Bassett reports Q3 loss, with performance hurt by cyberattack

Bassett Furniture reported $75.6 million in consolidated third quarter sales, a 13.3% decline from last year and a 9% drop from last quarter. It also recorded an operating loss of $6.4 million, its fifth consecutive loss. The overall loss included a $1.2 million loss on a logistical services contract the company chose to abandon to help it save costs.

Net wholesale sales fell 16% to $47.8 million, while retail sales fell 9.6% to $47.3 million.

Gross margin was 53%, which included $600,000 in manufacturing wages paid during a one-week manufacturing shutdown in July due to a cyberattack. Excluding the wage charge, gross profit margin would have been 53.8%, a 1.1% increase over last year.

“The integration of our industry, with the weak housing market, continued to pressure sales during the quarter,” CEO Rob Spilman said on an earnings call last week. “Although mortgage rates started to ease since the Fed’s 50 basis point rate cut three weeks ago, overall housing affordability and inventory affordability remain impediment in the short term.”

Besides the cyberattack, Spilman highlighted two other external events that impacted the quarter: Hurricane Helene and the East Coast port strike.

“Many customers and employees were deeply affected by the hurricane,” he said. “It impacted our distribution center in Catawba County, North Carolina, which was shut down to damage and power outages in the first week of October. We have recovered as quickly as possible. The longer-term impact on logistics and distribution is related to the damage to the I-40 infrastructure, which is our main route to the West. And while the East Coast dock strike was just three days, the impact on our business has pushed shipments back one to two weeks.”

Revenue in both segments was down, with greater pressure on retail, due to a higher level of fixed costs, Spilman said.

“Heading into the quarter, our Memorial Day event and Fourth of July event produced increases over last year, but the ‘in-between’ weeks were especially difficult as consumers stayed on the sidelines,” he said.

The 9% drop in wholesale sales was attributable primarily to a 22% decrease in shipments to the open market, a 13% drop in shipments to its own retail stores and a 6% drop in lane venture shipments. Gross margin rose 50 basis points, primarily due to improvements in club leather.

In retail, despite a 5% sales drop, gross margin improved due to “higher home delivery income and better margin on clearance inventory.” Spilman said the average retail ticket was $3,900, up 5%.

Inventories were down more than $10 million year-over-year, and slightly down sequentially, which Spilman says reinforces the company’s belief that it can run with leaner inventory.

Finally, the company highlighted its ongoing restructuring plan, which should help save costs of between $5.5 million and $6.5 million per year starting in fiscal 2025.

“We are running a leaner operation, reducing expenses and investing in new products and services,” Spilman added. “We are committed to returning to profitability.”