BASSETT, VA - Bassett Furniture Industries, Inc. (Nasdaq:BSET) said its earnings more than doubled as it announced results of operations October 1 for its fiscal quarter ended August 29, 2015. The furniture maker said all of the company's growth came from their domestically produced custom dining and custom upholstery programs.
In addition to their legacy custom casual dining program, their recently introduced Bench-Made premium dining program performed very well in the period and presents an exciting opportunity to expand this product range going forward, commented Robert H. Spilman, Jr., President and Chief Executive Officer.
Consolidated sales were $111.0 million for the third quarter of 2015 compared to $85.2 million for the third quarter of 2014, an increase of 30%. Operating income for the quarter was $7.7 million or 6.9% of sales as compared to $3.4 million or 4.0% of sales for the prior year quarter. Wholesale sales were $62.2 million for the third quarter of 2015 compared to $56.1 million for the third quarter of 2014, an increase of 11%. Wholesale operating profit was $3.8 million or 6.1% of sales as compared to $3.2 million or 5.7% of sales for the prior year quarter.
Company-owned store sales increased 15%, including a comparable store sales increase of 14%, compared to the prior year quarter. Comparable store operating income was $2.2 million or 3.7% of sales for the current year quarter as compared to $0.4 million for the prior year quarter, a $1.8 million improvement. Total retail operating income was $2.0 million or 3.3% of sales for the quarter as compared to a loss of $0.2 million for the prior year quarter.
Bassett Furniture's Bench-Made 108 in. Rectangular Table, H30 x W42 x D108 in.
"We are very pleased to report a strong performance in our 2015 third quarter in what is shaping up to be a very good year for Bassett," said CEO Spilman. "Our integrated strategy of dedicated distribution and open market sales once again combined to produce significant year-over-year improvement. Our product assortment, manufacturing efficiency, in-store retail experience, and logistics expertise are working synchronously to provide the consumer with a highly personalized home furnishings solution that continues to drive gains in market share for the Company. We enter the historically strong fall selling season with positive energy and a focus on sustaining our track record of enhanced operating results."
Net sales for the wholesale segment were $62.2 million for the third quarter of 2015 as compared to $56.1 million for the third quarter of 2014, an increase of $6.1 million or 11%. This sales increase was driven by a 7.8% increase in shipments to the Bassett Home Furnishings store network and a 15% increase in open market shipments (outside the Bassett Home Furnishings store network). Gross margins for the wholesale segment increased to 33.5% for the third quarter of 2015 as compared to 32.5% for the third quarter of 2014 due primarily to improved pricing strategies with respect to the upholstery offerings and improved margins in domestic wood operations. However, the company reported higher bad debt costs and increased incentive compensation. Operating income was $3.8 million or 6.1% of sales as compared to $3.2 million or 5.7% of sales in the prior year.
"Wholesale sales grew by 11% for the quarter," continued Spilman. "Once again, all of our Domestic upholstery continued to anchor our assortment with a 17% increase in sales. We are in the midst of rolling out our HGTV Design Studio by Bassett program into the independent furniture retail arena and will kick off with a nationally advertised HGTV Custom Event in October. This effort is designed to extend the success that we have enjoyed with our custom upholstery products in the Bassett store network and will be our primary open market growth initiative in the future. Although our imported furniture sales declined slightly during the period, our new Provence bedroom and Artisanal occasional introductions quickly rose to be top sellers this summer after their Memorial Day debut. We believe that the unique blend of domestically manufactured products and imported items designed by our merchandising staff have propelled our growth over the past few years. Building on this success, we are excited about the upcoming product introductions that are coming this fall."
Net sales for the 59 Company-owned Bassett Home Furnishings stores were $62.0 million for the third quarter of 2015 as compared to $54.0 million for the third quarter of 2014, an increase of $8.0 million or 15%. The increase was primarily due to a $7.4 million or 14% increase in comparable store sales coupled with a $0.6 million increase in non-comparable store sales.
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 increased by 4.4% for the third quarter of 2015 as compared to the third quarter of 2014. Written sales were affected by the timing of the Labor Day holiday which caused approximately half of the Labor Day promotional period to occur during the fourth quarter of 2015, whereas most of the promotional period occurred during the third quarter of 2014. Comparable store written sales for the entire two week Labor Day promotion increased 14% as compared to the prior year.
The consolidated retail operating profit for the third quarter of 2015 was $2.0 million as compared to a loss of $0.2 million for the third quarter of 2014, an improvement of $2.2 million. The 58 comparable stores generated operating income of $2.2 million for the quarter, or 3.7% of sales, as compared to $0.4 million, or 0.8% of sales, for the prior year quarter. Gross margins for comparable stores were 50.2% for the third quarter of 2015 compared to 50.1% for the third quarter of 2014. SG&A expenses for comparable stores increased $2.0 million to $27.9 million or 46.5% of sales as compared to 49.3% of sales for the third quarter of 2014. The decrease in SG&A as a percentage of sales is primarily due to greater leverage of fixed costs due to higher sales volumes for the comparable stores.
New Stores to Fuel Growth
"The 14% sales growth recorded by our corporate retail division marked the fifth consecutive quarter of double-digit comparable store sales increases," said Spilman. "We are on a five year run of comparable store sales growth which has been the key to the Company's improvement trend over the same period of time. In the third quarter alone, corporate retail profitability improved by $2.2 million. While we plan to continue to grow our business at a healthy rate and to invest capital where appropriate in order to further expand our retail store network, we do not expect to be able to sustain the double digit comp store sales increases we have seen to date. Accordingly, we will base our near term financial and capital plans on a more moderate rate of sales and profitability growth to ensure we maintain a solid balance sheet for the future. Our current plans primarily include adding stores to fill out existing underpenetrated markets. We plan to more fully communicate our intended rate of store expansion early in 2016."
Currently, the Company and certain licensees are actively engaged in site selection and lease negotiations for several new stores. One new corporate store in Woodland Hills, California is expected to open in early October 2015 with another new store in Sterling, Virginia scheduled to open during the first half of fiscal 2016. One licensee store opened in September 2015 with another expected to open during the first half of fiscal 2016. The Company also expects to relocate the Newport News, Virginia store during the first quarter of 2016.
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