Bassett Furniture Industries, Incorporated

Good day, and thank you for standing by. Welcome to Bassett Furniture Industries Q3 2024 Earnings Conference 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Daniels, CFO. Please go ahead.

Thank you, Gigi, for the introduction. Welcome to Bassett Furniture's earnings call for the third quarter ending August 31st, 2024. Joining me today is our Chairman and CEO, Rob Spillman. We issued our news release yesterday after the market closed, and it's available on our website. After today's remarks about our quarter, we will open the call up for a Q&A session. We will post the transcript of the call on our investor site within 48 hours of this call. In addition, we filed the 10-Q this morning, and that's available on our website under SEC Filings on the Investor Relations tab. During today's call, certain statements we make may be considered forward-looking and inherently involve risks and uncertainties that 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 25th 2023. Other filings with the SEC describing risk related to our business are available on our corporate website. Now I'll turn the call over to Rob for comments about our third quarter.

Rob? Thank you, Mike. Good morning, everyone, and thank you for joining us for today's call. The integration of our industry with the weak U.S. housing market continued to pressure sales during our third quarter. Although mortgage rates have started to ease since the Fed's 50 basis point rate cut three weeks ago, overall housing affordability and inventory availability remain impediments in the short term. Our industry is ready for a transformational shift in the next several quarters, and Bassett plans to benefit as it happens. I also want to mention two events that have occurred subsequent to the third quarter that will potentially have a bearing on our fourth quarter, Hurricane Helene and the East Coast Dock Strike. Many customers and employees were deeply affected by the devastating effects of Hurricane Helene. Our thoughts are with them. Hurricane Helene impacted our distribution center in Catawba County, North Carolina, and it was shut down due to damage and power outages for two days during the first week of October. We've recovered as quickly as possible to get shipments back on track. The larger, longer-term impact on our logistics and distribution systems are related to the damage to the I-40 infrastructure, which is our main route to the west. And while the East Coast dock strike was just three days, the impact on our business has pushed shipments back one to two weeks. Now let's move on to the discussion of our third quarter results. Like last quarter, revenue in both our wholesale and retail segments was down, with greater pressure on our retail business due to the higher level of associated fixed costs. Heading into the quarter, our Memorial Day event and our subsequent 4th of July event both produced increases compared to last year. But the in-between weeks were especially difficult as consumers stayed on the sidelines. The third quarter is always our weakest reporting period. This year's combination of the annual July 4th weekly operational shutdown, followed by the cyber attack that we suffered, meant that our manufacturing facilities were shut down for over 16% of the quarter's work days. Consolidated gross margin was 53%, up 1.4% from last year, though slightly lower on a sequential basis. Wholesale gross margins improved by 50 basis points, despite lower volume. largely driven by improvement in club level margins. Inventories were down more than $10 million year over year and slightly down sequentially, reinforcing our belief that we can run with leaner inventory. Retail gross margins improved by 210 basis points to 53.7%, attributable to higher home delivery income and better margin on clearance inventory. Our average ticket was $3,900, up 5%, while total retail written sales were down 5%. 41% of retail sales were design makeovers, also down slightly from last year. We remain focused on top line enhancements in both retail and open market efforts. Initial sell-through of our fall upholstery introduction was very strong heading into Labor Day. The reception of a leather option to our True Custom program produced strong sales in the quarter and should be an important feature going forward. Since the end of the third quarter, we have added nine new Bassett Custom Studio dealers to the program. We have made the Custom Studio a centerpiece of our showroom at the upcoming fall High Point Furniture Market. We also plan to support the outreach with trade advertising, something we have not done in several years. Last quarter, we initiated a five-point restructuring plan to set Bassett up for improved long-term operational and financial performance. We made good progress during the quarter on executing this plan, and we believe that we are better positioned as a result. Point one of our strategic plan was to drive organic growth through Bassett-branded retail locations, omnichannel capabilities, and enhanced customization positioning to expand our dedicated distribution footprints. We are remaking a significant portion of the product line in the upcoming quarters to address new styling and price point opportunities. In case goods, we will launch three major collections beginning this fall and culminating in the spring of 2025. The three imported collections are comprehensive bedroom, dining, and occasional and entertainment product offerings. On the domestic front, we are expanding our successful Origins dining program this fall. Our solid wood benchmade program will also undergo a makeover over the next two seasons. In upholstery, strong sales in our domestic motion assortment warrant expansion of the category, especially in our recliner line. We have a targeted outreach to the interior design community underway as well, recognizing the growing importance of this channel throughout the industry. For the second consecutive year, we will operate a designer showroom at Inner Hall and High Point at the Fall Market in two weeks. We've contacted more than 400 designers and design firms at the Spring Market and are encouraged by their recognition of our strength for the design trade. We have continued to invest in our multi-year cross-functional digital transformation this year, even in these challenging times. E-commerce sales are still a small portion of retail revenue. We are optimistic about the potential of our omni-channel capabilities. and we're excited to see double-digit e-commerce growth this quarter. With these investments, we expect stronger Bassett brand and design presentations to complement our in-home makeover proficiency. Point two of our plan was to rationalize U.S. wood manufacturing from two sites into one, primary location supported by a small satellite operation. As expected with any rationalization, there was some disruption in August during the transition which impacted margins. This consolidation is now complete and we are seeing improved overhead absorption with operating one location. Point three was to optimize inventory and drop unproductive lines. We are continuing on this path as part of the domestic wood plant consolidation strategy. As expected, this reduction of clearance and slow-moving products affected margins in third quarter, but is designed to strengthen overall productivity of our line and of our stores. Point four was to improve overall cost structure of both wholesale and retail businesses. In retail, we are consolidating warehouse operations after the closure of three warehouses during the second quarter. In today's reporting quarter, we moved facilities in East Texas and Oklahoma into our North Texas Home Delivery Center and also consolidated two Virginia facilities into one. This process will continue until we realize the completion of our new footprint. In wholesale, In addition to the aforementioned wood plant consolidation, we have completed our plan to move out of a major West Coast wholesale distribution center, which resulted in a $1.2 million charge this quarter. We continue to thoroughly review the SG&A structure of both retail and wholesale to further identify opportunities to pair operating expenses. On the capital side, we are beginning a program to refurbish certain stores within the retail fleet, with the recently completed Greensboro, North Carolina store being the first. Our last point in the restructuring plan was to close NOAA Home, the mid-price e-commerce furniture retailer headquartered in Canada with operations in Canada, Singapore, the U.S., and the United Kingdom. This work is still in progress as we plan. No operations and remaining inventory will wind down by the end of this current fiscal year. Our capital spending plans for the fiscal year are primarily complete. We will continue to purchase shares opportunistically and drive returns to shareholders through dividends, including the regular Or do we dividend that our board of directors approved this week? We continue to have a strong balance sheet, but it's imperative for us to improve profitability. That means we continue to evaluate the efficient use of our resources so that we can align Bassett's operating expense structure with projected revenue. Getting these pieces in place, along with the launching of new products and services I mentioned earlier, are expected to better position ourselves for the eventual turnaround in consumer demand. Now, I'll turn it over to Mike for more details on our financials. Mike.