C-Suite Interview with Bassett Furniture (BSET) President & CEO Rob Spilman

Thank you, Joe. Great to be here.

Sure, love to. We like to talk about our history. We're proud of it and use it quite a bit in our marketing, and I think it resonates even more today in the world we live in. But we find ourselves this morning, as we do most mornings, in the little hamlet of Bassett, Virginia. We're in southwest Virginia at the foot of the Blue Ridge Mountains. Back over a hundred years ago, in the late 19th century, J.D. Bassett, who happened to be my great-grandfather, or I happen to be his great-grandson, let's put it that way, was an entrepreneurial fella. He had a general store, was a farmer, and also in the timber business. He had a sawmill first, got the contract to construct the railroad ties of the O&NW railroad that came through here well over 100 years ago. Once he expanded the sawmill, he began to branch out and provide lumber to the nascent furniture industry down in North Carolina when that was starting. The real seat of the furniture industry in America in those days was around the Grand Rapids, Michigan area and upstate New York around Jamestown. So he began to branch out and take some of this beautiful white oak that we have here, and cherry and other hardwoods, and peddle those to the furniture manufacturers. One time his wife accompanied him on a trip up in Michigan, and when they were coming back home, he said, 'What do you think about all this?' Her answer was, 'I think we ought to do what they're doing. We have the raw material and we have the labor.' So it was really her idea to start Bassett Furniture in 1902. So he got his brother and his brother-in-law, and they started making furniture. We made strictly wood furniture, bedroom and dining room, until the early 1960s. We bought an upholstery company down in Newton, North Carolina called Prestige in 1964, and that began our entry into upholstered furniture. Today we are 70% upholstered furniture in our wholesale volume, so it's a good thing we went into the upholstery business because it's come to really be the leading segment for us. As far as I'm concerned, I grew up here in town, worked in the factories. It really wasn't a choice; I was told to go work in the factory. The first time I was 14 years old, I went down to Dumas, Arkansas and spent two wonderful months down there in a plant we had in those days. But I grew up in the business, went off to school. After school, I entered the industry but not with Bassett, and worked with a big retail operation down in Texas for about six years. In 1984, I joined Bassett and came back to the Hickory, North Carolina area where we still have the upholstery operation I talked about. I worked there and another division we had at the time for about 10 years. In '94, I moved back here to headquarters and had the responsibility of sales and merchandising for the company. I did that for three years until I became the CEO. We had a new CEO come in, and then since March of 2000, I have been the CEO. So that's the history of my involvement.

I would say, Joe, we are extremely vigilant when it comes to how we are dealing with this. Some things we unfortunately can't control. It's hard to believe a year later that we're in the situation that we are today. When you look back a year ago, in this very room where I'm sitting talking to you right now, we have big sticky notes on the walls here from a year ago which chronicled our incoming and outgoing cash week by week, almost day by day, because it really was white knuckle time. For a period of several weeks, the well completely dried up a year ago. So I instituted a daily crisis meeting we called it at 8:30, and this was cross-functional. We did this five days a week, and in the first few weeks we did it on Saturdays as well. We were that concerned about where all of this was going to come out. Come Memorial Day 2020, 11 months ago, our fortunes completely reversed. Folks started getting out again, going to stores, buying online, and we started selling one heck of a lot of furniture, and we haven't stopped since. So we've been dealing with it with an unbelievable amount of communication and coordination between our sales, marketing, manufacturing, sourcing, logistics teams. We do that twice a week now, so we really know what's going on every day with the company. We're doing this because things happen. For example, yesterday or a day before yesterday, India shut down because of COVID, so we have a bunch of our new fabrics that we're bringing out for the fall that are from India, and we were planning on getting that material and to have swatches to have our guys go sell it. So that's a small one, but every day there seems to be something new. So we're dealing with it by staying on top of it frankly. And what have we learned? Well, I guess in retrospect, even though we thought we were very diligent on cost control and things we could do without, when you truly have no water running through the system and the tap goes dry, you really realize you can do things more economically than you even thought about. So that's one. From a people point of view, mostly on the wholesale side, I will say most of those folks are back with us now because our business is so good, but we don't have more. We have the same amount, and that's spread amongst a much higher volume level. On the retail side, we really have taken out quite a few of the folks there. We're running the stores leaner, both from administrative and sales point of view, and the remaining sales people are working like Trojans, but they're making a lot more money than they were before, and we are not going to change that until we see that there's a reason to change. Other ancillary things: travel being a big one. In retail wholesale, how much do we really need to travel? Certainly the virtual thing is, we're all in some ways kind of sick of it a little bit with all the Zoom and the WebEx and all of that, but we just don't think we need to travel as much. We just got back from an event in High Point called Pre-Market, lasted four days. We had dealers come in, about 150 dealers, but the question remains: what is the future of furniture markets? That's an expensive endeavor for us between all the rents we pay, getting all the samples, getting the people in there, the meals, and all of those things. So certainly looking at cost control. And then finally, I would say learnings on the digital engagement side. We have really amped up all aspects of that. The virtual appointment is something that we did not do before, but now we're doing design jobs digitally. That was kind of born out of COVID. The live chat we have, we actually put the live chat in our stores now where our designers are doing that chat instead of doing it here at the office. They're the most qualified to know the product line, and we're seeing revenue evolve from that at an exciting level. So it's just a lot of stuff that came out of COVID, and I'm not sure we're sure how it's all going to play out for the long haul, but we have learned a lot.

We're excited about that. We announced that Monday, and it was very well received. The factory is actually, we call it the campus. We have two big buildings that I talked about down in Newton, North Carolina that make upholstered furniture, and this building is 125,000 feet, and it's just next door to our, separated by a railroad track, but it's right next door to where we are now. So very excited about that. Our business even before the pandemic, we were pretty cramped there in terms of space. We've also opened a new category of domestic motion furniture, which is exciting. We're selling that well, but it takes a lot more space with all the reclining mechanisms that we have to have on the factory floor. So we decided to take this factory down. Six weeks ago, eight weeks ago, we've been negotiating with the owners. We wanted to buy it, but we couldn't buy it. It was called up in a 20 property deal that would have been very expensive to extract, prohibitively expensive. So anyway, we're leasing it. We had to negotiate the lease, and we've just gotten that done. So our guys are over there this morning. They've been inside for about three weeks putting in the air compressors, the airlines, knocking out some offices that we're not going to need, working on the lighting, the roof, et cetera. So with all that going on, we still believe we're going to be able to open around the first of June. We have a specific plan for this. They are starting everyday value price point goods, which is so very well covered. We're going to be made there now. Where we previously made that product, we'll move that motion product in there, and we'll have ample room to do it, and that will happen in early July. On the other side of the wall of that building, we make outdoor furniture, and then contiguous is a very big facility that we manufacture custom products in and accent chairs. So each building has its own reason for being. That is a lot of stuff going on at one area, but the beauty of having the plant next door to us is we don't need to hire new management to run it. We can run it with our existing team, and we are really excited about it. As far as full production goes, we need to add about 80 people. That's very difficult to do today, labor being probably the most challenging aspect of our business today and maybe in the business world in America today. But we are able to hit singles every week, hire three, four, five people, that kind of thing. So over time, we'll build up to that 80, and I think we'll be able to accomplish that this summer. So we should be toward the end of the third quarter, which is in August for us, we should be at full production. Very excited about that. We look forward to that.