Cyber security incident that suspended all financial systems and manufacturing for 7 days in July identified as a factor in revenue decrease
BASSETT, Va. — Bassett Furniture Industries reported a 13.3% drop in revenues for its fiscal third quarter ended Aug. 31, which it attributed to a cyber security incident in mid-July, along with an ongoing industry slowdown relating to a slow housing market.
The company said revenues totaled $75.6 million, down $11.6 million from $87.2 million the same period last year. It also reported a net loss of $4.5 million, or 52 cents per share, compared to a net loss of $2.6 million, or 30 cents per share, the same period last year.
The company said the cyber incident suspended all financial systems and manufacturing for seven days in July. It reported an operating loss of $6.4 million, which it said included a $1.2 million loss on a logistical services contract it abandoned along with costs associated with the cyber incident.
Its gross margin was 53%, which it said included $600,000 of manufacturing wages paid during the cyber shutdown. Excluding the wage charge, it said its gross profit margin would have been 53.8% compared with an adjusted gross margin of 52.7% the same period in 2023.
“The third quarter is historically our slowest as we customarily shut down manufacturing for the week of July Fourth,” said Robert H. Spilman Jr., Bassett chairman and chief executive officer. “Although we had additional challenges this year, we delivered strong gross margins. In mid-July, we reported that we detected unauthorized activities in our IT systems, which resulted in us shutting down our IT systems and ceasing manufacturing for seven days. The industry remained challenged by economic factors in the quarter, including a slow housing market that is forecasted to improve heading into 2025. With our strong balance sheet and our focus on right-sizing our expense structure, our goal is to drive better profitability.”
Wholesale revenues totaled $47.8 million during the quarter, down 15.7% from $56.7 million the same period last year. The segment also reported operating income of $4.4 million, compared with operating income of $6.3 million last year.
Retail revenues totaled $47.3 million during the quarter, down 9.6% from $52.3 million last year. It also reported an operating loss of $2.8 million, compared with $3 million last year.
The report also noted that the company made progress on its restructuring plan announced in July aimed at lowering its cost structure and strengthening operations for top-line growth. The company noted that “the comprehensive strategy builds on the strength of Bassett’s brand quality, design expertise and service, and focuses on driving revenue growth and profitability long-term.”
The company said it expects to complete the five-point plan by the end of the fourth quarter.
“We are running a leaner operation, reducing expenses and investing in new products and services,” Spilman said. “Through our restructuring plan, we are on target to improve our bottom line between $5.5 million and $6.5 million on an annual basis. We are committed to returning to profitability.”
The company reported a quarterly dividend of 20 cents per share payable on Nov. 29 to shareholders of record on Nov. 15, which it said was an 11% increase over the prior year’s quarterly dividend.