3 takeaways from Bassett Furniture’s latest earnings report

BASSETT, Va. – Home Furniture Manufacturer and Retailer Basset Furniture reported third-quarter sales of $118 million, up 12.5% ​​from the same quarter last year, but down $10 million from the second quarter.

CEO Robert Spilman highlighted many key points in the company’s recent earnings report, but a few things stand out:

Inventory issues will remain for 6 months

“As sales of the product slowed in early April, incoming shipments, often months late due to Asian production delays, began to inflate our inventory levels,” Spilman said. “As a result, we have aggressively reduced parts of our Club Level range and have suffered significant margin declines in doing so over the past four months. We expect this momentum to continue over the next six months. months as we align inventory levels with current selling rates.

“Overall inventory of $91.7 million at the end of the August quarter actually declined for the first time since pandemic construction and should have peaked for the Bassett footprint for the foreseeable future.”

Padding performs better than checkout items

Spilman said the company’s overall wholesale segment grew 8.1% from 2021, with padding increasing 12.5%. The wood activities experienced modest growth of 1.3%.

“The resurgent performance of our Newton, NC upholstery complex, where combined shipments increased 21.5% and divisional profitability returned to pre-COVID levels, was significant. for the period,” he said. “We are now producing goods whose material costs are fully reflected in the price at which they are charged, as the runaway price increases we have absorbed over the past two years have subsided.

“Additionally, we’re excited about the early success of the new ‘Modern Casual’ product line which hit stores in time for Labor Day, which we’re counting on to help us maintain our production schedules on the right way. Fabric breakdowns have improved dramatically from the depths of the pandemic chaos of 2021, and our delivery times have improved markedly over the past few months. »

Inflation and high mortgage rates are hurting demand

“High inflation, rising mortgage rates and a slowing housing market have certainly weighed on the stock value of publicly traded furniture companies this year,” Spilman said. “We’re definitely in the mode of ‘focusing on what we can control’ because there are larger forces at work right now than Bassett in a macro sense. To that end, we invested in a robust marketing program for the recent three-week Labor Day promotion, and the results were quite gratifying as our retail stores saw better than 2020 sales volumes and 2021, which were, of course, very strong. .

“We believe that while our clients are smarter with their disposable income today than two years ago, their personal balance sheets are strong. So there will be people in the market, and we have to convince them. Meanwhile, Bassett has the financial strength to weather a downturn and an integrated strategy designed to deliver multiple avenues of growth going forward.

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