Bassett Furniture Indus Q3 2026 Earnings Call: Complete Transcript

On Thursday, Bassett Furniture Indus (NASDAQ: BSET ) discussed third-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

9% increase in wholesale written orders. Gross margins improved by 130 basis points due to enhanced wholesale margins and tariff refunds, despite a decline in retail gross profit by 80 basis points. The company opened a new store in Orlando and plans to open two more in FY27, showcasing a strategic focus on expanding retail presence. E-commerce written sales rose by 48%, with website-delivered sales increasing by 42%, highlighting successful digital sales and marketing efforts.

Bassett announced a new partnership with interior designer Heather Chadduck, set to launch a collection in spring, emphasizing product innovation and brand enhancement. Management remains optimistic despite challenges like slow housing markets and high inflation, expecting improved margins from newly implemented pricing strategies. 4 million in cash and short-term investments, and continues to pay dividends and conduct share buybacks. Full Transcript Latonya, Operator Good day, and thank you for standing by.

Welcome to the Bassett Furniture Indus Q3 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone.

You will then hear an automated message advising that your hand is raised. To withdraw, press star one one. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Daniel, Chief Financial Officer.

Please go ahead. Mike Daniel, Senior Vice President and Chief Financial Officer Thank you, Latonya, for the introduction. Welcome to the Bassett Furniture Indus earnings call for the third quarter of fiscal 2026, which ended August 29, 2026. Joining me today is our Chairman and CEO, Rob Spillman.

We issued our news release and Form 10-Q yesterday after the market closed, and they are available on our website. After today's remarks, Rob and I will be open for questions. We will also post a transcript of this call on Bassett's investor relations website following the call. During this call, certain statements we make may be considered forward-looking statements 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. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investors tab. Now I'll turn things over to Rob.

Rob Spillman, Chairman and Chief Executive Officer Thank you, Mike. Good morning, everyone. 4% increase in consolidated revenue bolstered by increases in both retail and wholesale sales. All product categories were positive with domestic upholstery leading the way.

4%, continuing the momentum from the second quarter in spite of one less week of Labor Day promotion in the quarter compared to last year. 9% led by double-digit gains in domestic upholstery and the Lane Venture outdoor division. Operating profit showed nice improvements thanks to sales increases in key product categories, improved expense control, and tariff refunds that offset tariff costs that were embedded in our balance sheet. It's important to note that Bassett imports less than 25% of our products; therefore, refunds are much lower for us than for others.

Mike will give you more color on the net impact of tariff refunds in his financial review. Consolidated gross margins grew by 130 basis points primarily due to improved wholesale margins and, to a lesser extent, tariff refunds, while retail gross profit fell by 80 basis points. We are encouraged by the gross margin improvement that we have seen since the pricing strategies that we implemented in July have started to take effect. The full four-week Labor Day promotion that spilled into the current quarter generated a 9% written sales increase.

With improved written gross margins, we've made progress on reducing operating expenses, which remains a key goal for our management team. SG&A, excluding pre-opening costs for the Orlando store, was 150 basis points lower than last year's third quarter. 5 to $2 million. I'm pleased with the gains we've made on our strategic initiative, especially that is to grow sales from new and existing stores.

Our marketing team's ability to optimize and refine the media mix continues to produce positive outcomes. We had excellent response to our 84-page fall catalog which featured curated room layouts and styling tips along with new collections. We have improved the visual presentation of our products on the website, helping consumers on their path to fully experience the Bassett brand. These efforts are paying off with e-commerce written sales up 48% this quarter and website-delivered sales rising more than 42%.

Average order value on the web was up 33%, which was propelled by stationary and motion upholstery categories. Our technology investments during the past two years continue to enhance the website presentation and navigation, benefiting the user experience and driving the sales results that I just mentioned. Once again, our domestic custom furniture products drove the majority of our written wholesale sales gain. Custom upholstery and custom motion upholstery in particular was very strong.

