Bassett to Shutter Wood Factory

March 4, 2007  by in UnCategorized   

By Home Furnishings Business in Case Goods on March 2007 Bassett Furniture Inds. plans to close its 323,000-square-foot wood manufacturing factory in Bassett, Va.

The closing will commence over the next 60 to 90 days and will impact about 280 employees, or 15 percent of the company’s work force.

In the announcement this afternoon, the company said it plans to source the majority of the products currently produced at this facility from overseas suppliers, to continue to produce certain custom bedroom products domestically and to discontinue providing certain slower selling items.

The company attributed the closing to the shift in demand from domestic product to imported wood products.

During the last few years, like most of the U.S. furniture industry, Bassett has continued to experience a shift in demand from domestically produced wood products to imported wood products.

“Closing this plant has been the most difficult decision we have ever had to make,” said Robert H. Spilman Jr., president and chief executive officer. “We regret the effect that this will have on the many fine employees who work at our largest hometown plant. We recognize that they have worked hard to meet the company’s goals and this decision is in no way a reflection upon them.”

Spilman called the decision a “needed step in our transformation from being primarily a domestic furniture manufacturing company to a retailer, manufacturer and marketer of branded home furnishings.”

The move will allow the company to focus on its retail and product development strategies to increase sales at its Bassett Furniture Direct stores, Spilman said.

Bassett will continue to operate two domestic manufacturing facilities which allow it to provide custom furniture solutions in both upholstery and wood within.

The closing is expected to improve operating income by $3 million to $4 million per year after factoring in an expected sales reduction this year.

In connection with the closing, the company plans to record a first quarter pre-tax impairment charge of approximately $3 million to $3.6 million, all of which will be non-cash, and an estimated second quarter pre-tax charge of approximately $1 million for one-time severance benefits.

With the closing of the Bassett facility, the company will employ approximately 1,500 people and operate one wood furniture plant, one upholstery plant and one supply plant, all located in Virginia and North Carolina.

To aid in the transition of those employees affected by the closing of the plant, the Company will work closely with the Virginia Employment Commission to provide outplacement and other employment assistance.

Bassett also announced today that its first quarter earnings will be negatively impacted by lower sales levels and reduced margins, compared to the year ago period. First quarter sales for the three month period ended Feb. 24 are expected to be approximately 16 percent to 18 percent below the same period last year and approximately 5 percent to 6 percent below the fourth quarter of 2006.

The company attributed the shortfall to soft furniture retail conditions which have impacted both retail sales and wholesale shipments. The decline against the same period last year was also partially due to a decline in year over year wholesale shipments to the Army/Air Force Exchange and to the sale of the company’s Weiman operation at the end of April 2006.