Bassett Announced Increased Earnings - Gross Margin Improvement Drives Results

Furniture World Magazine

Bassett Furniture Industries, Inc. (Nasdaq: BSET) today announced increased earnings for the third quarter offiscal 1999. The increase resulted from a combination of gross marginimprovement and investment earnings. Diluted earnings per share increased 28% for the third quarter and 11% for the nine-month period ended August 28, 1999. Diluted earnings per share were $.36 for the quarter and $1.10 for the nine months, compared with $.28 and $.99, respectively, for the year-ago periods. All comparisons are with proforma fiscal 1998 earnings excluding charges for restructuring and discontinued operations. Reported diluted earnings per share were $.24 and $.81, respectively for the year ago periods. The company also completed the sale of its bedding division in the third quarter. Since the sale was effective April 30, 1999, no results are included for the third quarter of 1999. Included in the nine month results for 1999 are bedding sales of $11.9 million and operating losses of $.2 million. Bedding division net sales and operating income were $9.9 million and $.2 million for the third quarter of 1998 and $30.4 million and $.8 million for the nine month period ended August 29, 1998. Commenting on the results, Paul Fulton, chairman and chief executive officer, said, "We are pleased with the fact that our gross margins held up for the quarter. Brand sales were basically flat in the third quarter but are up 5% for the year." Gross Margin -- a major area of focus for Bassett -- was 22.8% for the quarter and 21.6% for the first nine months, an improvement of 3.8 percentage points for the quarter and 2.2 percentage points for the year. The gross margin improvement resulted from a better product mix, price increases, and increased levels of production, with particularly strong performance in the wood division. A new table plant, which will open next month, will further improve manufacturing productivity. The operating margin was 3.4%, slightly better than last year, reflecting continued spending to build the brand and the organization, start-up costs of the new table plant and the growing retail operation. Losses associated with the start up of our retail operations were $.7 million for the quarter. Manufacturing operating profit was 4.0% of net sales for the quarter. Net sales for the quarter were $88.8 million, compared with $98.1 million (bedding sales were $9.9 million) in 1998; nine month sales were $291.9 million in 1999 and $294.8 million in 1998. Exclusive of bedding and retail, sales were $277.1 million in 1999 and $264.4 million in 1998. This sales improvement reflects both the expansion of the Bassett Furniture Direct (BFD) retail program from 30 stores in mid-1998 to 44 stores at the end of August 1999 and solid growth with the company's largest customers. BFD sales represented 20% of total sales in 1999, up from 14% in 1998. Plans call for a total of 50 to 55 BFD stores open by the end of 1999. Bassett also announced that it is continuing its active share repurchase program. As of August 28, approximately 50% of the current $40 million share repurchase program had been completed. Also , Bassett's Board of Directors declared a regular quarterly dividend of $.20 per share payable November 30, 1999, to shareholders of record November 16, 1999. Bassett Furniture Industries, Inc., based in Bassett, Va., is a manufacturer and marketer of branded home furnishings. The company operates 14 plants in five states and operates or licenses 44 Bassett Furniture Direct stores nationwide. The company's stock is traded on the Nasdaq market under the symbol BSET. More information about Bassett is available on the Internet at http://www.bassettfurniture.com.