管理層發言
Good day, and thank you for standing by. Welcome to Bassett Furniture Quarter 4 2024 Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Daniel, CFO. Please go ahead.
Thank you, Gigi, for the introduction. Welcome to Bassett Furniture's earnings call for the fourth quarter ending November 30, 2024. Joining me today is our Chairman and CEO, Rob Spilman. We issued our news release yesterday after the market closed and it's available on our website. After today's remarks about our quarter, we will open the call up for a Q&A session. We will post the transcript of the call on our investor site within 48 hours of this call. During today's call, certain statements we make may be considered forward-looking and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate nor does it undertake any obligation to update such forward-looking statements. For more information, including important cautionary notes, please see the company's annual report on Form 10-K for the fiscal year ending November 30, 2024, to be filed next week. Other filings with the SEC describing risks related to our business are available on our corporate website. Now I'll turn it over to Rob for comments about the fourth quarter. Rob?
Thank you, Mike. Good morning, everyone, and thank you for joining us today. Our industry has long been linked to housing, and with ongoing sluggish home sales, low housing inventory, and higher mortgage interest rates, furniture sales lagged again in the fourth quarter. We took necessary steps in 2024 to adjust our business through a comprehensive restructuring plan announced in July, which we have been executing since then. We are pleased to report that Bassett has returned to profitability for this quarter. Although the major elements of our restructuring plan were completed by the end of November, we continue to explore opportunities for enhancing efficiency, optimizing our cost structure, and cultivating a mindset geared toward running a leaner business consistently. We dedicate considerable time to analyzing ways to operate smarter while facing the ongoing challenging housing market.
In 2024, existing home sales were at levels not seen since 1995. Our entire industry is seeking to identify a bottom in demand to enable better business planning. Industry forecasts suggest only a slight increase in existing home sales for 2025, prompting us to prepare our strategic plan for another year of subdued demand. Let’s delve into the details of our fourth quarter results. While consolidated sales fell by 11% for the quarter, written retail sales decreased by only 0.006%. We were encouraged by our performance during the two-week Black Friday promotion, where retail written sales increased by 25.1% compared to last year's promotion, resulting in strong customer deposits and an improved backlog as we head into 2025. Wholesale orders declined by 3.1% for the quarter, but wholesale orders received from corporate stores rose by 1.8% during the same period. The decline in wholesale sales was primarily due to last year's aggressive inventory reduction program at Club Level.
Total outdoor orders for this quarter, though representing only 7.6% of the wholesale segment, nonetheless grew by an impressive 33%. As mentioned, the core elements of our restructuring plan have been implemented. We have demonstrated our ability to operate with leaner inventory, which decreased by over $8 million on a consolidated basis at quarter's end compared to last year. Wholesale inventory was down $6.5 million, mainly due to domestic wood plant consolidation and Club Level adjustments. The favorable effects of rightsizing our operating costs began to emerge in the fourth quarter. The remaining domestic wood manufacturing facility operated at a higher profitability level during this period, and we believe that additional efficiency improvements will continue to provide better results in the future. While losses from Noa Home, our e-commerce business based in Canada, were reduced in the quarter and are now behind us as the business has been closed as planned, other gains and improvements in our P&L have come from our warehouse consolidation.
We have reduced our retail home delivery facilities from 27 to 22 by the end of the year, and we are beginning to see the financial benefits associated with this consolidation. We plan to pursue further warehouse consolidation in 2025 without disrupting our customer commitments, maintaining our four to six-week delivery cycles. We have taken decisive steps to inject newness and innovation into our business, and our team is excited about what 2025 holds. Alongside cost-cutting measures, we conducted an extensive review of our product line last year and initiated significant upgrades to our assortment. We are set to launch three major whole home case goods collections in 2025. The first, the Copenhagen collection inspired by Danish modern design, has been in our retail stores for six weeks and is performing very well already. The other two collections, Andorra and Newberry, will debut this spring.
