It's been a big year for Bassett Furniture (BSET). The company started 2012 by paying out a 50-cent per share special dividend, a distribution made possible by the company's sale of the International Home Furnishing Center in High Point, North Carolina. That sale netted the company a pre-tax distribution of $74 million, nearly double its market capitalization at the time. Following the sale, BSET stayed roughly range-bound between $7 and $8 per share, but as 2012 rolled around, the stock took off. It closed Friday at $10.74, up 45% year-to-date after releasing fiscal second quarter earnings on Thursday morning.
Those earnings showed that Bassett continues to execute. Despite continuing weakness in the US housing market, the furniture maker saw moderate revenue growth of 1.2% year-over-year, but saw a net loss in the previous quarter swing to a solid 71 cent per share profit in Q2.
Much of that profit came from the final payment - totaling $9 million - from US Customs, part of a distribution due as part of the Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd Amendment (which has since been repealed). In fact, on a trailing twelve-month basis, BSET has actually posted a small net loss when excepting the Customs distribution.
But there's a lot to like at Bassett, and good reasons for the stock's recent strength. Company-owned stores saw a 7.9 percent increase in same-store sales in the quarter, while bad debt expense fell from $6.2 million in Q2FY11 to just $0.2 million in the recent quarter. The company posted a modest increase in revenue despite operating fewer stores, as the company increased its market share with independent dealers. And the company's new partnership with Home and Garden Television rolls out in September, with demand "encouraging" and a complete phase-in of the product line expected by early 2013.
In the meantime, Bassett - largely due to the IHFC sale - boasts an impressive balance sheet, with nearly $5 per share in net cash and a tangible book value just below $14. At Friday's close, BSET offers nearly a 25% discount to book, despite the clear growth trends and the potential for a rebound in the US housing market. In addition to the 50-cent per share special dividend authorized in late 2011, BSET has twice raised its quarterly dividend, which now yields nearly 2% annually. Given the strong cash balance, Bassett could easily offer another hike and/or another special distribution. The stock's quarterly dividend was set at 20 cents per share from 1993 to 2008, showing the company's long-term commitment to a strong dividend policy.
Of course, that dividend saw several cuts in the housing-led crash of the mid-2000s and there are risks with Bassett. US-based furniture makers continue to face severe competition from Asia, and the recent boom in housing stocks such as Lennar Corporation (LEN) and PulteGroup (PHM) shows that optimism toward the sector may be outpacing its slow, uneven rebound.
Still, the cash balance and continuing discount to book value make Bassett worth a look, even at these levels. And Thursday's earnings report shows that Bassett Furniture is rebounding, even if the housing sector it serves hasn't made it all the way back.