BASSETT, Va., July 01, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its second quarter ended May 29, 2021.
Fiscal 2021 Second Quarter Highlights
(Dollars in millions)
| Sales | Operating Income (Loss) | |||||||||||||||||||
| 2nd Qtr | Dollar | % | 2nd Qtr | % of | 2nd Qtr | % of | ||||||||||||||
| 2021 | 2020 | Change | Change | 2021 | Sales | 2020 | Sales | |||||||||||||
| Consolidated (1) | $ | 124.1 | $ | 63.8 | $ | 60.3 | 94.4 | % | $ | 8.4 | 6.8 | % | $ | (31.2 | ) | -48.9 | % | |||
| Wholesale | $ | 76.0 | $ | 33.1 | $ | 42.9 | 129.7 | % | $ | 5.4 | 7.0 | % | $ | (7.4 | ) | -22.3 | % | |||
| Retail | $ | 62.5 | $ | 33.2 | $ | 29.3 | 88.4 | % | $ | 1.7 | 2.6 | % | $ | (9.2 | ) | -27.6 | % | |||
| Logistical Services | $ | 22.2 | $ | 15.3 | $ | 7.0 | 45.8 | % | $ | 1.3 | 5.8 | % | $ | (1.8 | ) | -12.1 | % | |||
| (1) Our consolidated results include certain intercompany eliminations. See Table 4, “Segment Information” below for an illustration | ||||||||||||||||||||
| of the effects of these intercompany eliminations on our consolidated sales and operating income (loss). | ||||||||||||||||||||
Consolidated revenue of $124.1 million for our second quarter represented a 94% increase as compared to the pandemic impacted quarter in 2020 and 15% as compared to 2019. Similarly, strong wholesale orders of $96.0 million for the period increased by 172% versus 2020 and by 51% compared to the pre-pandemic 2019 second quarter. As we battle an extremely tight labor market and continued supply chain disruptions, we strive to chip away at our huge order backlog that grew by another $19 million over the three months. Adding to the complexity is the inflationary raw material spiral that we have confronted this year, leading to our unprecedented action of levying three general price increases since our fiscal year began in December. Amidst this unsettled environment, we were pleased to record an $8.4 million operating profit compared to last year’s loss. EPS advanced to $0.60 per share for the quarter against the COVID-19 affected loss of ($2.04) in 2020.
Again, our obvious focus is centered on the reduction of our backlog and returning to a semblance of normalcy in our service levels as soon as possible. Although our cancellation rate has not spiked significantly to date, it is a natural concern. At the recent High Point Furniture Market, we were actually thanked several times for our ability to deliver goods more quickly than the apparent current industry standard, which underscores just how compromised lead times actually are today. Aside from working massive amounts of overtime, the early June opening of our new upholstery production facility in Newton, NC will provide some immediate relief to a portion of the situation. With the polyurethane foam shortage largely behind us, our current raw material bottlenecks lie in the thousands of yards of decorative fabrics that our suppliers owe us. Our production managers have done a great job in shuffling our daily schedules to produce what they can based on the materials that they actually possess. Notwithstanding all the complications of the post-pandemic economy, our wholesale team produced a 7.0% operating margin for the period as our wood, upholstery, and outdoor divisions turned in performances significantly better than 2020 and 2019.
Another aspect of the current disorder is the state of the industry’s logistics model. The strong business that has characterized the past 13 months has overwhelmed the furniture trucking segment. There is currently a dearth of warehouse space, warehouse labor, and over the road trailers to handle shipping backlogs. Consequently, even after the goods have been manufactured, there are accompanying lags in logistics service that could represent several weeks of further delay. Exacerbating this state of affairs is the global shortage of shipping containers that continues to plague our sector. Our Zenith Logistics team has performed at a high level in dealing with the cumulative effect of these daily challenges by generating $1.3 million of operating profit for the quarter despite spiraling warehousing labor costs and procuring over 400 trailers on short term leases to combat the equipment shortage. Longer term we are motivated by prospects of our recent regional warehouse model that is showing great promise. Over the past six months we have experimented with keeping some of our best sellers closer to the U.S. population centers for quicker delivery. When we have been able to have these goods in inventory, we have seen significant upticks in rates of sale, which bodes well for our plan to expand this model as product availability becomes normalized.
