Bassett Sales Down 14% in Second Quarter

July 4, 2007  by in UnCategorized   

By Home Furnishings Business in Case Goods on July 2007 Bassett Furniture Inds., Bassett, Va., reported second-quarter 2007 sales of $75.4 million, a 14 percent drop from the same period last year, and a loss of $2.4 million.

The loss for the second quarter of 2007, which ended May 24, included several non-recurring charges such as severance costs related to the Bassett plant closure, lease exit costs related to three closed stores, and a leasehold improvement asset impairment related to downsizing the company’s wholesale showroom. Excluding the effects of these charges, the Bassett’s net results for the quarter would have been basically a breakeven, which represents a $2 million improvement over the results for the first quarter of 2007.

The Bassett Furniture retail store program had 133 stores (104 licensed and 29 company-owned) in operation at the end of the second quarter. Two stores were opened during the quarter and one store was closed. The company expects three to four new stores will be opened in the second half of the year.

“These are truly difficult times for our industry and our results for the second quarter reflect that,” said Robert H. Spilman Jr., Bassett president and chief executive officer. “We continue to believe the initiatives we have in place to improve our store program combined with actions we have and are taking to reduce our cost structure will make us a better company and coupled with a better overall retail environment should lead to improved operating results. An additional challenge will be repositioning our upholstery fabric line in light of the recent financial difficulties of two of our key suppliers.”

Net sales for our wholesale segment were $63.4 million for the second quarter of 2007, 16 percent below the $75.4 million sales level attained in the second quarter of 2006.

For the first half of 2007, approximately 72 percent of wholesale shipments were to Bassett stores compared to 69 percent in the first half of 2006. Additionally, approximately 46 percent of wholesale shipments in the first half were imported products compared to 44 percent in the first half of 2006.

The wholesale segment generated operating income of $0.4 million in the second quarter of 2007 as compared to $3.4 million of operating income in the second quarter of 2006. This decrease in operating income was primarily attributable to the reduction in sales volume and partially due to wind-down costs associated with closing a wood manufacturing facility in Bassett, Va.

The company expects that the closure of the Bassett plant and a corresponding shift to more imported products will result in annual improvements beginning in 2008 to operating income of $3 million to $4 million per year after factoring in expected sales reductions. Additionally, the Company has targeted another $3 million to $4 million of annualized operating expenses, primarily in the areas of marketing, distribution, and sales and administrative support, it is currently in the process of reducing.

Bassett’s 29 corporate stores continued to experience relatively soft conditions at retail with sales of $21.9 million in the second quarter of 2007 as compared to $20.9 million in 2006.

The retail segment incurred an operating loss of $2.7 million for the quarter compared to an operating loss of $2.6 million in 2006. The 2007 loss included approximately $400,000 in start-up related losses associated with two Boston area stores which were acquired at the beginning of the second quarter. Plans are in place to increase retail division gross margins, fully integrate the Boston stores into the Retail segment, and further reduce retail administrative expenses in the second half of the year.