For more than a century, Bassett Furniture (BSET, Financial) marked itself among the most recognizable brands in America. Its presence is felt in more than 100 retail locations in the U.S., Puerto Rico and Canada. It provides custom furnishing within a budget. It swears by the idea that great quality and stylish furniture can come at an affordable price.
This midpriced home furnishing company recently reported fiscal fourth-quarter results led by strong performance by the corporate retail segment. Second half of the year was marked by positive comparable store sales. Sales in the retail segment witnessed an increase of $3.6 million or 5.5% from the prior-year quarter. There was an increase in retail operating income.
Fourth-quarter results
Wholesale segment
Net sales during the fourth quarter for the wholesale segment were $62.6 million ($64.5 million during the prior-year quarter).
Gross margins for the wholesale segment were 35.5% for the fourth quarter of 2016 (33.9% in the prior-year quarter).
Wholesale SG&A for the fourth quarter of 2016 was $17.9 million (which was $17.7 million in the prior-year quarter). SG&A as a percentage of sales increased to 28.7% (which was 27.5% in the prior-year quarter). Higher marketing and advertising costs contributed to this increase.
Operating income during the quarter was $4.3 million or 6.9% of sales (which was $4.1 million or 6.4% of sales in the prior-year quarter).
Retail segment
Net sales during the quarter were $69.9 million for the fourth quarter of 2016 ($66.3 million in the prior-year quarter).
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. (Source: Company’s website)
The consolidated retail operating profit for the fourth quarter of 2016 was $2.9 million (which marked an increase of $700,000 from $2.2 million in the prior-year quarter).
The 56 comparable stores generated operating income of $3.4 million for the quarter, or 5.2% of sales ($2.9 million, or 4.6% of sales, in the prior-year quarter).
Gross margins for comparable stores were 50.2% for fourth-quarter 2016, which was 50.4% in the prior-year quarter.
SG&A expenses for comparable stores increased by $800,000 and were $30.0 million or 45.0% of sales (45.8% of sales in the prior-year quarter).
Consolidated performance
Consolidated sales during the quarter were $113.8 million ($115.6 million in the prior-year quarter).
Operating income during the quarter was $9.0 million or 7.9% of sales ($8.7 million or 7.5% of sales in the prior-year quarter).
Company-owned store sales were $69.9 million for the fourth quarter of 2016 (an increase of 5.5% from $66.3 million in the prior-year quarter).
Comparable store sales increase was 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 ($2.9 million or 4.6% of sales in the prior-year quarter).
Total retail operating income was $2.9 million or 4.1% of sales during the quarter (which was $2.2 million or 3.3% of sales in the prior-year quarter).
Comparable store written sales for the quarter increased 3.3%.
Revenue for Zenith Global Logistics, the Bassett-owned logistics company, was $24.2 million for the fourth quarter of 2016 (which was $25.6 million in the prior-year quarter). Zenith's operating profit for the quarter was $1.4 million or 5.9% of sales (which was $1.4 million or 5.6% of sales in the prior-year quarter).
Net income for the quarter was $5.0 million or 47 cents per diluted share (which was $5.7 million or 52 cents per diluted share during the prior-year quarter).
Dividend
The company declared a dividend of 10 cents per share of outstanding common stock payable on Feb. 24 to shareholders of record at the close of business on Feb. 10.
Focus
- The company plans to make significant investments in the store network.
- Expand digital presence.
- Upgrade manufacturing facilities.
- Broaden logistics platform.
Conclusion
Bassett Furniture comes up with varied and unique options like upholstery, beds, dining, home storage and home entertainment. Across the U.S. and internationally, Bassett has a traditional wholesale business with more than 700 accounts on the open market. Custom-made furniture is generally delivered within 30 days. It also provides free in-home visits to the consumers.
It is seeking more sales through makeover of product assortment. It has already leveraged its strong brand name in the furniture industry. Revenues have increased by $200 million over the past five years. The company’s relentless focus on store growth, disciplined site selection and economic modeling will go a long way in shaping the company’s future. Adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
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