As mentioned, wholesale orders increased dramatically during the quarter with all channels showing growth. Leading the way was our Bassett Design Center (BDC) network, part of our open market wholesale business, with increases of 212% and 87%, respectively, compared to 2020 and 2019. Another big part of the overall open market increase was the continuing rise of the Bassett Club Level program, which grew by 328% versus 2019. Dedicated Bassett-branded distribution in the form of the Bassett Home Furnishings network and BDC’s represented 67% of wholesale sales for the period. Once again, our corporate retail division was not able to deliver goods to the home at the rate that they were sold in the stores. Our digital outreach strategies continued to bear fruit as visitors to our website grew by 51% in the quarter. Store traffic, which has declined for the past few years, has held steady since business returned after the stores reopened last May. Still, our corporate retail turned in a profit of $1.6 million while continuing to add to its already large order backlog. Finally, we are excited by the combined results of the Lane Venture and Bassett Outdoor sales strategies as they combined for a 122% increase to 2020 and 124% to 2019. Much of the new business came from our Alabama metal facility that we purchased in 2019.
Summing it all up for the quarter, we wrote more wholesale business than we had in many years, back to when we operated a much larger domestic manufacturing footprint in the pre-globalization days. While retiring $2.4 million of stock and paying our quarterly dividend, we ended May with $63.5 million of cash and short-term investments and no debt. There are many cost pressures and raw material lead times remain long. But we have a very large backlog and our most recent big sales event around Memorial Day was very strong. Taking all of those positives and negatives into account, we remain encouraged concerning our prospects for the remainder of 2021.
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 97 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)
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 2021, 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 | |||||||||||||||||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| Condensed Consolidated Statements of Operations - unaudited | |||||||||||||||||||||||
| (In thousands, except for per share data) | |||||||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||
| May 29, 2021 | May 30, 2020 | May 29, 2021 | May 30, 2020 | ||||||||||||||||||||
| 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 | $ | 109,997 | $ | 53,000 | $ | 211,652 | $ | 151,942 | |||||||||||||||
| Logistical services | 14,062 | 10,801 | 26,080 | 23,979 | |||||||||||||||||||
| Total sales revenue | 124,059 | 100.0 | % | 63,801 | 100.0 | % | 237,732 | 100.0 | % | 175,921 | 100.0 | % | |||||||||||
| Cost of furniture and accessories sold | 52,911 | 42.6 | % | 29,452 | 46.2 | % | 101,163 | 42.6 | % | 74,722 | 42.5 | % | |||||||||||
| Selling, general and administrative expenses | 50,001 | 40.3 | % | 37,730 | 59.1 | % | 97,843 | 41.2 | % | 90,027 | 51.2 | % | |||||||||||
| Cost of logistical services | 12,768 | 10.3 | % | 12,643 | 19.8 | % | 24,326 | 10.2 | % | 24,986 | 14.2 | % | |||||||||||
| Asset impairment charges | - | 0.0 | % | 12,184 | 19.1 | % | - | 0.0 | % | 12,184 | 6.9 | % | |||||||||||
| Goodwill impairment charge | - | 0.0 | % | 1,971 | 3.1 | % | - | 0.0 | % | 1,971 | 1.1 | % | |||||||||||
| Litigation expense | - | 0.0 | % | 1,050 | 1.6 | % | - | 0.0 | % | 1,050 | 0.6 | % | |||||||||||
