Hot Stock to Track: Bassett Furniture Industries (NASDAQ: BSET)

On Monday, Shares of Bassett Furniture Industries (NASDAQ: BSET) lost -0.30% to $19.66. The stock grabbed the investor’s attention and traded 31,887 shares as compared to its average daily volume of 39.89K shares. The stock’s institutional ownership stands at 76.80%.

Bassett Furniture Industries, Inc. (BSET) declared recently its results of operations for its fiscal quarter ended August 25, 2018.

Fiscal 2018 Third Quarter Highlights

Net income for the quarter was $2.90M or $0.28 per diluted share as contrast to net income of $4.60M or $0.43 per diluted share for the prior year quarter.  Included in the consolidated operating and net income for the prior year quarter was a $1.20M gain on the sale of the Las Vegas store building.  Excluding the effects of this gain, operating income would have been $6.10M or 5.3% of sales and net income would have been $3.90M or $0.36 per diluted share for the prior year quarter, respectively.

Wholesale Segment:                                                                    

Net sales for the wholesale segment were $63.80M for the third quarter of 2018 as contrast to $61.80M for the third quarter of 2017, a boost of $2.10M or 3.4%.  This increase was driven by $3.20M in sales from Lane Venture, attained during the first quarter of 2018, partially offset by a 2.7% decrease in furniture shipments to the Bassett Home Furnishings network and a 0.2% decrease in furniture shipments to the open market (outside the Bassett Home Furnishings network), as contrast to the prior year period.  Gross margins for the wholesale segment were 33.3% for the third quarter of 2018 as contrast to 33.6% for the prior year quarter.  This decrease was mainly driven by the addition of comparatively lower margins in the Lane Venture operation as both Upholstery and Wood margins were slightly higher year over year.  Wholesale SG&A for the third quarter of 2018 was $18.00M as contrast to $16.30M for the prior year period. SG&A as a percentage of sales increased to 28.2% as contrast to 26.4% for the third quarter of 2017.  This increase in SG&A as a percentage of sales was mainly driven by planned higher digital marketing and other brand development costs.  Operating income was $3.30M or 5.2% of sales as contrast to $4.50M or 7.2% of sales in the prior year.

Retail Segment:

Net sales for the 64 Company-owned Bassett Home Furnishings stores were $65.40M for the third quarter of 2018 as contrast to $67.40M for the third quarter of 2017, a decrease of $2.00M or 2.9%. The overall decrease was because of a 1.7% decrease in comparable store sales together with a $1.00M decrease in non-comparable store sales.

While the Company does not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar value of sales orders taken, rather than delivered) as a key store performance indicator.  Written sales for comparable stores increased by 0.2% for the third quarter of 2018 as contrast to the third quarter of 2017.

The consolidated retail operating income for the third quarter of 2018 was $0.90M as contrast to $1.40M for the third quarter of 2017, a decrease of $0.50M.  The 55 comparable stores generated operating income of $2.20M for the quarter, or 3.6% of sales, as contrast to $1.20M, or 2.0% of sales, for the prior year quarter. Gross margins for comparable stores were 52.2% for the third quarter of 2018 as contrast to 51.9% for the third quarter of 2017.  This increase was mainly because of improved pricing strategies and product mix.  SG&A expenses for comparable stores reduced $1.30M to $28.80M or 48.5% of sales as contrast to $30.20M or 49.9% of sales for the third quarter of 2017 mainly because of lower advertising and employee benefit costs, and $0.50M in prior year expenses associated with settling employment claims.

Non-comparable stores generated sales of $6.00M with an operating loss of $1.30M as contrast to sales of $7.00M and operating income of $0.10M in the prior year quarter.  As part of the $1.30M loss for the third quarter of 2018, the Company incurred $0.50M in new store pre-opening costs, a boost of $0.20M over the prior year.  In addition, the Company incurred $0.10M of post opening startup losses contrast to $0.10M in the third quarter of 2017.  Also, the prior year period included a $1.20M gain on the sale of the Las Vegas store building.  As formerly stated, the Company’s retail expansion is at first costly.  However, the Company believes that site selection and new store presentation will generally result in locations that operate at or above a break-even level within a reasonable period of time following store opening.

Logistical Services Segment:

Revenue for Zenith was $23.50M for the third quarter of 2018 as contrast to $24.90M for 2017, a decrease of $1.40M or 5.6%.  This decrease was mainly because of reduced revenues in both the middle and final mile operations.  The middle mile decrease was because of freight reductions from one noteworthy customer. Final mile revenues began to decline during the quarter as Zenith began the process of discontinuing the final mile service in preparation for transitioning the assets and many of the employees used in that service to the Bassett corporate retail operation, where they will be used solely for the delivery of goods to Bassett retail customers.  This will result in reducing total revenue for the Logistical Services segment by about 20% when the transition is complete.  As the majorities of those revenues has been from Bassett corporate retail stores and have historically been eliminated in Bassett’s consolidated income statement, the ultimate effect is expected to be a reduction of consolidated revenues by less than 1%.  Zenith’s operating expenses were $23.40M or 99.4% of sales as contrast to $23.80M or 95.3% of sales for the prior year period.  This increase in expenses as a percent of sales was mainly because of increases in fuel costs coupled with reduced leverage of fixed costs.

BSET has a market value of $210.76M while its EPS was booked as $1.24 in the last 12 months. The stock has 10.72M shares outstanding. In the profitability analysis, the company has gross profit margin of 60.90% while net profit margin was 2.50%. Beta value of the company was 0.82; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 3.00.

Marion Frost

Marion Frost

I am Marion Frost and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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