Bassett(BSET) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue increased by $938,000 or 1.1% year-over-year, with a 2.5% increase when excluding sales from Noah Home, Inc [20] - Consolidated gross margin improved by 310 basis points to 55.6%, despite additional inventory valuation charges in the prior quarter [20] - Operating income was $2,500,000 or 3% of sales, a significant improvement from a loss of $8,500,000 in the prior year [21] - Diluted earnings per share were $0.22 compared to a loss of $0.82 in the previous year [21] Business Line Data and Key Metrics Changes - Net sales in the wholesale operations increased by $1,600,000 or 3%, driven by a 12.6% increase in shipments to Bassett retail stores, while shipments to the open market decreased by 2.6% [21] - Retail store net sales increased by $3,800,000 or 7.5%, although written sales declined by 0.8% [23] - Retail backlog was $34,100,000, down from $37,100,000 at the end of November 2024 [24] Market Data and Key Metrics Changes - Orders to the corporate and licensed store network grew by 9.6%, while wholesale business from the open market declined by 6.6% [11] - Written sales at bassetfurniture.com increased by 31% in the second quarter compared to the previous year, following a 36% increase in Q1 [15] Company Strategy and Development Direction - The company is focused on executing a five-point restructuring strategy aimed at growth and profitability, including product innovation and cost reduction [5][6] - Plans to open two new retail stores in Cincinnati and Orlando, with construction expected to start in the fall [18] - The company aims to enhance its presence in the interior design community and is committed to integrating further into this channel [73] Management's Comments on Operating Environment and Future Outlook - The management highlighted the challenging housing market and consumer confidence issues affecting the home furnishings industry [6][8] - Despite the tough environment, the company remains optimistic about the impact of its restructuring efforts and new product lines on future performance [73] - Management is closely monitoring tariff impacts and is working to mitigate their effects on pricing and supply chain [10][72] Other Important Information - The company generated $7,000,000 in operating cash flow during the quarter and ended with $59,800,000 in cash and short-term investments, with no outstanding debt [24][25] - The board of directors will consider a regular quarterly cash dividend of $0.20 per share [19] Q&A Session Summary Question: Update on design studios and future plans - The company currently has 54 design studios and expects to maintain a pace of opening six to eight studios per quarter [27][30] Question: Metrics on design studios' performance - The company is monitoring the performance of design studios but has not shared specific metrics externally [31] Question: Impact of tariffs on design trade versus retail - Tariffs have had less impact on the design trade compared to retail, which is more cost-conscious [36] Question: Shipment timing and expectations for the third quarter - A significant customer affected Lane Venture shipments, but improvements are expected in the third quarter [42][46] Question: Future margin impacts from discounting - The company is working to clean inventory, which may slightly affect margins but is seen as a prudent exercise [56][59] Question: Plans for store expansion - The company aims for a conservative growth strategy, targeting two to three net new stores per year [62][67]