| Income (loss) from operations | 8,379 | 6.8 | % | (31,229 | ) | -48.9 | % | 14,400 | 6.1 | % | (29,019 | ) | -16.5 | % | |||||||||
| Other loss, net | (332 | ) | -0.3 | % | (765 | ) | -1.2 | % | (669 | ) | -0.3 | % | (1,127 | ) | -0.6 | % | |||||||
| Income (loss) before income taxes | 8,047 | 6.5 | % | (31,994 | ) | -50.1 | % | 13,731 | 5.8 | % | (30,146 | ) | -17.1 | % | |||||||||
| Income tax provision (benefit) | 2,073 | 1.7 | % | (11,642 | ) | -18.2 | % | 3,746 | 1.6 | % | (11,004 | ) | -6.3 | % | |||||||||
| Net income (loss) | $ | 5,974 | 4.8 | % | $ | (20,352 | ) | -31.9 | % | $ | 9,985 | 4.2 | % | $ | (19,142 | ) | -10.9 | % | |||||
| Basic earnings (loss) per share | $ | 0.60 | $ | (2.04 | ) | $ | 1.01 | $ | (1.92 | ) | |||||||||||||
| Diluted earnings (loss) per share | $ | 0.60 | $ | (2.04 | ) | $ | 1.01 | $ | (1.92 | ) | |||||||||||||
| 25.76 | % | ||||||||||||||||||||||
| Table 2 | ||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Assets | May 29, 2021 | November 28, 2020 | ||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 45,776 | $ | 45,799 | ||||
| Short-term investments | 17,715 | 17,715 | ||||||
| Accounts receivable, net | 25,882 | 22,340 | ||||||
| Inventories, net | 67,301 | 54,886 | ||||||
| Recoverable income taxes | 7,789 | 9,666 | ||||||
| Other current assets | 12,008 | 10,272 | ||||||
| Total current assets | 176,471 | 160,678 | ||||||
| Property and equipment, net | 92,581 | 90,917 | ||||||
| Other long-term assets | ||||||||
| Deferred income taxes, net | 3,362 | 4,587 | ||||||
| Goodwill and other intangible assets | 23,637 | 23,827 | ||||||
| Right of use assets under operating leases | 116,357 | 116,903 | ||||||
| Other | 6,071 | 5,637 | ||||||
| Total long-term assets | 149,427 | 150,954 | ||||||
| Total assets | $ | 418,479 | $ | 402,549 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 28,522 | $ | 23,426 | ||||
| Accrued compensation and benefits | 14,124 | 16,964 | ||||||
| Customer deposits | 47,911 | 39,762 | ||||||
| Current portion of operating lease obligations | 27,358 | 27,078 | ||||||
| Other current liabilities and accrued expenses | 12,534 | 11,141 | ||||||
| Total current liabilities | 130,449 | 118,371 | ||||||
| Long-term liabilities | ||||||||
| Post employment benefit obligations | 12,398 | 12,089 | ||||||
| Long-term portion of operating lease obligations | 109,832 | 111,972 | ||||||
| Other long-term liabilities | 5,538 | 2,087 | ||||||
| Total long-term liabilities | 127,768 | 126,148 | ||||||
| Stockholders’ equity | ||||||||
| Common stock | 49,262 | 49,714 | ||||||
| Retained earnings | 112,325 | 109,710 | ||||||
| Accumulated other comprehensive loss | (1,325 | ) | (1,394 | ) | ||||
| Total stockholders' equity | 160,262 | 158,030 | ||||||
| Total liabilities and stockholders’ equity | $ | 418,479 | $ | 402,549 | ||||
| Table 3 | |||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | |||||||||
| Consolidated Statements of Cash Flows - unaudited | |||||||||
| (In thousands) | |||||||||
| Six Months Ended | |||||||||
| May 29, 2021 | May 30, 2020 | ||||||||
| Operating activities: | |||||||||
| Net income (loss) | $ | 9,985 | $ | (19,142 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) | |||||||||
| operating activities: | |||||||||
| Depreciation and amortization | 6,893 | 7,239 | |||||||
| Gain on lease modification | - | (152 | ) | ||||||
| Asset impairment charges | - | 12,184 | |||||||
| Goodwill impairment charges | - | 1,971 | |||||||
| Inventory valuation charges | 1,100 | 2,936 | |||||||
| Bad debt valuation charges (recoveries) | (43 | ) | 1,074 | ||||||
