Bassett Sales up 8.5% in Q3

September 26, 2012  by in UnCategorized   

By Home Furnishings Business in Financial Reports on September 27, 2012

Bassett Furniture Inds. (NASDAQ: BSET) reported third-quarter 2012 sales of $64.4 million, an 8.5 percent increase over the prior-year period.

Bassett, Bassett, Va., recorded net income of $2.4 million, or $0.21 per diluted share, for the three months ended August 25, compared with $0.4 million or $0.04 per diluted share in the third quarter of 2011. Company-owned store delivered sales increased 22.5 percent to $41.2 million with a 9.9 percent increase from the 43 comparable stores.

Third-quarter 2012 operating income improved to $0.8 million from a loss of $0.2 million in the prior-year period, driven primarily by higher sales in both the wholesale and retail segments. This was offset by higher selling, general and administrative expenses due primarily to the increased number of company-owned stores. The company also recorded a tax benefit of $1.9 million primarily as a result of favorable provision to return adjustments related to its 2011 Federal income tax return and the release of a portion of the valuation allowance against certain deferred tax assets.

"The achievement of solid growth in both our wholesale and retail segments in our fiscal third quarter was encouraging," said Robert H. Spilman Jr. president and CEO. "New product introductions, comparable corporate retail sales gains, and greater penetration with open market independent retailers contributed to the 8.5 percent consolidated revenue growth that the company generated during the period. Returning from the traditional July 4 shut down of our manufacturing facilities, production schedules compared favorably to those of the past few years. And, of course, we were very pleased to post a 9.9 percent increase in our comparable corporate store sales. Despite continuing up front expense associated with the pending launch of our partnership with the HGTV television network, we returned to operating profitability for the quarter after posting a small operating loss for the same quarter last year.

"After 18 months of planning and preparation, we look forward to finally realizing the benefits we expect from our partnership with HGTV. The in-store design centers in our Bassett Home Furnishings network have been co-branded with HGTV to more forcefully market the concept of a 'home makeover,' an important point of differentiation for our stores that also mirrors much of the programming content on the HGTV network. In addition, new HGTV Home branded furniture will hit independent retailers' floors during the fourth quarter. As we move into what has generally been a stronger selling season for our industry, we believe this partnership will drive additional sales."

Net sales for the wholesale segment were $44.8 million for the third quarter of 2012, compared with $41.9 million for the third quarter of 2011, an increase of 6.9 percent. The upholstery and wood divisions had third-quarter sales gains of 8 percent and 3 percent, respectively.

"Wholesale operating income increased 11 percent to $1.7 million," Spilman said. "Although operating with three fewer stores than one year ago, we increased wholesale shipments to our BHF store network this quarter. Also contributing to our growth was the favorable reception of our new product introductions from the High Point Market that turned into shipments in July and August. We have also added several new wholesale sales representatives to continue to present our programs to independent furniture retailers and designers in areas that do not conflict with our dedicated store network."

The 22.5 percent increase in company-owned stores was comprised of a $3.2 million, or 9.9 percent, increase in comparable store sales along with a $4.4 million increase in non-comparable store sales. While the company does not recognize sales until goods are delivered to the customer, management tracks written sales (the dollar value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores increased by 13 percent for the third quarter of 2012 as compared with the third quarter of 2011.

Operating loss for the company-owned stores improved to a loss of $1.5 million in the third quarter of 2012 as compared to a loss of $1.8 million for the third quarter of 2011 which was primarily driven by the sales increases noted above.

"Corporate retail losses decreased by 15 percent for the quarter and by 38 percent for the fiscal year to date," said Spilman. "The quarter was characterized by an abnormal amount of product clearance sales, which carry a lower margin, due to the large amount of new products that hit our showroom floors in July and August. Our corporate retail associates and our licensee partners spent a tremendous amount of effort over the summer to convert our in-store design centers to the HGTV Design Studio at Bassett that officially debuted over Labor Day weekend. Our marketing efforts and our design associates are the impetus that has allowed us to continue to increase our sales and to improve our year over year corporate retail results for six consecutive quarters. We believe that our new national television campaign on the HGTV network and the momentum that our retail division currently enjoys gives us the ability to continue to increase our market share and to further improve our results as the overall economy strengthens."