Bassett Furniture Industries, Incorporated

Good day, and welcome to the Bassett Furniture Industry's third quarter 2025 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Mike Daniel, CFO. Please go ahead.

Thank you, Michelle, for the introduction. Welcome to Bassett Furniture's earnings call for the third quarter fiscal 2025, ended August 30th, 2025. Joining me today is our chairman and CEO, Rob Spillman. We issued our news release and filed our form 10-Q yesterday after the market closed, and it's available on our website. After today's remarks, we will open up the call for a Q&A session. We will also post a transcript of the call on Bassett's investor website following the call. During today's call, certain statements we make 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 1995. The company cannot agree to or 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 30, 2024. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investor tab. Now I'll turn things over to Rob. Rob?

Hey. Thank you, Mike. Morning, everyone, and thank you for joining us today. I'm pleased for the third quarter. Despite the continuing challenges and challenging environment in the industry, Bassett reported increases in revenue, operating income, and gross margins. We also continue to look for ways to lower operating expenses, which continues the work that began in the summer of 2024, last year. We plan that this year would remain impacted by the slow housing market, and that is very much the reality. We remain nimble in managing our business and our focus on driving innovation into our product lines, becoming more aggressive in our marketing initiatives, leveraging technology and adjusting to the challenges affecting the industry in general. In short, we've adjusted to the new normal of furniture demand. We're pleased with our progress so far this fiscal year as we strive to be resilient in this environment. Mortgage rates have come down slightly from last quarter and we've all seen the recent news about rate decreases. While it's moving Slowly moving in the right direction for the housing market, we don't expect our industry to feel a more robust change until we can point to a sustained pickup in home sales. Many consumers are still cautious about making significant investments in home furnishings and they remain concerned about the price of houses and the lack of inventory. We're recognized as one of the premier quality brands for furniture and we concentrate on creating custom-designed solutions for our customers that align with their personal style. The decisions and the investment we've made in creating new lines, refreshing existing products, expanding e-commerce capabilities, and modifying our marketing activities are making a difference in our results. That said, while we can't control these areas, We have been adjusting to the impact that tariffs have on our supply chain in some respects on consumer confidence in general. We have a competitive advantage with approximately 80% of our wholesale shipments manufactured or assembled in our U.S. factories. However, we are still being impacted by tariffs, particularly from Vietnam and India, on imported fabrics, plywood, componentry, and finished goods. and we pass along those surcharges for these materials during the third quarter. We made the difficult decision to raise retail prices slightly in July to cover the tariff impact. Our teams continue to intently monitor the gossip and the reality about tariff activity daily, and I'm sure this will be the number one topic at the upcoming High Point Furniture Market later this month. Now let's move on to a discussion about our third quarter results. Let me remind you that the third quarter is generally our weakest reporting period of the year. We grew consolidated sales 5.9% with August the strongest month for orders in the quarter. Excluding sales from NOAA Home, which closed in late 2024 as part of our restructuring plan, consolidated revenues increased 7.3%. Ongoing operating efficiencies produced $600,000 of consolidated operating profit, due primarily to the wholesale business, compared to a loss of $6.4 million this time last year. Recall that in last year's third quarter, we had a cyber incident that suspended our manufacturing financial system for seven days, resulting in negative impacts on operating income, gross margin, and expenses. Gross margin this quarter improved 320 basis points due to better wholesale margins, slightly offset by a decrease in retail margins at company-owned stores, as well as the comparison of last year's impact of wages paid during the cyber shutdown. Orders from our combined network of corporate and licensed stores grew by 5.9%, driven by a 9.8% percent increase in company-owned retail stores. Wholesale sales to the open market were up approximately one percent. Rue Custom Upholstery offers more than 450 fabrics and 40 leathers and drove the majority of our wholesale improvement. We had a double-digit increase in case goods, which offset a slight decrease in our domestic custom wood lines. We continue to be pleased with the response to our new whole home product collections. Copenhagen is doing well across the board. The Newberry line has arrived in stores, and based on initial feedback, we believe it has great potential. Our U.S. manufacturer Finch Bay Hideaway dining line is also off to a good start in both retail and wholesale. Outdoor sales were up 18%. Written retail sales increased by 2.4% in the quarter. I mentioned that retail gross margins were down slightly and this was due to lower margins for both inline and clearance goods. We continue to be aggressive this year on moving through discontinued as is inventory. Ongoing operating expense efficiencies implemented this year coupled with higher sales delivered a decrease of 590 basis points on the SG&A expenses as a percentage of retail sales. We were able to do more with less in the quarter, and we must continue to challenge ourselves to improve. We're integrating new ideas and changes into our marketing mix without adding to our budget. shifted slightly away from digital in the third quarter and produced a high-quality 52-page catalog and several smaller mailers for our fall promotions. We featured True Custom, Motion, and Bitch Made. Customers are coming in at retail with the mailers, and the response has been very positive. We also added spot TV placements in Key Market with new professional-quality ads. The stores in these markets outperform those without the TV campaign. We will continue to test and learn from these approaches and use those that are delivering the highest return on investment. The marketing changes have enhanced our omnichannel experience as more of our target customers are integrated with their experience, their online experience and our in-person business. We are now lapping the double-digit e-commerce sales growth numbers from last year. Sales are still up, now with single-digit increases. Website traffic declined slightly in the third quarter, but conversion rates continue to rise, and we're up 18%, driven by improvements in our website experience to our shoppers. We remain pleased with the progress of our Bassett Custom Studio program. and now have 57 locations open. Orders were up in Bassett Custom Studio 35% in Q3 and growth is coming from new and existing stores. Shipments were up 38%. We will be focused on emphasizing the value of Custom Studio and High Point and are optimistic that we will bring on additional locations to the program. This plan leverages our core competency of providing custom upholstery over a broader range of the United States. We reopened our Concord, North Carolina corporate store in the last few weeks, which has been closed since April for remodeling. We are also in the architectural planning phase of two new Bassett stores set to open in 2026. Our board of directors approved our regulatory quarterly cash dividend of 20 cents per share, and our balance sheet remains strong. Now I'll turn things back over to Mike for more details on our financial results.