Basset Furniture Industries (BSET) is a small cap stock that continues to fly under the radar. Founded in 1902 by John David Bassett, the company engages in the design and manufacture of furniture. Bassett operates in three different segments: Wholesale, Retail, and Real Estate. The Wholesale segment mass produces and sells furniture to non-affiliated retail stores. The Retail segment is made up of company owned-stores and licensee-owned outlets through which Bassett sells its products. The Real Estate segment consists of licensee stores that the company owns or leases. Bassett has leveraged its strong brand name and solid finances to successfully open over 100 retail locations in the United States, Puerto Rico, and Canada. The company is also using its website bassettfurniture.com to expand its rapidly developing network of stores.
At its July 9th investor day, management spoke about the company’s recent performance and its financial outlook for the remainder of the 2013 fiscal year (ends November 30th). For the fiscal second quarter, consolidated sales of $81.2 million were 20% higher year over year. Operating profit more than doubled since last year’s like quarter ($1.6 million to $3.4 million). Wholesale profits increased by 17% and total revenue rose by more than 25%. The revenue factor was particularly impressive because it marked the third consecutive quarter in which Bassett’s revenues improved by at least 20%. As for the stock, since its low point in March of 2009, the share price has risen more than 1,600%. The strong showing stemmed from a material earnings rebound, which can be attributed to the recovering housing market.
Bassett also has positioned itself well financially. The company has $46 million in cash and little debt. The excess cash means Bassett should have more than enough to complete planned capital expenditures. On that note, its current assets could pay back total liabilities almost four times over. Lastly, with strong cash flow, increasing revenue and low debt, the company is poised to keep raising its quarterly dividends.
To sum up, Bassett does appear to have a bright future, though tough competitors, such as Ethan Allen (ETH) and Haverty Furniture (HVT), will not be sitting on their hands. Notably, Bassett’s fate appears tied to the housing recovery, and the company could potentially face an uphill battle if the real estate revival were to subside. However, we believe that Bassett will continue to prosper. The future looks promising as six new stores are set to open by early 2014 and five additional units are going to be repositioned and expanded. At Bassett’s recent stock price, we believe, that the equity still has sizable upside.
For a more in-depth look at Bassett Furniture Industries, subscribers should examine our full report in The Value Line Investment Survey.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.