BASSETT, Va., Sept. 30, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its third quarter ended August 28, 2021.
Fiscal 2021 Third Quarter Highlights
(Dollars in millions)
| Sales | Operating Income (Loss) | ||||||||||||||||||||
| 3rd Qtr | Dollar | % | 3rd Qtr | % of | 3rd Qtr | % of | |||||||||||||||
| 2021 | 2020 | Change | Change | 2021 | Sales | 2020 | Sales | ||||||||||||||
| Consolidated (1) | $ | 118.9 | $ | 91.6 | $ | 27.3 | 29.8 | % | $ | 4.5 | 3.8 | % | $ | 2.7 | 2.9 | % | |||||
| Wholesale | $ | 73.1 | $ | 55.4 | $ | 17.7 | 32.1 | % | $ | 4.5 | 6.2 | % | $ | 3.3 | 6.0 | % | |||||
| Retail | $ | 58.6 | $ | 48.1 | $ | 10.5 | 21.8 | % | $ | 0.9 | 1.5 | % | $ | (1.6 | ) | -3.3 | % | ||||
| Logistical Services | $ | 21.2 | $ | 17.8 | $ | 3.4 | 19.1 | % | $ | (0.5 | ) | -2.4 | % | $ | 1.0 | 5.6 | % | ||||
| (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). | |||||||||||||||||||||
The disruptions that have permeated the furniture industry since the pandemic restart began fifteen months ago remain with us as we hit the homestretch for calendar 2021. “Business as usual” this year means raw material shortages, escalating labor and commodity costs, severely compromised logistics capabilities, and an unyielding global virus stubbornly persisting at home and in the industry’s manufacturing centers in Asia. The frustration of dealing with these dynamics is certainly wearing on the psyche of our associates and on virtually everyone else in the business. Posting consolidated revenue of $118.9 million for the quarter, an increase of 30% compared to last year and 8.7% more than 2019 did not come easily. Although there are many factors that currently encumber our financial performance, our team produced operating income of $4.5 million, 63% more than the June-August period last year and 32% more than in 2019. EPS advanced to $0.31 per share against the $0.22 recorded in 2020. We are persevering through these challenges and are squarely focused on working with our vendors to schedule adequate production to reduce our large wholesale backlog and offer higher levels of service in the near term.
Quarterly wholesale revenue grew by 32% compared to last year and by 17% to 2019. The aforementioned daily upheaval of key elements of our supply chain means we left money on the table during the period, whether that came in the form of reduced production schedules or higher incurred costs. Total inventory now stands at $73.8 million, about $19 million more than at 2020 year end. Over $10 million of that increase came in the form of finished goods, which we are attempting to build to increase shipments. Still, our order backlog of $92.8 million, led by domestic upholstery and outdoor furniture sales, grew by 7.1% in the period as incoming orders once again outpaced shipments. Moving into our fourth quarter, our backlog has continued to grow thanks to our strong three-week Labor Day retail sales event, which mirrored last year’s results. 2021 and 2020 stand as the best ever years of that holiday’s promotions. We have been able to ship above our weekly sales for the past two weeks and hope to continue that trend for the remainder of 2021.
We instituted our fourth general price increase of the year on September 13th. The pace of incoming increases from our suppliers has subsided somewhat from earlier in the year but remains significant. Unfortunately, we have not been able to enact price increases on our goods as fast as we have incurred them from our material providers. The most glaring example is the escalation in ocean freight that has quintupled in the past twelve months, which affects not only our imported products but many of the components that are used in our domestic production. During the quarter, the rising prices on container freight ramped up as the availability of space on the giant vessels that move goods from Asia to the U.S. declined. In effect, the shipping companies are conducting daily auctions for space on their vessels, causing container prices to fluctuate wildly from day to day. This was driven, of course, by the fact that the aggregate demand for goods to move into the U.S. has consistently outstripped the supply of cargo space available to move it for most of 2021. Recent demand of containers has been somewhat tempered by Vietnam’s enactment of Martial Law, which has shut down all manufacturing activity in the country in an attempt to curb the Delta virus. Our information tells us that it will be late October before production fully returns, which will begin to affect our shipments in late Q4 and into fiscal 2022.
