This was an extremely difficult quarter for the Company both in terms of our business levels and the announcement made earlier this month related to the closing of our facility in Bassett.
Robert H. Spilman Jr., President and CEO, Bassett

Bassett Furniture Industries Inc reported sales for the first quarter of 2007 were $73.4 million down 15% from the $86.5 million reported in the first quarter of 2006. This shortfall is primarily due to continued soft furniture retail conditions which have impacted both retail sales and wholesale shipments.

Bassett announced on March 5, 2007 that it plans to cease operations at its wood manufacturing facility in Bassett. The closure of the 323,000 square foot facility is planned to be completed during the third quarter of 2007 and will affect approximately 280 employees or 15 percent of the Company’s workforce.

During the last few years, like most of the U.S. furniture industry, Bassett has experienced a shift in demand from domestically produced to imported wood furniture. With the current business levels, it was no longer feasible to continue to operate the large manufacturing facility even with the efficiency improvements and investments made over the last two years. The Company plans to source the majority of the products currently produced at this facility from overseas suppliers, to continue to produce certain custom bedroom products domestically and to discontinue production of slower selling items.

The Bassett Furniture retail store program had 133 stores (106 licensed and 27 Company-owned) in operation at the end of the first quarter. No stores were opened during the quarter with one licensee store being closed. The Company expects that four or five new stores will be opened over the remainder of the year.

“This was an extremely difficult quarter for the Company both in terms of our business levels and the announcement made earlier this month related to the closing of our facility in Bassett,” said Robert H. Spilman Jr., president and chief executive officer. “While we are reducing our cost structure to reflect the pace of incoming orders, the Company continues to pursue mid and long-term growth initiatives on a number of fronts. The reception of our dealers to new sharper value products at the High Point Market last week was very positive. Components of our store presentation improvement program were on display and favorably embraced by our licensees. The debut of our new store prototype this fall and new embellishments to our consumer catalog highlight continued efforts to strengthen store performance.”

Net sales for our wholesale segment were $62.3 million for the first quarter of 2007, 18% below the $76.3 million sales level attained in the first quarter of 2006. For the first quarter of 2007, approximately 74% of wholesale shipments were to Bassett stores compared to 70% in the first quarter of 2006. Additionally, approximately 47% of wholesale shipments in the quarter were imported products as compared to 44% in 2006. The wholesale segment generated an operating loss of $(1.2) million in the first quarter of 2007 as compared to $3.7 million of operating income in 2006. The $4.9 million decrease in operating income was primarily attributable to the reduction in sales volume. The Company also incurred increased selling, general and administrative expenses associated with the development and distribution of the spring catalog, the development of the new store prototype concept, additional television advertising and the addition of new retail management personnel.

With the continued difficult furniture retail environment resulting in the significant drop in the wholesale volume, the Company will continue to assess and adjust its wholesale cost structure to match the associated demand. The Company expects that the closure of the Bassett plant will result in annual improvements beginning in 2008 to operating income of $3.0 to $4.0 million per year after factoring in expected sales reductions.