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Bassett Announces Fiscal Fourth Quarter Results

BASSETT, Va., Jan. 19, 2017 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended November 26, 2016.

Fiscal 2016 Fourth Quarter Highlights

  • Consolidated sales were $113.8 million for the fourth quarter of 2016 compared to $115.6 million for the fourth quarter of 2015, a decrease of 1.5%. 
  • Operating income for the quarter was $9.0 million or 7.9% of sales as compared to $8.7 million or 7.5% of sales for the prior year quarter.
  • Wholesale sales were $62.6 million for the fourth quarter of 2016 compared to $64.5 million for the fourth quarter of 2015, a decrease of 3.0%.  Wholesale operating profit for the quarter was $4.3 million or 6.9% of sales as compared to $4.1 million or 6.4% of sales for the prior year quarter.
  • Company-owned store sales were $69.9 million for the fourth quarter of 2016 compared to $66.3 million for the fourth quarter of 2015, an increase of 5.5%.  This included a comparable store sales increase of 4.3% compared to the prior year quarter. Comparable store operating income was $3.4 million or 5.2% of sales for the current year quarter as compared to $2.9 million or 4.6% of sales for the prior year quarter.  Total retail operating income was $2.9 million or 4.1% of sales for the quarter as compared to $2.2 million or 3.3% of sales for the prior year quarter.  Comparable store written sales for the quarter increased 3.3%.   
  • Revenue for Zenith was $24.2 million for the fourth quarter of 2016 compared to $25.6 million for the fourth quarter of 2015, a 5.5% decrease.  Zenith’s operating profit for the quarter was $1.4 million or 5.9% of sales as compared to $1.4 million or 5.6% of sales for the prior year quarter.
  • Net income for the quarter was $5.0 million or $0.47 per diluted share as compared to $5.7 million or $0.52 per diluted share for the prior year quarter.

“Led by a strong performance from our corporate retail segment, we closed the year on a high note,” commented Robert H. Spilman, Jr., Chairman and CEO.  “After a sluggish start to the year, both our corporate and licensed retail store groups finished 2016 positively, largely due to the comparable store sales momentum that they generated during the second half of the year.  We look ahead to a new year that will see us make significant investments in our store network, expand our digital presence, upgrade our manufacturing facilities and broaden our logistics platform.”

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $62.6 million for the fourth quarter of 2016 as compared to $64.5 million for the fourth quarter of 2015, a decrease of $1.9 million or 3.0%.  This decrease was driven by lower shipments to the open market (outside the Bassett Home Furnishings network) partially offset by a 5.7% increase in shipments to the Bassett Home Furnishings network as compared to the prior year period. The decrease in sales to the open market was primarily due to lower sales of imported product primarily from the discontinuation of our relationship with a significant customer and loss of sales from the HGTV Home Collection brand, exited late in 2015.  Gross margins for the wholesale segment were 35.5% for the fourth quarter of 2016 as compared to 33.9% for the fourth quarter of 2015. This increase is due primarily to improved margins in the imported wood product as significant margin adjustments were necessary in the fourth quarter of 2015 as the Company was exiting the HGTV Home Collection brand.  Wholesale SG&A for the fourth quarter of 2016 was $17.9 million as compared to $17.7 million for the prior year period. SG&A as a percentage of sales increased to 28.7% as compared to 27.5% for the fourth quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by higher marketing and advertising costs.  Operating income was $4.3 million or 6.9% of sales as compared to $4.1 million or 6.4% of sales in the prior year.

“Our product assortment continues to undergo an important makeover as we seek more sales,” continued Spilman.  “From our wood division, the Peninsula collection, the Wood Haven bedroom, the Bench Made bedroom, and several new occasional offerings hit our stores in December in advance of the key holiday selling weekends that start the year.  In upholstery, the Designer Comfort and American Casual collections arrived in the stores on the same schedule.  In addition to these assortment changes, two other new product offerings are significant as we look ahead.  A revamped casual dining program was introduced at the October High Point Market which will begin shipping to our dealers and stores in February.  This program has been a stalwart contributor to our wood sales for over 15 years and we have made capital investments in finishing technology in our Martinsville, Virginia manufacturing facility to produce the latest advancements in today’s marketplace.  In addition to the work at the Martinsville facility, we will move our Zenith Logistics Texas distribution center and our Texas upholstery factory into a new 375,000 square foot building in mid-February.  By housing both of these entities under one roof, we expect to gain efficiency and cut costs.  The October show also included the debut of Club Level by Bassett, a major foray into the growing motion upholstery category.  Primarily aimed at the open market channel but also featured in select Bassett stores, Club Level was met with enthusiasm by our independent dealer base and is already showing potential with the initial retail sell through results.  Taken collectively, this new product effort will be a key determinant in the fortunes of Bassett in 2017 and our management will spend significant time in the field to make it successful.”

