Q2 2024 Bassett Furniture Industries Inc Earnings Call

Participants

John Daniel; Senior Vice President, Chief Financial and Administrative Officer; Bassett Furniture Industries Inc

Robert Spilman; Chairman of the Board, President, Chief Executive Officer; Bassett Furniture Industries Inc

Anthony Lebiedzinski; Analyst; Sidoti & Company, LLC

Budd Bugatch; Analyst; Water Tower Research LLC

Presentation

Operator

Hello, and thank you for standing by, and welcome to Bassett Furniture Industries Q2 2024 earnings call. (Operator Instructions)
I would now like to turn the call over to Mike Daniel, CFO of Bassett Furniture. Sir, you may begin.

John Daniel

Thank you, Twanda, and welcome to Bassett Furniture's earnings call for the second quarter ended June 1, 2024. Joining me today is our Chairman and Chief Executive Officer, Rob Spilman, Junior. We issued our news release yesterday after the market closed and it's available on our website.
We have updated our reporting format with a fresh look that we believe provides an efficient and easy comparison of important metrics compared to the prior year's second quarter. We're -- offering today's conference call to provide additional information about our business, including the restructuring plan we announced in the release.
We will open the call for a Q&A session after our remarks. In addition, we will post the transcript of the call on our investor site within 48 hours of this call. We believe this process will help enhance how we share our quarterly results with you, and we welcome your feedback.
During today's call, certain statements will be made may be considered forward-looking and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward-looking statements. For more information, including important cautionary notes, please see the company's annual report on Form 10-K for the fiscal year ended November 25, 2023. Other filings with the SEC describing risks related to our business are available on our corporate website.
Now I'll turn it over to Rob for comments about our second quarter. Rob?