Also on the domestic front, our Benchmade dining program had a nice quarter and once again Lane Venture performed very well. Our product team continues to seek new expressions of comfort and innovation to add to the assortment. We are extremely excited about the debut of our new 44,000 square foot showroom at the High Point Market on October 15th. We are in a new location designed to provide greater traffic and visibility while inspiring customers with a broad range of new products.

Our teams have worked hard to enhance the styling and appeal of the Bassett brand which is embodied in the new showroom presentation. We recently announced our partnership with Birmingham-based interior decorator and textile designer Heather Chadduck. Heather is highly respected for her portfolio of design projects and for her successful line of textiles. The highlight of our events in High Point will be the launch of a major new collection on which Heather collaborated with our internal team.

The whole-home collection features 30 furniture pieces with five finishes and 70 inline fabrics that she has personally curated. Heather says the collection feels timeless but very organic and fresh. The Heather Chadduck Collection for Bassett will be in retail stores next spring. Our priority remains growth from existing and new stores, and we're happy to add another location, bringing our corporate retail store total to 60.

Tomorrow we are opening a new store in Orlando, which has a similar footprint to the 14,000 square foot store we opened in May in Cincinnati. These are important markets and position us in quality real estate catering to our targeted demographic profile. We rely on our two dedicated distribution concepts, Bassett Design Centers and Bassett Custom Studios, for growth in the open market. Our 94 design centers and 64 custom studios currently represent over half of our wholesale business outside of the Bassett store network.

S. mid-sized towns, we view our dedicated dealer network as our local showcase of well-crafted custom home furnishings. Our executive team has been traveling to these Bassett partner locations this summer with the goal of strengthening our collaboration with the dedicated network. We have been gathering input to formulate enhancements to the concepts for 2027 and beyond.

2%. The natural extension of our wholesale outreach is our Bassett Hospitality division, now operating for about nine months. We've had several orders but acknowledge that this effort will take time while we are gaining a foothold in the hospitality segment. All in all, we were pleased with our third quarter trajectory.

Housing remains slow and mortgage rates are in lockstep with the Federal Reserve's recent rate increases. S. consumer continues to be a major concern. That said, we remain optimistic about managing these challenges.

Now I'll turn things over to Mike. Mike Daniel, Senior Vice President and Chief Financial Officer Thank you, Rob. In my commentary, the comparisons I'll discuss will be the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, unless otherwise noted. S.

S. Supreme Court's February 2026 decision invalidating the IEEPA tariffs imposed by the president in 2025. Of this amount, $1 million was recorded as an increase in gross profit for this quarter, with additional amounts to be recorded primarily in the fourth quarter of 2026. Tariff costs are capitalized into inventory at the time they are incurred and subsequently recognized in the income statement when those goods are sold to a third party.

The high tariff costs recognized in the quarter were substantially offset by the tariff refund income that we recorded. As Rob pointed out, we import less than 25% of our products. 4%. 4% increase in sales to external wholesale customers.

5% represented a 130 basis point increase when compared to the prior year, primarily driven by the previously discussed tariff refund and partially offset by lower margins in the retail business. The margin increase was also due to a higher mix of retail sales which carry a higher gross margin than third-party wholesale sales. 9% of sales, 150 basis points lower than the prior year. This decrease was driven primarily by increased leverage of fixed costs on higher sales in our retail segment coupled with lower corporate expenses.

4% of sales as compared to income of $593,000 or 7% of sales in the prior period. 09 last year. I'll now cover more details on our wholesale operations. 7% compared to last year.

7% more shipments to open market. 5% increase for the retail stores. In total, shipments of Lane Venture were up 44%. Gross margins rose 150 basis points primarily due to the previously discussed IEEPA tariff refund along with improved margins in both the domestic wood and the Lane Venture operations.

The increase was partially offset by lower margins in the imported wood and upholstery which carry tariff costs. SG&A expenses as a percentage of sales were flat as the effects of greater leverage of fixed costs from higher sales were offset by greater outbound freight expenses primarily driven by higher fuel costs. 5% increase over the prior year. 4%.

