Bassett Furniture Industries, Incorporated Q4 FY2025 earnings call

• The market for housing sales remains slow, impacting the business, but the company increased sales and profits in the fourth quarter.
• Restructuring mindset and focus on a leaner, smarter business continues. The tariff situation is a challenge but the company's flexible sourcing model helps resilience.
• Progress in various product lines: wood business sales up over 50%, Copenhagen line is a top seller, homework line repositioned in home office, upholstery sales up 19%, outdoor line absorbed into Lane Venture.
• Marketing activities: supplemented digital with print and spot TV, direct mail ROI was encouraging, moving from one catalog to two in 2026. E-commerce site enhanced, sales up 14% in Q4.
• Store expansion plans: Cincinnati to open in Q2, Orlando in Q3, Long Island store to relocate in September. Strategies in place to adapt to independent furniture store retirements, adding elements to distribution concepts, and pursuing interior design community and Bassett Hospitality division.

Consolidated revenue increased $4.4 million or 5.1% in the fourth quarter of 2025. Excluding the impact of last year's Noah Home closure, consolidated revenues were up 6.4%. Operating income was $2.3 million or 2.6% of sales. Wholesale sales increased $4.4 million or 8.3%, with gross margin increasing 60 basis points. Retail sales increased $4.2 million or 7.9%, but gross margin declined 150 basis points. E-commerce sales were up 14% in the quarter, with full-year e-commerce sales up 27%. Wholesale backlog was $19.5 million, and retail backlog was $34.4 million.

• Plan to open three new stores in 2026: Cincinnati in Q2, Orlando in Q3, and relocate Long Island store.
• Forecast $8 to $12 million of CapEx for 2026, more than the $4.5 million spent in 2025.
• Continue to pay quarterly dividend and repurchase shares opportunistically. The board approved a regular 20¢ dividend to be paid February 27.

• Volatility in tariffs causing challenges in pricing and margin management.
• Weather disruptions affecting store operations and sales, such as closing stores during ice and snow weekends.
• Challenges in managing retail margins due to timing of price adjustments and tariff surcharges.

Q: Can you comment on pricing versus unit volumes in Q4, particularly regarding tariffs?

A: Back in spring, prices were increased initially, then tariffs caused fluctuations. Retail prices were held in Q4 impacting retail gross margins, with a tariff surcharge absorbed in the retail division, and recent adjustments made.

Q: Can you comment on written retail sales in the quarter and early fiscal 2026 demand trends?

A: Written sales started strong but tempered as the quarter went on. Had a strong Black Friday, first seven weeks of fiscal 2026 were solid, but weather disrupted sales recently. Written sales were up 4% for the quarter.

Q: Do you expect to open more Bassett Design Studios and design centers in fiscal '26?

A: Yes, focusing on the productivity of these concepts. The studio (thousand square feet) specializes in custom upholstery, and design centers are bigger commitments, but they are a focus.

Q: Longer term, how do you think about the retail store network?

A: Look at geography and revenue derived from areas. Open stores in areas where they drive more business. Post-COVID models have changed construction and rent costs, but plan to continue opening 2-4 stores a year, leveraging existing investments in geographic areas.

Q: Will opening new stores impact the P&L on the retail side?

A: On gross margin, no immediate effect. On SG&A, there is a hit due to preopening rent expense and other costs before sales start. Preopening costs for a new store are in the four to $500,000 range.

Q: How is the macro environment challenging yet you're growing wholesale and retail 8%? How are you taking market share?

A: Attributed to new products like in the wood business, Copenhagen line, etc. Also, independent furniture store retirements provide opportunities.

Q: What is the attitude on share repurchases?

A: Opportunistic, looking at cash level and cash generation to determine if purchases are affordable. Quiet periods may restrict open market buying, but decisions are based on opportunistic timing.