Robert Spilman

Thank you, Mike. Good morning, everyone, and thank you for joining us today. The macro-economic pressure currently exerted on the furniture industry continued in the second quarter. Elevated home prices, relatively high mortgage rates and general inflationary tension remain persistent.
We also know from our own customer data that many are spending more on experiences than they are in their homes, a reversal from what we saw during COVID. Revenue in both our wholesale and retail segments down with greater pressure on our retail business due to the higher level of associated fixed costs.
Geographically, sales were stronger in areas where housing is hotter and specifically the Southeast and across to Texas. Excluding the $2.7 million and additional inventory valuation charges that we levy. We were pleased with the strong consolidated gross margin that we recorded in the second quarter coming in at 55.7% compared to last year's 53.6%.
Although inventories have dropped by $28.6 billion or 33% since the end of fiscal 2022. We believe that we can run an even leaner business in the future because certain elements of our assortment are not predictably generating our expected sales -- velocity. Accordingly, this quarter, we elected to record higher reserves on items in anticipation of the sale of more discontinued product, over the course of the next couple of quarters.
Our average retail ticket was $3,960 up 9% from last year. Design makeover projects comprise 43% of total retail sales, down slightly from last year. And the current economic environment that I discussed earlier, the big holiday sales events carry even more weight.
We are pleased that our three-week Memorial Day promotion slightly exceeded last year's written business. Total additions to our online product catalog, ongoing website optimizations and stronger promotional messaging proved to successively successfully drive consumer engagement during the key holiday period.
Particularly notable over the Memorial Day selling event was the success of the addition of leather to our True Custom Upholstery program. Also, the recently introduced Origin Dining program drove new sales as we reentered the everyday dining category with product designed for kitchen are breakfast areas of the home.
On the wholesale side, we were excited about our showing at the High Point Furniture Show in April for two reasons. First, the showroom debut of our Bassett Design Studio concept, spotlighting, our True Custom Upholstery program. And second, the strategic outreach to the interior design community through our selling space, located in the inner hall area of the international Market Center.
We were pleased that we made contact with over 400 interior designers and design firms, and we expect this will yield results well into next year in our news release yesterday, we reported that we are executing a restructuring strategy effective immediately. While we are going through a down period for the industry, we are setting the table for the inevitable rebound in consumer purchases for the homes.
This plan is designed to grow our business and to get the most out of our revenue and our working capital to drive profitability. There are five key points to the plan. Number one, drive organic growth through better branded retail locations, omnichannel capabilities and enhanced customization positioning to expand our dedicated distribution footprint.
Number two, rationalize US wood manufacturing from two locations into one primary location, supported by a small satellite operation. Number three, optimize inventory and drop unproductive lines. Number four, improve our overall cost structure and invest capital and refurbishment of current corporate retail locations.
And number five, close the know-how eCommerce business. We believe that the depth of our custom furniture manufacturing capabilities and our quick response made in America model. Makes us unique in the industry with our network of company-owned and licensed stores and our organization of highly trained design consultants.
We are leveraging people and technology for customer acquisition. Although we are exploring three new markets for store locations, we do not plan any further openings this year. Capital investments are targeted for refurbishments of existing corporate locations, our approach is well suited to offer personalized solutions to the carrier design community to better serve their clients.
And we are excited about showcasing our long proven true custom upholstery offering and the new Bassett Design Studio format introduced earlier this year. Many in the industry now refer to offering more than one fabric on a frame as custom upholstery. Our True Custom program truly represents what custom upholstery really as a choice of frame lenght, arm, back styles, cushion options, multiple fabric and leather options, et cetera.
Designed for better independent furniture retailers that 1,000 square foot concept is off to a great start. Recall in April, in our first quarter report, we had said 17 new locations. And through May, we are up to 30 for a modest investment in fixtures and displays.
Our customers receive a quick response set up that Bassett is recognized for and they are giving us very positive feedback. They are happy with the margins and the fact that they can carry lower inventory. We are targeting to have 50 dealers in the fold by year end toward our ultimate goal of at least 100 locations, because we believe we can manufacture the same amount of US made wood furniture that we are currently providing more efficiently and cost effectively.
We are reconfiguring our domestic wood manufacturing footprint. This action is underway and resulted in a charge of $1.4 million for the second quarter. Our goal is to lower our cost structure. We have completed the initial phase of our retail warehouse consolidation that resulted in the closing of three warehouses during the quarter.
We also plan to move out of a major wholesale distribution center at the end of the third quarter that will result in significant savings and could result in an additional charge of up to $1 billion to be taken. And the third quarter. We made the decision to close Noa Home, the mid-priced e-commerce furniture retailer headquartered in Canada with operations in Canada, Singapore US in the UK.
Despite providing not consistently with the working capital that was needed starting in 2022, they were not able to generate sales growth. As a result, we did not feel that additional funding of the operation was Bassett's best interests and have made the decision to wind down their operation by the end of the fiscal year.
Our capital allocation strategy remains to focus on investments in our business like those have outlined and to deliver returns to shareholders through dividends and share repurchase.
We also announced on Tuesday that the Bassett Board of Directors approved an 11% increase in our quarterly dividends. We're proud to increase our dividend, and this is a sign of confidence and our growth potential and cash flow.
Our company has a long history, 122 years and counting of weathering economic cycles from housing to inflation. We believe that our restructuring plan backed by our strong financial position and consistent cash dividend will grow revenue, reduce costs and strengthen operating margins.
As we implement this plan, we expect that Bassett, of 2024 will be a reset for our business. We are optimistic that consumer demand will improve and that our unique competitive advantages will allow us to increase market share and deliver long-term shareholder returns.
Now I'll turn over things over to Mike for more details on our financials.

