Q1 2025 Bassett Furniture Industries Inc Earnings Call
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Speaker Change: Good day, and thank you for standing by and welcome to the best furniture Industries first quarter 2025 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session will need to press star one on your telephone you will then hear an automated message advising your hand is raised to Australia.
Your question. Please press Star one again, please be advised today's conference is being recorded.
Ingram: I'd like to hand, the conference over to your speaker today through Ingram Vice President Controller. Please go ahead.
Speaker Change: Thank you Kevin for the introduction welcome Tabasco Furniture's earnings call for the first quarter ending March one 2025.
Speaker Change: I am doing ambassador controller I am sitting in this morning for our CFO, Mike Daniel who is out for an unexpected event in his immediate family. Please keep Mike and his family in your thoughts.
Speaker Change: Joining me today is our chairman and CEO, Rob Stillman, we issued our news release yesterday after the market closed and is available on our website.
Speaker Change: After today's remarks, we will open up the call for question and answer session. We will post the transcript of the call on <unk> Investor website within 48 hours of this call.
Speaker Change: Due to calendar shifts or first quarter of the fiscal year had 13 weeks as compared to 14 weeks in fiscal 2024.
Speaker Change: During today's call certain statements, we make may be considered forward looking in inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view.
Speaker Change: These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker Change: The company cannot agree to or cannot guarantee the accuracy of any forecast or estimate nor does it undertake any obligation to update such forward looking statements.
Speaker Change: For more information, including important cautionary notes. Please see the company's annual report on Form 10-K for the fiscal year ending November 32024.
Speaker Change: Other filings with the SEC, describing risks related to our business are available on our corporate website under the Investor tab.
Rob Stillman: Now I'll turn it over to Rob for comments about our first quarter Rob.
Rob Stillman: Thank you drew and good morning, everyone.
Rob Stillman: We are pleased to report improved operating results.
Rob Stillman: First quarter of 2025.
Rob Stillman: The streamlining of our cost structure that began last year.
Coupled with higher levels of operating efficiency in both our wholesale and retail segments.
Rob Stillman: Combined to produce $4 $8 million of improvement in operating profit.
Rob Stillman: Sure.
Rob Stillman: As I said last quarter, our strategic plan for 2025.
Rob Stillman: It was designed to whether another year of tepid demand and keep us disciplined and focus on growth.
Rob Stillman: Our management team is running with the later mindset and we are accelerating new ideas and innovative products to position us well and providing quality home furnishings and design services.
Rob Stillman: We're incorporating more technology.
Rob Stillman: The customer experience and fine tuning our marketing.
Rob Stillman: We plan for housing sales to remain slow and we're working to react quickly to the ups and downs.
Rob Stillman: Economic data and changes from Washington.
Rob Stillman: Last week's report that consumer confidence was plummeting was disconcerting, but we believe the steps we've taken will help us run efficiently.
Rob Stillman: And get through this tough furniture economy.
Rob Stillman: Yes.
Rob Stillman: Let's move to the results of our first quarter.
Rob Stillman: Solidago sales were down by five 1% for the first quarter.
Rob Stillman: It was due largely to the comparison of 13 weeks this year to last years fiscal 14 weeks.
Rob Stillman: Normalized basis sales revenue for the first quarter increased two 2%.
Rob Stillman: We had a strong December and January.
Rob Stillman: Due in part to the shorter timeframe between Black Friday and Christmas.
Rob Stillman: The sales environment was a little more challenging in February.
Rob Stillman: Our President's day promotional event was not as successful as last year.
Rob Stillman: And we've said.
Rob Stillman: History get more aggressive with discounts and credit promotions.
Rob Stillman: Wholesale orders were down by.
Rob Stillman: Eight 4% for the quarter or one 4% normalized for the extra week.
Rob Stillman: On a normalized basis compared to last year.
Rob Stillman: Orders from our store network increased four 2% with.