Our Zenith Logistics subsidiary suffered a $500k loss for the period compared to last year’s $1.0 million profit. Zenith is a microcosm of the overall domestic logistics environment in the U.S. today. An acute shortage of warehousing labor, an issue that rarely confronted us prior to the pandemic, is now a very challenging issue. In an attempt to staff our facilities, we have aggressively raised wages to the extent that the labor line on the Zenith P&L rose 700 basis points for the quarter as a percentage of revenue, thus causing our loss. As with our competitors in the transportation space, the labor shortage has caused a massive backup of transportation equipment that has been sitting on yards waiting to be unloaded throughout the country. An additional response that we have made has been leasing several hundred trailers on the open market to keep goods moving, albeit at a higher expense than originally contemplated. The logjam of freight has also backed up our manufacturing schedules as we have simply run out of room in our facilities to store goods before shipment. To compensate, we aggressively raised prices for Zenith’s services back in August, too late to arrest the trend for the quarter. The increases that cover these higher costs will begin to run through our financial statements over the next few months and we have made arrangements to acquire more warehousing space as well.
Amidst this litany of challenges, we take solace in the fact that the overall pace of our business has remained strong for the past sixteen months, both at Bassett retail and in our wholesale operations. Our retail sales have remained secure and, coupled with our fixed cost adjustments, produced a profit for corporate retail even though we are not delivering close to as much as we are writing in the stores at the moment. Gross margins for the quarter ran 290 basis points better than last year and are trending to the highest ever. We have not realized the full benefit of our cost reduction program due to the huge undelivered order backlog but this will come into view as the product goes in the customer’s homes. On the open market front, wholesale sales to the customers outside the Bassett retail network grew by 6.6% and sales of Lane Venture outdoor grew by 42%. The success of our Bassett Design Center network and our Club Level motion program in 2021 has us enthusiastically looking at the future potential of the open market. And the 75% growth rate of our Lane Venture and Bassett Outdoor efforts in 2021 has expanded our thinking about greater outdoor opportunities moving ahead. Working in tandem, our multi-channel strategy is designed to drive wholesale growth and combined to generate $14.6 million of operating profit for the nine months of 2021 to date despite all of the operational headwinds that we have faced.
We are certainly looking beyond the current turmoil to the future with optimism across all channels. We have been investing in upgrades to the plant and equipment in our manufacturing footprint to provide a better work environment for our associates and to improve efficiency. We are formulating a new warehousing and logistics architecture that we should communicate by year end and that will help grow and improve service. Our digital transformation program has been underway for one year and will culminate with a new website platform in mid-2022. We have been working on additional elements to our in-store retail experience that will also debut in late spring next year. Rounding out our capital allocation strategy and against the backdrop of a strong balance sheet came the 12% increase to our quarterly dividend authorized by our Board of Directors in July and the $2.6 million of share repurchases that we made this past quarter. We will maintain our balanced approach to capital allocation as we pursue the opportunities for growth that we have identified and we ultimately return to a semblance of normalcy on the other side of the pandemic.
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 third 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 | Nine Months Ended | |||||||||||||||||||||