5% is a decline of 90 basis points, primarily due to lower margins on inline goods from increased promotional activity. Total SG&A expenses, excluding new store preopening costs, as a percentage of sales decreased 130 basis points due to greater leverage of fixed costs from higher sales levels and lower advertising and marketing costs, partially offset by higher employee costs. During the quarter, we incurred $144,000 of new store preopening costs associated with our Orlando location opening tomorrow. Before opening a new store, we incur such expenses as rent, training costs, and other payroll-related costs.

These costs generally range between $200,000 and $400,000 per store, depending on the location and the period of time between when we take physical possession of the store space and the. 4 million of cash and short-term investments. 1 million of operating cash flow. 3 million on capital expenditures, which was significantly higher than the recent run rate.

This increased spending was primarily related to the Orlando store that opens tomorrow and the build-out of our new showroom in High Point. We expect capital expenditures in the fourth quarter to be between $2 and $4 million and are updating our full capital expectations for 2026 to range between $9 million and $11 million versus our prior forecast of $10 million to $12 million. We continue to pay our quarterly dividend and repurchase shares opportunistically. 7 million on dividends and $126,000 on share buybacks in the quarter.

We remain committed to delivering shareholder returns through dividends and, when appropriate, share buybacks. Now we'll open up the line for questions. Latonya, please provide instructions on how to do so. Latonya, Operator Sure.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. Our first question will be coming from the line of Anthony Lebiedzinski of Sidoti.

Your line is open, Anthony. Anthony Lebiedzinski, Analyst at Sidoti Thank you very much and good morning everyone and certainly nice job improving the top and bottom line in the quarter. So as we look at the reported revenue, can you give us just a rough idea as far as the impact of pricing versus unit volumes that you saw in the quarter? Rob Spillman, Chairman and Chief Executive Officer Mike's digging that out right now.

Anthony, you asked that last quarter. Well, yeah, well, just, you know, as we think about, you know, all the noise with the— That's a good question given what's going on in the world today. Mike Daniel, Senior Vice President and Chief Financial Officer Yeah, here we go. So, yes, on the wholesale side, units were down slightly.

I won't give you the exact percent, but it was low single digits and unit price was up, I would say up in the less than double-digit range. Anthony Lebiedzinski, Analyst at Sidoti Mm, gotcha. Okay, that's very helpful. And the retail, on the retail side, Mike Daniel, Senior Vice President and Chief Financial Officer Pretty similar.

Pretty similar. Let's just leave it at that. Anthony Lebiedzinski, Analyst at Sidoti Okay, fair enough. Okay, gotcha.

And then, you know, certainly it was encouraging to hear that you guys did very well during your Labor Day promotion with your written sales. Just curious, did you see any notable regional differences throughout the country or was it more or less kind of consistent? Rob Spillman, Chairman and Chief Executive Officer It's pretty consistent. All the regions were up.

Anthony Lebiedzinski, Analyst at Sidoti That's good to hear. Okay. And then, you know, so earlier this year, you guys opened a new store and acquired another dealer store, and you're about to open a new store in Orlando tomorrow. You know, so as we kind of look forward, I mean, how do we think about the additional store locations in FY27 and beyond?

What's the latest thinking on that? Rob Spillman, Chairman and Chief Executive Officer We will open two stores next year, Anthony. And honestly, beyond that, we don't have one in the queue. We are looking at upgrading existing locations as part of, you know, our consideration on future capital expenses.

But at the moment we have two. Mike Daniel, Senior Vice President and Chief Financial Officer And Anthony, let me just add one of those is a reposition. So there'll be a closure and an opening. So it's net up one.

Anthony Lebiedzinski, Analyst at Sidoti Gotcha. Okay, thanks for that. Okay, and then my last question before I pass it on to others. So, you know, as it relates to your comment about being more aggressive with Black Friday promotions, can you provide more details as to what your plans are?

How do we think about the impact that may have on margins? Rob Spillman, Chairman and Chief Executive Officer I don't think it's going to have a big impact on the margin, Anthony.