Bassett Announces Fiscal Third Quarter Results
Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its third quarter ended August 27, 2022.
Fiscal 2022 Third Quarter Highlights of Continuing Operations (Dollars in millions)
|3rd Qtr||Dollar||%||3rd Qtr||% of||3rd Qtr||% of|
|(1) Our consolidated results include certain intercompany eliminations as well as a gain on the sale of real estate in Q3 2022 which is not|
|included in our segment results. See Table 4, “Segment Information” below for an illustration of the effects of these items on our|
|consolidated sales and operating income.|
Consolidated revenue for our third quarter of 2022 came in at $118.0 million, a 12.5% increase compared to last year. Operating profit of $6.1 million improved by 22.1%, excluding the $4.6 million gain from the sale of our Southwest Freeway store in Houston, which brought the all-in income from operations to $10.7 million. Earnings per share of $0.82 was well ahead of $0.31 per share in 2021. We aggressively pursued our customer acquisition strategies while formulating business plans that take the uncertain business environment that clouds the outlook for 2023 into account. Nonetheless, we trust that the collective strength provided by our domestic manufacturing platform, international sourcing partnerships, dedicated distribution network, best in class logistics system, and burgeoning digital capabilities portend continued success for Bassett despite the challenges that currently exist for the U.S. economy.
Shipments from our wholesale segment grew by 8.1% with upholstery operations posting a 12.5% sales increase while wood operations grew a modest 1.3%. Said another way, shipments of domestically produced merchandise grew by 18.1% while imported product shipments declined by 15.7%. Significant for the period was the resurgent performance of our Newton, NC upholstery complex where combined shipments grew by 21.5% and divisional profitability returned to pre-covid levels. We are now producing goods with material costs that are fully reflected in the price for which they are invoiced as the rampant price increases that we have absorbed over the past two years have subsided. Further, we are excited by the early retail success of the new “Modern Casual” product range that hit stores in time for Labor Day, which we are counting on to help keep our production schedules on track moving forward. Fabric outages have improved significantly from the depths of the pandemic related chaos of 2021 and our lead times have markedly improved in the past few months. Shipments of our outdoor seating product continued its sizzling growth – this time at a rate of 30.3%. Amidst these strong performances is the problematic situation that we face with our imported Club Level product range. Recall that Club Level sales exploded in 2021 and that our inventory levels last year were such that we were out servicing our competition and enjoying robust shipments. Accordingly, we responded by ordering replenishment inventory at record levels into the teeth of the unprecedented ocean freight rate spiral. As sales of the product slowed at the beginning of April, incoming shipments, often months late due to Asian production delays, began to swell our inventory levels. Consequently, we have been aggressively discounting certain portions of our Club Level line and have suffered significant margin hits in so doing for the past four months. We expect this dynamic to persist for the next six months as we align inventory levels with current rates of sale. In the end, however, we remain committed to the long-term viability of the Club Level product line and value the open market account business that it will continue to provide. Also affecting our overall wholesale margins are the marketing spending levels that we have chosen to employ and, to a lesser extent, miscellaneous expenditures including the LIFO charges that have accompanied the inventory build that has characterized the twenty-one months since the end of covid dominated fiscal 2020. Overall inventory of $91.7 million at the end of the August quarter actually decreased for the first time since the pandemic build and should have peaked for the Bassett footprint for the foreseeable future. Returning our wholesale margins to their historical levels is an important element of successfully moving into 2023, although we do plan to continue our aggressive marketing spending as long as we can see corresponding upticks in business as a result.
Our corporate retail group extended their strong run of positive operating results, this time producing their “best ever” third quarter with $70.9 million of deliveries while providing $4.5 million of operating income to the cause. For the nine months, corporate retail revenue of $210.6 million represents an increase of 16.1% over 2021 and the $15.8 million of operating profit brought forth exceeds any full year bottom line performance to date. Delivered gross margins of 51.8% remained near our target range despite the headwinds that four store closings presented. Due to construction related supply chain issues, the opening of one of the contemplated replacement stores – this one in Dallas, was delayed from the original late August date until the new date in early November. In conjunction with the Dallas opening, we are remodeling two other Metroplex stores – Southlake and Frisco. There we are testing a “take with” strategy for certain accessory items and have designed a supporting fixturing package for all three Dallas area stores. Looking ahead to next year, we will incorporate these elements into the Austin, TX remodel project as well as into new stores that will open in Tampa, FL and in Houston. We are also considering another Florida location as well. In April, we opened a Regional Fulfillment Center (“RFC”) in Orlando to provide our stores and other customers with the ability to offer a two-week in-home delivery option to add a new selling opportunity to our incumbent design focused custom-made furniture business. We are excited to see the initial benefit of the quick ship capability and have subsequently opened another RFC in the Baltimore area to service the mid-Atlantic stores.
To begin our fourth quarter, on September 6th, we announced the acquisition of Montreal- based online furniture retailer, Noa Home Inc. Founded in 2016, Noa sells furniture, mattresses and accessory items online in four markets – Australia, Singapore, the UK, and Canada. Net revenue for their most current fiscal year was C$19.1 million. We have been enthusiastically collaborating with the Noa team over the past few months to identify and implement the synergies that do exist today and can be capitalized upon in the future between our two organizations. First on the list is to provide the capital to improve their in-stock positioning on their best-selling items. Next is to enter a 3PL warehouse in western Canada to open up the entire country for Noa distribution as they have heretofore only serviced Ontario and Quebec. We are simultaneously developing Bassett made upholstery products that can complement their existing best seller lineup and have entered initial production orders to ship to Noa warehouses. Once we make sure that we have begun to maximize the opportunity in their existing markets, we will start the planning process to introduce the Noa experience to the U.S. market sometime in 2023.
High inflation, rising mortgage rates, and a slowdown in the housing market have certainly taken a toll on the equity values of publicly traded furniture companies this year. We are definitely in the mode of “focusing on what we can control” as there are currently forces at work greater than Bassett in a macro sense. To that end, we invested in a robust marketing program for the recent three-week Labor Day promotion and the results were quite gratifying as our corporate retail stores recorded sales volumes better than both 2020 and 2021, which were, of course, very strong. We do believe that although our customer is being more judicious with their disposable income today than two years ago, their personal balance sheets are strong. So, there will be folks in the marketplace and we have to win them over. Meanwhile, Bassett has the financial strength to weather a downturn and an integrated strategy designed to provide multiple paths for growth in the future.
Robert H. Spilman, Jr., Chairman and CEO
For the complete press release, click here.
About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 92 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 bassettfurniture.com. (BSET-E)
J. Michael Daniel, Senior Vice President and Chief Financial Officer – email@example.com – (276) 629-6614
Source: Bassett Furniture Industries, Incorporated