Retail Segment

Net sales for the 59 Company-owned Bassett Home Furnishings stores were $69.9 million for the fourth quarter of 2016 as compared to $66.3 million for the fourth quarter of 2015, an increase of $3.6 million or 5.5%. The increase was due to a $2.8 million or 4.3% increase in comparable store sales along with a $0.9 million increase in non-comparable store sales. 

While the Company does not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar value of sales orders taken, rather than delivered) as a key store performance indicator.  Written sales for comparable stores increased by 3.3% for the fourth quarter of 2016 as compared to the fourth quarter of 2015. 

The consolidated retail operating profit for the fourth quarter of 2016 was $2.9 million as compared to $2.2 million for the fourth quarter of 2015, an increase of $0.7 million.  The 56 comparable stores generated operating income of $3.4 million for the quarter, or 5.2% of sales, as compared to $2.9 million, or 4.6% of sales, for the prior year quarter. Gross margins for comparable stores were 50.2% for the fourth quarter of 2016 compared to 50.4% for the fourth quarter of 2015.  SG&A expenses for comparable stores increased $0.8 million to $30.0 million or 45.0% of sales as compared to 45.8% of sales for the fourth quarter of 2015. The decrease in SG&A as a percentage of sales was primarily due to greater leverage of fixed costs due to higher sales volumes for the comparable stores. 

“We were pleased with the performance of our retail segment during the second half of the year and we look to the future with excitement as we work to expand our 59 store corporately owned network,” said Spilman.  “2016 was foundational to our blueprint for store expansion in 2017 and beyond.  This included repositioning one store, closing three, and opening two new ones in the year just ended.  Furthermore, a tremendous amount of site selection and real estate negotiations took place during the year as we prepare to open six new stores and reposition two others over the course of 2017.  Four of the new stores are expansions of existing markets and the other two are brand new.  Therefore, 2017 will be a year of investment as we absorb in excess of $2 million more in preopening and startup costs than we experienced in 2016.  In addition to these up front expenses, proper site selection, store economics, and staffing are major challenges that must be met in order to successfully execute store expansion and these factors cannot be compromised.  While we do not provide financial forecasts externally, we do believe that we have the ability to open five to six new stores annually in addition to strategically repositioning stores when warranted.  With a track record of six consecutive years of positive same store sales and our focus on store productivity, we are intent on taking our concept to new markets and consistently growing our overall store count in the years to come.”

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With 90 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. The most significant growth opportunity for Bassett continues to be the Company’s dedicated retail store program. Bassett’s retail strategy includes affordable custom-built furniture that is ready for delivery in the home within 30 days. The stores also feature 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)

Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the fourth fiscal quarter of 2016, 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; 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.



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, 2016   November 28, 2015   November 26, 2016   November 28, 2015
    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 $   100,339       $   101,283       $   377,196       $   387,405    
  Logistics     13,447           14,272           54,842           43,522    
    Total sales revenue     113,786   100.0 %       115,555   100.0 %       432,038   100.0 %       430,927   100.0 %
                       
Cost of furniture and accessories sold     43,023   37.8 %       45,615   39.5 %       167,519   38.8 %       179,291   41.6 %
                       
Selling, general and administrative expenses excluding                      
  new store pre-opening costs     61,333   53.9 %       60,847   52.7 %       235,178   54.4 %       224,050   52.0 %
New store pre-opening costs     421   0.4 %       387   0.3 %       1,148   0.3 %       623   0.1 %
Lease exit costs     -   0.0 %       -   0.0 %       -   0.0 %       419   0.1 %
Asset impairment charges     -   0.0 %       -   0.0 %       -   0.0 %       106   0.0 %
Management restructuring costs     -   0.0 %       -   0.0 %       -   0.0 %       449   0.1 %
  Income from operations     9,009   7.9 %       8,706   7.5 %       28,193   6.5 %       25,989   6.0 %
                       
