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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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FORM 8-K

 

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CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) September 28, 2017

 

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BASSETT FURNITURE INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

 

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VIRGINIA		0-209		54-0135270
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(I.R.S. Employer Identification No.)

 

3525 FAIRYSTONE PARK HIGHWAY BASSETT, VIRGINIA		24055
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code 276/629-6000

  

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02.

Results of Operations and Financial Condition.

 

On September 28, 2017 Bassett Furniture Industries issued a news release relating to, among other things, the third quarter financial results for the fiscal year ending November 25, 2017. A copy of the news release announcing this information is attached to this report as Exhibit 99.

  

Item 9.01.

Financial Statements and Exhibits.

  

 

Exhibit 99

News release issued by Bassett Furniture Industries, Inc. on September 28, 2017.

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	BASSETT FURNITURE INDUSTRIES, INCORPORATED
Date: September 28, 2017	By:	/s/ J. Michael Daniel
	J. Michael Daniel
	Title:	Senior Vice President – Chief Financial Officer

 

 

EXHIBIT INDEX

 

 

 

 

Description

 

Exhibit No. 99

News release issued by Bassett Furniture Industries on September 28, 2017.

 

 

Exhibit 99

 

Bassett Furniture Industries, Inc.		J. Michael Daniel
P.O. Box 626		Senior Vice President and
Bassett, VA 24055		Chief Financial Officer
		(276) 629-6614 – Investors
		Jay S. Moore
		Director of Communications
For Immediate Release		(276) 629-6450 – Media

                                              

 

 

Bassett Furniture News Release

Bassett Announces Fiscal Third Quarter Results

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(Bassett, Va.) – September 28, 2017 – Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fiscal quarter ended August 26, 2017.

 

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 the Las 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 Robert H. Spilman, Jr., Chairman and Chief Executive Officer. “All three of our operating segments posted revenue gains led by our retail division’s 10% increase. Although there were a number of unusual year over year comparisons, quarterly operating income grew by 7% on an adjusted basis despite increasing expense related to investments in our digital platform. We look forward to opening two new stores in new markets in the current quarter, and entering fiscal 2018 with plans to open an additional six to eight new stores, while continuing our program to reposition older stores to better real estate when circumstances are appropriate. Finally, we welcomed our Board of Directors’ approval in July of a 10% increase in our quarterly dividend as part of our ongoing capital allocation strategy.”

 

Wholesale Segment

 

Net sales for the wholesale segment were $61.8 million for the third quarter of 2017 as compared to $58.3 million for the third quarter of 2016, an increase of $3.5 million or 5.9%. This increase was driven by a 5.1% increase in furniture shipments to the Bassett Home Furnishings network as compared to the prior year period and a 5.7% increase in furniture shipments to the open market (outside the Bassett Home Furnishings network). Wholesale shipments of accessories, a much smaller component of the Company’s wholesale revenues, increased 79% over the prior year quarter. Gross margins for the wholesale segment were 33.6% for the third quarter of 2017 as compared to 35.4% for the prior year quarter. Excluding the effects of the previously mentioned foam settlement in 2016, the prior year gross margin would have been 33.0%. Gross margins improved in both the Upholstery and Wood operations as compared to the prior year driven by increased operating efficiencies in the domestic operations along with greater leverage of fixed costs from higher sales levels. Wholesale SG&A for the third quarter of 2017 was $16.3 million as compared to $15.0 million for the prior year period. SG&A as a percentage of sales increased to 26.4% as compared to 25.8% for the third quarter of 2016. This increase in SG&A as a percentage of sales was primarily driven by increased spending on the website and e-commerce strategy development along with higher accruals for incentive compensation, partially offset by greater leverage of other fixed costs due to higher sales volumes. Operating income was $4.5 million or 7.2% of sales as compared to $5.6 million or 9.7% of sales in the prior year. Excluding the effects of the previously mentioned foam settlement in 2016, the prior year operating income would have been $4.2 million or 7.2% for the prior year.

 

“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 Bassett motion upholstery product line also contributed to wholesale sales gains and profitability.”

