Bassett Furniture Inds. reports 94% increase in Q2 revenues


BASSETT, Va. – Bassett Furniture Inds. reported consolidated revenues of $124.1 million for the second quarter ended May 29, a 94% increase compared to the $60.3 million reported the same period in 2020, a change that highlights a return to normalcy when compared to the industry-wide shutdown at this time last year.

The increase was also 15% above the same period in 2019.

For the quarter ended May 29, the company recorded net income of nearly $6 million, compared to a loss of $20.4 million last year. Its operating profit totaled $8.4 million, compared to an operating loss of $31.2 million last year.

Despite the positive results, the company said challenges remain, including a tight labor market and continued supply chain disruptions as well as an order backlog that grew by another $19 million during the quarter. In addition, the company has faced increases in raw materials costs that have led to what it described as an “unprecedented action of levying three general price increases” since the start of the company’s fiscal year in December.

“Our obvious focus is centered on the reduction of our backlog and returning to a semblance of normalcy in our service levels as soon as possible,” said Robert H. Spilman Jr., Chairman and CEO. “Although our cancellation rate has not spiked significantly to date, it is a natural concern.”

Spilman said that during the June High Point furniture market, some dealers thanked the company for its ability to deliver goods more quickly than the current industry standard, which he noted “underscores just how compromised lead times actually are today.”

“Aside from working massive amounts of overtime, the early June opening of our new upholstery production facility in Newton, NC will provide some immediate relief to a portion of the situation,” he said. “With the polyurethane foam shortage largely behind us, our current raw material bottlenecks lie in the thousands of yards of decorative fabrics that our suppliers owe us. Our production managers have done a great job in shuffling our daily schedules to produce what they can based on the materials that they actually possess.”

He noted that the wholesale team produced a 7% operating margin for the period as the wood, upholstery and outdoor divisions delivered results that were “significantly better than 2020 and 2019.”

For the quarter, the wholesale division reported sales of $76 million, compared to $33.1 million last year, an increase of nearly 130%. Operating income totaled $5.4 million, compared to a loss of $7.4 million the same period last year.

Spilman noted that the strong performance was due largely to the Bassett Design Center (BDC) network. Part of the company’s open market wholesale business, it had increases of 212% and 87%, respectively, compared to 2020 and 2019.

Also driving the increase was the Bassett Club Level program, which, Spilman said, grew by 328% versus 2019. In addition, dedicated Bassett-branded distribution in the form of the Bassett Home Furnishings network and BDCs represented 67% of wholesale sales for the period.

Sales on the retail side of the business totaled $62.5 million, up 88.4% from the $33.2 million reported last year. Operating income was $1.7 million, compared to a loss of $9.2 million last year.

Logistical services revenues totaled $22.2 million, compared to $15.3 million last year, a $45.8% increase, while operating income in the segment totaled $1.3 million, compared to a loss of $1.8 million last year.

Spilman added, however, that industry-wide challenges remain in the area of logistics.

“The strong business that has characterized the past 13 months has overwhelmed the furniture trucking segment,” he noted. “There is currently a dearth of warehouse space, warehouse labor, and over-the-road trailers to handle shipping backlogs. Consequently, even after the goods have been manufactured, there are accompanying lags in logistics service that could represent several weeks of further delay.”

He added that this has been further complicated by the global shortage of shipping containers “that continues to plague our sector.”

“Our Zenith Logistics team has performed at a high level in dealing with the cumulative effect of these daily challenges by generating $1.3 million of operating profit for the quarter despite spiraling warehousing labor costs and procuring over 400 trailers on short-term leases to combat the equipment shortage,” Spilman said. “Longer term we are motivated by prospects of our recent regional warehouse model that is showing great promise. Over the past six months we have experimented with keeping some of our best sellers closer to the U.S. population centers for quicker delivery. When we have been able to have these goods in inventory, we have seen significant upticks in rates of sale, which bodes well for our plan to expand this model as product availability becomes normalized.”

He noted that while the company’s corporate retail division was not able to deliver goods to the home at the rate that they were sold in the stores, digital outreach strategies proved successful as visits to the company’s website grew 51% in the quarter.

“Store traffic, which has declined for the past few years, has held steady since business returned after the stores reopened last May,” Spilman said. “Still, our corporate retail turned in a profit of $1.6 million while continuing to add to its already large order backlog. Finally, we are excited by the combined results of the Lane Venture and Bassett Outdoor sales strategies as they combined for a 122% increase to 2020 and 124% to 2019. Much of the new business came from our Alabama metal facility that we purchased in 2019.”

In conclusion, he noted that the company wrote more wholesale business during the quarter than it had in many years dating back to when it had a much larger domestic manufacturing footprint. He said the company’s financial position also remains healthy.

“While retiring $2.4 million of stock and paying our quarterly dividend, we ended May with $63.5 million of cash and short-term investments and no debt,” Spilman said. “There are many cost pressures, and raw material lead times remain long. But we have a very large backlog, and our most recent big sales event around Memorial Day was very strong. Taking all of those positives and negatives into account, we remain encouraged concerning our prospects for the remainder of 2021.”

 

 





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