| August 28, 2021 | August 29, 2020 | August 28, 2021 | August 29, 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 | $ | 104,870 | $ | 80,341 | $ | 316,522 | $ | 232,283 | ||||||||||||||
| Logistical services | 14,036 | 11,218 | 40,116 | 35,197 | ||||||||||||||||||
| Total sales revenue | 118,906 | 100.0 | % | 91,559 | 100.0 | % | 356,638 | 100.0 | % | 267,480 | 100.0 | % | ||||||||||
| Cost of furniture and accessories sold | 52,263 | 44.0 | % | 38,418 | 42.0 | % | 153,426 | 43.0 | % | 113,140 | 42.3 | % | ||||||||||
| Selling, general and administrative expenses | 47,631 | 40.1 | % | 40,198 | 43.9 | % | 145,474 | 40.8 | % | 130,225 | 48.7 | % | ||||||||||
| Cost of logistical services | 14,522 | 12.2 | % | 10,196 | 11.1 | % | 38,848 | 10.9 | % | 35,182 | 13.2 | % | ||||||||||
| Asset impairment charges | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | 12,184 | 4.6 | % | ||||||||||
| Goodwill impairment charge | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | 1,971 | 0.7 | % | ||||||||||
| Litigation expense | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | 1,050 | 0.4 | % | ||||||||||
| Income (loss) from operations | 4,490 | 3.8 | % | 2,747 | 3.0 | % | 18,890 | 5.3 | % | (26,272 | ) | -9.8 | % | |||||||||
| Other income (loss), net | (347 | ) | -0.3 | % | 697 | 0.8 | % | (1,016 | ) | -0.3 | % | (430 | ) | -0.2 | % | |||||||
| Income (loss) before income taxes | 4,143 | 3.5 | % | 3,444 | 3.8 | % | 17,874 | 5.0 | % | (26,702 | ) | -10.0 | % | |||||||||
| Income tax provision (benefit) | 1,127 | 0.9 | % | 1,266 | 1.4 | % | 4,873 | 1.4 | % | (9,738 | ) | -3.6 | % | |||||||||
| Net income (loss) | $ | 3,016 | 2.5 | % | $ | 2,178 | 2.4 | % | $ | 13,001 | 3.6 | % | $ | (16,964 | ) | -6.3 | % | |||||
| Basic earnings (loss) per share | $ | 0.31 | $ | 0.22 | $ | 1.32 | $ | (1.70 | ) | |||||||||||||
| Diluted earnings (loss) per share | $ | 0.31 | $ | 0.22 | $ | 1.32 | $ | (1.70 | ) | |||||||||||||
| 27.20 | % | |||||||||||||||||||||
| Table 2 | ||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Assets | August 28, 2021 | November 28, 2020 | ||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 38,611 | $ | 45,799 | ||||
| Short-term investments | 17,715 | 17,715 | ||||||
| Accounts receivable, net | 26,769 | 22,340 | ||||||
| Inventories, net | 73,827 | 54,886 | ||||||
| Recoverable income taxes | 6,778 | 9,666 | ||||||
| Other current assets | 13,111 | 10,272 | ||||||
| Total current assets | 176,811 | 160,678 | ||||||
| Property and equipment, net | 94,489 | 90,917 | ||||||
| Other long-term assets | ||||||||
| Deferred income taxes, net | 3,498 | 4,587 | ||||||
| Goodwill and other intangible assets | 23,543 | 23,827 | ||||||
| Right of use assets under operating leases | 110,792 | 116,903 | ||||||
| Other | 6,900 | 5,637 | ||||||
| Total long-term assets | 144,733 | 150,954 | ||||||
| Total assets | $ | 416,033 | $ | 402,549 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 27,951 | $ | 23,426 | ||||
| Accrued compensation and benefits | 14,603 | 16,964 | ||||||
| Customer deposits | 51,103 | 39,762 | ||||||
| Current portion of operating lease obligations | 27,545 | 27,078 | ||||||
| Other current liabilities and accrued expenses | 13,050 | 11,141 | ||||||
| Total current liabilities | 134,252 | 118,371 | ||||||
| Long-term liabilities | ||||||||
| Post employment benefit obligations | 12,454 | 12,089 | ||||||
| Long-term portion of operating lease obligations | 103,468 | 111,972 | ||||||
| Other long-term liabilities | 6,412 | 2,087 | ||||||
| Total long-term liabilities | 122,334 | 126,148 | ||||||
| Stockholders’ equity | ||||||||
| Common stock | 48,779 | 49,714 | ||||||
| Retained earnings | 111,958 | 109,710 | ||||||
| Accumulated other comprehensive loss | (1,290 | ) | (1,394 | ) | ||||
| Total stockholders' equity | 159,447 | 158,030 | ||||||
| Total liabilities and stockholders’ equity | $ | 416,033 | $ | 402,549 | ||||
| Table 3 | |||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | |||||||||
| Consolidated Statements of Cash Flows - unaudited | |||||||||
| (In thousands) | |||||||||
| Nine Months Ended | |||||||||
| August 28, 2021 | August 29, 2020 | ||||||||
