Bassett Furniture Industries, Incorporated Q2 FY2025 earnings call

• One year ago, announced a five-point restructuring strategy to grow business and improve profitability, aggressively implementing it. • Second quarter results improved despite tough sales environment, with consolidated sales slightly up 1.1% and ongoing business revenue up 2.5% excluding Noah Home. • Restructuring program positively affecting results, cost structure reduction and operating efficiency in wholesale and retail segments. • Developed innovative products like Copenhagen, Newberry collection, Benchmade hideaway dining program. • E-commerce performance: Written sales at bassettfurniture.com up 31% in Q2 vs last year. • Marketing mix adjusted, including use of direct mail, Spot TV testing, private sale for key customers. • Opened 7 new design studios, plan to open Cincinnati and Orlando stores, remodel Concord store to reopen in Oct. • Board to consider regular quarterly cash dividend of 20¢ per share.

Total consolidated revenue increased $938,000 or 1.1%. Excluding sales from Noah Home Inc, which closed in late 2024, consolidated revenues increased 2.5%. Consolidated gross margin was 55.6%, a 310 basis point improvement over the prior year. Operating income was $2.5 million or 3% of sales. For wholesale operations: Net sales increased $1.6 million or 3% over the prior year, with a 12.6% increase in shipments to Bassett retail store network, offset by a 2.6% decrease in shipments to open market and 22% decrease in Lane Venture shipments. Gross margins increased 260 basis points. For retail store operations: Net sales increased $3.8 million or 7.5%. Written sales declined 0.8%. Gross margin declined 50 basis points.

• Reduced projected annual capital investment range to between $7 million and $9 million for remodels, technology investments, and new store openings. • Board will consider regular quarterly cash dividend of 20¢ per share. • Expect design studio count to continue growing at a steady pace, with cautious store expansion plans.

• Industry challenges including weak housing market, high interest rates, and tariffs affecting consumer confidence and cost of goods. • Impact of retail inventory discounting on gross margin. • Uncertainty regarding trade tariffs affecting future orders and products in transit.

Q: With the seven new design studio sign-ups, where does that put you right now in terms of the total, and where do you think that might land by end of year?

A: That puts us at 54 of these design studios. The pace revealed will be reflective of the ongoing pace, and we'll monitor the success and performance of existing ones.

Q: Should we see a reversal of the timing in the third quarter regarding shipments to the open market?

A: The open market business has improved somewhat since the second quarter, though business remains tough. May was relatively better, and we're working to keep the open market channel growing.

Q: How should we think about the impact on margins overall from discounting, and will we see more of that type of margin decline sequentially in the third quarter?

A: We're modeling internally, we had a margin decline, but don't expect significant further detriment, though it could affect slightly as we continue to clean inventory to have a good balance sheet.

Q: How do you guys think about the store base going forward, and any particular markets you'd like to be in that you're not in already?

A: We look at markets considering existing infrastructure, executional risk, capital, and the environment. We're conservative, looking at 2 - 4 net stores a year, focusing on independent dealers who sell nicer furniture and designers in all markets, with a cautious approach to store expansion.