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Bassett Furniture Industries, Inc. (BSET - Free Report) is seeing a dramatically slower business environment in 2023. This Zacks Rank #5 (Strong Sell) is expected to see earnings slump this year.
Bassett Furniture Industries makes home furnishings. It operates 89 company- and licensee-owned stores, which offer free in-home design visits, coordinating accessories and on-trend furniture styles.
Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally, and a logistics business specializing in home furnishings.
In Sep 2022, it acquired Montreal mid-priced e-commerce furniture retailer Noa, which has operations in Canada, Australia, Singapore and the United Kingdom.
A Beat in the Fiscal Third Quarter
On Sep 28, 2023, Bassett reported its fiscal third quarter 2023 results and beat the Zacks Consensus by $0.29. It reported a loss of $0.30 versus the Consensus of a loss of $0.59.
Consolidated sales were down 26.1% to $87.2 million from $118 million a year ago. Wholesale sales were down 28.2% to $56.7 million from $79 million while Retail sales were down 26.2% to $52.3 million from $70.9 million.
The company was bearish in its earnings press release.
"Writing new business, both at wholesale and retail, proved very difficult in the twelve weeks between Memorial Day and the start of our Labor Day promotion in late August," said Robert H. Spilman, Jr., CEO.
"Although we continue to see increased business around the important holiday events, day-to-day store traffic and wholesale order writing between the big events remain very challenging. We first began to see signs of a slowdown in the third quarter of 2022 and this year’s period represented another 4.6% decline in wholesale orders," he added.
The company has had excess inventory in the Club Level business. It peaked at $22 million in Aug of 2022. At the most recent August close, it was slightly over $11 million, or 49% below last year.
Ultimately, Bassett believes that $5 to $6 million of inventory will be sufficient to support the Club Level line.
On the retail side of the business, the company said that things had changed "dramatically" from 2022, it's best retail year ever. It did not generate enough retail revenue to break even in this fiscal third quarter.
While gross margins were comparable to last year, with a 26% decline in sales, Bassett could not reduce its fixed and variable SG&A costs enough to maintain profitability with the reported level of sales.
In the retail segment, Bassett said that in the first four weeks of the fiscal fourth quarter, average weekly sales did improve markedly, but were aided by the expected Labor Day boost and by several new product introductions that coincided with the promotion.
New Website Launched
On Aug 10, 2023, Bassett launched its new website which was three years in the making and included the complete re-architecture of its product data.
It has already seen returns as engagement has improved with consumers spending more time on the new site with each visit compared to previous metrics with the old platform. Bassett also sent out its new fall catalog in the mail at the same time as the launching of the new website which has a fresh new styling direction.
Bassett said sell-through of the new items was off to a good start.
Analysts are Bearish
With the tough industry conditions, and big drop in sales, the analysts have gotten more bearish on fiscal 2023.
1 estimate has been cut in the last week, pushing the fiscal 2023 Zacks Consensus down to $0.12 from $0.94 in the last 30 days. That's also a 95.6% decline from fiscal 2022, where it made $2.70.
1 estimate has also been cut for fiscal 2024 in the last week, pushing the Zacks Consensus down to $1.31 from $1.75 just 7 days before. While that's an earnings rebound from this year, it's still well under fiscal 2022's earnings.
Image Source: Zacks Investment Research
Shares Fall in 2023
Bassett shares have not participated in the 2023 rally. They are down 12.5% year-to-date while the S&P 500 is still up 10.7%.
Image Source: Zacks Investment Research
But it's not exactly "cheap" on a P/E basis. It trades at 122x now because earnings estimates have plunged.
Bassett is shareholder friendly. In July, Bassett's board raised the dividend by 12.5%. It's currently yielding 4.9%. It has returned $8.5 million to shareholders in both dividends and shareholders year-to-date.
But with business conditions challenging and uncertainty in the economy, investors may want to wait on the sidelines on the furniture retailers, like Bassett, for an improving earnings outlook.