Rob Stillman: With December and January posting higher increases in February February reporting a decrease due to a very aggressive promotional environment around Presidents' day.
Rob Stillman: Orders from our traditional wholesale business, however decreased 10% on a normalized basis with.
Rob Stillman: With February being the slowest month of the quarter orders from our outdoor furniture business were essentially flat on.
Rob Stillman: On a normalized basis.
Rob Stillman: We were pleased that on a normalized basis written sales and our corporate stores for the quarter increased five 4%.
Even with the softer February sales.
Retail gross margins fell modestly.
Rob Stillman: Cost reductions from our retail warehouse consolidation program and lower marketing expense contributed to our improved results.
Rob Stillman: Our retail warehouse consolidation plan is ongoing and we expect additional improvement in this regard.
Rob Stillman: As the year progresses.
Rob Stillman: I am, especially excited with even more progress coming from our E Commerce.
Rob Stillman: And our drive to improve assets Omnichannel model.
Rob Stillman: The investments that we've made and will continue to make.
Rob Stillman: And Bassett furniture Dot com are responsible for Q1 e-commerce sales.
Rob Stillman: Being up 36%.
Rob Stillman: While we have not seen higher web traffic so far this year.
Rob Stillman: A higher rate of conversion.
Rob Stillman: As currently contributing.
Rob Stillman: To sales growth.
Rob Stillman: We expect that with continued investments in Omnichannel.
Rob Stillman: We have opportunities for growth in traffic and conversions for the remainder of the year.
Rob Stillman: We are being more prescriptive in our marketing efforts, while we reduced marketing and advertising cost. This quarter. We are disciplined about getting better returns from these investments.
Rob Stillman: Direct mail was especially effective in supporting the launch.
Rob Stillman: Of our whole home Copenhagen line and allows us to reinforce newness and our design services.
Rob Stillman: We plan to incorporate direct mail more frequently in our promotional mix and then digital outreach activities for the remainder of the year.
Rob Stillman: Okay.
Rob Stillman: We continue to focus on our sales efforts outside of the store network, we reached a milestone.
Rob Stillman: <unk> dealer number 52 are Abbasid custom studio program in February.
Rob Stillman: The 1000 square foot concept.
Rob Stillman: From the recently claimed best custom.
Upholstery company in the industry about furniture today is.
Rob Stillman: Is gathering steam.
Rob Stillman: Part of the momentum we are seeing is attributable to last year's edition a bit the leather options to our true custom upholstery programs.
Rob Stillman: We are also about to unveil our new product visualization.
Rob Stillman: And database ordering system that will simplify the experience for the retail salespeople and their clients at the store level.
Rob Stillman: With the April high point furniture market around the corner.
Rob Stillman: We continue to integrate greater innovation and newness into our product line to drive higher sales.
Rob Stillman: Three new efforts are particularly noteworthy.
Rob Stillman: First a hideaway benchmade domestic dining program.
Rob Stillman: An extensive collection of tables and chairs and solid maple that feature self storing table leaves and enhanced array of upholstered dining chairs.
This program offers tremendous value in today's marketplace.
Rob Stillman: Next are the two whole home product collections.
Rob Stillman: <unk> and the new Berry.
Rob Stillman: Which rollouts later this year, both Patriot transitional styling and exciting combinations.
Rob Stillman: Finishes and materials.
Rob Stillman: And third we are building on our program of accent furniture.
Rob Stillman: To enhance our retail displays.
Rob Stillman: These products feature stone battle.
Woven material in leather combinations that are also conducive for web sales.
Rob Stillman: Rand out design projects.
Rob Stillman: <unk>.
Rob Stillman: Tariffs have been top of mind across the industry for several months.
Rob Stillman: Culminating with President Trump's Rose Garden announcement 17 hours ago.
Speaker Change: Although 79% of our wholesale shipments in the first quarter.
