Bassett Announces Fiscal Fourth Quarter Results and Discusses Sale of Zenith Assets

BASSETT, Va., Jan. 31, 2023 (GLOBE NEWSWIRE) — Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fourth quarter ended November 27, 2023 and discusses the previously announced sale of the assets of Zenith Freight Lines, LLC for $87 million in cash.

Fiscal 2023 Fourth Quarter Highlights
(Dollars in millions)

  Sales   Operating Income (Loss)
  4th Qtr   Dollar %   4th % of   4th Qtr % of
  2021 2020   Change Change
  2021 Sales   2020 Sales
Consolidated (1) $ 129.9 $ 118.4   $ 11.5 9.7 %   $ 7.1 5.5 %   $ 10.0 8.4 %
                       
Wholesale $ 76.0 $ 67.5   $ 8.5 12.8 %   $ 2.9 3.8 %   $ 5.9 8.7 %
                       
Retail $ 66.4 $ 64.8   $ 1.6 2.5 %   $ 3.4 5.1 %   $ 2.5 3.9 %
                       
Logistical Services $ 23.5 $ 20.7   $ 2.8 13.5 %   $ 0.5 2.1 %   $ 1.2 5.8 %
                       
(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).      

Our fourth quarter concluded another turbulent year for the industry with a consolidated sales increase of 9.7%, coming in at $129.9 million. Although incoming wholesale orders did slow from 2020’s torrid pace, fourth quarter written orders were 8.7% ahead of 2019. Despite ongoing supply chain complications, we were able to slightly reduce our backlog at year end measured against the end of our third quarter. Nevertheless, we ended the year with a wholesale backlog of $90.1 million compared to $54.9 million in 2020 and $20.0 million in 2019. Raw material stock outages have improved somewhat since the end of November, making way for further reduction of the wholesale backlog to start 2023.

Operating profit of $7.1 million was behind last year due to margin pressure in our wholesale and logistics operations and higher spending levels, primarily related to technology initiatives. I am especially pleased that we generated $26.0 million of operating profit for the full year, the most since 2017, despite the aforementioned margin pressures. For the past five quarters, we have sought to combat ceaseless raw material and ocean freight increases with wholesale price increases of our own; passed along to our customers. Unfortunately, our spiraling costs coupled with late shipments from our suppliers have eroded our wholesale margins as we continue to produce goods today with higher material costs than they had when the finished goods were sold months ago. This dynamic will remain with us for the first few months of 2023 as we whittle the backlog down to normalized levels and our pricing becomes current with our costs. We hope the pace of cost increases has slowed such that future wholesale price increases will be at a more normal level. Furthermore, we are experiencing COVID related delays in our wood import business to begin the year as plant schedules have been compromised in Vietnam since a second wave of the virus hit that country this fall.

Supply chain issues also prevented our corporate retail stores from realizing the full benefit of the sales generated over the course of the year. In spite of that, corporate retail grew sales and profits in the fourth quarter and the year by reducing its SG&A costs significantly. Also, for the year, corporate retail gross margins improved by 200 basis points, primarily attributable to lower promotional costs and reduced levels of discounting for obsolescence. This trend continued at a greater level in the fourth quarter and should keep going in 2023.

2023 represented growth for all of our sales channels, led by our open market accounts, customers outside of our corporate and licensed store network. Excluding our Lane Venture outdoor division, total wholesale shipments for the year were comprised of 57% retail sales and 43% open market. Open market shipments grew by 49% compared to last year. Both our Bassett Design Center (BDC) store-within-a-store network and Bassett Club Level motion furniture store accounts were major contributors to this exciting trend. Equally exciting was the progress we made in advancing our position in the outdoor furniture arena. Though experiencing daily disruptions to our production schedule due to poor service from outdoor fabric suppliers, our sales momentum allowed us to partially overcome this handicap and grow our Lane Venture and Bassett Outdoor divisions by 28%.

Looking ahead, we have started a series of initiatives currently underway that are designed to grow Bassett and to make us more competitive in the short- and mid-term. We plan to invest up to $30 million in the business in 2023 in the following areas:

  • Technology – Our digital transformation program is well underway, which includes reformatting our business data with a new Product Information Management package and introducing a new website platform this fall.
  • Retail – We plan to open two new format stores in 2023, one of which will be in a new market while the other store will be a reposition of a store in the Dallas market. We also have plans to remodel at least three others.
  • Manufacturing – New advanced machinery purchases are in process for both our North Carolina upholstery operations and our Virginia based woodworking facilities. We have also invested in new material handling equipment to improve the ergonomic environment of our facilities and to further protect our products on their way to our customers.
  • Outdoor – The domestic aluminum outdoor furniture operation that we acquired in Haleyville, Alabama in 2019 has the potential to significantly contribute to our growth plan. We are negotiating to buy the facility (currently leased) and another adjacent building and continue with the upgrade program that is already underway.

