Declines in revenues on wholesale and retail side of business in 2023 occur in contrast with prior period of high demand
BASSETT, Va. — Bassett Furniture’s recently released Q4 earnings report — in the words of Chairman and CEO Robert Spilman — echo many of the same challenges of the industry at large, namely comparisons to historic demand for furniture during the pandemic.
It’s a message we’ve heard from other public companies not to mention in government retail reports and surveys from observers such as Smith Leonard that track orders and shipments.
For Bassett, the result was a quarter and year with double-digit declines in sales for the final quarter and full year ended Nov. 25. Consolidated sales for the quarter totaled $94.7 million, down 21.7% from the $121 million reported the same period in 2022. For the full year, sales totaled $390.1 million, down 19.6% from the $485.6 million for 2022.
The company reported a Q4 net loss of $4.1 million, or 47 cents per share, down from net income of $5 million, or 55 cents per share, the prior year. For the full year, it reported a net loss of $3.2 million, or 36 cents per share, compared to net income of $65.3 million, or nearly $7 a share in 2022.
Net revenues for the wholesale side of the business in Q4 totaled $60.6 million, down 18.8% from the $74.6 million in 2022. For the full year, wholesale revenues totaled $248.9 million, down 23.3% from the $324.6 million reported in 2022.
Income from operations during the quarter totaled $8.4 million on the wholesale side compared to $10.3 million in 2022, and for the full year, the segment reported $30.7 million in income from operations compared to $41.9 million in 2022.
Retail sales totaled $57.9 million during the quarter, down 22.2% from $74.5 million in 2022. For the full year, retail sales were down 17.2%, to $235.9 million from $285.1 million in 2022.
Income from operations on the retail side totaled $215,000 during the quarter, down from $5.5 million in 2022, and for the full year, the company had a loss of $536,000, compared to a gain of $19.4 million in 2022.
In comments relating to the quarterly and full-year financial performance, Spilman took an optimistic view of the year ahead, while also qualifying that optimism against the current period of retail malaise. “Year-over-year comparisons will be more favorable as 2024 unfolds, but the difficult sales environment for home furnishings persists for the moment,” he said.
He continued with several positives relating to the business of late, noting that the company saw an improvement in its gross margin and strengthened its balance sheet, generating $8.4 million in operating cash flow and ending the quarter with $70.2 million in cash and cash equivalents.
Other takeaways from the report were as follows:
+ Its Club Level domestic upholstery and BenchMade case goods and upholstery “held up slightly better than the remaining product lines,” which experienced order declines. Spilman noted that overall incoming wholesale orders were very similar for the first nine months of the year and appear to have stabilized, “albeit at a relatively low level.”
+ Year-end wholesale inventory levels totaled $36 million, down 38.7% compared to year-end 2022. “As expected we did see a nice improvement in overall margins compared to the third quarter of 2023 as we continue to cycle through excess Club Level inventory and imported wood product that both had the inflated container freight from 2022.” Excess Club Level inventory, he said, was reduced by half during the fourth quarter to about $3.4 million. The company expects to sell the remainder during the first two quarters of 2024.
+ Operating profits from its domestic upholstery operations rose despite a 16.7% decrease in domestic upholstery sales from its Newton, North Carolina, facility. Spilman described this as “a testament to the operational efficiencies of our associates in those facilities. We expect to continue to see margin improvement in our wholesale operations over the course of 2024.”
+ Despite the decline in sales and profitability at its corporate retail locations, Spilman described close ratios at an all-time high with average order values also improving. This was driven in part by design projects, which represented more than 45% of sales. “Our design staffs are doing a tremendous job of maximizing their opportunities and building bigger tickets. In short, the stores operated quite well under challenging circumstances.”
+ Spilman add that there is room to further improve gross margins through new pricing and promotional strategies and “by employing increased discipline in the disposition of our clearance merchandise.”
+ In October, the company completed the renovation of its first Bassett store, which opened in Austin, Texas, in 1997. It also completed an upfit of a store it purchased in Tampa, Florida, in 2022 whose doors reopened in mid-January. It also plans another store opening in the Houston area in the first quarter of this year. Following that opening, it will refurbish six of its legacy stores over the year.
+ Since the company completed the migration of its e-commerce platform this past August, Spilman said, the company has seen “increased engagement as visitors are spending more time on our website as they view a greater number of pages.” He also noted that the average order has increased and customers are making more purchases at the upper end of the line. “Our ultimate goal is to provide a seamless omnichannel experience for our customers, allowing them to ship online or in the store.”
He concluded his remarks by saying, “Favorable demographics provide optimism for the future of home furnishings as millennial household formation unfolds. The post-pandemic boom has led to a period of difficulty and disruption as witnessed by the bankruptcies of several prominent players in 2023. Although last year and early 2024 have been challenging, we have seen downturns before and we have a positive outlook on the future, perhaps with anticipated interest rate reductions later this year. In the meantime, we will focus our attention on product innovation, improving sales technology, updating our stores, enhancing margins, bringing in new talent, and prudently managing our balance sheet as we anticipate the inevitable upswing in the home furnishings space.”