Speaker Change: Our manufactured or assembled in the U S.
Speaker Change: Many materials, such as fabrics or plywood used in the manufacturing process will now be exposed to tariffs.
Speaker Change: As well the remaining 21% that we bring in fully assembled.
Speaker Change: While the reciprocal tariffs are now known.
Speaker Change: There are additional tariffs on certain materials used in the manufacture of some of our products.
Speaker Change: The entire industry.
Speaker Change: Working with outside experts.
Speaker Change: Again clarity on this unusual situation.
Speaker Change: We will determine what this means for our pricing structure.
Speaker Change: On goods that are affected over.
Speaker Change: Over the next several days.
Speaker Change: We do firmly believe that the announced tariff policies will not positively influenced the American consumer to invest in home furnishings until the effects of these policies are fully implemented and understood.
Speaker Change: On March 13, we announced that our board of directors approved a regularly quarter regular quarterly dividend of <unk> 20 per share.
Speaker Change: Dividends.
Speaker Change: <unk> by opportunistic share repurchases remain a key piece of our capital returns to shareholders.
Drew: Now I'll turn things back over to drew.
Drew: More details on our financials drew.
Drew: Thanks, Rob and my commentary the comparisons I will discuss will be the first quarter of fiscal 2020 compared to the first quarter of fiscal 2024, unless otherwise noted.
Speaker Change: And as Rob mentioned earlier, there was an additional week from the prior year period compared to 13 weeks in the reporting quarter.
Speaker Change: For the first quarter total consolidated revenue declined $4 4 million or five 1% primarily due to the additional week in the prior year quarter.
Speaker Change: On a normalized basis sales revenue increased $1 8 million or two 2%.
Speaker Change: This includes a normalized $4 two increase in wholesale wholesale shipments and $6 eight increase in retail delivered sales through our company owned stores.
Speaker Change: Solid gross margins increased 170 basis points due primarily to better margins in the wholesale segment.
Speaker Change: SG&A expenses were 54% of sales, which was a 400 basis, which was 400 basis points lower than last year as we reap the benefits of last year's restructuring.
Speaker Change: We reported consolidated operating income of $2 5 million compared to a loss of $2 4 million Duluth.
Speaker Change: Diluted earnings per share were 21 cents versus a loss of 14.
Speaker Change: Let me cover more details on the wholesale operations net sales decreased $1 8 million or three 2% from the prior year period.
Speaker Change: Primarily to the additional week in the prior year quarter on a comparable basis sales revenue increased four 2% or $2 1 million consisting of a $6 one increase.
Speaker Change: Shipments to the retail store network, and an 11% increase in lane venture shipments, partially offset by a $2 two decrease in shipments to the open market.
Speaker Change: Gross margin increased 250 basis points over the prior year period, primarily due to improved margins in.
Speaker Change: In our basket custom upholstery business for manufacturing efficiency gains.
Speaker Change: Increased margins in our lean operations due to improved customer mix.
And improved margins in our imported club level business.
Speaker Change: SG&A expenses as a percentage of sales decreased to 150 basis points, primarily due to the benefit.
Speaker Change: Of cost reductions implemented during the second half of fiscal 2024.
Speaker Change: Wholesale backlog at quarter end was $19 5 million compared to $21 8 million at the end of last year and $19 5 million at the end.
Speaker Change: Q1 2024.
Speaker Change: Now moving onto our retail operations.
Speaker Change: Net sales decreased 460 <unk>.
Speaker Change: Or 90 basis points due primarily to the additional week in the prior year quarter on a comparable basis.
Speaker Change: Sales revenue increased six 8% or $3 4 million.
Speaker Change: Written sales.
Speaker Change: Orders written but not delivered declined two 1% from the first quarter last year.
Speaker Change: Normalized basis, written sales were up five 4%.
Speaker Change: Gross margin for the quarter declined 80 basis points due to.
Speaker Change: Due to lower margins.
