Bassett(BSET) - 2025 Q2 - Quarterly Report

Part I - Financial Information Condensed Consolidated Financial Statements The company reported a significant financial turnaround, achieving net income for the quarter and six months ended May 31, 2025, and dramatically improving operating cash flow compared to prior-year losses Condensed Consolidated Statements of Operations Consolidated Statement of Operations Highlights (in thousands, except per share data) | Financial Metric | Quarter Ended May 31, 2025 | Quarter Ended June 1, 2024 | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $84,348 | $83,410 | $166,510 | $169,964 | | Gross profit | $46,909 | $43,760 | $93,739 | $91,627 | | Income (loss) from operations | $2,497 | $(8,462) | $4,952 | $(10,819) | | Net income (loss) | $1,918 | $(7,201) | $3,772 | $(8,394) | | Diluted earnings (loss) per share | $0.22 | $(0.82) | $0.43 | $(0.96) | Condensed Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2025 (Unaudited) | November 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $39,433 | $39,551 | | Inventories | $59,362 | $54,965 | | Total current assets | $144,193 | $141,539 | | Total assets | $331,333 | $341,170 | | Total current liabilities | $74,524 | $73,403 | | Total liabilities | $164,557 | $173,843 | | Total stockholders' equity | $166,776 | $167,327 | Condensed Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,903 | $(1,919) | | Net cash used in investing activities | $(2,349) | $(4,066) | | Net cash used in financing activities | $(4,672) | $(3,777) | | Change in cash and cash equivalents | $(118) | $(9,761) | Notes to Condensed Consolidated Financial Statements Key notes outline the company's two reportable segments, the closure of the Noa Home business, revenue recognition policies, and details of its $25 million credit facility with $16.8 million available - The company's fiscal year 2024 contained 53 weeks, with the extra week in the first quarter, resulting in 27 weeks of operations for the six-month period ended June 1, 2024, versus 26 weeks for the period ended May 31, 2025[19] - The company maintains a $25 million credit facility, secured by accounts receivable and inventory, with $8.2 million outstanding under standby letters of credit and $16.8 million available as of May 31, 2025[40] - The company operates two reportable segments, Wholesale and Retail, with 'Corporate and other' including shared costs and the now-closed Noa Home business[59][61] - In Q2 2025, the company received $698,000 from a business interruption insurance claim related to a 2024 cybersecurity incident, recorded as a gain reducing SG&A expenses[48] Management's Discussion and Analysis (MD&A) Management attributes improved performance to cost reductions and the absence of prior-year impairment charges, with the Retail segment returning to profitability and the Wholesale segment improving operating income, supported by strong liquidity Company Overview - Bassett operates through a network of 87 Company-owned and licensee-owned Bassett Home Furnishings (BHF) stores, accounting for approximately 60% of wholesale sales[79] - The company is focusing on its digital presence, noting a greater than 35% increase in e-commerce sales for the first six months of fiscal 2025 compared to the prior year[81] - The Noa Home e-commerce business, acquired in 2022, was closed and liquidated in fiscal 2024 after continued operating losses[82] - Approximately 80% of wholesale revenues are derived from products manufactured in the United States[84] Consolidated Results of Operations - Q2 2025 consolidated sales increased 1.1% YoY, while H1 2025 sales decreased 2.0% YoY, though normalizing for the extra week in H1 2024 shows a 1.7% increase[86][89] - Gross margin for Q2 2025 increased by 310 basis points, and SG&A as a percentage of sales decreased by 330 basis points, primarily due to cost reductions and the absence of prior-year inventory valuation and asset impairment charges[87][88] Consolidated Results Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $84,348 | $83,410 | 1.1% | $166,510 | $169,964 | -2.0% | | Gross profit | $46,909 | $43,760 | 7.2% | $93,739 | $91,627 | 2.3% | | SG&A expenses | $44,412 | $46,707 | -4.9% | $88,787 | $96,931 | -8.4% | | Income (loss) from operations | $2,497 | $(8,462) | N/M | $4,952 | $(10,819) | N/M | Segment Analysis The Wholesale segment significantly increased operating income, while the Retail segment achieved profitability through higher sales and cost reductions, with the 'Corporate and Other' segment reflecting the Noa Home business closure Operating Income (Loss) by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Wholesale | $8,290 | $5,687 | $16,975 | $12,446 | | Retail - Company-owned stores | $482 | $(2,222) | $434 | $(3,834) | | Net expenses - Corporate and other | $(6,521) | $(6,942) | $(12,747) | $(14,537) | Liquidity and Capital Resources - Cash provided by operating activities was $6.9 million for H1 2025, a significant improvement from $1.9 million cash used in H1 2024, primarily due to improved operating income[122] - The company has a strong liquidity position with $59.8 million in cash, cash equivalents, and short-term investments as of May 31, 2025[123] - During H1 2025, the company paid $3.5 million in dividends and repurchased $1.2 million of its common stock, with $19.2 million remaining available under the stock repurchase plan[123] - The company has a $25 million credit facility with $16.8 million available as of May 31, 2025[126] Market Risk Disclosures Primary market risks include raw material and fuel cost fluctuations, alongside exposure to the commercial real estate market through owned properties and leased right-of-use assets totaling over $100 million - The company is exposed to market risk from the cost of raw materials like wood, fabric, and petroleum-based foam products[133] - The company has potential exposure to the commercial real estate market through its owned retail properties (net book value of $23.8 million) and leased locations (right-of-use assets of $84.8 million)[135] - The company is contingently liable for $4.6 million in licensee lease obligation guarantees[135] Controls and Procedures The company's disclosure controls and procedures were deemed effective as of May 31, 2025, with no material changes to internal controls over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[136] Part II - Other Information Share Repurchases and Other Information The company reported no material legal proceedings and continued its stock repurchase program during the quarter, with $19.2 million remaining authorized for future repurchases - The company has no material legal proceedings to report[138] Stock Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | March 2 - April 5, 2025 | 23,155 | $15.79 | | April 6 - May 3, 2025 | 4,000 | $15.44 | | May 4 - May 31, 2025 | 582 | $16.28 | - As of May 31, 2025, $19.2 million remained available for share repurchases under the company's plan[138]