Bassett Reports Fiscal Second Quarter Results and Launches Restructuring Plan

/EIN News/ -- 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			Change			Change				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
	Amount			Net Sales			Amount			Net Sales			Amount			Net Sales			Amount			Net 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)
Assets	June 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
	Amount			Net Sales			Amount			Net Sales			Amount			Net Sales			Amount			Net 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	%