Speaker Change: For inline in clearance goods as we became slightly more aggressive in cycling through unproductive inventory.
Speaker Change: Which was part of our five point restructuring plans from 2024.
Speaker Change: SG&A expenses as a percentage of sales were down 370 basis points, primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024, coupled with lower advertising and marketing costs and efficiency gains in our warehouse and delivery operations.
Speaker Change: Retail backlog at the end of the first quarter was $36 1 million compared to $37 million at the end of last year and $31 3 million at.
Speaker Change: At the end of Q1 'twenty four.
Speaker Change: Our liquidity position remains solid although we generated a slight operating cash flow deficit for the quarter. It represented an improvement of $7 7 million over the prior year.
Speaker Change: Our first quarter is typically our lowest of the four quarters for cash generation.
Speaker Change: We ended the quarter with $56 4 million in cash and short term investments and have no outstanding debt. This.
Speaker Change: This year, we have predicted a range of capital investment in our business of between $8 million and $12 million.
Speaker Change: Primarily to cover Remodels of existing stores investments in technology, including e-commerce and potential store openings.
Speaker Change: We continue to pay our quarterly dividend and repurchase shares Opportunistically, we spent $1 7 million on dividends and 721000 on share buybacks in Q1.
Speaker Change: We remain committed to stockholder returns through dividends and paybacks.
Speaker Change: Through our restructuring we made the necessary changes to our operations to return to profitability as Rob said, we believe we have positioned <unk> well to weather today's challenges and we are committed to investing in our business and a cautious smart and calculated fashion.
Speaker Change: While providing our stockholders with a reasonable return.
Now I will note that we now will open up the line for questions. Kevin Please provide instructions to do so.
Speaker Change: Ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again, we will pause for a moment, while we compile our Q&A roster.
Anthony: Our first question comes from Anthony <unk> with Sidoti <unk> Company. Your line is open.
Speaker Change: Good morning, and thank you for taking the questions.
Speaker Change: Sympathies to Mike and his family.
Speaker Change: So I guess first.
Speaker Change: By the way Rob Thanks for providing the color about the monthly trends so.
Speaker Change: Just wondering since.
Speaker Change: Then as far as now with consumer confidence dropping as you noted have you guys seen any meaningful change in the trends.
Speaker Change: And your business.
Speaker Change: Since the quarter end, just curious to get your high level thoughts about that.
Speaker Change: Well Anthony.
Anthony: Good morning.
Speaker Change: I would say.
Speaker Change: Wind after the election.
Speaker Change: We saw.
Speaker Change: A spike in sales in activity, our Black Friday was good.
As we've noticed last quarter, and then December and January.
Speaker Change: We're pretty strong, but as we've gotten further ended the year I would say that.
Speaker Change: Our business has.
Speaker Change: Fallen off that pace, but but back.
Speaker Change: Two last year's pace.
Speaker Change: That we saw in the first part of last year. So.
Speaker Change: On a year over year basis.
Speaker Change: I think we're kind of trending where we were.
Speaker Change: A year ago.
Speaker Change: With.
Speaker Change: The notable bump that we got.
Speaker Change: Post election, then.
Speaker Change: November December and January.
Speaker Change: That makes it any help yes, yes, yes.
Speaker Change: That makes sense.
Speaker Change: Providing that color.
Speaker Change: So as far as the inventory it was up sequentially from last I'm, sorry at the end of <unk>.
Speaker Change: The fiscal year.
Speaker Change: Just wondering if you could comment on the health of that inventory and just just wondering if you guys.
Speaker Change: Perhaps brought in some additional inventory to try to get ahead of the tariffs.
Well.
Speaker Change: We really didn't consciously bring in extra inventory.
Speaker Change: For the tariffs but.
Speaker Change: Collections that I mentioned, the Copenhagen, which we did last year.
Speaker Change: It's selling well and then one of those a whole home collections the Andorra.
