Company owes its success to multifaceted business strategy on the wholesale and retail side of the business
BASSETT, Va. — On the surface, Bassett Furniture’s latest results for the six-month period ended May 27 and released late last month illustrate the challenges most companies are facing in a slow economy. But a closer look into the numbers illustrates what the company is doing to set itself apart.
Overall consolidated sales were down nearly 22% during the second quarter to $100.5 million, which was largely driven by a 29.4% decline on the wholesale side of the business and to a lesser extent a 19.6% decline on the retail side. For the first half, consolidated sales were down 15.5% to $208.2 million, again largely driven by a 23% decline in revenues on the wholesale side of the business. By comparison, the retail side of the business saw sales decline 10%.
Yet the company still looks strong in relation to pre-pandemic levels, a comparison that offers a more realistic view of demand when viewed alongside the breakneck pace of business at the height of the pandemic.
In this regard, Chairman and CEO Rob Spilman Jr. put things into perspective in comments he offered as part of the earnings release.
For one, he noted, consolidated revenues were nearly 5% higher than the comparable quarterly period in 2019. Consolidated revenues also were 7.6% higher compared to the six-month period ended June 1, 2019.
The company also remains profitable, netting $2.5 million in consolidated operating income for the quarter and $5.2 million for the first half. While this pales in comparison to the same periods last year, it also is a significant turnaround from the company’s consolidated operating income of $701,000 and $1.7 million for the first quarter and first half of 2019 respectively.
As we previously reported, Spilman said that while its operating results were challenged by soft demand at retail, “we successfully managed our balance sheet and maintained profitability during the second quarter.” He also noted that while the company is uncertain of when sales will improve, it has a strong and dedicated distribution strategy and domestic manufacturing platform in place and a strong financial position.
Other positives, some of which we previously reported in our earnings report, contribute to Spilman’s outlook and the apparent strength of the company’s position:
+ The company has an operating cash flow of $5.8 million, which Spilman noted was fueled by an 11% reduction in total inventory. And while operating income was negatively impacted by a $1.1 million write-down of its Club Level motion product, the company expects better margins for the remainder of 2023 as it comes out of the ongoing strain of slow-moving inventory that also was burdened by the high freight costs of mid-2022.
+ Labor costs associated with its domestic manufacturing operations have decreased as the company’s headcounts are 20% below last year’s levels. However, while work schedules were reduced during the first quarter, the company has partially restored some work hours because of relatively strong Memorial Day sales and the positive response to products sold during the High Point Market. “New wood products are crucial to improving plant fixed-cost absorption,” Spilman said, adding that the company plans to introduce a new opening price point dining collection in the fall “to bolster our factory work schedules.”
+ Further bolstering the wood segment was the addition of modern casual styling to its solid wood Bench Made dining line, which Spilman said represented the strongest wood product introduction the company has had in several seasons. The product will be included in the catalog it launches before the Labor Day sales event in its stores and Bassett Design Centers.
+ While store foot traffic declined during the quarter, average sales tickets rose slightly, Spilman said. In addition, he said, the company’s strong interior design expertise contributed to nearly half of written sales during the quarter. The company is expected to open a new flagship store in Tampa in time for Labor Day, and the company also is remodeling its Austin store, also expected to be completed in time for the holiday weekend.
+ The casual side of its business also appears to be flourishing. While outdoor sales were down compared to the same period in 2022, Spilman said that they were up 68% compared to the same period in 2019. He noted that the company is making further investments in its Alabama aluminum facility to improve the layout and overall efficiency of the operation. The company also opened a new Lane Venture showroom in Atlanta that coincided with the recently concluded Casual Market in Atlanta and also debuted the outdoor line at the HD Expo in Las Vegas in May to target the hospitality sector. The company also has partnered with designer Celerie Kemble on new design-oriented collections that will complement its existing outdoor line.
Other areas where Spilman said the company is investing include the launch of a new website expected by the end of August. As part of its investment in online technology, it also is launching new product data software that he said will “permeate all of our new product development, engineering, marketing and digital representation of our products on the website itself. This important project is a cornerstone of our growth strategy, and we believe that the expansion of our e-commerce business is crucial to our omnichannel future.”
He added that the website is also designed to “increase traffic, reduce bounce and exit rates, increase virtual appointments, improve conversion rates and provide our customers with more payment options at checkout.” He said both the Bassett store network and open market dealer partners also will benefit from the increased digital commerce as they will fulfill the home delivery portion of these sales in their respective areas. Also, for the first time, he said, Bassett’s partnership with logistics partner J.B. Hunt will give the company nationwide home delivery capabilities for e-commerce orders.
As the company’s multifaceted strategy in product, distribution and customer experience continues, the industry likely will be watching closely as the model illustrates the many ways to be successful even in challenging times.