Bassett Announces Fiscal First Quarter Results
Bassett Furniture Industries, Inc. (“Bassett”) announced its results of operations for its first quarter ended February 25, 2023.
Early in our first quarter we fulfilled the remaining excess portion of the large backlog created during the pandemic boom and are now producing and shipping at a rate commensurate with our written business. As the industry and Bassett wrestle with macroeconomic inconsistencies, we are focused on efficiently targeting our consumers, new product innovation, providing the best buying experience and service possible, and working to sharpen our value proposition on the heels of the unprecedented cost pressures that we faced over the past thirty months. We are managing our expense structure while investing in the growth initiatives that are essential for the Company’s future. Our balance sheet continues to provide the foundational element on which our strategy rests and provides the strength to weather the depth of the current market downturn.
Wholesale sales were 16% behind last year but 7.5% ahead of the last corresponding pre-pandemic quarter. For the past two months, we have been working reduced production schedules in our facilities. As a consequence, we have adjusted manufacturing employment levels by 11% this year, primarily through attrition. Total wholesale inventories were reduced by 15% for the period. As previously reported, we continue to right size our Club Level imported motion inventories and are suffering margin degradation in so doing as the inventory is valued with the exorbitant ocean freight costs incurred last year and we are discounting the product to move the goods. The corresponding effect resulted in a 250 basis point blow to overall operating margins for the quarter versus last year. The bottom-line effects of the price reduction lessened somewhat as the period unfolded but will represent a hindrance to operating results until sometime in the third quarter at current sales levels. Once we return to Club Level inventories that were shipped from Asia with current ocean freight rates, those margins will return to historical levels, which is already the case for certain styles.
The turmoil caused by pandemic supply chain upheaval is now behind us. Part of the disruption included skyrocketing raw material prices and the aforementioned freight costs. As the environment has normalized, certain manufacturing cost inputs have been reduced. Armed with the results of a thorough line-wide cost analysis, we plan to sharpen price points on key items across the line to enhance sales and improve overhead absorption in our factories. We will implement the new pricing strategy in our stores and to our wholesale customers sometime in April, which we believe will not adversely affect wholesale margins based on our internal calculations.
While year over year retail delivered sales increased by 1.4% for the quarter, retail operating profit fell to $1.5 million. Gross margins were flat compared to last year as the effects of heavier promotional activity were offset by the positive impacts of LIFO valuation adjustments. We elected to increase marketing expenses as well to maintain consumer engagement on the web and in our stores. The increase in interest rates also impacted our consumer finance costs. Our new Dallas store opened in the period and we also remodeled two other existing locations in the Dallas market to test a new fixturing package designed to further enhance accessory sales. We will begin work on our new large store (25,000 square feet) in Tampa early in April. We are excited about the new face that our latest formats put on our brand presentation, and we will monitor the performance of these locations as we consider enhancements to certain stores in the rest of the fleet.
2023 is a big year from a technology standpoint as our long-awaited digital transformation becomes more obvious with the debut of our new web platform in the next ninety days. Adding a new level of omni-channel capabilities has been a major objective from the outset and we are close to bringing it to the marketplace. On a related note, February brought the second quarter of our ownership of pure-play e-commerce provider Noa Home to a close. Noa is operating at a loss and will likely do so until at least the latter part of the year as we hone their operating metrics and adjust certain pricing strategies. We also continue to work on broadening their assortment. We value the insights that we are gaining from owning Noa and look forward to growing the business and reaching a new consumer in their existing international markets and ultimately the U.S.
Once again, we will manage our capital allocation strategy in keeping with the economic uncertainty that we see around us today. We have postponed certain elements of our capital expenditure plan as we gain clarity on consumer behavior over the next few months. Although we have slowed the pace of share repurchases as compared to the prior year, we retired $1.8 million of our stock in the quarter and plan to continue to actively acquire shares while we believe the stock is undervalued. We are confident in the investments that we are making for the future but recognize that the fluid economic environment in which we are currently operating merits the conservative capital allocation approach that we are taking.
Robert H. Spilman, Jr., Chairman and CEO
For the full first quarter results, 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 – firstname.lastname@example.org – (276) 629-6614
Source: Bassett Furniture Industries, Incorporated