Speaker Change: We brought in in anticipation of the spring season, and those were really the primary drivers of increased inventory and.
Speaker Change: Frankly, now that we know what happened yesterday I'm glad we did bring in that <unk>.
Speaker Change: The spring season.
Speaker Change: That's basically the.
Speaker Change: Yes.
Speaker Change: What happened then.
<unk> now now we've got a new ballgame, so we will be.
Speaker Change: Certainly discussing that today and in the next several days, but that was really the driver.
Speaker Change: Gotcha.
Speaker Change: Speaking of the new ballgame as far as the announcements yesterday.
Speaker Change: I know, it's still for us, but just kind of initial kind of thoughts as to kind of the strategy.
Speaker Change: What are you guys go from here.
Speaker Change: Just wondering if any of those imported products could they be manufactured in the U S or is that just not feasible.
Speaker Change: We would love to hear your thoughts on that.
Speaker Change: I think for US that's that's not feasible.
Speaker Change: What we can we can.
Speaker Change: Of course, I mean as I.
Speaker Change: You mentioned, 79%.
Speaker Change: When in the box in the U S. We do have.
Speaker Change: Solid domestic footprint and so we will be looking at our mix.
Speaker Change: We will be looking at really what the full effects.
Speaker Change: The tariffs are and we can certainly emphasize.
Speaker Change: Excuse me the domestic product.
Speaker Change: More purposefully and more prominently if we choose to do so but.
Speaker Change: We have some some nice selling imported products and a couple that.
Speaker Change: That we introduced last year.
Speaker Change: Breaking the difference that we've got a really.
Speaker Change: Study that and but we do have some flexibility given that we have.
Speaker Change: Fab factories in the U S and.
Speaker Change: We can do some things it's not as they were.
Speaker Change: Totally relying on.
Speaker Change: On imports.
Speaker Change: Understood Yes.
Speaker Change: Well, thank you very much and best of luck.
Speaker Change: Thank you Anthony.
Speaker Change: For our next question.
Speaker Change: Our next question comes from Brian Gordon with.
Speaker Change: Water Tower research your line is open.
Brian Gordon: Good morning, everyone.
Speaker Change: Would also.
Speaker Change: One of my sympathies to his family.
Speaker Change: I guess my question is sort of on the gross margins I mean, they were they were very impressive in the quarter.
Speaker Change: Im.
Speaker Change: Wondering how how sustainable these could be.
Given yes.
Speaker Change: The majority of your production domestic even if there is an impact from.
Speaker Change: The tariffs on that 21% of the business.
Speaker Change: It feels like I mean, assuming demand.
Speaker Change: Holds up reasonably well.
Speaker Change: We could see.
Speaker Change: Levels continuing through the rest of the year.
Speaker Change: Well.
Speaker Change: Morning, Brian This Rob.
Speaker Change: Okay.
Speaker Change: These lasers as high gross margin levels, we've ever.
Speaker Change: Achieved are right up there with it and.
Speaker Change: We do.
Drew: Drew mentioned in his remarks.
Speaker Change: <unk>.
Speaker Change: The wholesale segment.
Speaker Change: Really.
Speaker Change: Contributed to that.
Speaker Change: And our retail margins were down slightly but not very much and of course, we had the corresponding reduction.
Speaker Change: The reduction in SG&A expenses.
<unk>.
Speaker Change: I don't see our gross margins going any higher than this.
Speaker Change: In the short term.
Speaker Change: And.
Speaker Change: That's because we wanted to keep.
Speaker Change: Our retail inventory lane.
Speaker Change: Anthony asked about the increase in inventory.
Speaker Change: I mentioned that our retail inventory did go up some and some of that is.
Speaker Change: Yes.
Speaker Change: Goods that we want to move out so we want to continue to keep that cash flow and of course and.
Speaker Change: And then the wildcard is of course.