John Daniel

Thanks, Rob. In my commentary, the comparisons I will discuss will be the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023, unless otherwise noted.
Total revenues decreased $17.1 million or 17%. Consolidated gross margins were comparable to the prior year at 52.5% versus 52.6%. Adjusted for the additional and unusual inventory reserves that I'll discuss shortly, consolidated gross margins were 55.7% versus 53.6%. We had a consolidated operating loss of $8.5 million as compared to operating profit of $2.5 million for the second quarter of 2023.
Included in the current quarter were several significant and unusual expenses due to the restructuring plan Rob previously enumerated, including $2.9 million of asset impairment charges associated with retail store tenant improvements and lease right-of-use assets for underperforming stores and warehouse consolidation;
$1.8 million of asset impairment charges and $500,000 of inventory valuation charges associated with the wind down of Nova Home Inc.; $700,000 of asset impairment charges and $700,000 of inventory valuation charges associated with the consolidation of our domestic wood manufacturing operations;
and finally, $1.5 million of additional inventory valuation charges in both our wholesale and retail operations in anticipation of the sell-off of more discontinued product over the course of the next couple of quarters. As a result of the restructuring plan and the charges taken, we expect to realize annual cost savings of between $5.5 million and $6.5 million starting with fiscal 2025.
Now, I'll provide information regarding our wholesale operations. Net sales decreased $9.2 million or 15% from the prior-year period, due primarily to a 19% decrease in shipments to the open market, a 16% decrease in shipments to our retail store network, partially offset by a 2% increase in Lane Venture shipments.
Gross margins increased 110 basis points over the prior year, primarily due to the expected improvement in the Club Level leather business as this product line is internationally sourced with extended lead times, we receive significant amounts of inventory during the second and third quarters of 2022, just as product demand was weakening due to the market downturn in home furnishings.
Also, the ocean freight costs associated with the majority of the product received were at significantly higher costs than we are currently being realized on current product receipts. In addition, we realized a favorable adjustment in our warranty and returns reserve due to improved diligence and efficiency in handling claims.
These increases were partially offset by $1.7 million of additional inventory valuation charges previously discussed and decreases in the gross margins for domestic upholstery and wood operations due to deleverage of fixed costs and labor inefficiencies due to the lower sales volumes.
SG&A as a percentage of sales increased 170 basis points, primarily due to reduced leverage of fixed costs from decreased sales. Now moving on to our retail store operations. Net sales decreased $10.3 million, or 17% from the prior year period written sales. The value of sales orders taken but not delivered, declined 2.5% from the second quarter of 2023.
Gross margin was flat with the prior period because higher margins on inline goods were offset by lower margins on clearance goods. In addition, we had $500,000 of increased inventory valuation charges previously discussed due to the strategy to be more aggressive in selling clearance goods to better control inventory levels.
SG&A expenses as a percentage of sales increased 570 basis points, again, primarily due to decreased leverage of fixed costs from lower sales volumes. As Rob discussed, we have announced that we will be winding down the operations of Noa Home Inc. As part of that, we recorded a $1.8 million charge to write off the previous recorded intangible asset for the trade name and $500,000 of inventory valuation reserves to prepare for an orderly sell-through of the inventory.
Finally, let's turn to the balance sheet and capital allocation. We ended the quarter with $60.5 million in cash and short-term investments. We generated $5.8 million of operating cash funding, all of our capital expenditures, dividends and share repurchases for the quarter. Given the current state of business. We have cut back our prior plans for capital expenditures.
Now we plan to spend an additional $4 million to $5 million over the back half of the year with the majority of that spending on limited retail store remodels. We will also continue to buy back shares opportunistically as the share price warrants. Our financial condition remains solid and provides us with the platform to weather the current economic storm while executing our plans for generating sales growth.
Now, we will open up the line for questions. Twanda, please provide instructions to do so.

Question and Answer Session

Operator

(Operator Instructions) Anthony Lebiedzinski with Sidoti.

Anthony Lebiedzinski

Good morning, gentlemen, and thank you for taking the questions. Can you hear me, guys?

John Daniel

Yeah, we got you.

Anthony Lebiedzinski

All right. Thanks for hosting the call and thanks for taking the questions. And first, just a quick comment. Nice job maintaining a strong balance sheet, certainly again, given the state of business nowadays.
So, I guess, first, when we look at the components of the restructuring plan, how should we think about the timing and the impact? If you could just kind of parse out the different components of the restructuring plan, what's kind of them low-hanging fruit first and then kind of like maybe walk us through the time line as to the expected benefits.

Robert Spilman

Why don't I take a crack at it, Mike, and you fill in the blanks?

John Daniel

Okay.

