by Company also adjusts employment levels by 11% so far this year, largely through attrition
BASSETT, Va. — Bassett Furniture reported a decline in revenues and earnings for its first fiscal quarter ended Feb. 25.
The company said that consolidated sales totaled $107.7 million, down 8.7% from the $117.9 million reported the same period last year.
Net income totaled $1.44 million, or 16 cents per share, compared to $5.57 million, or 57 cents per share, in last year’s first fiscal quarter.
The company’s retail segment actually saw an increase in revenues during the quarter, which rose from $64.1 million in early 2022 to $65 million this year, a 1.4% increase.
This was more than offset by a 16.3% decrease in sales in the wholesale segment, which totaled $69.9 million, compared to $83.5 million in the same fiscal first quarter of last year. However, sales in the segment were 7.5% above the last corresponding pre-pandemic quarter.
Operating income in the retail segment totaled $1.5 million, down from $2.6 million in the same period last year. This represented about 2.3% of sales, compared to 4.1% of sales last year.
Operating income in the wholesale segment totaled $9 million, down from $10.2 million in the same period last year. It represented 12.9% of sales, compared to 12.2% of sales the same period last year.
Company Chairman and CEO Robert H. Spilman Jr. said that the company fulfilled the remaining excess portion of a large backlog created during the pandemic and noted that the company is now shipping at a rate that is commensurate with its written business.
“As the industry and Bassett wrestle with macroeconomic inconsistencies, we are focused on efficiently targeting our consumers, new product innovation, providing the best buying experience and service possible, and working to sharpen our value proposition on the heels of the unprecedented cost pressures that we faced over the past 30 months,” Spilman said. “We are managing our expense structure while investing in the growth initiatives that are essential for the company’s future. Our balance sheet continues to provide the foundational element on which our strategy rests and provides the strength to weather the depth of the current market downturn.”
He added that for the past two months, the company also has been working reduced production schedules in its facilities and has adjusted employment levels by about 11% this year, largely through attrition. He also noted that the company reduced total wholesale inventories by 15% for the period.
“As previously reported, we continue to right size our Club Level imported motion inventories and are suffering margin degradation in so doing as the inventory is valued with the exorbitant ocean freight costs incurred last year and we are discounting the product to move the goods,” he said. “The corresponding effect resulted in a 250-basis-point blow to overall operating margins for the quarter versus last year. The bottom-line effects of the price reduction lessened somewhat as the period unfolded but will represent a hindrance to operating results until sometime in the third quarter at current sales levels. Once we return to Club Level inventories that were shipped from Asia with current ocean freight rates, those margins will return to historical levels, which is already the case for certain styles.”
However, he noted that the turmoil caused by pandemic supply chain upheaval “is now behind us. Part of the disruption included skyrocketing raw material prices and the aforementioned freight costs. As the environment has normalized, certain manufacturing cost inputs have been reduced. Armed with the results of a thorough line-wide cost analysis, we plan to sharpen price points on key items across the line to enhance sales and improve overhead absorption in our factories. We will implement the new pricing strategy in our stores and to our wholesale customers sometime in April, which we believe will not adversely affect wholesale margins based on our internal calculations.”
Other developments he noted include:
+ The opening of its new Dallas store during the quarter.
+ The company also remodeled two other existing locations in the same market as part of a redesign aimed at boosting accessory sales.
+ Work will being in early April on its new 25,000-square-foot store in Tampa.
“We are excited about the new face that our latest formats put on our brand presentation, and we will monitor the performance of these locations as we consider enhancements to certain stores in the rest of the fleet,” Spilman said.
He added that 2023 is a big year from a technology standpoint as the company undertakes a digital transformation with the debut of its new web platform in the next 90 days.
“Adding a new level of omnichannel capabilities has been a major objective from the outset and we are close to bringing it to the marketplace,” he said, adding, “On a related note, February brought the second quarter of our ownership of pure-play e-commerce provider Noa Home to a close. Noa is operating at a loss and will likely do so until at least the latter part of the year as we hone their operating metrics and adjust certain pricing strategies. We also continue to work on broadening their assortment. We value the insights that we are gaining from owning Noa and look forward to growing the business and reaching a new consumer in their existing international markets and ultimately the U.S.”
“Once again, we will manage our capital allocation strategy in keeping with the economic uncertainty that we see around us today. We have postponed certain elements of our capital expenditure plan as we gain clarity on consumer behavior over the next few months. Although we have slowed the pace of share repurchases as compared to the prior year, we retired $1.8 million of our stock in the quarter and plan to continue to actively acquire shares while we believe the stock is undervalued. We are confident in the investments that we are making for the future but recognize that the fluid economic environment in which we are currently operating merits the conservative capital allocation approach that we are taking.”