Speaker Change: Yesterday, knowing now what's what's going on with the imports.
Speaker Change: We react to that.
Speaker Change: If it.
Speaker Change: Stays like it is we're going to have to increase prices.
Speaker Change: At some level on this stuff and we don't.
Speaker Change: That's what today is about were really kind of how it.
Speaker Change: <unk> been saying so.
Speaker Change: I don't see.
Speaker Change: A big ammunition in our gross margin coming but I don't see it getting.
Speaker Change: Higher than it currently is.
Speaker Change: Is there was for this quarter.
Speaker Change: Got it. Thank you that's very helpful.
Speaker Change: The near term strategy for addressing the tariffs.
Speaker Change: Are you thinking about surcharges or list price increases or any other sort of mitigation strategy like that.
Speaker Change: We're thinking about everything.
Speaker Change: But we don't know the answer we have been reaching out to.
Speaker Change: To our best customers.
Speaker Change: Talking to them about this.
Speaker Change: What's their point of view.
Speaker Change: What do they see happening from our competitors.
Speaker Change: That kind of stuff.
Speaker Change: So we're going to have to.
Speaker Change: Ratio conclusion on that but frankly.
Speaker Change: Since four o'clock yesterday, we've been talking about this and we've been getting ready for this call. So.
Speaker Change: When we get up.
Speaker Change: We've made it so.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: It's an unusual time St. Louis.
Speaker Change: Yes.
Speaker Change: Could you talk a little bit more about your plans for new store openings and maybe your targets for the design studios and how many.
Speaker Change: And then the ideal situation would you like to be at by the end of this year.
Speaker Change: Well if I tell you the number you will remember it.
Speaker Change: While the design studios, but we do see.
Speaker Change: Additional white space for us to grow this this program win.
Speaker Change: I would say significantly.
Speaker Change: So that is.
Speaker Change: That's a big focus and of course all of that is domestic product.
So.
Speaker Change: We'll be pushing that hard.
Speaker Change: At the.
Speaker Change: Yes, the market coming up in between now and then.
Speaker Change: What was the second part of that.
Speaker Change: Sure.
Speaker Change: I was just asking about new stores as well as <unk>.
Speaker Change: Stores.
Speaker Change: I think the number was like maybe Q.
Speaker Change: That's right we actually are in the throes.
Speaker Change: Jay our general counsel sitting in here and he has been.
Speaker Change: Working with.
Speaker Change: Couple of landlords, we will usually don't.
Speaker Change: Yes.
Speaker Change: Reveal where they are until we get closer to the thing and get things that but we do we will sign a couple of new leases in the next in a very short amount of time, it's going to take some time to.
Speaker Change: Retrofit the store and turn it into a asset footprint and so we're thinking probably.
Speaker Change: Very late this year or early next year, but both are new markets for us.
Speaker Change: One of which we've been in before so.
Speaker Change: But we're excited about that.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: That's basically all of the questions I have at this point so good luck.
Speaker Change: During the quarter.
Brian Gordon: Hey, Thank you, Brian we will be we'll be talking to you.
Rob Stillman: And I'm not showing any further question at this time I'd like to turn the call back over to Rob.
Brian Gordon: Well.
Rob Stillman: Thank you, Kevin and thank everyone for tuning in today and we are pleased with.
Brian Gordon: The quarter and our progress but.
Brian Gordon: Certainly the environment out there is not getting <unk>.
Brian Gordon: Simpler is getting more complex and.
Brian Gordon: We are going to deal with that and and.
Brian Gordon: Persevere through this.
Brian Gordon: We like.
Brian Gordon: What we've done with our cost structure and we feel.
Brian Gordon: Our product line is strong in.
Brian Gordon: We're just going to.
Brian Gordon: Focus on.
Brian Gordon: Dealing with this new environment and heading into hopefully a successful market in April. So thank you for your interest in <unk> and <unk>.
Brian Gordon: Have a good day.
Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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