Bassett Furniture Industries, Inc. (NASDAQ:BSET)
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Retailer, manufacturer and marketer of branded home furnishings.
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Retailer, manufacturer and marketer of branded home furnishings.
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Bassett Furniture is engaged in manufacturing, marketing, and retailing of branded home furnishings in the United States, Canada, and internationally. The Company operates through wholesale and retail segments. The wholesale segment contributes about 80% of the revenues. The retail segment consists of 135 stores, 26 of which are owned stores and the rest are partnership licensee stores.
In Q3’06, Net Revenues declined by 6.3%; wholesale segment declined by 8.3 %, and retail segment showed a flat trend on a year-over-year basis. Gross margins declined by 5.9% year-over-year as a result of soft retail conditions and clearance sales. New housing unit sales have also shown declining trend which is expected to continue. Due to the downturn in housing sales and increasing competition in the industry it is expected to negatively impact the company.
To counter the situation of declining revenues and margins, the company is adopting a strategy of growing company-owned stores and expects to increase number of stores to 250 to 300 by 2007. The Company also expects to shift its domestic versus imported product to contain a 50/50 mix over the next two years, which is expected to positively impact company’s operating margins then.
Despite the initiatives taken by the company, we believe that the company would underperform given the softness in the housing sales and the increasing competition.
Basset Furniture is engaged in manufacturing, marketing, and retailing of branded home furnishings in the united sates and internationally. Company seems to be in a doom presently, considering the slumping housing market, which as adversely affected the company’s performance. Sales of new houses in February 2007 were down 3.9% and 18.3% as compared to previous quarter and year. Average interest rates on conventional 30-year mortgage loans and 15 year fixed rate loans have been increased by 1 bps and 4 bps Y-o-Y. This may put a further negative impact on an already weak housing market.Endorsing the same, company reported a 15% sales decline in the first quarter of 2007; in line with the declining sales from past three consecutive quarters. Its wholesale segment sale, which contributes for 75% of the total sales, was 18% below this quarter resulting from the slowing housing market.Company has announced the Bassett plant closure and has planned to increase its imports, which should help the company to improve its margins, but this improvement will be seen only by 2008. On one hand company is planning to improve its margins and on the other hand we see its increasing expenses, which will again negatively affect its margins. Its licensees are planning to open 6 new stores in 2007, which should increase the sales, however with increasing prices in fuel and housing one can expect the customers to spend less money. Considering the above, company will have to struggle for its share in an already shrinking market. Despite the few initiatives taken by the company, it may not be able to pace up the ladder, given the softness in the housing sales.