| Operating activities: | |||||||||
| Net income (loss) | $ | 13,001 | $ | (16,964 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) | |||||||||
| operating activities: | |||||||||
| Depreciation and amortization | 10,458 | 10,249 | |||||||
| Gain on lease modification | - | (152 | ) | ||||||
| Asset impairment charges | - | 12,184 | |||||||
| Goodwill impairment charges | - | 1,971 | |||||||
| Inventory valuation charges | 1,975 | 3,814 | |||||||
| Bad debt valuation charges (recoveries) | (145 | ) | 727 | ||||||
| Deferred income taxes | 1,053 | (708 | ) | ||||||
| Other, net | 410 | 188 | |||||||
| Changes in operating assets and liabilities | |||||||||
| Accounts receivable | (4,184 | ) | 1,552 | ||||||
| Inventories | (20,916 | ) | 3,887 | ||||||
| Other current and long-term assets | (100 | ) | (8,898 | ) | |||||
| Right of use assets under operating leases | 18,857 | 24,338 | |||||||
| Customer deposits | 11,341 | 10,380 | |||||||
| Accounts payable and other liabilities | 2,750 | 1,379 | |||||||
| Obligations under operating leases | (20,823 | ) | (26,464 | ) | |||||
| Net cash provided by operating activities | 13,677 | 17,483 | |||||||
| Investing activities: | |||||||||
| Purchases of property and equipment | (7,141 | ) | (2,214 | ) | |||||
| Proceeds from sale of property and equipment | 101 | 2,345 | |||||||
| Purchase of investments | - | (241 | ) | ||||||
| Proceeds from maturity of short-term investments | - | 16 | |||||||
| Other | (1,173 | ) | (1,107 | ) | |||||
| Net cash used in investing activities | (8,213 | ) | (1,201 | ) | |||||
| Financing activities: | |||||||||
| Cash dividends | (6,321 | ) | (3,306 | ) | |||||
| Proceeds from the exercise of stock options | 42 | - | |||||||
| Other issuance of common stock | 266 | 217 | |||||||
| Repurchases of common stock | (5,566 | ) | (1,542 | ) | |||||
| Taxes paid related to net share settlement of equity awards | (219 | ) | (214 | ) | |||||
| Repayments of finance lease obligations | (854 | ) | (95 | ) | |||||
| Net cash used in financing activities | (12,652 | ) | (4,940 | ) | |||||
| Change in cash and cash equivalents | (7,188 | ) | 11,342 | ||||||
| Cash and cash equivalents - beginning of period | 45,799 | 19,687 | |||||||
| Cash and cash equivalents - end of period | $ | 38,611 | $ | 31,029 | |||||
| Table 4 | ||||||||||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||||
| Segment Information - unaudited | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||
| August 28, 2021 | August 30, 2020 | August 28, 2021 | August 30, 2020 | |||||||||||||
| Sales Revenue | ||||||||||||||||
| Wholesale sales of furniture and accessories | $ | 73,073 | $ | 55,443 | $ | 219,371 | $ | 153,588 | ||||||||
| Less: Sales to retail segment | (26,779 | ) | (23,246 | ) | (84,303 | ) | (68,466 | ) | ||||||||
| Wholesale sales to external customers | 46,294 | 32,197 | 135,068 | 85,122 | ||||||||||||
| Retail sales of furniture and accessories | 58,576 | 48,144 | 181,454 | 147,161 | ||||||||||||
| Consolidated net sales of furniture and accessories | 104,870 | 80,341 | 316,522 | 232,283 | ||||||||||||
| Logistical services revenue | 21,200 | 17,848 | 63,525 | 54,422 | ||||||||||||
| Less: Services to wholesale segment | (7,164 | ) | (6,630 | ) | (23,409 | ) | (19,225 | ) | ||||||||
| Logistical services to external customers | 14,036 | 11,218 | 40,116 | 35,197 | ||||||||||||
| Total sales revenue | $ | 118,906 | $ | 91,559 | $ | 356,638 | $ | 267,480 | ||||||||
| Operating Income (Loss) | ||||||||||||||||
| Wholesale | $ | 4,466 | $ | 3,324 | $ | 14,622 | $ | (1,344 | ) | |||||||
| Retail | 917 | (1,585 | ) | 3,663 | (12,004 | ) | ||||||||||
| Logistical services | (486 | ) | 1,022 | 1,267 | 15 | |||||||||||
| Inter-company elimination | (407 | ) | (14 | ) | (662 | ) | 2,266 | |||||||||
| Asset impairment charges | - | - | - | (12,184 | ) | |||||||||||
| Goodwill impairment charge | - | - | - | (1,971 | ) | |||||||||||
| Litigation expense | - | - | - | (1,050 | ) | |||||||||||
| Consolidated | $ | 4,490 | $ | 2,747 | $ | 18,890 | $ | (26,272 | ) | |||||||
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