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Bear of the Day: Bassett Furniture (BSET)
Bassett Furniture Industries, Inc. (BSET - Free Report) is seeing a dramatically slower business environment in 2023. This Zacks Rank #5 (Strong Sell) is expected to see earnings slump this year.
Bassett Furniture Industries makes home furnishings. It operates 89 company- and licensee-owned stores, which offer free in-home design visits, coordinating accessories and on-trend furniture styles.
Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally, and a logistics business specializing in home furnishings.
In Sep 2022, it acquired Montreal mid-priced e-commerce furniture retailer Noa, which has operations in Canada, Australia, Singapore and the United Kingdom.
A Beat in the Fiscal Third Quarter
On Sep 28, 2023, Bassett reported its fiscal third quarter 2023 results and beat the Zacks Consensus by $0.29. It reported a loss of $0.30 versus the Consensus of a loss of $0.59.
Consolidated sales were down 26.1% to $87.2 million from $118 million a year ago. Wholesale sales were down 28.2% to $56.7 million from $79 million while Retail sales were down 26.2% to $52.3 million from $70.9 million.
The company was bearish in its earnings press release.
"Writing new business, both at wholesale and retail, proved very difficult in the twelve weeks between Memorial Day and the start of our Labor Day promotion in late August," said Robert H. Spilman, Jr., CEO.
"Although we continue to see increased business around the important holiday events, day-to-day store traffic and wholesale order writing between the big events remain very challenging. We first began to see signs of a slowdown in the third quarter of 2022 and this year’s period represented another 4.6% decline in wholesale orders," he added.
The company has had excess inventory in the Club Level business. It peaked at $22 million in Aug of 2022. At the most recent August close, it was slightly over $11 million, or 49% below last year.
Ultimately, Bassett believes that $5 to $6 million of inventory will be sufficient to support the Club Level line.
On the retail side of the business, the company said that things had changed "dramatically" from 2022, it's best retail year ever. It did not generate enough retail revenue to break even in this fiscal third quarter.
While gross margins were comparable to last year, with a 26% decline in sales, Bassett could not reduce its fixed and variable SG&A costs enough to maintain profitability with the reported level of sales.
In the retail segment, Bassett said that in the first four weeks of the fiscal fourth quarter, average weekly sales did improve markedly, but were aided by the expected Labor Day boost and by several new product introductions that coincided with the promotion.
New Website Launched
On Aug 10, 2023, Bassett launched its new website which was three years in the making and included the complete re-architecture of its product data.
It has already seen returns as engagement has improved with consumers spending more time on the new site with each visit compared to previous metrics with the old platform. Bassett also sent out its new fall catalog in the mail at the same time as the launching of the new website which has a fresh new styling direction.
Bassett said sell-through of the new items was off to a good start.
Analysts are Bearish
With the tough industry conditions, and big drop in sales, the analysts have gotten more bearish on fiscal 2023.
1 estimate has been cut in the last week, pushing the fiscal 2023 Zacks Consensus down to $0.12 from $0.94 in the last 30 days. That's also a 95.6% decline from fiscal 2022, where it made $2.70.
1 estimate has also been cut for fiscal 2024 in the last week, pushing the Zacks Consensus down to $1.31 from $1.75 just 7 days before. While that's an earnings rebound from this year, it's still well under fiscal 2022's earnings.
Image Source: Zacks Investment Research
Shares Fall in 2023
Bassett shares have not participated in the 2023 rally. They are down 12.5% year-to-date while the S&P 500 is still up 10.7%.
Image Source: Zacks Investment Research
But it's not exactly "cheap" on a P/E basis. It trades at 122x now because earnings estimates have plunged.
Bassett is shareholder friendly. In July, Bassett's board raised the dividend by 12.5%. It's currently yielding 4.9%. It has returned $8.5 million to shareholders in both dividends and shareholders year-to-date.
But with business conditions challenging and uncertainty in the economy, investors may want to wait on the sidelines on the furniture retailers, like Bassett, for an improving earnings outlook.