| Deferred income taxes | 1,201 | (521 | ) | ||||||
| Other, net | 255 | 673 | |||||||
| Changes in operating assets and liabilities | |||||||||
| Accounts receivable | (3,399 | ) | 2,483 | ||||||
| Inventories | (13,515 | ) | 883 | ||||||
| Other current and long-term assets | 25 | (9,091 | ) | ||||||
| Right of use assets under operating leases | 12,558 | 14,810 | |||||||
| Customer deposits | 8,149 | (2,150 | ) | ||||||
| Accounts payable and other liabilities | 2,775 | (2,670 | ) | ||||||
| Obligations under operating leases | (13,934 | ) | (16,274 | ) | |||||
| Net cash provided by (used in) operating activities | 12,050 | (5,747 | ) | ||||||
| Investing activities: | |||||||||
| Purchases of property and equipment | (3,483 | ) | (1,791 | ) | |||||
| Proceeds from sale of property and equipment | 96 | 2,345 | |||||||
| Purchase of investments | - | (241 | ) | ||||||
| Other | (335 | ) | (211 | ) | |||||
| Net cash provided by (used in) investing activities | (3,722 | ) | 102 | ||||||
| Financing activities: | |||||||||
| Cash dividends | (4,954 | ) | (1,258 | ) | |||||
| Proceeds from the exercise of stock options | 42 | - | |||||||
| Other issuance of common stock | 172 | 157 | |||||||
| Repurchases of common stock | (2,925 | ) | (1,241 | ) | |||||
| Taxes paid related to net share settlement of equity awards | (219 | ) | (215 | ) | |||||
| Repayments of finance lease obligations | (467 | ) | (50 | ) | |||||
| Net cash used in financing activities | (8,351 | ) | (2,607 | ) | |||||
| Change in cash and cash equivalents | (23 | ) | (8,252 | ) | |||||
| Cash and cash equivalents - beginning of period | 45,799 | 19,687 | |||||||
| Cash and cash equivalents - end of period | $ | 45,776 | $ | 11,435 | |||||
| Table 4 | ||||||||||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||||
| Segment Information - unaudited | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||
| May 29, 2021 | May 30, 2020 | May 29, 2021 | May 30, 2020 | |||||||||||||
| Sales Revenue | ||||||||||||||||
| Wholesale sales of furniture and accessories | $ | 76,034 | $ | 33,128 | $ | 146,298 | $ | 98,145 | ||||||||
| Less: Sales to retail segment | (28,520 | ) | (13,299 | ) | (57,524 | ) | (45,220 | ) | ||||||||
| Wholesale sales to external customers | 47,514 | 19,829 | 88,774 | 52,925 | ||||||||||||
| Retail sales of furniture and accessories | 62,483 | 33,171 | 122,878 | 99,017 | ||||||||||||
| Consolidated net sales of furniture and accessories | 109,997 | 53,000 | 211,652 | 151,942 | ||||||||||||
| Logistical services revenue | 22,244 | 15,259 | 42,325 | 36,574 | ||||||||||||
| Less: Services to wholesale segment | (8,182 | ) | (4,458 | ) | (16,245 | ) | (12,595 | ) | ||||||||
| Logistical services to external customers | 14,062 | 10,801 | 26,080 | 23,979 | ||||||||||||
| Total sales revenue | $ | 124,059 | $ | 63,801 | $ | 237,732 | $ | 175,921 | ||||||||
| Operating Income (Loss) | ||||||||||||||||
| Wholesale | $ | 5,359 | $ | (7,381 | ) | $ | 10,156 | $ | (4,668 | ) | ||||||
| Retail | 1,652 | (9,170 | ) | 2,746 | (10,419 | ) | ||||||||||
| Logistical services | 1,294 | (1,842 | ) | 1,753 | (1,007 | ) | ||||||||||
| Inter-company elimination | 74 | 2,369 | (255 | ) | 2,280 | |||||||||||
| Asset impairment charges | - | (12,184 | ) | - | (12,184 | ) | ||||||||||
| Goodwill impairment charge | - | (1,971 | ) | - | (1,971 | ) | ||||||||||
| Litigation expense | - | (1,050 | ) | - | (1,050 | ) | ||||||||||
| Consolidated | $ | 8,379 | $ | (31,229 | ) | $ | 14,400 | $ | (29,019 | ) | ||||||
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