BASSETT, Va. — Bassett Furniture Industries, Inc. announced that sales and earnings for the first quarter, which ended Feb. 25, 2023, were down, but there were some positives such as the alleviation of supply chain disruptions, material costs normalizing, inventory under control, and technology improvements in terms of its digital platform.

Still, uncertainties remain and the company is hoping to “gain clarity on consumer behavior over the next few months,” said Spilman. The company is an FDMC 300 that ranks #38 with sales of $324.6 million in sales. 

In a statement, Spilman said that early in the first quarter the company fulfilled the remaining excess portion of the large backlog created during the pandemic boom and is now producing and shipping at a rate commensurate with its written business. 

He said that the company, and the industry as a whole, is wrestling with macroeconomic inconsistencies and to deal with these inconsistencies the company is “focused on efficiently targeting our consumers, new product innovation, providing the best buying experience and service possible, and working to sharpen our value proposition on the heels of the unprecedented cost pressures that we faced over the past thirty months,” he said. “We are managing our expense structure while investing in the growth initiatives that are essential for the Company’s future. Our balance sheet continues to provide the foundational element on which our strategy rests and provides the strength to weather the depth of the current market downturn.”

Net sales of furniture and accessories in the first quarter were $107.7 million, down 8.7% from the $117.9 million reported in the same period last year.  Net income totaled $1.44 million, or 16 cents per share, compared to $5.57 million, or 57 cents per share, in last year’s first fiscal quarter.

Wholesale sales were 16% behind last year but 7.5% ahead of the last corresponding pre-pandemic quarter. For the past two months, the company has worked to reduce production schedules at its facilities. “As a consequence,” Spilman said, “we have adjusted manufacturing employment levels by 11% this year, primarily through attrition.”

Total wholesale inventories were reduced by 15% for the period. The company is working to “right size” its Club Level imported motion inventories and is “suffering margin degradation in so doing as the inventory is valued with the exorbitant ocean freight costs incurred last year and we are discounting the product to move the goods.”

The turmoil caused by pandemic supply chain upheaval is now behind us, he added. Part of the disruption included skyrocketing raw material prices and the aforementioned freight costs. As the environment has normalized, certain manufacturing cost inputs have been reduced. Armed with the results of a thorough line-wide cost analysis, we plan to sharpen price points on key items across the line to enhance sales and improve overhead absorption in our factories. We will implement the new pricing strategy in our stores and to our wholesale customers sometime in April, which we believe will not adversely affect wholesale margins based on our internal calculations.

While year-over-year retail delivered sales increased by 1.4% for the quarter, retail operating profit fell to $1.5 million. Gross margins were flat compared to last year as the effects of heavier promotional activity were offset by the positive impacts of LIFO valuation adjustments. We elected to increase marketing expenses as well to maintain consumer engagement on the web and in our stores. The increase in interest rates also impacted our consumer finance costs. Our new Dallas store opened in the period and we also remodeled two other existing locations in the Dallas market to test a new fixturing package designed to further enhance accessory sales. We will begin work on our new 25,000-square-foot store in Tampa early in April. 

"2023 is a big year from a technology standpoint as Bassett’s digital transformation becomes more obvious with the debut of its new web platform in the next ninety days," said Spilman. "Adding a new level of omni-channel capabilities has been a major objective from the outset and the company is close to bringing it to the marketplace. 

On a related note, February brought the second quarter of our ownership of pure-play e-commerce provider Noa Home to a close. Noa is operating at a loss and will likely do so until at least the latter part of the year as their operating metrics are honed and pricing strategies are adjusted. “We also continue to work on broadening their assortment. We value the insights that we are gaining from owning Noa and look forward to growing the business and reaching a new consumer in their existing international markets and ultimately the U.S.”

He added, “Once again, we will manage our capital allocation strategy in keeping with the economic uncertainty that we see around us today. 

“We have postponed certain elements of our capital expenditure plan as we gain clarity on consumer behavior over the next few months. Although we have slowed the pace of share repurchases as compared to the prior year, we retired $1.8 million of our stock in the quarter and plan to continue to actively acquire shares while we believe the stock is undervalued. We are confident in the investments that we are making for the future but recognize that the fluid economic environment in which we are currently operating merits the conservative capital allocation approach that we are taking.”