All three collections will transform our retail visual merchandising and cover categories such as bedroom, dining, occasional, and entertainment furniture. Our investments in our website continue to yield benefits for the business, representing a small fraction of our overall sales, but e-commerce revenue is rising. We have experienced sales increases for seven consecutive months as we wrapped up 2024. Our enhancements in presentation and user experience are driving traffic and increasing e-commerce order values, which are up 27% year-over-year. Our in-store designers have noted that customers are entering the store with specific items in mind based on their online interactions with our brand. In the fourth quarter, we strengthened our marketing strategies and began highlighting the price and value of our furniture. Early feedback indicates that this messaging is resonating with customers, and price value will be a key focus in 2025.
We reintroduced direct mail into our marketing efforts in the fourth quarter, which yielded positive results. We plan to leverage direct mail more often in 2025 to boost retail traffic, particularly around significant events and new product launches such as Copenhagen, Andorra, and Newberry. About 80% of our annual wholesale revenue comes from one of our dedicated distribution concepts. The latest is the Bassett Custom Studio, which requires independent furniture retailers to allocate a prescribed 1,000 square foot space to our True Custom Upholstery program without needing to maintain backup inventory. Nine months into this program, we are pleased with the progress. With the various frame, fabric, and design options that True Custom provides in a relatively compact space, dealers can achieve a high sales rate per square foot without any inventory investment beyond floor samples. The program is successful, and several dealers have already increased the dedicated space for it.
This cost-effective commitment to the Bassett brand holds great potential, and we plan to expand the number of studios this year. I also want to highlight the pride our team feels in being named the Best Custom Upholstery Company in the industry according to Furniture Today's Annual Reader Survey. This recognition reflects the achievements of numerous Bassett teammates who have earned the respect of those intimately familiar with the furniture business, reinforcing the quality reputation associated with our brand. I acknowledge that 2024, along with the implementation of the restructuring, was challenging. We made tough decisions, but it has shifted our mindset to operate as a smaller company. At year-end, we had 11% fewer associates than a year ago. Our priority remains to consistently assess our operations to ensure we enhance efficiency while delivering innovation and fresh offerings for our customers.
We are investing in remodeling several stores and are negotiating leases for two additional locations expected to open in late 2025 or early 2026. While we cannot predict the housing market or mortgage rate trends for this year, industry data suggests similar patterns to last year. However, with a leaner operating model and new elements in our growth plan, we believe Bassett is well-positioned for the future. On January 16, we announced that our Board approved our regular quarterly dividend of $0.20 per share, reaffirming our commitment to shareholder returns through dividends and opportunistic share repurchases. Now I will hand it back to Mike for further details on our financials.
Thanks, Rob. In my commentary, the comparisons I will discuss will be the fourth quarter of fiscal 2024 compared to the fourth quarter of fiscal 2023, unless otherwise noted. For the fourth quarter, total consolidated revenue declined $10.4 million or 11%, primarily due to a 14% decrease in wholesale sales and an 8.4% decrease in retail sales through our company-owned stores. Consolidated gross margins increased 230 basis points due primarily to better margins in the wholesale segment from improved margins in our Club Level product, coupled with better margins in our domestic upholstery manufacturing operation. Although we're pleased with our very strong consolidated gross margins during the quarter, we do expect a slight moderation during 2025 due to the expectation that we will be more aggressive with pricing on the retail side, as Rob mentioned earlier. We reported consolidated operating income of $900,000 compared to a loss of $4.5 million for the fourth quarter of 2023.
However, if you normalize the operating income for both 2024 and 2023 for the special charges, operating income would have been $2.3 million or 2.7% of sales as compared to $900,000 or 0.9% of sales for 2023. Now I'll provide information regarding our wholesale operations. Net sales decreased $8.3 million or 14% from the prior year period due primarily to a 13% decrease in shipments in both the store network and the open market, partially offset by a 22% increase in shipments for Lane Venture. Gross margin for the three months ended November 30, 2024, increased 290 basis points over the prior year, primarily due to the expected improvement in the Club Level business and the improved mix of customers for the Lane Venture operation. Although SG&A expenses decreased year-over-year, SG&A expense as a percent of sales increased slightly due to the deleverage of fixed costs from lower sales volumes, partially offset by cost reductions from implementing our restructuring plan.