 

 

“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 Bassett store as a result. The third component of our technology investments is designed to grow our accessory business and to round out our offerings as a complete resource for interior design. Exposing these products more heavily on our website and creating a full E-commerce framework to complement our in-store home makeover capabilities will generate opportunities for Bassett to attract more customers more often. We are encouraged by the early results that we have seen from these efforts and believe that the commitment to invest in these digital competencies will strengthen our store performance and the Bassett brand in general as we move forward.”

 

Retail Segment

 

Net sales for the 62 Company-owned Bassett Home Furnishings stores were $67.4 million for the third quarter of 2017 as compared to $61.2 million for the third quarter of 2016, an increase of $6.2 million or 10%. The increase was due to a $1.1 million or 1.8% increase in comparable store sales along with a $5.1 million increase in non-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 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 $1.4 million as compared to $0.8 million for the third quarter of 2016, an increase of $0.6 million. The 55 comparable stores generated operating income of $1.2 million for the quarter, or 2.0% of sales, as compared to $1.4 million, or 2.5% of sales, for the prior year quarter. Gross margins for comparable stores were 51.3% for the third quarter of 2017 as compared to 50.3% for the third quarter of 2016.  This increase is primarily due to improved pricing strategies and product mix. SG&A expenses for comparable stores increased $1.4 million to $29.6 million or 49.3% of sales as compared to 47.9% of sales for the third quarter of 2016. The increase in SG&A was primarily due to a $0.5 million loss for expenses associated with settling employment claims along with higher advertising expenses and occupancy costs.

 

Non-comparable stores generated sales of $7.3 million with operating income of $0.1 million. Included in the operating income was a $1.2 million gain on the sale of the Las Vegas store building that was closed during the third quarter.

 

“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 Westbury, NY and King of Prussia, PA locations though the overall markets grew significantly in both cases. Written sales were also affected by store closures in the south Texas market over the final three days of the quarter due to the approach of Hurricane Harvey. While these factors contributed to our written sales shortfall, the decline in store sales that we began to see this summer have continued into the first four weeks of the current quarter. We completed the store closing event in our original Las Vegas location during the quarter and began closing events in Dallas and Cincinnati. We were pleased that we were able to hold our overall margins intact as the final liquidation of store inventories are detrimental to margins. We plan to open new locations in each of these markets over the next few quarters.”

 

 

Logistical Services Segment

 

Revenue for Zenith was $24.9 million for the third quarter of 2017 as compared to $23.0 million for 2016, an increase of $1.9 million or 8.4%. Revenues to both Bassett and non-Bassett customers were higher quarter over quarter. Zenith’s operating expenses for the third quarter of 2017 were $23.7 million or 95.3% of revenue as compared to $22.3 million or 97.1% for the third quarter of 2016. This resulted in operating profit of $1.2 million or 4.7% of sales for the current quarter as compared to $0.7 million or 2.9% of sales for the prior year quarter. Improved operating efficiencies in the over the road freight operations were partially offset by increased costs in the home delivery operations primarily from the start-up of several local distribution hubs.

 

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. 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. 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 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, 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.

 

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BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income - unaudited

(In thousands, except for per share data)

 

 

		Quarter Ended																Nine Months Ended
		August 26, 2017								August 27, 2016								August 26, 2017								August 27, 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		$	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

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

 

		(Unaudited)
		August 26, 2017				November 26, 2016
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
Goodwill and other intangible assets			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

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows - unaudited

(In thousands)

 

		Nine Months Ended
		August 26, 2017				August 27, 2016
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

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Segment Information - unaudited

(In thousands)

 

		Quarter Ended								Nine Months Ended
		August 26, 2017				August 27, 2016				August 26, 2017				August 27, 2016
Net Sales
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

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Rollforward of BHF Store Count

 

 

		November 26,																August 26,
		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.

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Supplemental Retail Information--unaudited

(In thousands)

 

		55 Comparable Stores																55 Comparable Stores
		Quarter Ended								Quarter Ended								Nine Months Ended								Nine Months Ended
		August 26, 2017								August 27, 2016								August 26, 2017								August 27, 2016
						Percent of								Percent of								Percent of								Percent of
		Amount				Net Sales				Amount				Net Sales				Amount				Net Sales				Amount				Net Sales
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
		August 26, 2017								August 27, 2017								August 27, 2017								August 27, 2016
						Percent of								Percent of								Percent of								Percent of
		Amount				Net Sales				Amount				Net Sales				Amount				Net Sales				Amount				Net Sales
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.