Remeasurement gain on acquisition of affiliate     -   0.0 %       -   0.0 %       -   0.0 %       7,212   1.7 %
Income from Continued Dumping & Subsidy Offset Act     240   0.2 %       90   0.1 %       240   0.1 %       1,156   0.3 %
Other loss, net     (752 ) -0.7 %       (797 ) -0.7 %       (2,656 ) -0.6 %       (2,489 ) -0.6 %
Income before income taxes     8,497   7.5 %       7,999   6.9 %       25,777   6.0 %       31,868   7.4 %
                       
Income tax provision     3,452   3.0 %       2,317   2.0 %       9,948   2.3 %       11,435   2.7 %
Net income $   5,045   4.4 %   $   5,682   4.9 %   $   15,829   3.7 %   $   20,433   4.7 %
                       
Basic earnings per share $   0.47       $   0.53       $   1.47       $   1.91    
                       
Diluted earnings per share $   0.47       $   0.52       $   1.46       $   1.88    
                       

/EIN News/ --  

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
 
    (Unaudited)    
Assets   November 26, 2016   November 28, 2015
Current assets        
  Cash and cash equivalents    $   35,144     $   36,268  
  Short-term investments       23,125         23,125  
  Accounts receivable, net       18,358         21,197  
  Inventories, net       53,215         59,896  
  Other current assets        10,727         6,798  
Total current assets       140,569         147,284  
         
Property and equipment, net       104,655         96,104  
         
Other long-term assets        
  Deferred income taxes, net       8,071         13,471  
  Goodwill and other intangible assets       17,360         17,682  
  Other       7,612         8,002  
Total long-term assets       33,043         39,155  
Total assets   $   278,267     $   282,543  
         
Liabilities and Stockholders’ Equity        
Current liabilities        
  Accounts payable   $   21,281     $   20,916  
  Accrued compensation and benefits       13,602         14,345  
  Customer deposits       25,181         23,999  
  Dividends payable       3,218         2,184  
  Current portion of long-term debt       3,290         5,273  
  Other accrued liabilities       10,441         13,133  
Total current liabilities       77,013         79,850  
         
Long-term liabilities        
   Post employment benefit obligations       12,760         12,694  
   Long-term debt       3,821         8,500  
  Other long-term liabilities       3,968         4,133  
Total long-term liabilities       20,549         25,327  
         
         
Stockholders’ equity        
  Common stock       53,615         54,580  
  Retained earnings       129,388         120,904  
  Additional paid-in-capital       255         4,560  
  Accumulated other comprehensive loss       (2,553 )       (2,678 )
Total stockholders' equity       180,705         177,366  
Total liabilities and stockholders’ equity   $   278,267     $   282,543  
         

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
         
    Year Ended
    November 26, 2016   November 28, 2015
Operating activities:        
Net income   $   15,829     $   20,433  
Adjustments to reconcile net income to net cash provided by        
(used in) operating activities:        
Depreciation and amortization       12,249         10,137  
Equity in undistributed income of investments and unconsolidated        
affiliated companies       -         (220 )
Non-cash asset impairment charges       -         106  
Non-cash portion of lease exit costs       -         419  
Remeasurement gain on acquisition of affiliate       -         (7,212 )
Tenant improvement allowances received from lessors       914         1,283  
Deferred income taxes       5,324         1,930  
Collateral deposited with insurance carrier       (300 )       -  
Excess tax benefits from stock-based compensation       87         1,998  
Other, net       1,055         2,082  
Changes in operating assets and liabilities         
Accounts receivable       3,228         (2,354 )
Inventories       6,681         (2,624 )
Other current and long-term assets        (3,629 )       1,494  
Customer deposits       1,182         1,796  
Accounts payable and accrued liabilities       (3,558 )       5,128  
Net cash provided by operating activities       39,062         34,396  
         
Investing activities:        
Purchases of property and equipment       (21,501 )       (13,974 )
Proceeds from sale of retail  real estate and property and equipment       667         2,981  
Cash paid for business acquisition, net of cash acquired       -         (7,323 )
Capital contribution to affiliate       -         (1,345 )
Net cash used in investing activities       (20,834 )       (19,661 )
         
Financing activities:         
Cash dividends        (6,311 )       (5,786 )
Proceeds from the exercise of stock options       114         4,031  
Other issuance of common stock       182         325  
Repurchases of common stock       (6,393 )       (2,071 )
Taxes paid related to net share settlement of equity awards       (77 )       (178 )
Repayments of notes payable       (14,251 )       (2,768 )
Proceeds from equipment loans       7,384         1,307  
Net cash used in financing activities       (19,352 )       (5,140 )
Change in cash and cash equivalents       (1,124 )       9,595  
Cash and cash equivalents - beginning of period       36,268         26,673  
         