Today we made a joint announcement with J.B. Hunt Transport Services, Inc (J.B. Hunt) to sell Zenith Freight Lines to a subsidiary of J.B. Hunt for $87 million subject to customary closing conditions. We expect to close the deal by the end of February. This transaction will open an exciting new chapter in our quest to provide the highest level of service to our customers. Disruption caused by the pandemic aside, we believe that the consolidation of the traditional “middle mile” segment of specialized furniture carriers is inevitable. There are already much fewer of these providers today than were in existence a few years ago. Accordingly, this thinking led us to seriously consider selling Zenith to J. B. Hunt when the initial overtures were made last year. As due diligence progressed, we came to understand the benefits that the scale of J.B. Hunt could provide in terms of equipment, technology, driver recruitment, intermodal transportation, and warehousing density. As we became more familiar with their management team and developed respect for them, we became convinced that they were the right partners for our vision to build out a nationwide network of Regional Fulfillment Centers that could serve as local warehouses for our “Make, Then Sell” stocking assortment while serving as cross docks for our “Sell, Then Make” custom programs that have been so successful for us for so long. The idea is to reduce costs to our customers and get them their goods faster, while providing more visibility to the status of their shipment in the process. We plan to open the first of these new facilities in Florida this spring and we are working on every aspect of the model that will be required to allow our new logistics strategy to serve as a linchpin for future wholesale and retail growth for Bassett. We are extremely enthusiastic about the potential to better serve our customers with the 50-year accumulated furniture know-how of Zenith in combination with the power of the JB Hunt platform.

Of course, there are additional considerations brought on by today’s announcement for Bassett. In light of the cash value of the transaction where we expect to net in the neighborhood of $65 million after taxes, our Board of Directors and Management will evaluate appropriate capital allocation strategies which may include any or all of the following:

  • Payment of a special dividend
  • Increase in the regular quarterly dividend
  • Investment in a strategic acquisition or other partnership
  • Increase in the share repurchase authorization
  • Increase in capital investment in the business

Our business has notably improved since the return from the first phase of COVID in May 2020. Sales have grown and we have developed new capabilities and new sales channels, particularly with our Club Level motion line and with a deepening commitment to the outdoor furniture category. The partnership with J.B. Hunt and the upcoming investments in technology and new growth strategies represent a tremendous opportunity for us to build on the successful elements of our business and to augment them with new products, better technology, and higher levels of service. We will provide additional insights into our business and capital allocation strategies after the transaction with J.B. Hunt closes.

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 96 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 2023, 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   Year Ended
  November 27, 2023   November 28, 2020   November 27, 2023   November 28, 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 $ 114,364       $ 105,389       $ 430,886       $ 337,672    
Logistical services   15,532         12,994         55,648         48,191    
Total sales revenue   129,896   100.0 %     118,383   100.0 %     486,534   100.0 %     385,863   100.0 %
                       
Cost of furniture and accessories sold   56,373   43.4 %     50,427   42.6 %     209,799   43.1 %     163,567   42.4 %
                       
Selling, general and administrative expenses   51,357   39.5 %     46,178   39.0 %     196,831   40.5 %     176,404   45.7 %
Cost of logistical services   15,057   11.6 %     11,729   9.9 %     53,905   11.1 %     46,910   12.2 %
Asset impairment charges     0.0 %       0.0 %       0.0 %     12,184   3.2 %
Goodwill impairment charge     0.0 %       0.0 %       0.0 %     1,971   0.5 %
Litigation expense     0.0 %       0.0 %       0.0 %     1,050   0.3 %
Income (loss) from operations   7,109   5.5 %     10,049   8.5 %     25,999   5.3 %     (16,223 ) -4.2 %
                       
Other income (loss), net   (743 ) -0.6 %     (133 ) -0.1 %     (1,759 ) -0.4 %     (563 ) -0.1 %
Income (loss) before income taxes   6,366   4.9 %     9,916   8.4 %     24,240   5.0 %     (16,786 ) -4.4 %
                       
Income tax provision (benefit)   1,325   1.0 %     3,373   2.8 %     6,198   1.3 %     (6,365 ) -1.6 %
Net income (loss) $ 5,041   3.9 %   $ 6,543   5.5 %   $ 18,042   3.7 %   $ (10,421 ) -2.7 %
                       
Basic earnings (loss) per share $ 0.52       $ 0.65       $ 1.83       $ (1.05 )  
                       
Diluted earnings (loss) per share $ 0.52       $ 0.65       $ 1.83       $ (1.05 )  
                       
Table 2
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)    
Assets   November 27, 2023   November 28, 2020
Current assets        
Cash and cash equivalents   $ 34,374     $ 45,799  
Short-term investments     17,715       17,715  
Accounts receivable, net     28,168       22,340  
Inventories, net     78,004       54,886  
Recoverable income taxes     8,379       9,666  
Other current assets     13,644       10,272  
Total current assets     180,284       160,678  
         
