Item 1. Business
ITEM 1. BUSINESS
(dollar amounts in thousands except per share data)
General
Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We also sell our products through our website at www.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 122-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.
With 87 BHF stores at November 30, 2024, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly and casual environment for buying furniture and accessories. Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. In order for the Bassett brand to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.
The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.
We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Digital outreach strategies have become the primary vehicle for brand advertising and customer acquisition. We expect to supplement the digital outreach strategies in 2025 with added direct mail and television.
We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website. While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities.
During the fourth quarter of fiscal 2022 we acquired Noa Home Inc. (“Noa Home”) (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom. After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we have substantially completed the liquidation of Noa Home’s assets and liabilities. In the second quarter of 2024 we recognized non-cash charges totaling $2,401 related to the impairment of certain long-lived assets of Noa Home and the establishment of a reserve against Noa Home’s remaining inventory at that time. Upon substantially completing the liquidation of Noa Home at the end of the fourth quarter of 2024, we recognized a charge of $962 associated with the transfer of the cumulative translation losses out of accumulated other comprehensive income.
2
In 2018, we added outdoor furniture to our offerings with the acquisition of the Lane Venture brand. Our strategy is to distribute these products outside of our BHF store network through independent sales representatives each of which have a stated geographic territory. Using Lane Venture as a platform, we developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded products to move from inside the home to outside the home to capitalize on the growing trend of outdoor living. In the second quarter of 2023, we debuted the Bassett Outdoor contract line at the HD Expo Show in Las Vegas targeting the hospitality segment.
We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings. We also have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.
In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam. Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.
During the first quarter of 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith Freight Lines, LLC (“Zenith”) to J.B. Hunt Transport Services, Inc. (“J.B. Hunt”), and the transaction was completed on February 28, 2022. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in this Annual Report on Form 10-K as discontinued operations.
Operating Segments
We have strategically aligned our business into two reportable segments:
●
Wholesale
●
Retail—Company-owned stores
Wholesale Segment Overview
The wholesale segment is involved principally in the design, manufacturing and sourcing of furniture products that are distributed through our BHF store network (both Company-owned and licensee-owned stores) and various independent retailers. The wholesale furniture industry is very competitive and there are a large number of manufacturers both within and outside the United States who compete in the market on the basis of product quality, price, style, delivery and service. Additionally, many retailers source imported product directly, thus bypassing domestic furniture manufacturers and wholesale importers. We believe that we can be successful in the current competitive environment because our products represent excellent value combining attractive prices, quality and styling, prompt delivery, and superior service.
Wholesale shipments by category for the last three fiscal years, excluding intercompany sales to our retail segment, are summarized below:
2024*
2023
2022
External
Intercompany
Total
External
Intercompany
Total
External
Intercompany
Total
Bassett Custom Upholstery
$
79,344
$
55,168
$
134,512
64.8
%
$
89,005
$
66,363
$
155,368
62.4
%
$
124,565
$
82,437
$
207,002
63.8
%
Bassett Leather
15,705
1,919
17,624
8.5
%
26,701
1,171
27,872
11.2
%
35,953
76
36,029
11.1
%
Bassett Custom Wood
14,075
16,674
30,749
14.8
%
17,357
20,070
37,427
15.0
%
22,534
24,764
47,298
14.6
%
Bassett Casegoods
11,317
13,260
24,577
11.8
%
12,329
15,915
28,244
11.3
%
15,628
18,612
34,240
10.5
%
Total
$
120,441
$
87,021
$
207,462
100.0
%
$
145,392
$
103,519
$
248,911
100.0
%
$
198,680
$
125,889
$
324,569
100.0
%
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
Approximately 20% of our 2024 wholesale sales were of imported product compared to 22% in 2023 and 2022. We define imported product as fully finished product that is sourced. Our domestic product includes certain products that contain components which were also sourced. We continue to believe that a blended strategy including domestically produced products primarily of a custom-order nature combined with sourcing of major collections provides the best value and quality of products to our customers.
The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $21,750 at November 30, 2024 and $18,478 at November 25, 2023.
3
We use lumber, fabric, leather, foam and other materials in the production of wood and upholstered furniture. These components are purchased from a variety of domestic and international suppliers and are widely available. The price and availability of foam, which is highly dependent on the cost of oil and available capacity of oil refineries, can be subject to significant volatility from time to time.
