Bassett Furniture Industries, Incorporated · NASDAQ:BSET
Bassett Furniture Industries — Proxy Contest (April 2008)
36 slides from Bassett Furniture Industries's proxy contest presentation, Apr 3, 2008
Slide 1: Bassett Investor Presentation April 2008
Bassett Investor Presentation April 2008 NASDAQ: BSET
Slide 2: Agenda
Agenda Business Overview & Industry Update Retail Growth Strategy Rollout & Repositioning Plan Balance Sheet Costa Brava’s Bid for Control
Slide 3: Business Overview
Business Overview 130 stores – 32 corporate & 98 licensed 75% of sales through store network 3 regional distribution centers Wholesale sales nearly 60% import, 40% domestic 2 domestic manufacturing facilities focused on executing our unique merchandising strategy 1,420 employees – 570 in corporate r
Slide 4: Furniture Industry Update
Furniture Industry Update From 1999 – 2007, China’s furniture exports (1) have grown 640% from approximately $3bn to over $20bn Mass merchandisers (e.g., Wal-Mart, Target, Costco) have taken share and pressured margins of pure Home Furnishings retailers Slowdown within the housing industry has put a
Slide 5: China Furniture Exports & U.S. Furniture Employment
China Furniture Exports & U.S. Furniture Employment 1999 - - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 '99 '00 '01 '02 '03 '04 '05 '06 '07 Chinese exports data per the China National Furniture Association. U.S. employment data per the U.S. Bureau of Labor Statistics.
Slide 6: Home Furnishings Consolidation
Home Furnishing Consolidatio Difficult industry conditions have led to consolidation 209 bankruptcies since 1999; 171 in the last five years (*) Numerous M&A transactions November 8, - Levitz Furniture Inc. declared its third bankruptcy in ten years The furniture chain is undergoing outright liquida
Slide 7: Industry Undergoing Change
Industry Undergoing Change Numerous domestic manufacturing closures; companies shift to outsourced production Renewed retail focus with dedication to improving/attaining profitability, store presentation and improved customer service New financial strategies Capital raise (e.g., STLY’s $25m private
Slide 8: Retail Growth Strategy
Retail Growth Strategy Building a Specialty Furniture Retail Brand Strengthen retail talent Execute new product strategy A new store prototype Modernize marketing effort Strengthen our Design Services Build national consistency in our network
Slide 9: Strengthen Retail Talent
Strengthen Retail Talent Retail Leadership Hired Jason Camp as SVP Retail Restoration Hardware Hired Barbara Kurgan as Creative Advisor Martha Stewart, Elle Decor Upgraded talent in key retail leadership roles. Retail Store Talent Investing heavily in recruitment and development of high quality reta
Slide 10: New Product Strategy
New Product Strategy Become a style leader within 4 lifestyles Strengthen offering in custom furniture Create a clear price / value point of differentiation from EA, Thomasville and Pottery Barn Strengthen design capabilities with a fully coordinated assortment Grow accessory / drapery business
Slide 11: A New Store Prototype
A New Store Prototype Create 3 custom workshops Upholstery, Dining and Storage Showcase our 4 lifestyles More residential scale and design Create authority in Design Services Create a Home Entertainment destination Sectionals, Motion and Wall Units Build authority in Accessories Drapery, Rugs, Light
Slide 12: New Store Format
New Store Format •3 custom workshops •4 Lifestyles •More residential scale •Design Services •Authority in Accessories •Home Entertainment
Slide 13: A New Store Prototype
A New Store Prototype Early results are very encouraging 5 new stores are now open Higher average volume Higher average transaction Higher conversion rate
Slide 14: Modernize Marketing Effort
Modernize Marketing Effort Website A critical research tool for furniture shoppers Piloting web commerce this summer Catalog Will mail 9m across 8 drops this year Design Resource Guide Launch first bi-annual book this fall Television Gain national strength and consistency through TV
Slide 15: Strengthen our Design Services
Strengthen our Design Services Thoughtful accents and accessories Wall art and mirrors Lighting & decorative accessories Fully coordinated textiles assortment Upholstery Fabrics Leather Assortment Rugs / Rug Squares Custom Drapery in 30 days Stocked top of bed Stocked pillows
Slide 16: Strengthen our Design Services
Strengthen our Design Services Talented Design Consultants Aggressively recruiting and developing high quality Design Consultants Launching Bassett University Tools, Technology and Resources Presentation Rooms in new stores Prevue & Room Planner in stores/web Design Resource Guide Marketing the Capa
Slide 17: Retail Strategy Summary
Retail Strategy Summary Early results are encouraging New products are selling briskly New stores are delivering better performance Design Services are increasing Our national network is gaining consistency
Slide 18: Growth Strategy – Rollout Plan (2008–2010)
Growth Strategy – Rollout Plan (2008 – 2010) Closing underperforming stores 20 to 25 stores over next three years Investing in new stores – 13 to 19 Converting and remodeling a certain number of stores
Slide 19: Retail Store Network
Retail Store Network (includes both Corporate and Licensee owned stores) Targeting improvement in average annual sales per store $3.1 million in 2007 to $3.7 million in 2010 Based on achieving a new store annual top line target of $4.0 to $4.6 million
Slide 20: Rollout & Repositioning Plan