Robert Spilman

Well, as we said, Anthony -- we'll start from the bottom and go up. So, number five was than our Noa Home business. And as Mike just mentioned, we had the intangible goodwill on the balance sheet. And so, we've taken that and can add also some reserve for the remaining inventory that will be winding down over the course of the year.
So, we think that all of that's baked into the reported numbers, there will be some severance that takes place over primarily the third quarter. And but we don't really think that's a material number that we had a small amount of employees there. So we've checked with those folks live and not Canada.
So we've had to, of course, adhere to the set of laws that govern Canada in regard to us closing the operation. So anyway, for the most part, most of that's done is the point. Moving up to number four, the overall cost structure and invest capital and refurbishment.
Of course that again, as Mike mentioned, we have some of this refurbishment is underway. We're actually our Greensboro, North Carolina store is undergoing into refurbishment as we speak. And we plan to take our Concord, North Carolina and Wilmington, Delaware store into that program. As soon as we get the architectural drawings worked out.
In terms of our overall cost structure, it's just kind of a macro look at what we're doing. There could potentially they some severance costs involved with that, but I don't think it would be again have a material number. So that's kind of been ongoing.
The inventory, again, will be its heavily dispositions over the back half of the year, but we've basically taken that upfront as well. So, there you have it as far as that's concerned. And again, the of the consolidation of the wood operation is also baked into the program, as already announced.
I will say, and this could be and number four -- I'm not sure it's number four or number one, but we do have this warehousing operation out in California that we mentioned that we are attempting to sublease and we think that way, if we are successful in that we could have a charge of up to $1 million in the third quarter. We plan to be out of there by the end of the third quarter.
We plan to be out of there by the end of third quarter in any event. So that's probably the most significant thing that remains on the restructuring for the rest of the year. So, we plan to consummate all these items by year-end. And, Mike, you can correct me, but there's the severance that I mentioned, which is not really material when this and this looming warehouse charge.
Now, am I leaving anything out on that?

John Daniel

No. And Anthony, I think the goal here is for 2025 to have all the savings baked in. And certainly we'll have some like all the consolidation of the wood furniture plants, we'll still have some cost involved and some inefficiencies in getting that together during the third quarter, but theoretically and hopefully the fourth quarter will be clean with that.
But again, 2025, we do expect to realize $5.5 million to $6.5 million in 2025.

Anthony Lebiedzinski

Sounds good. Okay. And then, if we could just go back to the second quarter, so I guess, if we were to exclude the inventory write-down charge gross margin came in at a very strong, I believe, 55.7%. So what do you attribute that to? And how sustainable do you think that that type of gross margin is?

Robert Spilman

On the retail side, we're doing a very good job. I think part of it in that regard. A part of that is pricing that we have worked on for some time. So I would say a more disciplined approach there. Also, Mike mentioned in his remarks about the warranty reserve.
Our -- domestic furniture, a lot of which is solid wood. And I would say, we had somewhat of a perception issue sometimes with consumers because they would see a beautiful table inside a store. And then the table that came out didn't exactly match it. And what he would say, well, we can't control how God might the tree.
And there's nothing wrong with the table. A lot of that was perception, and we've really worked hard on that. It sounds trivial, but it's been kind of a big, big thing for us. And so, our returns and claims have really gone down in the last six months. And this is a company-wide effort, not only from retail but also from the manufacturing guys who have done a great job of that. So, retail is a big piece of it.
Also, we had the Club Level inventory issues that we mentioned last year or in the back half of 2022. And that has righted itself as we moved through that inventory and that that has been a driver on the gross margin. And yes, we do we think that's sustainable we don't know how much higher we can go than where we are because we want to be competitive in the marketplace as well, but we do think it's sustainable.

Anthony Lebiedzinski

That's great to hear. And then, so obviously, the vast majority of your products are made domestically, but you do import some products like the Club Level. You also import some components. Now we have heard from some companies talking about higher ocean freight costs as some have put in freight charges. Can you comment on that? How should we think about that?

Robert Spilman

So we have contracted container rates, of course, like most folks do. And so far with us, it's been a week-to-week kind of things. At some weeks. We'll get our containers. We need at the contracted rates and there's no adverse affect some weeks. We are not and the rates have definitely the spot rates have definitely gone up.
And excuse me, the shipping companies are playing games on all this. Again, of course, there are some macro, some big factors with the Suez Canal, et cetera. We're looking very hard at a surcharge of it we have not enacted one yet, and we're discussing that as we speak. But yes, there the if you can't get at the contract rate, which you can always get, we've seen these rates drip at certain cases.
So it's kind of day in day out there. A lot of factors behind now that and I think most people on the call probably know about all that, but it's a it is an issue.