Retail Segment Overview – Company-Owned Retail Stores
The retail—Company-owned stores segment consists of 58 BHF stores that provide consumers with a friendly and casual environment for buying furniture and accessories. The retail furniture industry remains very competitive and includes local furniture stores, regional furniture retailers, national department and chain stores, single-vendor branded retailers and on-line retailers. As a whole, our store network which includes 29 licensee-owned stores, ranks in the top 40 in retail furniture sales in the United States. The following table shows the number of Company-owned stores by state at November 30, 2024:
Number of
Number of
State
Stores
State
Stores
Arizona
3
Nevada
1
Arkansas
1
New Jersey
2
California
2
New York
4
Connecticut
3
North Carolina
5
Delaware
1
Ohio
2
Florida
5
Oklahoma
1
Georgia
3
Pennsylvania
2
Kentucky
1
South Carolina
1
Maryland
3
Tennessee
1
Massachusetts
1
Texas
11
Missouri
1
Virginia
4
Total
58
Net sales for our Company-owned retail stores by major product category for the last three fiscal years are summarized below:
2024*
2023
2022
Bassett Custom Upholstery
$
111,943
54.7
%
$
134,000
56.8
%
$
163,755
57.4
%
Bassett Leather
4,990
2.4
%
1,951
0.8
%
1,707
0.6
%
Bassett Custom Wood
32,201
15.7
%
36,732
15.6
%
43,208
15.2
%
Bassett Casegoods
26,179
12.8
%
32,252
13.7
%
40,146
14.1
%
Accessories, mattresses & other (1)
29,250
14.3
%
31,005
13.1
%
36,303
12.7
%
Total
$
204,563
100.0
%
$
235,940
100.0
%
$
285,119
100.0
%
(1)
Includes sales of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans.
*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2023 and 2022.
We also continue to examine the performance of every one of our stores. Store traffic has been declining and the effect on our retail model has become increasingly challenging. We believe that on a market-by-market basis, there will be fewer stores in the future. We will continue to evaluate store-by-store performance as we seek the optimal store count in the markets in which we compete at retail. While we opened two new stores in 2024, we are currently negotiating leases for stores in two new markets with potential opening dates in late 2025 or 2026.
4
Corporate and Other
In addition to the two reportable segments described above, we include our remaining business activities in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the periods ended November 30, 2024, November 25, 2023 and November 26, 2022, the only such operating segment included in Corporate and other was Noa Home, which was acquired on September 2, 2022. All sales reported in our Corporate and other category were attributable to Noa Home, which generated substantially all of its sales outside of the United States. During the second quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of November 30, 2024, we have substantially completed the liquidation of Noa Home.
Trademarks
Our trademarks, including “Bassett” and the names of some of our marketing divisions, products and collections, are significant to the conduct of our business. This is important due to consumer recognition of the names and identification with our broad range of products. Certain of our trademarks are licensed to independent retailers for use in full store and store gallery presentations of our products. We also own copyrights that are important in the conduct of our business.
Government Regulations
We believe that we have materially complied with all federal, state and local standards regarding safety, health and pollution and environmental controls.
We may also be affected by laws and regulations of countries from which we source goods. Labor, environmental and other laws and regulations change over time, especially in the developing countries from which we source. Changes in these areas of regulation could negatively impact the cost and availability of sourced goods. The timing and extent to which these regulations could have an adverse effect on our financial position or results of operations is difficult to predict. In addition, the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced products could negatively impact the cost of such goods. Based on the present facts, we do not believe that they will have a material adverse effect on our financial position or future results of operations.
Human Capital
We employed 1,228 people as of November 30, 2024. Our associate count represents a decrease of 161 from a year ago, 71 due to headcount reductions in our manufacturing facilities in response to business conditions and the consolidation of our two wood manufacturing facilities, 43 in our retail segment primarily attributable to the elimination of certain retail support functions and warehouse consolidation, and 47 at our corporate office related to the closure of our central customer care center and the elimination of several corporate overhead functions. Headcount by segment is as follows:
●
644 in the wholesale segment
●
453 in the retail segment
●
131 in the corporate and other segment
We approach our workplace culture by being Invested … In Each Other , the tenets of which include fostering a workplace that promotes respect for each other, investing in our associates’ well-being, providing safe and comfortable work environments, offering opportunities to develop personally and professionally, being good stewards of the environment, and giving back to the communities in which we work and live. We believe that these investments are crucial to the success of our associates and our Company.
