Bassett Reports Fiscal Second Quarter Results and Launches Restructuring Plan

 | Source: Bassett Furniture Industries, Incorporated Bassett Furniture Industries, Incorporated

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  ChangeChange  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
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet 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)  
AssetsJune 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
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet 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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