by Growth in designer business, demand for custom products at retail will likely sustain US manufacturing presence moving forward
BASSETT, Va. — One of the strengths in Bassett Furniture’s arsenal is its domestic manufacturing footprint both in upholstery and case goods. While much of its wood furniture line including bedroom and dining room furniture along with leather and Club level motion upholstery is made overseas, the company produces some 77% of its mix in the U.S., with a similar amount of its revenues coming from domestically made product.
It’s a particularly high mix, largely bolstered by upholstery produced in its Newton, North Carolina, facilities, but that also includes some solid wood furniture produced in its BenchMade facilities in Bassett, Virginia, and its Martinsville, Virginia, plant. A common denominator between both facilities is their ability to offer product featuring custom fabrics and finishes in relatively quick turnaround times for both its wholesale customers and its retail stores.
Both segments have been impacted by slow sales at retail as seen in the company’s latest quarterly report for the second quarter ended June 1. Wholesale revenues for the custom upholstery mix fell between 9.2% and 13.2% for the second quarter and first half respectively, compared with 18.4% and 20.8% for custom wood product, both made domestically. Meanwhile, wholesale revenues for imported leather fared much worse, falling between 41.4% and 41.6% in the second quarter and first half, compared to a 2% decline for imported case goods during the second quarter and an 11.2% decline in the first half.
On the retail side, sales of custom upholstery fell 21.5% during the second quarter and 19.5% during the first half, while sales of custom wood furniture fell 13% during the second quarter and 14.1% during the first half. Sales of imported case goods fell 17.8% during the quarter compared with 22.7% in the first half. Leather stood out as a bright spot with a 93% gain during Q2 and an 81.5% gain for the first half. While coming off smaller numbers compared to other segments, the category proved to be a winner at retail, while also helping narrow the overall declines in both periods.
And while the domestic portion of the business suffered, the custom nature of the business model could help turn things around moving forward. For one, it’s driving some of the company’s business at retail, particularly among the design trade, which represented some 43% of revenues at retail along with an increased average retail ticket of nearly $4,000, up 9% from last year.
The company also is touting its custom offerings through its Bassett Design Studio concept, which the company said is designed with independent retailers in mind, starting with footprints around 1,000 square feet in size. As of the April High Point Market, it had 17 new locations, which increased to 30 by the end of May, company Chairman and CEO Rob Spilman told analysts during its latest earnings call.
“For a modest investment in fixtures and displays, our customers received a quick response setup that Bassett is recognized for and they are giving us very positive feedback,” he said during the call. “They are happy with the margins and the fact that they can carry lower inventory.”
By year end, he noted, the company plans to have 50 dealers signed up, representing roughly half of the planned locations.
Also worth noting is that the company is aiming to differentiate itself in the marketplace with what Spilman described as a true custom offering that offers not only multiple fabrics, but also multiple sizes, as well as different cushion options and more.
“Our approach is well suited to offer personalized solutions to the interior design community to better serve their clients,” Spilman said, referencing the new Bassett Design Studio format. “Many in the industry now refer to offering more than one fabric on a frame as custom upholstery. Our True Custom program truly represents what custom upholstery really is, a choice of frame length, arm, back and base styles, cushion options, and multiple fabric and leather options.”
He added that the company’s efforts to consolidate its domestic wood manufacturing operations along with the closure of three of its retail warehouses during the quarter and its plans to move out of another wholesale distribution center at the end of the third quarter will help lower its cost structure, with a goal of returning the company to profitability.
Other factors such as improvements in the housing market — of course driven by a stabilization of current interest rate levels — along with overall increases in consumer interest and spending on home furnishings also are needed to help reverse the Bassett’s fortunes. But it’s clear that the company aims to use the strength of its domestic footprint in both case goods and upholstery to help achieve long-term success.
As we’ve noted with other retailers seeing success with their designer business in the past, the domestic strategy will be worth watching moving forward as it likely will remain a critical part of the company’s business.