Workplace Respect
We value the diversity of our associates as an essential component in the way we do business. It continues to be Bassett’s policy to be equitable and impartial in our relations with our associates and to base all employment-related decisions upon valid, job-related factors, without regard to race, color, religion, national origin, age, sex, gender identity and gender expression, transgender status, pregnancy, physical or mental disability, genetic information, veteran or other protected status.
We continue to maintain and enforce our policy prohibiting discrimination and harassment in our workplace. Our managers are trained in how to prevent, recognize and respond to possible inappropriate behavior. Associates have several available avenues for reporting concerns, including a confidential hotline. We promptly and carefully investigate each complaint of harassment or discrimination. More details about our commitment to preventing discrimination and harassment in our workplaces are available on our website.
5
Quality of Life
We continue to invest in the physical and mental well-being of our associates, their spouses and their children.
●
We introduced a benefits and wellness app, free to our associates and their dependents, which assists with locating best-in-class, in terms of quality and cost, healthcare providers and facilities, along with free virtual exercise therapy for back and joint care.
●
We offer several free online mental and behavioral health resources, with unlimited access to board-certified psychiatrists and licensed therapists.
●
Our wellness programs, including onsite health clinics, personalized health coaching, mental health counseling, and incentivized healthy lifestyle choices, are designed to improve associate health and reduce healthcare costs for both the associate and the Company.
●
We provide opportunities for our associates to meet with a certified financial planner for personalized retirement planning and budget counseling.
●
We offer comprehensive benefit plans including Company subsidized health insurance, 401(k) Plan with Company matching contributions, and paid time off. We believe our benefit plans are competitive and meet the needs of most of our associates.
Work Environment
Our investments in our facilities continue, which improve our associates’ safety and comfort, and increase efficiency. These include:
●
Installed vacuum lifts, designed to reduce manual lifting, at our Martinsville facility
●
Improved air quality with the addition of a humidity-controlled air handling system and battery-operated forklifts
●
At our upholstery locations, we continued to upgrade the lighting in our manufacturing areas and warehouses, along with resurfacing floors to improve safety and aesthetics
●
Improved security with the installation of a biometric (finger scan) timekeeping system at all our manufacturing facilities.
We installed a comprehensive human resources, benefits, payroll and timekeeping system which gives our associates the ability to view, and where applicable, update their personal information, benefits enrollments, pay history and time worked in real time.
Professional Development
We offer opportunities to our associates for educational and skill development, including:
●
Tuition reimbursement for associates who desire to further their education.
●
Online training for managers, with classes completed monthly.
●
Training for customer-facing associates designed to enhance the in-store and follow up experiences for our customers.
Environmental and Civic Responsibility
Representing our commitment to sustainably sourced hardwoods, each Arbor Day since 2021, over 30 of our associates travel to central Ohio to take part in the planting of Appalachian hardwood seedlings. This event is hosted by our BenchMade supply partners, and over 200,000 trees have been planted to date – and counting. Additionally, we remain committed to our recycling efforts. Materials recycled in 2024 include:
Tons
Tons
Wood dust
1,620
Fabric scraps
155
Paper/cardboard
174
Wood Pallets
78
Metal/electronics
45
Finishing materials
39
Foam
15,750
cubic feet
Our partnership with the Stephen Siller Tunnels2Towers Foundation reached the 10-year mark in 2024. To date, we have furnished over 40 smart homes built for wounded veterans and first responders. Additionally, we supported numerous other charitable and civic organizations with monetary and in-kind donations.
6
Major Customers
Our risk exposure related to our customers, consisting primarily of trade accounts receivable along with certain guarantees, net of recognized reserves, totaled approximately $18,281 and $15,636 at November 30, 2024 and November 25, 2023, respectively. At November 30, 2024 and November 24, 2023, approximately 43% and 35%, respectively, of the aggregate risk exposure, net of reserves, was attributable to five customers. In fiscal 2024, 2023 and 2022, no customer accounted for more than 10% of total consolidated net sales.
Available Information
We file our annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at www.sec.gov.
Through our website, www.bassettfurniture.com, we make available free of charge as soon as reasonably practicable after electronically filing or furnishing with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments thereto.