Bassett Furniture Industries, Incorporated

Good day and thank you for standing by. Welcome to the Bassett Furniture Industries Q2 2026 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 this 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 1-1 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. Sir, please go ahead.

Thank you, Michelle, for the introduction. Welcome to Bassett Furniture Industries' earnings call for the second quarter of fiscal 2026, which ended May 30th. Joining me today is our chairman and CEO, Rob Spilman. We issued our news release in Form 10-Q yesterday after the market closed, and it's available on our website. After today's remarks, Rob and I will open up 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?

All right. Thank you, Mike, and good morning, everyone. I'll start with some insights on the second quarter, and Mike will get into more of the financial details. I'll also discuss our strategic initiatives to drive further growth at Bassett. Operating profit on an adjusted basis improved in the second quarter on slightly lower consolidated revenue. As we move through the quarter, positive traffic during April and May contributed to retail written sales being up 9.5%. Our Memorial Day promotion was especially strong with written sales up 14% and 4% more traffic than last year. We saw these trends continue into June, which is a good start for the third quarter. Wholesale orders were up 5.2% for the second quarter. The shipments were down 2% as the increase in written sales were back in loaded. We also generated $7.4 million of cash from operations during the period. Our consolidated gross margins grew by 90 basis points for the quarter, primarily due to improvements in wholesale margins on slightly lower revenue. Despite significant cost cutting in recent quarters, our SG&A has remained stubbornly high. Part of this is the higher percentage of overall sales that corporate retail represents with a structurally higher amount of SG&A compared to the traditional wholesale model. And we did have some unforeseen expenses run through such as fuel surcharges that stem from the Iranian conflict. In any event, we are committed to improving our operating margins, and our SG&A percentage is a major part of the picture. In keeping with last quarter's announced target, we remain focused on reducing expenses by an additional $1.5 to $2 million on an annual basis. Although we have seen recent forecasts foretelling modestly better housing numbers in the second half of 2026, we must generate higher sales in our existing store network and the environment in which we operate today. We are not simply waiting on things to get better. Obviously, higher average sales per store means greater leverage of our fixed costs. That is why the quarterly 9.5% written sales increase was particularly encouraging. That said, our retail gross margins fell by 120 basis points in the quarter, partially due to more aggressive pricing of our clearance inventory. Accordingly, we plan to raise retail gross margins in mid-July by 200 to 250 basis points. Our marketing organization has begun to consistently deliver greater efficiency on investment as our adjusted media mix drove more foot traffic to our stores for the first time since the COVID boom. We engaged a new agency last year and their analytics platform is giving us a better understanding of our customer. We've also begun to use artificial intelligence to further reach our customers on a more personalized basis. Augmenting the more precise digital strategy is our growing utilization of direct mail, which we successfully reincorporated into the mix 18 months ago. We are excited about these results and believe that more fertile ground lies ahead due to our marketing efforts. We continue to benefit from the successful product introductions of 2025, both in upholstery and case goods. Several of these offerings have become top five items in their respective categories and offer a nice complement to our legacy custom programs that remain the hallmark of our assortment. At the April market in High Point, we had very positive response to our introduction of opening price point lines. both in living room and bedroom. These collections will bolster our good, better, best strategy and will be available in Bassett stores and at independent dealers in advance of the important Labor Day selling events. Our second initiative is to generate growth from opening new corporate and licensed retail locations. On May 8th, we opened a new 14,000 square foot store in Cincinnati which marks a return for Bassett for this important market. We spent almost two years researching the location, negotiating terms with the landlord, and converting the space in a highly trafficked retail center to our specifications. Early indications of traffic and written sales are encouraging. In fact, on the wholesale side, we sold more products in eight weeks in Cincinnati than we did all of last year. We will open a location of similar size and economics in Orlando in early October. In addition, just after the quarter ended, an existing open market dealer in Nashville, Tennessee converted an existing location into a new 12,000 square foot Bassett Home Furnishings store. Currently, we have 59 corporate stores and 28 licensed stores and operations. We will also continue to evaluate opportunities to convert current licensed locations to corporate stores as owners retire and exit the business. Third, we continue to invest in e-commerce for a fully integrated omnichannel experience. We are seeing a return on this investment as web traffic was up more than 3% in the quarter. Perhaps more importantly, written web sales were up by 40%, marking seven of the last eight quarters with increases exceeding 20%. Contributing to that performance was a 24% increase in average order value. Upholstery sales saw the greatest jump, aided by an updated fabric module that improves the customization process. This is part of an overall improvement to the user experience, including a new navigation menu that makes it easier for customers to shop and find products. Finally, the National Home Delivery Program that we launched last fall is contributing as we reach customers where we don't have stores in all the contiguous 48 states. Fourth, we plan to expand Our overall wholesale business through several efforts. Outside the Bassett store network, we rely on two dedicated distribution concepts, Bassett Design Centers, the BDC, and Bassett Custom Studios, the BCS, which represent well over half of our open market business. The combined orders for the quarter rose by 1.3%, shipments fell by 4.5%. Behind these numbers, the BDCs contracted by 6.3%, while the smaller footprint of the studio grew by 7.2%. Currently, we have 94 accounts on the books classified as BDCs, generally consisting of 3,000 to 5,000 square feet of floor space dedicated to our products. The newer studio concept is a 1,000-foot little sister presentation of our true custom upholstery programs. We opened four custom studios in the quarter bringing the fleet total to 64. We are auditing the results of both our best partners and the less productive locations to drive higher levels of standardization and performance across both of our dedicated distribution concepts. Integrated into our initiative to grow wholesale is our expanded focus on increasing Bassett's share of the professional interior design channel. We have the breadth of assortment, fabric line, custom capabilities, and the ability to upholster and custom customers' own material that is COM that arms us with the product currency to effectively serve this disparate but growing channel. Our new High Point Showroom location is more relevant to the design trade and will showcase all of these attributes in a much more forceful way than was accomplished in our prior location. We will also unveil a new product collaboration with an accomplished interior designer that we will begin to market later this summer. A natural extension of our wholesale outreach is our six-month-old Bassett Hospitality Division. Although we must be patient with our progress in gaining acceptance from this somewhat insular community, we have written some orders with entities as varied as hospitals, boutique hotels, and senior living communities. We have also recently quoted some large hospitality projects. This is a new business for us and we are committed to learning the ropes and becoming a factor in this segment of the industry. This plan is our roadmap for growth and improved performance. Our organization is energized by recent order trends and we are focused on getting the job done. Mike, I'll turn things over to you.