Bassett Furniture Industries, Inc. (BSET) reported recently its results of operations for its fiscal quarter ended June 1, 2k19. “The second quarter of fiscal 2k19 was tough,” commented Rob Spilman, Chairman and CEO. “The overall retail home furnishings sector was sluggish and sales in our corporate store network were down sharply on both a written and delivered sales basis. The important declines in our written sales about President’s Day and the month of April resulted in the stated delivered comparable sales shortfall for the quarter. These trends coupled with store startup losses in new stores opened less than a year and a markedly negative comparison to the hurricane fueled sales and profits generated in Houston in 2k18 were importantly detrimental to our bottom line. Relatively strong sales about our quarter ending Memorial Day Sale provided a much-needed boost to our order backlogs as we entered the third quarter. In addition, sales trends for the June promotions were slightly better than last year. Positively, we generated $6.8M of operating cash flow for the period, keeping our balance sheet in a solid position with $34.2M of cash and short-term investments, over $22M accessible on our credit facility, and no long-term debt.”
Wholesale Section
Net sales for the wholesale section were $63.1M for the second quarter of 2k19 as contrast to $63.8M for the second quarter of 2k18, a decrease of $0.7M or 1.0%. This decrease was primarily driven by a 7% decrease in furniture shipments to the open market (outside the Bassett Home Furnishings network), partially offset by a $0.3M raise in Lane Venture shipments. Shipments to the Bassett Home Furnishings network were essentially flat as contrast to the previous year quarter. Gross margin for the wholesale section was 34.3% for the second quarter of 2k19 as contrast to 32.9% for the previous year quarter. This raise was primarily driven by higher margins in the domestic custom upholstery operations as price raises implemented during the third quarter of 2k18 offset the raised raw material costs experienced late in 2017 and early 2k18. Wholesale SG&A for the second quarter of 2k19 was $18.5M as contrast to $17.9M for the previous year period. SG&A as a percentage of sales raised to 29.3% as contrast to 28.1% for the second quarter of 2k18. This raise in SG&A as a percentage of sales was primarily driven by higher over-the-road freight costs together with higher marketing and other brand development costs, partially offset by lower incentive compensation costs. Operating income was $3.2M or 5.0% of sales for the second quarter of 2k19 as contrast to $3.0M or 4.8% of sales in the previous year.
Retail Section
Net sales for the 70 Company-owned Bassett Home Furnishings stores were $62.6M for the second quarter of 2k19 as contrast to $68.7M for the second quarter of 2k18, a decrease of $6.1M or 8.9%. This decrease was Because of a $9.8M or 14.8% decrease in sales for the 59 comparable stores, partially offset by an raise of $3.7M in non-comparable store sales as the Company has opened 10 stores over the last 18 months.
While the Company does not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores reduced by 7.4% for the second quarter of 2k19 as contrast to the second quarter of 2k18.
The consolidated retail operating loss for the second quarter of 2k19 was $3.0M as contrast to operating income of $1.6M for the second quarter of 2k18, a decrease of $4.6M. The 59 comparable stores generated an operating loss of $1.7M for the quarter, or 3.0% of sales, as contrast to operating income of $2.4M, or 3.7% of sales, for the previous year quarter. Gross margins for comparable stores were 50.8% for the second quarter of 2k19 as contrast to 52.1% for the second quarter of 2k18. This decrease was primarily Because of raised wholesale costs as a result of tariffs on Chinese products instituted in late 2k18 together with higher costs of freight, both of which were passed on in a wholesale price raise in January 2k19. Although most of the Company’s goods are domestically made, and most of its other goods are imported from countries outside of China, the most important impact from the tariffs has been in the cost of the fabric that the Company uses in its upholstered furniture manufactured in the United States. The Company implemented a retail price raise late in the second quarter to mitigate these cost raises.
A look on the firm performance, its monthly performance is -7.84% and a quarterly performance of -23.97%. The stock price is trading downbeat from its 200 days moving average with -28.36% and down from 50 days moving average with -14.15%. In the liquidity ratio analysis; quick ratio for most recent quarter was 1.00 while current ratio for time period was 1.90.
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