Bassett Furniture Inds. (NASDAQ: BSET) announced Tuesday that fourth-quarter 2011 sales fell 4.1 percent compared with the prior-year period to $63.3 million.
Net income declined to $600,000 from $1.9 million in fourth-quarter 2010, partly attributable to a $900,000 increase in income tax expense.
Company-owned store delivered sales increased 13 percent to $39.4 million, with a 4.9 percent comparable store increase.
Wholesale sales declined 11% to $43.7 million.
"As the Company grappled with the negative effects of the housing related downturn over the past several years, management's focus has been largely concentrated on stabilizing the health of its store network and on limiting balance sheet exposure," said Robert H. Spilman Jr., President and CEO of Bassett, Bassett, Va. "The emphasis has now squarely shifted to fine tuning the Company's operating performance. We made progress this quarter by improving corporate retail results, increasing wholesale margins, and reducing bad debt charges. The improvement in operating results was tempered by increased SG&A spending primarily related to next fall's launch of the new HGTV Home Division and restructuring charges related to closed plant demolition and store closure and relocation costs."
Wholesale shipments in the fourth quarter fell 11 perecent to $43.7 million compared with the fourth quarter of 2010, due primarily to fewer stores in the dedicated retail network in 2011 and shipping in the fourth quarter of 2010 of a backlog built in the second and third quarters of 2010. This decline was partially offset by increased shipments in the traditional and export channels in 2011.
Both wood and upholstery sales fell 12 percent for the quarter; and both are essentially flat for the year. Traditional and export sales channels increased 8.4 percent for the quarter, resulting from increased market share.
"In order to reduce accounts receivable exposure from underperforming retail licensees, the company ultimately ended 2011 with 15 fewer licensed stores than at year end 2010," Spilman said. "This reduction in store count was responsible for 97 percent of the quarter's decline in wholesale sales. Conversely, the wholesale volume derived from corporate retail stores and from independent retail furniture store sales grew by 9 percent. Despite the reduced volume, wholesale operating margins increased by 50 percent in 2011.
"For several years we have been dealing with the business challenges presented by the deteriorating health of our weaker licensed store operations. We made the decision to aggressively deal with most of the remaining delinquent licensee exposure in 2011, primarily through closures or takeovers. Although we definitely believe that this was the right decision for the Company, we are now dealing with the decline in wholesale sales that is a by-product of this process. Nevertheless, we were pleased that we were able to post improved wholesale margins for the quarter. We are focused on increasing our wholesale market share through our remaining store operations and with independent furniture retailers in both the Bassett and soon to be introduced HGTV Home Furniture Collection product assortments."
