BASSETT, Va. – Bassett Furniture reported $86.6 million in consolidated first quarter sales, a 19.6% decline from last year and an $8 million drop from last quarter. It also recorded a net loss of $1.2 million, marking its third consecutive quarterly loss.
Wholesale sales fell 21.7% to $54.7 million for the quarter, while retail sales fell 17.2% to $53.8 million. Both segments have now reported similar declines for the past three quarters.
The company attributed its performance to a challenging sales environment and to an especially weak end of January caused by storms. On the upside, the company produced its highest ever gross margin, with gains driven by cost and spending reductions.
“We produced an operating loss of $2.4 million and a net loss of $1.2 million in the challenging sales environment,” said Robert H. Spilman, CEO. “Our consolidated gross margin of 55.3% was an all-time high, but spending reductions were not enough to generate profitability at the reported level of sales. We continue to explore expense reduction strategies that will not be detrimental to gaining market share in the competitive furniture industry landscape.
“Wholesale and retail orders were more stable and fell by 6.3% and 3.4%, respectively (14 weeks vs. 13 weeks),” he continued. “The final two weeks of January proved to be especially damaging to written sales during the period as we lost the historically strong MLK holiday event due to storms across several regions of the country where we expect to write good business.”
Spilman noted that inventory levels are stable and “appropriate.” The company continues to trim its headcount.
“Total headcount in our wholesale segment has been reduced by 26% since the peak of the pandemic booms in 2022,” he said. “The corporate retail organization is 44% leaner than February 2020, the last month before the world changed. And the balance sheet is well-built and provides stability as we focus on improving results in anticipation of a better macro-economic environment in the future.”
On the retail side, the company opened two new stores during the quarter. No further stores are planned for 2024.
“We were excited to open new stores in Tampa and Houston,” Spilman said. “Startup expenses recorded on the income statement were in excess of $700,000. Our average ticket was $3,800, and 41% of sales came from design projects as we generally write a smaller percentage of design business around the holidays. We did not curtail retail marketing expenses for the quarter, although we are currently cutting back prior to picking up again in May for the Memorial Day promotion.”
In e-commerce, the company plans to consolidate its distribution by eliminating five warehouses.
“On the digital front, we are continuing to optimize our tactics to build our omnichannel capabilities and enhance website conversion,” Spilman said. “Declining written and delivered sales obviously apply pressure to results through the deleveraging of SG&A expenses.
“On the expense side, we are at the early stages of implementing a new retail distribution model designed to reduce warehouse and delivery expenses by 200 basis points. The first phase of this plan will eliminate five facilities that are currently in use primarily in the mid-Atlantic region. After evaluation of the results, we plan to implement further warehouse consolidations in other regions,” he said.
“On the revenue front, we plan to sharpen the value proposition of a portion of our assortment with the addition of several new products that we believe will complement the wide array of customizable furniture that currently dominates our stores.”
In wholesale, Spilman cited a challenge in balancing domestic capacity with order backlogs. The company also is now sourcing product from India.
“Our team produced a 200-basis point gross margin improvement for the quarter,” he said. “Embedded in the wholesale results is the return to profitability of the Club Level motion assortment which has been a drag on the bottom line in recent quarters. We expect further improvement in the Club Level results in the upcoming months.”
Spilman said production has begun on its contemporary-styled solid maple Parkway bedroom and the “more popularly priced” Origins dining. The first pieces of the company’s new premier custom leather upholstery line were produced, which Spilman said sold well in the final weeks of the quarter. India-made case goods have allowed for more artistic design, but have been negatively affected by longer lead times caused by Red Sea turmoil.
“As we try to mention every quarter, we continue to maintain a strong balance sheet to weather downturns like the one we are in now while supporting the dividend,” Spilman concluded.