John Daniel

Hey, Anthony, -- let me jump in real quick on what Rob was talking about on the reserves because I know you're asking about modeling questions. I would say for the back half of the year, we might have slightly lower margins because the mix of what we're trying to sell-through.
The things we took the reserves down. Remember that only brings it up to on zero gross margin, if you will. And so there could be the back half of the year, a little bit less or lower margins. And then on a go forward basis in 2025, again, we should be back to the margins at Rob referring to.

Anthony Lebiedzinski

Thank you for that. And then, my last question before I pass it onto others. So given your focus on True Customer Upholstery, do you plan to change your advertising messaging to better highlight this?

Robert Spilman

We feature this on the website. We feel like we talk about it a lot, but actually, they turn up true custom and it's new for us. And we did this because frankly, we got tired of seeing all these people talk about custom upholstery when they really in our mind, don't make customer upholstery.
They'll put a blue fabric on them on Southwind and red fabric on the seven out of its customer upholstery. Well, in our mind, that's not it when you're doing things by the action, different cushions and bases and backs and not and people really respond to this.
This is -- the sales have been good. So I think, yes, we will leverage that thinking into more and overt messaging on what really comprises True Custom Upholstery reverses, they are overworked term customer upholstery that we see in the industry today.

Anthony Lebiedzinski

Got you. Well, thank you, gentlemen, and best of luck going forward.

John Daniel

Thanks, Anthony.

Robert Spilman

Thank you, Anthony.

Operator

Budd Bugatch, Water Tower Research.

Budd Bugatch

Good morning, Rob. Good morning, Mike. And let me add my thanks for the call and they have the information and also for the filing of the Q this morning, which I answered a lot of my questions on in terms of some of the detail.
I want also on just comment I've been doing this for a long time. And I don't remember seeing the time and it's not a pleasant time in the industry where you've seen the company address forthrightly, it's charges that it needed to take and done business and come up with a stronger balance sheet and at the same time, raise a dividend.
That's really a remarkable and shows a tremendous confidence and the commitment to your shareholders. So, thank you for that. And --

Robert Spilman

Thank you, Budd.

Budd Bugatch

Let me go into some of my questions. And I'm going to also ask about True Custom, because I think you're right, you have some different features in your customer post to program that make it unique and really significantly different than others. And you've got you said I think you said you have 30 new dealers since market, 17 at market and 13 additional, and you want to get the [50], how is the pipeline look?

Robert Spilman

Well, we've got one last week at in California. And our guys are energized about this. When I say our guys, I mean our sales management and our field representatives and that number that we included in the release, it said 50 by year-end. We feel good about that, but we don't want to get too far ahead of ourselves.
But this really is an inexpensive way for the retailer to take advantage of the breadth of our options that the technology that we provide. The best-in-class speed of delivery of all of these things that characterize the program we've gotten to where now we're getting this thing down to a science, which sounds like a little bank but it's kind of a big bank because in the end, in the past, when we've done these programs to the point of purchase material and some of the furniture trickles in and then the furniture trickles in and all of this.
And we actually make the furniture faster than the fixture guys can make the fixtures. And so now we're inventory and all that stuff. We're palletizing all the support material. And the furniture and all of that arrive on the same truck. And then, our representative goes in there set up training the sales force.
And so you really have a great kick-off with this thing. And it's a tough time, it's been exciting internally for our whole team to use this as a rallying cry to take our best program and spread the word.

Budd Bugatch

And of the 30, are all there are some of them installed already? And if not, and get it up, then when will it be done?

Robert Spilman

I would say the -- I should know this, but I would say the majority of those guys are up and running, yes.

Budd Bugatch

And -- early results in terms of delta sales?

Robert Spilman

Well, we get a report on that every Monday and we have a yes, good results we're -- this thing works as a good thing about it because really that in our design centers in our stores for years, this has been going on. And then, also in our bigger gallery program, it's kind of the epicenter of that as well. So, this is yes, we're getting good results.

