Bear of the Day: Bassett Furniture (BSET)
Bassett Furniture Industries, Inc. BSET is expected to see falling earnings this year as the pandemic-fueled furniture boom ends. This Zacks Rank #5 (Strong Sell) is grappling with declining sales but rising costs.
Bassett Furniture makes home furnishings. It operates 92 company and licensee-owned stores in the United States. Bassett also had a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally.
Additionally, it operates a logistics business specializing in home furnishings.
First Earnings Miss Since 2020
On Mar 30, 2023, Bassett Furniture reported its fiscal first quarter results, which were those for the quarter ending Feb 25, 2023, and missed on the Zacks Consensus by $0.02. Earnings were $0.16 versus the Zacks Consensus of $0.18.
It was the first earnings miss since early 2020, just before the pandemic hit.
Bassett, and the furniture industry, are wrestling with "macroeconomic inconsistencies" even as furniture demand normalizes from the pandemic boom years. Early in the first quarter, Bassett fulfilled the remaining excess portion of the large pandemic backlog. It is now producing and shipping at a rate commensurate with its written business.
While retail sales rose 1.4% year-over-year, wholesale sales fell 16% compared to the prior year, but were 7.5% ahead of the last corresponding pre-pandemic quarter.
Given the slowdown, for two months, Bassett worked a reduced production schedule in its facilities. It also adjusted manufacturing employment levels by 11% this year, mostly through attrition.
The supply chain turmoil is now over. As the environment has normalized, certain manufacturing cost inputs have been reduced.
The company also instituted a new pricing strategy in its stores and to wholesale customers in April.
Fiscal 2023 Earnings to Fall
It shouldn't be a surprise that furniture remains subdued. Consumers are returning to experiences, like travel, instead of spending on the home. 1 analyst cut their fiscal 2023 earnings estimate in the last 60 days. That has pushed the Zacks Consensus down to $1.20 from $2.70 that it made last year.
That's a decline of 55.6%.
Are Shares Cheap?
Year-to-date Bassett Furniture shares have fallen 16.6%. Looking out over the prior 2 years, it's even worse, as the shares are down 58%.
Image Source: Zacks Investment Research
But is it a cheap stock?
Bassett trades with a forward P/E of 12.2, even as earnings estimates are expected to decline. It does have a PEG ratio of just 0.8. A PEG under 1.0 usually indicates a company has both growth and value.
Bassett is shareholder friendly. It pays a dividend, yielding 4.4%. It also has a share buyback program as it believes the stock is undervalued. Bassett retired $1.8 million of its stock in the quarter and continues to actively acquire shares but it has reduced its purchases given the market conditions.
For those interested in the furniture industry, Bassett Furniture should be on the watch list but investors might want to wait until those earnings estimates start turning around.
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Bassett Furniture Industries, Incorporated (BSET) : Free Stock Analysis Report
