3Q Sales, Income Down for Bassett

September 26, 2006  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on September 2006 Bassett Furniture Inds. reported third-quarter 2006 sales of $77.6 million, down 6.3 percent from the period last year; and net income of $0.4 million, or $0.04 per share, compared to net income of $1.9 million, or $0.16 per share, in the third quarter of 2005.

The period, which ended Aug. 26, included a $1.1 million o after-tax charge related to the acquisition of seven Bassett Furniture Direct stores in Atlanta and upstate New York.

Year-to-date, Bassett’s sales of $251.7 million are still 2.1 percent ahead of the prior year. Gross margins increased 3.6 percentage points as compared to 2005. Year-to-date net income of $5.6 million also remains ahead of last year, when Bassett netted $5.3 million through nine months. The company attributed increases in sales and gross margins from 2005 to a greater number of company-owned stores and an improved mix of imported product.

The Bassett Furniture Direct retail store program had 135 stores (109 licensed and 26 company-owned) in operation at the end of the third quarter. Licensees opened three stores during the quarter and closed two. As previously announced, two company-owned stores were closed in the quarter. Also, Bassett expects to open one new company-owned BFD store in the fourth quarter of 2006.

“This was a tough quarter for the Company,” said Robert H. Spilman, Bassett president and chief executive officer. “As we previously released, retail conditions continue to be challenging and our focus remains on improving the store program and building the Bassett brand. Last month, we launched our first-ever catalog targeted directly toward consumers. The 84-page book was shipped to 1.2 million households. In addition to the catalog, the Company has several other marketing and merchandising initiatives underway including a new quick delivery program, new product introductions centered around the Company’s core middle price point category and the development of a new store prototype to open in the spring of 2007. The combination of these initiatives should drive more traffic into our stores and better position us for future sales growth.”

On a wholesale basis, Bassett’s net sales were $67.2 million for the third quarter of 2006, 8.3 percent below the same period last year. For the third quarter of 2006, 72 percent of wholesale shipments were to BFDs compared to 68 percent in the third quarter of 2005; and imports accounted for approximately 44 percent of wholesale shipments, compared to 35 percent last year. Upholstery operating earnings continued to improve due to the retail acceptance of our custom programs and the new fabrics introduced over the past several years.

Retail sales for the third quarter of 2006 were $20.1 million, basically flat with third quarter of 2005. For the year, sales were $62.9 million, up $16.2 million from 2005. The increase in sales for the first nine months of 2006 is due to the stores acquired during 2005.

Bassett’s 26 corporate stores continued to experience relatively soft conditions at retail and incurred an operating loss of $3.8 million for the third quarter of 2006, compared to near break-even results for the third quarter of 2005 when Bassett’s retail segment included only 20 stores. The third quarter 2006 losses relate primarily to the 15 stores acquired from three licensees in 2005. During the second quarter of 2006, Bassett made the decision to close two of its corporate stores, one in Texas and one in Georgia. Clearance events conducted at these stores during the third quarter of 2006 negatively impacted earnings by approximately $0.9 million.

Net sales and margins were lower than planned primarily due to the overall soft retail conditions, selling of selected products at clearance prices in order to prepare for the arrival of new products and featured catalog products, and the discounting related to the clearance events at the two stores that were closed. As previously discussed, changes being made to drive more traffic, improve staffing, standardize pricing and streamline operations are taking longer than anticipated to implement.