Budd Bugatch

That's great. I mean, I when I was in the retail business, this would have been a program that would have been a no brainer for retail. So, whenever I could use your capital to do why on my sales up, it's always a good idea. For the last several quarters, I've noticed that the change in orders at retail are significantly less bad than the change in deliveries. And are we the backlog now is up sequentially from last quarter.
Are we starting to see at a point where we start to see positive orders at retail? And maybe how did it how did it progress during the second quarter, I know you said the Memorial Day was an important period, so that would have some impact. But what were you seeing month on month?

Robert Spilman

Let's two of us try to take a stab at this. I would say one thing that and Mike can kind of walk you through it. I think, well, definitely the backlog took a while I mean, the backlog got up to $100 million. Tam is huge, and now it's $20 million. So you have the one thing that I don't think JD Bassett in 1902 was contemplating this, but the way he set up the fiscal year just happens day quarters and on the big holiday weekends.
And so, the first quarter ends at Presidents' Day the second quarter. It's more of a in the third quarter and at Labor Day. And so we get a kind of a boost because those are the big selling periods, and Mike can walk you through that.
I think one thing I do want to say is, though it's kind of the big picture and our retail sales were down 2%, 2.5%, I think, for the quarter. So in our top line was down 17%. So we're starting to finally, it hit bottom here and now we're going to obviously spring up this this number. But Memorial Day, we were, as I mentioned in my remarks, we were up versus last year for the three-week period.
And I will say, if I can say this, July 4, can I say this -- July 4, was up versus last year. And it was it was a good event. So these days, these kind of tent-pole events are of outsized significance in this environment than they've had in the past, at least for us.
So, Mike, you've got.

John Daniel

Yeah. And to tag along here, since you're comparing that 17% down compared to Q2 of last year, we were so still selling through backlog and you can see that if you go back to Q1 of 2023, our retail backlog was $42 million at Q2 of '23, the next quarter, it was down to $33 million, and it's been pretty consistent since then.
So I think that's a way of saying it feels like we've hit the bottom. I guess it would be as we said, we were down 2.5% written for the quarter, but down 17% because we were selling really through the backlog.

Budd Bugatch

And that's the way the math works from the stuff you disclosed in the Q. So, that's what I think. I mean, it looks like you're bouncing along the bottom here that at this point in time, because you've shrunk that delta now for the last couple of quarters on.
My next question is, on the math on the income statement in terms of the tax, the tax shield is over 11% that I know you report GAAP and in respect that you don't adjust, but we've got two significant items in this particular period that I think may have different tax treatments, the inventory valuation, additional inventory valuation charge and asset write-downs.
Can you kind of parse out with the tax consequences of those items are?

John Daniel

Yes, I'll take this one, Rob.

Robert Spilman

Good.

John Daniel

So two things. Let me first say the two charges associated with no $1.8 million and the $500,000, I take no tax benefit on that. So that's the first thing to consider. Then, in turn to the other, there's really no difference in the tax treatment on the other, the other restructuring charges.
And the other and the inventory charges. That's just baked into the to the year-end right now, given where we are with our permanent differences and being in a lot of things your normal, you would expect 25%, 26% blended rate. It just doesn't all work out in that fashion. So, I don't know that answers your question, but --

Budd Bugatch

It certainly bring some assets into better alignment on the that 25%, 26% is assuming a 21% federal and then the balance between state and other kinds of correct read items?

John Daniel

Correct.

Budd Bugatch

And so, what would be with the losses? Is it still in that -- low-20%s or mid-20%s kind of range? Is that about where it works out?

John Daniel

You have to back out the losses associated with Noa, which we don't give you.

Budd Bugatch

$2.3 million --

John Daniel

We don't give we don't give you the actual loss generated by Noa. It's buried in the corporate and other.

Budd Bugatch

I got --

John Daniel

-- So, you really can't do the math because we don't give you the numbers of the actual loss that's generated by Noa.

Budd Bugatch

But if we take the $2.3 million and take that out of the tax equation, it gets kind of percentages to come as somewhat more into alignment.

John Daniel

Right. But then you'd also have to back out the losses from Noa outside of the charges taken.

Budd Bugatch

Got you. Okay. Well, we're going to we'll take a stab at it and we'll see a quick hit what commentary in general that at that point in time for the bank or the benefit that you see next year in fiscal '25 and 5.5% to 6.5%. does that come in ratably over the years that come in quarter-by-quarter about the same level?
Or do you see it build during the year?