Cash and cash equivalents - end of period   $   35,144     $   36,268  
         


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
                 
    Quarter Ended   Year Ended
    November 26, 2016   November 28, 2015   November 26, 2016   November 28, 2015
Net Sales                
Wholesale   $   62,561     $   64,505     $   240,346     $   252,180  
Retail - Company-owned stores       69,913         66,266         254,667         249,379  
Logistical services       24,227         25,643         95,707         77,250  
Inter-company eliminations:                
   Furniture and accessories       (32,135 )       (29,488 )       (117,817 )       (114,154 )
   Logistical services       (10,780 )       (11,371 )       (40,865 )       (33,728 )
Consolidated   $   113,786     $   115,555     $   432,038     $   430,927  
                 
Operating Income                
Wholesale   $   4,292     $   4,100     $   18,672     $   15,618  
Retail       2,868         2,203         4,333         6,170  
Logistical services       1,432         1,439         3,511         3,528  
Inter-company elimination       417         964         1,677         1,647  
Lease exit costs       -         -         -         (419 )
Asset impairment charges       -         -         -         (106 )
Management restructuring costs       -         -         -         (449 )
Consolidated   $   9,009     $   8,706     $   28,193     $   25,989  
                 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Rollforward of BHF Store Count
         
           
    November 28,     November 26,
    2015 Opened* Closed* 2016
           
Company-owned stores     60   2   (3 )   59
Licensee-owned stores     33   -    (2 )   31
           
      Total     93   2   (5 )   90
           
           
* Does not include openings and closures due to relocation of existing stores within a market.
           

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
Supplemental Retail Information--unaudited  
(In thousands)  
                         
  56  Comparable Stores   56  Comparable Stores  
  Quarter Ended   Quarter Ended   Year Ended   Year Ended  
  November 26, 2016   November 28, 2015   November 26, 2016   November 28, 2015  
    Percent of     Percent of     Percent of     Percent of  
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales  
                         
Net sales $   66,637   100.0 %   $   63,865   100.0 %   $   243,062   100.0 %   $   239,713   100.0 %  
                         
Cost of sales     33,190   49.8 %       31,688   49.6 %       121,735   50.1 %       119,178   49.7 %  
                         
   Gross profit     33,447   50.2 %       32,177   50.4 %       121,327   49.9 %       120,535   50.3 %  
                         
Selling, general and administrative expense*     30,009   45.0 %       29,248   45.8 %       114,097   46.9 %       112,484   46.9 %  
                         
   Income from operations $   3,438   5.2 %   $   2,929   4.6 %   $   7,230   3.0 %   $   8,051   3.4 %  
                         
                         
  All Other Stores   All Other Stores  
  Quarter Ended   Quarter Ended   Year Ended   Year Ended  
  November 26, 2016   November 28, 2015   November 26, 2016   November 28, 2015  
    Percent of     Percent of     Percent of     Percent of  
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales  
                         
Net sales $   3,276   100.0 %   $   2,401   100.0 %   $   11,605   100.0 %   $   9,666   100.0 %  
                         
Cost of sales     1,584   48.4 %       1,257   52.4 %       6,473   55.8 %       5,198   53.8 %  
                         
   Gross profit     1,692   51.6 %       1,144   47.6 %       5,132   44.2 %       4,468   46.2 %  
                         
Selling, general and administrative expense     1,841   56.2 %       1,483   61.8 %       6,881   59.3 %       5,726   59.2 %  
Pre-opening store costs**     421   12.9 %       387   16.1 %       1,148   9.9 %       623   6.4 %  
                         
   Loss from operations $   (570 ) -17.4 %   $   (726 ) -30.2 %   $   (2,897 ) -25.0 %   $   (1,881 ) -19.5 %  
                         
 *Comparable store SG&A includes retail corporate overhead and administrative costs.                
**Pre-opening store costs include the accrual for straight-line rent recorded during the period between               
  date of possession and store opening date, employee payroll and training costs prior to store opening               
  and other various expenses incurred prior to store opening.                      
J. Michael Daniel
Senior Vice President and  
Chief Financial Officer
(276) 629-6614 – Investors

Jay S. Moore
Director of Communications
(276) 629-6450 – Media