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Bassett Announces Fiscal Fourth Quarter Results

/EIN News/ -- 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   Change Change   2022 Sales     2021 Sales
Consolidated (1) $ 121.0 $ 114.4   $ 6.6   5.8%   $ 6.7 5.6%   $ 6.6 5.8%
                       
Wholesale $ 74.6 $ 76.0   $ (1.4 ) -1.6%   $ 0.9 1.2%   $ 2.9 3.8%
                       
Retail $ 76.3 $ 66.4   $ 9.9   14.9%   $ 5.8 7.6%   $ 3.4 5.1%
                       
(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 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 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  
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
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  
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net 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
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)    
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  
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
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  
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
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
mdaniel@bassettfurniture.com

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


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