Wholesale backlog at the quarter end was $21.8 million as compared to $18.5 million at the end of both the third quarter of 2024 and the end of fiscal 2023. Now moving on to our retail store operations. Net sales decreased $4.8 million or 8% from the prior year period. As Rob said, written sales, the value of sales orders taken but not delivered, declined 0.6% compared to the prior year period. Gross margin for the quarter was essentially flat as improved in-line margins were offset by lower margins on clearance goods. As Rob mentioned, we've been aggressively working through unproductive inventory, which was part of our restructuring plan. Although SG&A expenses decreased year-over-year, again, SG&A expense as a percentage of sales increased slightly due to the deleverage of fixed costs from lower sales volumes, partially offset by cost reductions from implementing our restructuring plan.
Retail backlog at the end of the fourth quarter was $37.1 million compared to $33.3 million at the end of the third quarter and $30.9 million at the end of fiscal 2023. As Rob mentioned, Noa Home has been closed, and it was closed by the end of the fourth quarter, but we recorded a $2.6 million tax benefit for a capital loss associated with the cumulative investment in Noa Home. As capital losses can only be deducted to the extent of capital gains, we will be able to file an amended return for 2022 and use that loss against the large gain that we recorded in 2022 on the sale of Zenith Logistics and recapture part of the cash paid for that year. Let's cover the balance sheet and capital allocation. We generated $6.4 million of operating cash flow in the fourth quarter. We ended the quarter with $59.9 million in cash and short-term investments with no outstanding debt. As Rob discussed, we've made significant progress on the restructuring plan over the back half of the year.
Although savings to date have been slightly above $1 million, expected savings in 2025 compared to 2024 should be between $7 million and $8 million. As mentioned in last quarter's report, we reduced our capital outlay in the fourth quarter and closed fiscal 2024 with capital spend of $5.2 million. The majority of the spending was on retail store openings and remodels. Fiscal 2025, we have projected a range of capital investment between $8 million and $12 million. This will be dedicated primarily to existing store remodels and the potential store openings that Rob previously mentioned as well as investments in technology. We continue to pay our quarterly dividend and repurchase shares opportunistically. We spent $4.9 million on dividends and $1.4 million on share buybacks during 2024. Our goal is to provide good returns to Bassett shareholders. Our financial condition remains solid and provides us with a platform to service all of our obligations. Now we'll open up the line for questions. Gigi, please provide instructions to do so.
分析師問答
Thank you. Our first question comes from the line of Anthony Lebiedzinski from Sidoti & Co LLC.
Good morning everyone, and thanks for taking the questions. So first, great to see Bassett returning to profitability, and maintaining a strong balance sheet. I know you touched on the written sales, so good to see that also relatively improving. Just curious as to what you guys have seen, I guess, since the election. I guess we've heard from some other companies, seeing relatively better trends. Also wondering if you could comment on what you've seen thus far in the first two months of your new fiscal year, just overall, whether it's written sales, or just overall trends in the business that you're seeing, that would be great to get an update on that?
Okay. Anthony, good morning. This is Rob. So as we pointed out, it seemed like we got a brief period of euphoria around Black Friday, as we mentioned, and that was, of course, right after the election. Since that time, we would say we've kind of settled back down to where we were to a certain extent. I’ll qualify that by saying that last year in our fiscal calendar, it was a six-week December. And this year was a five-week. So we had one less week to deal with. But we were up mid-single digits in December. And that's the trend that we're seeing. I'm talking about at retail. So when I say we're back to where we were, it is slightly better, but we're not seeing a sense of euphoria out there at the moment, but a little better.
Little better sounds good, certainly. So you highlighted Bassett Design Studio. Can you give us an update, as to how many of those you have in place now? And what is your expectation, if you have one as far as the number of those design studios that you plan to have by the end of fiscal '25?
Well, we are now around 43 or 44 of those. It changes from day-to-day, of course, as we get reports from the field. Honestly, I don't want to commit to how many we're going to have at year-end, but you think about it, nine months, we've been opening about five per month. I'm not sure we're going to be able to continue that pace, but we are getting a lot of interest in this program, and we expect it to grow significantly in 2025.