Property and equipment, net     94,066       90,917  
         
Other long-term assets        
Deferred income taxes, net     3,189       4,587  
Goodwill and other intangible assets     23,448       23,827  
Right of use assets under operating leases     114,148       116,903  
Other     6,525       5,637  
Total long-term assets     147,310       150,954  
Total assets   $ 421,660     $ 402,549  
         
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable   $ 28,324     $ 23,426  
Accrued compensation and benefits     15,934       16,964  
Customer deposits     51,492       39,762  
Current portion of operating lease obligations     27,693       27,078  
Other current liabilities and accrued expenses     10,776       11,141  
Total current liabilities     134,219       118,371  
         
Long-term liabilities        
Post employment benefit obligations     12,968       12,089  
Long-term portion of operating lease obligations     105,841       111,972  
Other long-term liabilities     5,900       2,087  
Total long-term liabilities     124,709       126,148  
         
         
Stockholders’ equity        
Common stock     48,811       49,714  
Retained earnings     115,631       109,710  
Additional paid-in-capital     113        
Accumulated other comprehensive loss     (1,823 )     (1,394 )
Total stockholders’ equity     162,732       158,030  
Total liabilities and stockholders’ equity   $ 421,660     $ 402,549  
         
Table 3
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – unaudited
(In thousands)
         
    Year Ended
    November 27, 2023   November 28, 2020
Operating activities:        
Net income (loss)   $ 18,042     $ (10,421 )
Adjustments to reconcile net income (loss) to net cash provided by (used in)        
operating activities:        
Depreciation and amortization     14,597       13,480  
Gain on lease modification     (37 )     (1,313 )
Net (gain) loss on disposals of property and equipment     (367 )     (81 )
Asset impairment charges           12,184  
Goodwill impairment charges           1,971  
Inventory valuation charges     2,969       4,922  
Bad debt valuation charges (recoveries)     (156 )     492  
Deferred income taxes     1,545       2,513  
Other, net     765       (51 )
Changes in operating assets and liabilities        
Accounts receivable     (5,672 )     (1,454 )
Inventories     (26,087 )     6,494  
Other current and long-term assets     (2,241 )     (9,325 )
Right of use assets under operating leases     26,243       32,107  
Customer deposits     11,730       14,421  
Accounts payable and other liabilities     2,153       5,965  
Obligations under operating leases     (28,921 )     (35,229 )
Net cash provided by operating activities     14,563       36,675  
         
Investing activities:        
Purchases of property and equipment     (10,750 )     (6,029 )
Proceeds from sale of property and equipment     382       2,345  
Purchase of investments           (295 )
Proceeds from maturity of short-term investments           16  
Other     (1,203 )     216  
Net cash used in investing activities     (11,571 )     (3,747 )
         
Financing activities:        
Cash dividends     (7,689 )     (4,544 )
Proceeds from the exercise of stock options     42        
Other issuance of common stock     363       285  
Repurchases of common stock     (5,566 )     (2,208 )
Taxes paid related to net share settlement of equity awards     (219 )     (228 )
Repayments of finance lease obligations     (1,348 )     (121 )
Net cash used in financing activities     (14,417 )     (6,816 )
Change in cash and cash equivalents     (11,425 )     26,112  
Cash and cash equivalents – beginning of period     45,799       19,687  
         
Cash and cash equivalents – end of period   $ 34,374     $ 45,799  
         
Table 4
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information – unaudited
(In thousands)
                 
    Quarter Ended   Year Ended
    November 27, 2023   November 28, 2020   November 27, 2023   November 28, 2020
Sales Revenue                
Wholesale sales of furniture and accessories   $ 75,958     $ 67,487     $ 295,329     $ 221,075  
Less: Sales to retail segment     (27,967 )     (26,881 )     (112,270 )     (95,347 )
Wholesale sales to external customers     47,991       40,606       183,059       125,728  
Retail sales of furniture and accessories     66,373       64,783       247,827       211,944  
Consolidated net sales of furniture and accessories   114,364       105,389       430,886       337,672  
                 
Logistical services revenue     23,452       20,736       86,977       75,158  
Less: Services to wholesale segment     (7,920 )     (7,742 )     (31,329 )     (26,967 )
Logistical services to external customers     15,532       12,994       55,648       48,191  
Total sales revenue   $ 129,896     $ 118,383     $ 486,534     $ 385,863  
                 
Operating Income (Loss)                
Wholesale   $ 2,868     $ 5,932     $ 17,490     $ 4,587  
Retail     3,381       2,507       7,044       (9,497 )
Logistical services     476       1,230       1,743       1,245  
Inter-company elimination     384       380       (278 )     2,647  
Asset impairment charges                       (12,184 )
Goodwill impairment charge                       (1,971 )
Litigation expense                       (1,050 )
Consolidated   $ 7,109     $ 10,049     $ 25,999     $ (16,223 )
                 

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

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

Bassett Furniture Industries I