BSET - Bassett Furniture (BSET) - Exceeds Estimates in a Challenging Market
1Q21 Results. Revenue for the fiscal first quarter ended February 28th was $117.1 million, up 15.9% y-o-y. Wholesale revenue rose 19% to $83.5 million, while Retail revenue rose 3.7% to $64.1 million. Bassett reported net income from continuing operations of $4.3 million, or $0.44 per share, compared to net income from continuing operations of $3.7 million, or $0.37 per share, in the prior year. We had forecast revenue of $110 million and EPS from continuing operations of $0.36.Orders Remain Strong, Working Off Backlog. Wholesale orders remained relatively strong during 1Q22, although they declined y-o-y due to the Club Motion segment, where there remains a large backlog and shipping challenges have been most impactful. Wholesale backlog ended the quarter at $78 million, down from $90.1 million at fiscal yearend.Inflation Remains Challenging. Bassett continues to chase cost increases and will take another wholesale price increase to help offset rising costs. The inability to keep pace with the inflationary pressures cost the Company between 150-200 basis points in the consolidated operating margin for the quarter, which came in at 5.5% for 1Q22. Updated Projections. Challenging conditions remain which could continue to impact margins in the near term. But, overall industry conditions remain favorable. For the fiscal second quarter, we increased our revenue estimate to $116 million from a prior $113 million. We believe margins should see some sequential improvement from the price increases but will be below our prior projection. EPS is projected to come in at $0.46, down from our previous estimate of $0.51. For the full year, we are estimating revenue of $464.4 million and EPS of $1.96.Maintaining Outperform and $32 Price Target. In spite of the current operating challenges, we are maintaining our Outperform rating and our $32.00 12-month price target. The current constraints will be worked through and we believe BSET shares represent a favorable risk/reward proposition at the current price. Read More >>