BASSETT FURNITURE INDUSTRIES INC Q1 FY2025 earnings call

• Streamlining of cost structure began last year, contributing to $4.8 million improvement in operating profit.
• Consolidated sales down 5.1% (due to 13 vs 14 weeks in prior year), but normalized sales revenue increased 2.2%.
• Strong December and January, but February sales environment was challenging. Wholesale orders down 8.4% (normalized), while retail store network orders up 4.2%, traditional wholesale down 10%, and outdoor furniture flat.
• Retail gross margins modestly down, but cost reductions from retail warehouse consolidation and lower marketing expense helped. E-commerce sales up 36%.
• Focus on omnichannel with investments in BassettFurniture.com. Direct mail effective for launching Copenhagen line.
• Signed dealer number 50 to Bassett custom studio program. Unveiling new product visualization and B2B ordering system.
• Upcoming High Point furniture market: new product efforts including hideaway bench made domestic dining program, Andor and Newbury whole home collections, and accent furniture.
• Tariffs impact: 79% of wholesale shipments manufactured in US, remaining 21% affected; industry working on clarity on tariff effects.
• Board approved regular quarterly dividend of $0.20 per share.

Wholesale Operations: Net sales decreased $1.8 million or 3.2% primarily due to an additional week in the prior year quarter. On a comparable basis, sales revenue increased 4.2% or $2.1 million, with a 6.1% increase in shipments to the retail store network and an 11% increase in Lane Venture shipments (partially offset by 2.2%). Gross margin increased 250 basis points due to manufacturing efficiency gains in Bassett custom upholstery, improved customer mix in Lane Venture, and better margins in imported club level business. SG&A expenses as a percent of sales decreased 150 basis points. Wholesale backlog at quarter end was $19.5 million. Retail Operations: Net sales decreased $460,000 or 90 basis points primarily due to an additional week in the prior year quarter. On a comparable basis, sales revenue increased 6.8% or $3.4 million. Written sales orders written but not delivered declined 2.1% from the prior year, but normalized written sales were up 5.4%. Gross margin declined 80 basis points due to lower margins for in-line and clearance goods. SG&A expenses as a percent of sales were down 370 basis points. Retail backlog at quarter end was $36.1 million.

• Projected capital investment range of $8 million to $12 million for remodels of existing stores, technology investments (including e-commerce), and potential store openings.
• Committed to paying quarterly dividend and opportunistic share repurchases. Spent $1.7 million on dividends and $721,000 on share buybacks in Q1.

• Tariffs on materials used in manufacturing, which may impact pricing structure.
• Tepid demand and economic uncertainties affecting furniture sales.

Q: How has consumer confidence dropping affected the business since quarter end?

A: Business fell off the pace seen in Dec/Jan but is trending at last year's first part pace.

Q: Comment on inventory health and if additional inventory was brought in for tariffs?

A: Inventory increased due to spring season products like Copenhagen and Andorra, not consciously for tariffs.

Q: Strategy for addressing tariffs, including if imported products can be manufactured in US?

A: 79% of shipments are US-made, so can emphasize domestic products more, but need to study full effects of tariffs.

Q: Sustainability of gross margins and near-term tariffs mitigation strategy?

A: Gross margins unlikely to go higher in short term; thinking about all options for tariffs mitigation but no immediate decision made.

Q: Plans for store openings and design studios?

A: Targeting potential store openings (couple), and design studios with significant growth potential, focusing on domestic products at upcoming High Point market.