The potential for future growth here is huge. The difference in Bassett and most other brands (except Lazyboy and Ethan Alan) is they have a store network they own for distribution and in great locations nationwide not to mention the international growth. With dealers going out of business at an alarming rate this will be a winner. They are poised to take advantage of the business especially when the housing market returns.
Furniture stocks like this one and LaZboy should be big gainers as this industry is starting to turn. There is good news thats been coming recently and I think we have seen the bottom for these two. Good luck to all.
I agree with a lot of your comments about furniture brands except that they have a good platform to drive business. It is in worst shape than ever. It takes dealer base, relationships,and the people to do it and they have none of these. They went way to far with the cuts, there is no sales talent left in management. This company will be known as the company that was "Bean Counted to Death".
”buddy81385: Bassett made $$$$$”
ranni: Bassett’s strategy seems to be invoking different approach, where main part is one time accounting tricks and one to report profits; they are rather kicking the can down the road. You cannot see improvement in fundaments. This has been excellent opportunity to clean balance sheet, and if I understand correctly, it is now gone.* You know, short term pain is often unavoidable, to archive maximum long term gain.
“buddy81385:. Bottom line is that the dealer base has shrank dramatically and dealers are not happy with them so if there is a pent-up demand and when business does come back strong they will not share in it.”
ranni: It remains to seen, how FBN is able to drive their top line in future, but the platform is now better shape than ever to do that.
“buddy81385:The other problem is there are to many dead companies in the portfolio they have. The high end is dead and everyone knows that except them.“
ranni: High end is not dead; it may take time to be good business again. It’s not fad, which would fade away permanently in recession. HE has hit hard, but it is also area where overcapacity is reduced even more than industry in general. Longer term characteristics look good.
”buddy81385: And by the way, FBN reported a 65MM loss last quarter.
ranni: In my view, now was time to take losses, this kind of friendly tax carry back “window” wont last forever. This was time to write down everything which is suspected to result problems in future. They reported losses, correct, but balance sheet is now best in this industry. More than that, they will receive ~$58-60M cash as tax refund (1H 2010), and that will more than offset those ugly accounting numbers. More cash than debt.
“isabelleb1: The real question is what Companies are poised for growth going forward. Ratio's change as time moves on. Both companies have financially strapped dealers. I would argue that Thomasville dealers are more strapped then Bassett. Bassett has had a five year head start on running there own stores, where as FBN just started to take over dealer stores and run them.
This requires infrastructure and a very large learning curve. “
You are right, it will take some time to learn and fine-tune operations, but like they keep taking over those (last 2y) you don’t have to start the learning process from zero, I would say they will do that routine way when time goes on. And they said, that company operated stores are doing better (merchandise is moving) than others, hard to ask much more.
“isabelleb1: As evidenced by Bassett's most recent quarter, there corporate stores are turning the corner. There corporate stores look great and are being converted to the new format. The thomasville stores look worse then when the dealers owned them.”
How they look worse? They said that they have cleared more slowly moving unwanted stuff at latter part of year and that would be explanation for that?
” isabelleb1: I highly doubt fbn's ability to generate cash in the future as they have turned off there product development machine to save $$$$$.”
I think this is something what they referred in latest Conference Call too, could you give more clarify about that?
The earnings are much better and the sales decline is a fraction of ethan allen's. The two positive things are the corporate stores performed much better and secondly the earnings include 2.2 million of bad debt reserves. This number will decline as time moves on, as the more troubled dealers have already been taken over. The one thing you can not escape is they generated more than $6 million in cash in the quarter.
FBN is dead! There stores look terrible, Thomasville stores sell other merchandise (a recipe for failure) and the other brands have been run into the ground. When you take Bassett's $35 million cash position and take away the $14 million of revolver they are in the best financial shape in the industry. Ethan Allen borrowed $200 million to repurchase shares at inflated prices. I agree with Buddy, lets let this play out.
Bassett has invested in its store network and introduced new products thru the downturn and is well positioned to continue to take market share. I thought the quarter was amazing!
Hey pals (B & I); I appreciate your opinions even they differ my views.
Could you give more colour of your experiences in Thomasville or other their stores. Couple things comes to mind, They have taken over some Lanes, and converted those to Thomasville and I understand, that merchandise varies in that kind of situations. Also they could shut down some stores and as owner, it’s of course better to us, when they try to convert that surplus furniture’s to cash, no matter how they try to do that.
These kind times when retail environment is soft, I don’t believe, brand is the thing number 1. People would look where they get best deals, most value for their money. Of course some would argue same time, that Thomasville is not then those destination to shop. Who knows?
But bottom line is this that, it is better to avoid looking gift horse, like FBN in the mouth. Of course it’s ugly, but same time far from dead.
What comes to financial stability?
I haven’t seen FBN FY balance sheet yet but even 3Q was rock solid. Current ratio +3.5 x, when Bassett’s seems to have 2.4x – 2.7x (depends how current their investments are), and keep in mind, if we compare full year results disparity is even wider.
Today’s valuations, both are cheap, but there is huge difference in cash generation. I think FBN would give maybe ~2 - 2.5x cash returns (owner’s earnings) overtime compared to Bassett.
That’s main reason why I like most this old deserted racehorse.
The point I am trying to make is the sales at fbn have been in serious decline for many years and will continue until the end. They have no set up internally for sales growth. Bassett does. You will see over the next 24 months how this develops in comparison to both companies. Let's sit back and watch, it will be entertaining.
Like I said, Bassett too is cheap company no question about that, but still I don’t see real evidence of improvement in their operations.
If you look FBN, there is lot of evidence what kind of leverage they may have, when this restructuring is completed.
To understand what kind of earnings power Furniture Brands may have, one should look pace how FBN have shed their debt over last years, mostly “internally” without vital asset sales or dilution, In fact, they have reduced share count at same time.
Talk is cheap, but if you see this kind of development, it means they are really doing something (not just accounting tricks or one time benefits).
When they shed that debt pile, same time they paid out $ 68-Millions dividends, and that time period 2006-2009 we had also one of the worst recessions in 70-years. Sum that up and compare today’s market price. I think we have winner.