BASSETT, Va. – Bassett Furniture Inds. saw a decline in revenue but an increase in net income during the first quarter ended Feb. 29, according to financial results released Thursday.
The company had consolidated revenues of $112 .1 million during the quarter, down 7.2% from the $120.8 million reported in the first quarter of 2019, a change that was partly due to an additional week in the first quarter of 2019.
Net income during the first quarter of 2019 was $1.2 million, or 12 cents diluted earnings per share, compared with $608 million, or 6 cents diluted earnings per share in the first quarter of 2019.
“We were encouraged by the sales momentum that we were generating as our February quarter drew to a close,” said Rob Spilman, chairman and CEO. “Positive written comparable store sales during our three-week President’s Day event and a series of new marketing events slated to debut in March and throughout the May quarter pointed to a stronger start to 2020 and showed promise for the entire year.
“Unfortunately, the world has been turned upside down over the past four weeks, and the optimism that we were feeling about this year has been replaced by an abrupt disruption to our day-to-day business. We are now completely focused on protecting our balance sheet and our employees,” Spilman added. “Despite the shock and tragedy of COVID-19, we believe that we will weather this storm, and we are taking the necessary steps in the short term to ensure that we do so. Ultimately, we look forward to returning to the marketplace with aggressive programs that are being designed to capture as much business as we possibly can when our country returns to normal.”
On the wholesale side of the business, the company had net sales of $65 million, down 10.7% from the $72.8 million reported last year, and operating income of $2.7 million, down 36% from $4.2 million reported in the first quarter of 2019.
The company attributed the drop in sales to a 95% decrease in juvenile furniture shipments as it has exited the business and a 5.2% drop in shipments on an average weekly basis to traditional open market customers. These decreases were partially offset by a 1.2% increase in shipments on an average weekly basis to the Bassett Home Furnishings Network and a 16% increase on an average weekly basis of Lane Venture products.
The wholesale segment also stopped selling accessories to the BHF network at the start of the third quarter of 2019.
“Normalized revenue gains in our logistics and retail segments offset a decline in wholesale sales,” Spilman noted. “Imported Bassett case goods shipments declined, in part due to unfavorable comparisons with last year’s shipments of the now exited juvenile furniture category.
“Overall upholstery sales grew slightly on a normalized basis driven by Lane Venture and a portion of the rollout of the new Bassett Outdoor collection. Retail sell-through of our new Magnificent Motion program also drove sales gains and will pave the way for expansion of our domestically produced custom motion product assortment in the future.”
Gross margins for the wholesale segment were 32.5% for the first quarter of 2020 compared with 32.9% for the prior year quarter.
On the retail side, the company said that net sales for the 69 company owned BHF stores were $65.8 million, for the first quarter, compared with $69.6 million for the first quarter of 2019, down 5.4%. The company said this was due to a $6.9 million, or 10.4% drop in comparable store sales, offset by a $3.1 million increase in non-comparable store sales as the company opened six stores in the past 18 months.
The company also closed one non-performing store in the fourth quarter, another underperforming store in the first quarter and closed an additional three underperforming stores in March, which falls in the second quarter. On an average weekly basis, accounting for the extra week in the first quarter of 2019, the company said that comparable store sales dropped 3.5%.
The consolidated retail operating loss for the first quarter was $1.2 million, compared with a loss of $3 million in the first quarter of 2019, an improvement of $1.8 million.
“While we were not profitable at corporate retail, we substantially improved on last year’s performance despite lower sales stemming from one less week,” Spilman said. “The expense reductions that we made last summer coupled with slight improvements in overall gross margins and the absence of new store startup costs allowed us to improve the retail bottom line by $1.8 million.
“We opened no new stores in the quarter as we turn our focus to improving the performance and the aesthetics of the existing fleet. In fact, we began store closing events in four stores during the period and will finish disposing of the associated inventory when our network is up and running again after we return from the COVID-19 shutdown that began in all stores on March 20,” he continued.
“We also remodeled our Falls Church, Va., location and reopened in time for Presidents Day. We have been working to more forcefully integrate the store and web experience by highlighting key attributes of our brand: Made in America, our 118 year heritage, custom made in four weeks to your home, our skilled artisans, and free design services.”
On the Zenith logistical services side of its business, the company had sales of $21.3 million during the first quarter, down 2% from 21.8 million last year. Its operating income in the segment totaled $800,000 in the first quarter, compared with $700,000 during the first quarter of last year, a 14.3% increase.
On an average weekly basis, accounting for the extra week in the first quarter of 2019, revenues in the segment rose $1.1 million, or 5.5%. The company said this increase was primarily due to higher over-the-road trucking revenues as several new customers were added during the quarter.
“Moving on from the quarter, we find ourselves in a surreal environment as our Bassett stores and factories and our open market wholesale customers have ground to a halt,” Spilman added. “We have always prided ourselves on possessing a strong balance sheet and now is the time when we will need it.
“We have paid or will pay the vast majority of our hourly employees two weeks of wages to help them cope with these extraordinary circumstances. All employee salaries have been cut substantially through the month of May; ranging from 20% to 25% depending on salary level and the individual’s position to 50% for top management.
“All non-essential spending has been eliminated, including the company 401K matching contribution. We have decided to defer the regular quarterly dividend due to be paid on May 29 until we learn more about the financial ramifications of a potentially long period of nationwide economic inactivity and hardship. Earlier this week we were pleased to receive a commitment to double our $25 million credit facility to $50 million, thus underscoring our bank’s trust in our future.
“We are prepared to do what it takes to weather the crisis,” Spilman said, “and to successfully emerge with our Bassett teammates on the other side of this difficult period of time.”
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