John Daniel

Well, the idea is that you would be starting the -- December 1, which is our first day of the 2025 calendar fiscal year. So, really starting with the first quarter.

Budd Bugatch

Okay. And a couple of other just quickies. I know that. Noa, I didn't live up to expectations, but hopefully there were some learnings in there that, Rob, you might want to chat about.
And is there any is there any residual that you can glean from Noa in terms of sales domestically or even in Canada somehow with the e-comm?

Robert Spilman

Good question that you have. One thing we learned is a pure-play e-commerce and furniture is a tough business for venture event. And the in that we put in a new website at Bassett last year, we talked about that quite a bit. We are seeing some green shoots of that effort. I mean, we think we have a much better platform and navigation and all that and we're starting to see some nice results.
We're not anywhere near where we want to be on the e-commerce side, but that's good. And a couple of I know folks have helped us with that. And one, it's likely for a period of time for sure to remain in the mix. And he has quite a bit of experience and e-commerce dating back before, Noa. So yes, from that perspective, we see some ongoing benefit.
And -- also potentially in and out of that, we've explored. And out of that, we haven't decided but they did have a brand up there. And so furniture in Canada more than that we sell. So, could we go forward with, I Noa site with Bassett product as an entry-level offering up there maybe, but we're really more focused on the balance sheet now, and they were requiring cash contributions from the mothership. And we did not see the value in continuing at that level. So we're still talking about what could happen down the future -- the future in that regard.

Budd Bugatch

Okay. As I said, just a few more regional more details are that there's a difference between the $2.7 billion valuation charge to inventory that you showed. I think that affected the income statement on the gross margin ended $3.8 million showing on the cash flow is additional inventory valuation. What accounts for that difference?

John Daniel

Well, so we take a charge every month, a regular charge to put stuff into our reserve and that delta that you're referring to go $2.7 million versus $3.8 million. That's kind of a $500,000 a quarter run rate and you can kind of compare that to last year where we say $2.5 million or $2.475 million.
Within that $2.475 million was another $1 million extra charge. We didn't talk about it, at least we did talk about it, but we didn't give you that number last year and we didn't provide an adjusted gross margin last year. But in the press release, you saw that back table that shows how we reconcile and $1 million charge.
Normally it's $500,000, roughly a quarter and that's what for both years. That's what the normal charge was.

Budd Bugatch

Yeah. I don't think we normally see that reserve additional charge, at least I have to go back and look --

Robert Spilman

On an basis, you wouldn't have seen it there because the magnitude of what we just did and they have retired what we called it out in addition to that was our normal quarterly charge that we do to, I guess, inventory.

John Daniel

I think we broke it out in the 10-K last year at the end of the year, but yes, that's you're right. We don't normally break that out.

Budd Bugatch

Within the quarters. Yes, that's it, whereas our will call and last for me is you talked about you're looking at some other sites and that would be exciting to see of and other markets for the retail of when do you think you'll make a decision? I know nothing for this year but are they can you talk a little bit about what the processes and when the decision might be made on that?

Robert Spilman

We've got some travel set in July to look at the sites. It takes us. It takes a long time to once you make the decision to make these things happen in some cases, depending on what the actual situation is. But I think these would be decisions that we would be making the next 90 days out surmise and something that would happen in 2025 as far as a timetable goes.

Budd Bugatch

Okay. Well, again, thank you for taking my questions. Thank you for the call and best of luck in the second half of '24 and beyond.

Robert Spilman

Thanks, Budd.

John Daniel

Thank you.

Operator

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Spilman for closing remarks.

Robert Spilman

All right. Well, I just I'd just like to wrap it up by saying we appreciate the interest and Bassett and your questions. Third quarter is underway and the environment for home furnishings remains challenging, but as we said earlier, we've got a long history of weathering economic cycles, making the right decisions to remain an industry leader.
We're confident that through our restructuring plan. We can continue to provide exceptional customer service with a leaner, more efficient operation. And that's that was the basis for the restructuring charges and they have the 11% increase in our quarterly dividend that our Board of Directors approved on Tuesday is a further indication of our focus on delivering additional shareholder value.
Thank you for your time and thank you, operator.

Operator

You're welcome. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.