Bassett Announces Fiscal Fourth Quarter Results

BASSETT, Va., Jan. 24, 2023 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fourth quarter ended November 26, 2022.

Fiscal 2022 Fourth Quarter Highlights of Continuing Operations
(Dollars in millions)

 Sales Operating Income
 4th Qtr Dollar% 4th Qtr% of 4th Qtr% of
  2022 2021 ChangeChange 2022Sales  2021Sales
Consolidated (1)$121.0$114.4 $6.6 5.8% $6.75.6% $6.65.8%
Wholesale$74.6$76.0 $(1.4)-1.6% $0.91.2% $2.93.8%
Retail$76.3$66.4 $9.9 14.9% $5.87.6% $3.45.1%
(1) Our consolidated results include certain intercompany eliminations as well as a gain on the sale of real estate in Q4 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.

We posted revenue of $121.0 million in our fourth quarter, a 5.8% increase against the backdrop of an increasingly difficult macroeconomic environment as we head into another year. Operating profit of $6.7 million was slightly ahead of last year even though we made selected price adjustments designed to reduce inventory that were detrimental to our margins. We also invested more digital marketing dollars to drive our top line. Our Company is stronger than when we entered the pandemic three years ago. We have trimmed our underperforming stores, properly adjusted our retail cost structure, gained wholesale market share with independent furniture dealers, and further fortified our strong balance sheet. Still, we acknowledge that fiscal 2023 has started off slowly from a wholesale order standpoint with quarter-to-date written sales off 20% compared to the robust pace we experienced last year. However, quarter-to-date shipments are down 10% as fourth-quarter orders were off modestly. Despite the uncertainty around the current pace of orders, we will concentrate on running our business with financial discipline and operational excellence while executing our growth strategies that are designed to create long term value for our shareholders.

Service levels in our wholesale operations are almost back to the best-in-class standard that was our hallmark prior to the breakdown of the global supply chain. Backlogs are now comparable with pre-pandemic equivalents. Combined wholesale shipments declined 1.6% for the quarter with increases in wood and outdoor furniture products being offset by declines in domestic upholstery and Club Level. As previously discussed, the “right sizing” of our Club Level inventory is negatively affecting our wholesale margins, and, in the case of the fourth quarter, constitutes more than 100% of the year over year wholesale margin shortfall. On a positive note, wholesale inventories declined by $4.0 million in the quarter with Club Level again representing essentially all of the reduction. So, we are making good progress on this front. Also, our domestic upholstery operating margins returned to their historical levels by improving 670 basis points as we are through the period of misalignment between inflated raw materials and our ability to pass those costs along. In fact, we have recently begun to receive several price decreases from various suppliers. Looking ahead, we have returned to a more normalized wholesale operating environment in terms of supply chain. Our challenge now is to efficiently operate while we assess how the economy will affect order flow and our work schedules.

Meanwhile, corporate retail produced its fourth record quarter for the year as the fourth quarter was more profitable than any previous comparable period on record. The year was characterized by a gross margin improvement of 40 basis points to 52.6% and operating profit that more than tripled compared to last year. Our retail backlog remained healthy heading into the new fiscal year as our Black Friday event was relatively strong. 2023 will mark the opening of three new Bassett stores and an extensive remodeling of our Austin, Texas location.

Coming in the second quarter of 2023 is the debut of our new website platform featuring better navigation and architecture designed to drive more consumers to our stores and significantly enhance our ecommerce capabilities. While this will represent the culmination of a multi-year digital transformation plan, it will also provide a platform for greater integration of the website with our store network and better overall customer and product data that will lead to better decision making.

In that vein, we acquired Canadian online furniture retailer Noa Home Inc. in early September to begin our fourth quarter. As expected, the Noa results, now included in our corporate retail segment, were not profitable for the quarter. We spent the three months scaling the business for growth as we worked to get best sellers in stock, opened a new 3PL warehouse in western Canada, and integrated the first Bassett designed product into their lineup. Our focus for this year is to continue to expand their lean assortment and to prepare to open the U.S. market by the fall selling season.

