   52.6 %   $ 91,627   52.5 %   $ 110,030   52.8 %
Additional inventory valuation charges   2,701   3.2 %     1,003   1.0 %     2,701   1.6 %     1,003   0.5 %
                       
Gross profit as adjusted $ 46,461   55.7 %   $ 53,836   53.6 %   $ 94,328   55.5 %   $ 111,033   53.3 %
                       

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Source: Bassett Furniture Industries, Incorporated