3 things to note in Bassett Furniture’s recent earnings report

BASSETT, Va. – Bassett Furniture reported $121 million this week in consolidated fourth quarter sales, a 5.6% gain over last year and a 3% gain over last quarter.

CEO Robert Spilman highlighted many key points in the company’s recent earnings report, but a few things stood out:

Wholesale orders are down

Despite substantial growth in retail, Bassett’s wholesale orders declined 1.6% from last year’s fourth quarter. At $74.6 million, they’re also down $4.4 million from last quarter and $12.9 million from the second quarter.

“We acknowledge that fiscal 2023 has started off slowly from a wholesale order standpoint with quarter-to-date written sales off 20% compared with the robust pace we experienced last year,” said Spilman. “Quarter-to-date shipments are down 10% as fourth-quarter orders were off modestly.

“Despite the uncertainty around the current pace of orders, we will concentrate on running our business with financial discipline and operational excellence while executing our growth strategies that are designed to create long term value for our shareholders.”

Backlogs and inventory are normalizing

Backlogs have returned to the pre-COVID normal, and the company is working through on-hand inventory.

“Backlogs are now comparable with pre-pandemic equivalents,” said Spilman. “Combined wholesale shipments declined 1.6% for the quarter, with increases in wood and outdoor furniture products being offset by declines in domestic upholstery and Club Level.

“On a positive note, wholesale inventories declined by $4 million in the quarter with Club Level again representing essentially all of the reduction. So, we are making good progress on this front,” Spilman continued. “Also, our domestic upholstery operating margins returned to their historical levels by improving 670 basis points as we are through the period of misalignment between inflated raw materials and our ability to pass those costs along. In fact, we have recently begun to receive several price decreases from various suppliers.

“Looking ahead, we have returned to a more normalized wholesale operating environment in terms of supply chain. Our challenge now is to efficiently operate while we assess how the economy will affect order flow and our work schedules.”

E-commerce remains a strong focus

“Coming in the second quarter of 2023 is the debut of our new website platform featuring better navigation and architecture designed to drive more consumers to our stores and significantly enhance our e-commerce capabilities,” said Spilman. “While this will represent the culmination of a multi-year digital transformation plan, it will also provide a platform for greater integration of the website with our store network and better overall customer and product data that will lead to better decision making.

“In that vein, we acquired Canadian online furniture retailer Noa Home Inc. in early September to begin our fourth quarter,” he said. “As expected, the Noa results, now included in our corporate retail segment, were not profitable for the quarter. We spent the three months scaling the business for growth as we worked to get best sellers in stock, opened a new 3PL warehouse in western Canada, and integrated the first Bassett designed product into their lineup.

“Our focus for this year is to continue to expand their lean assortment and to prepare to open the U.S. market by the fall selling season.”

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