Our partnership with JB Hunt, who purchased the Zenith logistics business from us last February, continues to offer great service to our stores and participating open market dealers. During the quarter, we opened our second Regional Fulfillment Center (“RFC”) with JB Hunt and will use the facility located in the Baltimore area to service our best sellers in the northeast markets. The RFC strategy is unfolding via daily collaboration with the JB Hunt team with three additional centers having been opened around the country in December.

Proceeds from the sale of Zenith were the catalyst for the $14.5 million special dividend that we distributed last April and, in addition, our regular quarterly dividend that we increased in July. Furthermore, in light of the historically low earnings multiples with which industry stocks have been trading and our belief in Bassett’s future, we retired $15.1 million of our common stock in 2022 including $4.9 million in the fourth quarter. After returning over $35 million to shareholders in 2022, we have the financial strength to pursue our long term growth strategies.

Robert H. Spilman, Jr., Chairman and CEO

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 (BSET-E)

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 fourth fiscal quarter of 2022, 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 (including, without limitation, the effects on revenue, supply and demand resulting from the duration and extent of the COVID-19 pandemic) 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.

Table 1 
Condensed Consolidated Statements of Income - unaudited 
(In thousands, except for per share data) 
 Quarter Ended Year Ended 
 November 26, 2022 November 27, 2021 November 26, 2022 November 27, 2021 
  Percent of  Percent of  Percent of  Percent of 
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales 
Net sales of furniture and accessories$121,019 100.0% $114,364 100.0% $485,601 100.0% $430,886 100.0% 
Cost of furniture and accessories sold 56,784 46.9%  56,373 49.3%  237,262 48.9%  209,799 48.7% 
     Gross profit 64,235 53.1%  57,991 50.7%  248,339 51.1%  221,087 51.3% 
Selling, general and administrative expenses 57,532 47.5%  51,357 44.9%  218,069 44.9%  196,830 45.7% 
Gain on sale of retail real estate - 0.0%  - 0.0%  4,595 0.9%  - 0.0% 
   Income from operations 6,703 5.5%  6,634 5.8%  34,865 7.2%  24,257 5.6% 
Other income (loss), net 1,047 0.9%  (672)-0.6%  (803)-0.2%  (1,500)-0.3% 
Income from continuing operations before income taxes 7,750 6.4%  5,962 5.2%  34,062 7.0%  22,757 5.3% 
Income tax expense 2,197 1.8%  1,257 1.1%  8,702 1.8%  5,836 1.4% 
Income from continuing operations 5,553 4.6%  4,705 4.1%  25,360 5.2%  16,921 3.9% 
Income (loss) from discontinued operations - net of tax (527)   336    39,985    1,121   
Net income$5,026   $5,041   $65,345   $18,042   
Basic earnings per share:            
Income from continuing operations$0.61   $0.49   $2.70   $1.72   
Income (loss) from discontinued operations (0.06)   0.03    4.26    0.11   
Basic earnings per share$0.55   $0.52   $6.96   $1.83   
Diluted earnings per share:            
Income from continuing operations$0.61   $0.49   $2.70   $1.72   
Income (loss) from discontinued operations (0.06)   0.03    4.26    0.11   
Diluted earnings per share$0.55   $0.52   $6.96   $1.83   

Table 2
Condensed Consolidated Balance Sheets
(In thousands)
Assets November 26, 2022 November 27, 2021
Current assets    
    Cash and cash equivalents $61,625 $34,374 
    Short-term investments  17,715  17,715 
    Accounts receivable, net  17,838  20,567 
    Inventories, net  85,477  78,004 
    Recoverable income taxes  2,353  8,379 
    Current assets of discontinued operations held for sale  -  11,064 
    Other current assets  11,487  10,181 
Total current assets  196,495  180,284 
Property and equipment, net  77,001  69,168 
Other long-term assets    
    Deferred income taxes, net  5,528  3,189 
    Goodwill and other intangible assets  21,727  14,354 
    Right of use assets under operating leases  99,472  95,955 
    Long-term assets of discontinued operations held for sale  -  52,757 
    Other  6,050  5,953 
Total long-term assets  132,777  172,208 
Total assets $406,273 $421,660 
Liabilities and Stockholders’ Equity    
Current liabilities    
    Accounts payable $20,359 $23,988 
    Accrued compensation and benefits  12,921  12,639 
    Customer deposits  35,963  51,492 
    Current portion of operating lease obligations  18,819  20,235 
    Current liabilities of discontinued operations held for sale  -  16,095 
    Other current liabilities and accrued expenses  12,765  9,770 
Total current liabilities  100,827  134,219 
Long-term liabilities    
    Post employment benefit obligations  9,954  12,968 
    Long-term portion of operating lease obligations  97,477  94,845 
    Long-term liabilities of discontinued operations held for sale -  16,210 
    Other long-term liabilities  2,406  686 
Total long-term liabilities  109,837  124,709 
Stockholders’ equity    
     Common stock  44,759  48,811 
     Retained earnings  150,800  115,631 
     Additional paid-in-capital  -  113 
     Accumulated other comprehensive loss  50  (1,823)
Total stockholders' equity  195,609  162,732 
Total liabilities and stockholders’ equity $406,273 $421,660 

