BSET - Bassett Furniture (BSET) - Orders Shipments and Backlog Remain Strong
Strong Operating Environment. The operating environment remains strong. Orders for March 2021 (a five week fiscal month) increased 125% over March 2020 and 52% over March 2019. Shipments for March 2021 increased 59% over March 2020 and 21% over March 2019. Wholesale backlogs ended March 2021 9% higher than at the end of the Company’s first fiscal quarter ended February 27, 2021. Incoming orders continue to exceed expectations with all segments experiencing strong sales. BSET shares jumped 11% to $29.68 on the news.Key Industry Drivers Still Positive. Key industry indicators remain positive: the housing market continues to be red hot, with low inventory, fast selling times, and low mortgage rates, although rapidly rising average home prices could slow the momentum. Weekly unemployment claims continue to trend down, the overall unemployment rate has declined to 6%, the latest JOLTS report indicated the number of job openings edged up to 7.4 million on the last business day of February, and the latest forecasts for 2021 GDP growth remains a strong 6+%.Additional Manufacturing Capacity. Bassett also announced the Company has signed a lease for the additional manufacturing facility, which adds some 123,000 square feet. Production at the facility is expected to start in June 2021 and ramp up during the Company’s fiscal third quarter. The new facility will enable Bassett to grow its upholstery business by 20% long-term. In 2019, upholstery sales accounted for $152 million of revenue.Raising PT to $32. We are maintaining our Outperform rating and raising our 12-month price target to $32 from a prior $28.00. At our $32 price target, the shares would trade at 18x our fiscal 2021 EPS estimate, 0.6x sales on an EV/estimated 2021 revenues basis, and 6.5x on an EV/estimated 2021 EBITDA basis. The peer group currently trades at an average 18.8x consensus 2021 EPS, 1.7x on a EV/consensus 2021 revenue, and 11.5x on a EV/consensus 2021 EBITDA. Read More >>