Release Date: October 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated gross margin improved to 53%, up 1.4% from the previous year.
- Retail gross margins increased by 210 basis points to 53.7%, driven by higher home delivery income and better margin on clearance inventory.
- The company added nine new Bassett custom studio dealers, enhancing its distribution footprint.
- Bassett Furniture Industries Inc (BSET, Financial) reported strong initial sell-through of its fall upholstery introduction, indicating positive market reception.
- The company maintained a strong balance sheet with $56.2 million in cash and short-term investments.
Negative Points
- Revenue in both wholesale and retail segments declined, with a 16% decrease in wholesale sales and a 10% decrease in retail sales.
- The company faced operational disruptions due to a cyber attack, resulting in an estimated loss of $1 million to $2 million for the third quarter.
- Hurricane Helene and the East Coast dock strike negatively impacted logistics and distribution, delaying shipments.
- The company reported a consolidated operating loss of $6.4 million, compared to a loss of $3.2 million in the same quarter of the previous year.
- Retail written sales were down 5%, and the company faced challenges with consumer demand in a tough economic environment.
Q & A Highlights
Q: Given the operational challenges in Q3, including the July 4th shutdown and the cyberattack, how should we interpret the company's performance and near-term outlook?
A: Robert Spilman, CEO, noted that July was particularly tough due to limited operational days. However, sales typically improve in late August leading into Labor Day, and September is generally a strong month. Despite these challenges, the company is navigating a tough environment, but there are signs of slight improvement.
Q: What factors contributed to the increase in average ticket size, and is this trend sustainable?
A: The average ticket size has been around $4,000, fluctuating slightly. This is influenced by the size of design projects. While the company aims for higher average tickets, they also focus on store traffic and transactions. The current range is expected to continue.
Q: How did the cyber incident impact wholesale shipments, and what are the implications for future performance?
A: John Daniel, CFO, explained that while the cyber incident disrupted operations, the company managed to catch up on most shipments. The main impact was on retail, where some customers refrained from placing orders due to system issues. The company is working to improve efficiency and expects to recover.
Q: With the restructuring efforts underway, what gross margin improvements can be expected in a better environment?
A: CEO Robert Spilman believes there is potential for further gross margin improvements, despite challenges like factory consolidations. The company aims to offer value in a competitive market while enhancing margins, particularly in wholesale.
Q: What is the outlook for the Bassett Custom Studio concept, and how many new stores are planned?
A: The company has 40 custom studios, with plans to reach 50 by year-end. While only one new store is currently planned, the focus is on refurbishing existing stores and expanding e-commerce. The custom studio program is expected to drive growth, though exact numbers for next year are uncertain.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