Table 3 
Consolidated Statements of Cash Flows - unaudited 
(In thousands) 
  Year Ended 
  November 26, 2022 November 27, 2021 
Operating activities:     
Net income $65,345  $18,042  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:     
Depreciation and amortization  11,309   14,597  
Gain on disposal of discontinued operations  (52,534)  -  
Gain on sale of property and equipment  (4,595)  (367) 
Inventory valuation charges  3,648   2,969  
Deferred income taxes  (2,339)  1,545  
Other, net  (302)  728  
Changes in operating assets and liabilities     
Accounts receivable  3,169   (5,828) 
Inventories  (9,536)  (26,087) 
Other current and long-term assets  5,944   (2,241) 
Right of use assets under operating leases  20,531   26,243  
Customer deposits  (16,588)  11,730  
Accounts payable and other liabilities  (4,073)  2,153  
Obligations under operating leases  (22,949)  (28,921) 
Net cash provided by (used in) operating activities  (2,970)  14,563  
Investing activities:     
Purchases of property and equipment  (21,296)  (10,750) 
Proceeds from sale of property and equipment  8,226   382  
Proceeds from disposal of discontinued operations, net  84,534   -  
Cash paid for business acquisition, net of cash acquired  (5,582)  -  
Other  (40)  (1,203) 
Net cash provided by (used in) investing activities  65,842   (11,571) 
Financing activities:      
Cash dividends  (20,162)  (7,689) 
Proceeds from the exercise of stock options  -   42  
Other issuance of common stock  424   363  
Repurchases of common stock  (15,122)  (5,566) 
Taxes paid related to net share settlement of equity awards  (19)  (219) 
Repayments of finance lease obligations  (684)  (1,348) 
Net cash used in financing activities  (35,563)  (14,417) 
Effect of exchenge rate changes on cash and cash equivalents  (58)  -  
Change in cash and cash equivalents  27,251   (11,425) 
Cash and cash equivalents - beginning of period  34,374   45,799  
Cash and cash equivalents - end of period $61,625  $34,374  

Table 4 
Segment Information - unaudited 
(In thousands) 
  Quarter Ended Year Ended  
  November 26, 2022 November 27, 2021 November 26, 2022 November 27, 2021 
Sales Revenue         
Wholesale sales of furniture and accessories $ 74,624 $ 75,958 $ 324,569 $ 295,329 
Less: Sales to retail segment (29,913) (27,967) (125,889) (112,270) 
Wholesale sales to external customers 44,711 47,991 198,680 183,059 
Retail sales of furniture and accessories 76,308 66,373 286,921 247,827 
Consolidated net sales of furniture and accessories$ 121,019 $ 114,364 $ 485,601 $ 430,886 
Operating Income         
Wholesale $ 856 $ 2,868 $ 9,286 $ 17,490 
Retail 5,754 3,381 21,508 7,044 
Inter-company elimination 93 385 (524) (277) 
Gain on sale of real estate - - 4,595 - 
Consolidated $ 6,703 $ 6,634 $ 34,865 $ 24,257 

J. Michael Daniel
Senior Vice President and
Chief Financial Officer
(276) 629-6614 – Investors

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

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