Rollout & Repositioning Plan Targeted Today End of 2010 Corporate New prototype 15 to 20 Old prototype 16 to 18 (100% remodeled) 31 to 38 Licensed New prototype 6 to 10 Old prototype 78 to 88 (50% remodeled) 84 to 98 115 to 136
Slide 21: Store Conversions & Remodels
Store Conversions & Remodels Conversion is a complete store redesign to incorporate all of the facets of the new store prototype. This represents a significant capital investment. Remodel is a redesign that is less in scope and incorporates only certain facets of the new store prototype. The capital
Slide 22: Planned Capital Spending for New Prototype Stores
Planned Capital Spending for New Prototype Stores • 2009 and 2010 targets based on new stores achieving targeted performance levels. Our Board has not approved 2009 and 2010 capital spending. Based on certain percentage of leases versus owned real estate on new stores. New store real estate could be
Slide 23: Targeted Store Economics
Targeted Store Economics Assumes 16,000 square foot retail stores built for $100 per square foot Approximately $53 per square foot of tenant improvements and initial inventory costs of $0.5 million Total new store investment of $4.5 million Buy $4.5m, Lease $1.4m Retail segment growth drives Wholesa
Slide 24: Actual & Targeted Store Performance
Actual & Targeted Store Performance Current Targeted New Targeted Total Bassett Fleet Bassett Stores Fleet - 2010 Avg. Sales per sq.ft. $180 $275 $220 Average Size 17,200 16,000 16,800 Avg. Sales per store $3.1 mil. $4.4 mil. $3.7 mil. Note - Five new stores are currently achieving targeted levels o
Slide 25: Balance Sheet
Balance Sheet Our balance sheet is bolstered by two significant investments/assets 1. Investment Portfolio (Q1 est.) Marketable Securities Alternative Asset Fund 2. International Home Furnishings Center Listed on the balance sheet as a liability due to dividends received being in excess of earnings
Slide 26: Balance Sheet
Balance Sheet This strong balance sheet HAS allowed us to: Pay out more than $48 million in dividends over the past five years (very important to many of our long- term shareholders) Invest in store real estate Sign leases for store expansion $96 million commitment at 11/24/07 Guarantee leases for c
Slide 27: Balance Sheet
Balance Sheet We anticipate our strong balance sheet WILL allow us to: Continue paying an attractive dividend Weather current difficult industry conditions Prudently execute our long-term retail growth strategies New stores Conversions and remodels
Slide 28: March 17, 2008 Release
March 17, 2008 Release Reinforces our belief in long-term viability of the furniture business and continued expansion of the retail program Will liquidate significant portion of our investment portfolio over the next two years to: Invest in store program – real estate $10 – 12 million per year Subje
Slide 29: April Release
April Release Since the March release, Bassett shareholders have offered strong support for the increased ongoing dividend and aggressive continuation of share repurchase program have expressed strong sentiment for immediate return have noted concern over level of capital spending Bassett adjusts it
Slide 30: Who is Costa Brava?
Who is Costa Brava? A Bassett shareholder for less than four months Nominees appear to have no experience or expertise in the home furnishings or retail business of any kind Sought control without stating any plan for the future of the company Now presents a platform that unwisely promises unachieva
Slide 31: What Costa Brava Doesn't Say
What Costa Brava Doesn’t Say In just 10 years, while numerous furniture companies have failed, Bassett has moved from manufacturing to retailing with over $400 million in annualized sales The Company’s retail plan Is the culmination of more than two years of extensive study and consultation Has been
Slide 32: Costa Brava's letter is wrong.
Costa Brava’s letter is wrong. Costa Brava says Bassett’s plan is too uncertain and is based on a “very short observation period.” Costa Brava is wrong . Bassett’s plan is the culmination of more than two years of extensive study and consultation. Costa Brava says Bassett’s plan involves “high price
Slide 33: What the Company is already providing shareholders
What the Company is already providing shareholders Cautious execution of its business plan without depletion or deterioration of shareholder value Immediate return of nearly $15 million of shareholder value through issuance of a $1.25 dividend plus $20 million to be used for share repurchases An inc
Slide 34: Bassett's Board of Directors Deserves Your Support
Bassett’s Board of Directors Deserves Your Support Overwhelmingly independent (7/9); no insiders or affiliated outsiders on key committees Significant home furnishings and retail experience and expertise Detailed plan for maximizing and delivering value to shareholders; will use undervalued non-oper
Slide 35: Summary
Summary Conditions are tough but your Board has experience and a plan to build shareholder value Retail strategies properly executed should allow Bassett to take market share without risking valuable assets Growth plan as outlined will allow Bassett to gain consistency and needed scale Recent Board
Slide 36: Forward-looking statements
Certain of the statements in this presentation, particularly those preceded by, followed by or including the words “believes,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the fiscal year
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