Bassett Sales Up Slightly in 3rd Quarter

October 7, 2010  by in UnCategorized   

By Home Furnishings Business in Financial Reports on October 8, 2010

Bassett Furniture Industries (NASDAQ: BSET) announced third-quarter 2010 sales of $58.5 million, a 1.5 percent increase over the prior-year period.

For the quarter ended August 28, Bassett, Bassett, Va., reported a net loss of $2.4 million, or $0.21 per share, compared with a net loss of $3.4 million, or $0.30 per share, for the quarter ended August 29, 2009.

Gross margins for the third quarter of 2010 and 2009 were 45.5 percent and 45.1 percent, respectively. The margin increase was primarily a result of the retail segment's increased share of the overall sales mix, as well as improved margins in the company-owned stores.

"The Company grew quarterly wholesale sales on a year over year basis for the first time in four years," said Robert H. Spilman Jr., president and CEO, said in an announcement of results. "However, actions that we have taken over the course of the year to position the company for the future adversely affected our performance for the period. In particular, losses from newly acquired stores and the costs associated with opening two new stores temporarily slowed the pace of progress shown by our Corporate Retail Division. In addition, the slow sales environment of the summer months has historically made the third quarter our weakest of the year. But beyond this seasonality, supply chain delays and aggressive holiday wholesale discounts negatively impacted our bottom line. We have addressed all of these areas and expect corresponding improvement going forward."

"Additionally, the Company grew wholesale inventories by $8 million during the quarter," Mr. Spilman added. "This increase is designed to offer higher service levels to our customers and to grow our wholesale volume. We expect to further increase inventories in the fourth quarter, although at a considerably slower pace. As a result, the Company used approximately $7 million of cash during the quarter. While we continue to monitor our cost structure and overall expenses, we believe that this investment will result in top-line sales growth and improved operating results in the future."

At the end of third-quarter 2010, Bassett's total store network included 55 licensee-owned stores and 47 company-owned and operated stores. During the quarte,r Bassett acquired certain assets of, and now operates, two additional licensee stores; and two single-store licensees closed during the third quarter of 2010.

Company-owned stores increased sales 5 percent to $29.9 million in this year's third quarter. The increase was comprised of a $3.4 million increase from the net addition of 12 stores since the end of the third quarter of 2009, partially offset by a $2 million, or 7.9 percent decrease in comparable store sales. Deliveries to customers continued to be adversely affected during the third quarter of 2010 by stock outages at the wholesale level due to delays in receiving imported product from the company's overseas suppliers, partially offset by deliveries from a strong order backlog carried over into the third quarter from May 2010.

Written sales for comparable stores during the third quarter of 2010 and 2009 were $21.2 million and $22 million, respectively, a decrease of 3.5%.

"Despite our large unfulfilled backlog and lower delivered sales, our comparable corporate retail stores were once again able to improve operating results, primarily due to gross margin improvement,"  Spilman said. "However, the combination of 11 store acquisitions over the last 12 months, many of which were being operated in a distressed mode, and the costs associated with the opening of two new stores generated a larger loss in corporate retail than we experienced last year. While we believe these acquisitions will ultimately better position us for the future, we plan to slow the pace of upcoming licensee takeovers dramatically over the next several months. Meanwhile, we will evaluate the current fleet of 47 stores, location by location, to produce improved performance. At the moment we have identified two recently acquired stores for closing. We believe that this process will ensure that the newly acquired stores begin to operate at a level similar to our existing store network."