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Bull of the Day: Bassett Furniture (BSET)

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Bassett Furniture Industries, Inc. (BSET - Free Report) isn't seeing any slowdown in furniture demand. This Zacks Rank #1 (Strong Buy) just raised its dividend and increased its share repurchase plan.

Bassett Furniture makes custom built home furnishings. It operates 97 company- and licensee-owned stores.

In addition to the stores, it operates a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally.

Raised the Dividend 12%

On July 15, Bassett announced it was increasing its dividend by 12%, to $0.14 per share. It is payable on Aug 27, 2021 to shareholders of record at the close of business on Aug 13, 2021.

It's currently yielding 2.4%.

The Board of Directors also increased the company's existing share repurchase authorization by approximately $16 million.

That takes the share repurchase authorization back to the original limit of $20 million.

Hot Wholesale Orders

Bassett also provided an update on the wholesale orders for the fiscal month of June 2021. They increased by 25% over June 2020 and 39% over June 2019.

The wholesale shipments rose 55% over June 2020 and 21% over June 2019.

However, the company is expressing caution about how much longer this hot furniture market can continue.

“With the reopening of the country fully underway and with consumer spending moving in favor of travel, dining, and other discretionary pursuits, we do expect our incoming business to ultimately feel the effects of this shift," said Rob Spilman, CEO.

"Nevertheless, the underlying strength of the economy and of our sales programs continued to produce vigorous sales again in June. That aside, we are committed to decrease our current order backlogs and to improve service levels as soon as possible.”

Another Beat in the Fiscal Second Quarter

On July 1, Bassett announced its fiscal second quarter results and blew by the Zacks Consensus Estimate for the sixth consecutive quarter.

Earnings were $0.60 versus the Zacks Consensus of $0.35 for a beat of $0.25, or 71%.

It was the third big beat in a row.

Revenue rose 94% to $124.1 million year-over-year, but the 2020 quarter was impacted by the pandemic. However, it was also 15% higher as compared to the same quarter in 2019.

Wholesale orders jumped 172% to $96 million year-over-year and were up 51% compared to the pre-pandemic 2019 second quarter.

However, it's backlog grew by $19 million over the three months as it faced a tight labor market and continued supply chain disruptions.

It also has had to raise prices three times since the fiscal year began in December due to a rise in raw materials.

The market continues to be complex.

But, despite the challenges, Bassett finished the end of the fiscal second quarter with $63.5 million in cash and short-term investments, and no debt.

Earnings Estimates Rise

The analysts liked what they heard, as 2 estimates have been raised in the last 30 days.

The fiscal 2021 Zacks Consensus Estimate has jumped to $2.11 from $1.77. That's earnings growth of 339% as the company made just $0.48 last year.

However, analysts are cautious on fiscal 2022. While 2 analysts have raised, it has pushed the Zacks Consensus up to $2.20 which is just a gain of 4.5% from this year.

Shares Weaken: Is It a Buying Opportunity?

The furniture retailers were big winners during the first year of COVID.

Shares of Bassett have soared 182% over the last year. However, they've weakened in the last 3 months, and have fallen 2.5% during that time, easing off the recent highs.

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Image Source: Zacks Investment Research

They're still cheap, with a forward P/E of just 11.6.

They also have a PEG of 0.7. A PEG under 1.0 usually indicates a company is both a value and has growth.

Bassett is the only Zacks Rank #1 (Strong Buy) in the furniture industry. Competitor WilliamsSonoma, Inc. (WSM - Free Report) is a Zacks Rank #2 (Buy) and it's more expensive on a P/E basis at 13.6.

With the strong June results, will the hot furniture market continue?

If it does, investors might want to keep Bassett on their short list.

[In full disclosure, Tracey owns shares of WSM in her personal portfolio.]

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