Got you. Okay. And then, you've talked about the True Custom Upholstery program you guys have had. It sounds like you guys have been recognized for those efforts, based on your comment about the furniture today. Now is this something you plan to highlight more in terms of your marketing messaging, whether it's like you said, I think direct mail you'll do more of, or anything else so that you think that you plan to do to highlight that?
I would say in conjunction with the custom studio, Anthony, we were definitely - we've done some trade advertising, which we haven't done in a long time. And I think there's a community of dealers out there, and a lot of them think we are a store company and that we are not interested in their business. Let's say, and we're only in about half the states with stores. So, we think there's a lot of opportunity to communicate just how strong this custom upholstery is, which has been a hallmark of our retail concept for a number of years. Yes, we will be continuing to highlight our competencies on True Custom in the stores as always, but we're also going to be a little more aggressive out there in the field, in our dedicated distribution opportunities.
Got you. And then my last question, before I pass it on to others. So obviously, the gross margin was impressive in Q4. I know you mentioned that you expect that to moderate a bit because of pricing. That being said, when housing does recover at some point, how should we think about potential gross margins in the future?
Well, we're answering the question from almost an all-time high, I think - so I don't see them climbing significantly beyond where we are even if housing comes back. We still want to offer value, and we think we can leverage that volume to lower the SG&A and have better operating margins. That's really the plan. We are very focused now given the environment for two years on offering good value to our customers. We think we have, but we really want to start communicating that. So I think the gross margin is going to stay in this neighborhood, if I had to guess.
That makes a lot of sense. Well, thank you very much and best of luck.
Thanks, Anthony.
Thank you. One moment for our next question. Our next question comes from the line of Brian Gordon from Water Tower Research.
Hi, guys. It's Mike McCormack from Water Tower. How are you?
Hi Mike, we're doing great. Thank you.
Hi, just a little more color on the margin commentary. You talked about a step back, I guess, as we go forward this year. Can you just give us a hint on what that degree might look like?
Right. I mean...yes. I'd say, again, as we alluded to, we think we're going to get a little bit more aggressive - well, two things, get more aggressive on pricing related to retail, or in our retail stores as well as making sure that we're moving through clearance goods as quickly as we need to be moving them through. As Rob has said to us many times, inventory does not get more valuable as it sits in warehouses. So we just want to make sure that we're moving that through. Now that's not going to be - those together are not going to put that much pressure on the margins. But we do see that we had, what we consider to be a record margin. But just not comfortable to say that, that's going to be sustainable and particularly, with those added pressures on the margin. But again, it's not going to be a drastic shift of any kind.
I would add Mike that it’s similar to Anthony's question, we don't see this trend continuing to rise necessarily, and that's by design. And although I think as Mike said, we're going to moderate it slightly. It's not - we're not talking about a huge decline in margin, but we don't see it. This trend we've been on continuing this year, but we don't want to drop much either. So it's - we're just setting expectations really.
That's right.
Understood. Thank you. And then I guess just on the natural disasters, between the hurricanes and the wildfires, any impact in the business?
The North Carolina hurricane back in September was - caused an effect. I mean, we had to close our operations down for a couple of days, a few days there in the Hickory area. Also, we have a very strong independent dealer base in that area in North Carolina. That's a very strong - and it affected other areas too, South Carolina, et cetera. So a lot of our dealers were affected by that, and that hurt our incoming business. As far as the California fire tragedy. We did have one store out there that had to shut down for a few days. But I wouldn't say that it caused a whole lot of upheaval to our operations.
Thank you, guys.
At this time, I would now like to turn the conference back over to Rob Spilman, Chairman and CEO, for closing remarks.
Thank you, Gigi, and thank you everyone for your interest in Bassett, and for your questions. We know that our decisions to right-size our cost structure put us on the road to improve profitability. We delivered that in the fourth quarter. We're optimistic that our growth driving initiatives will deliver for customers and shareholders this year. We are excited about our new collections, strengthening our dedicated distribution programs, and reaching more consumers through our e-commerce site, and price value messaging. Thank you very much, and have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.