BASSETT FURNITURE INDUSTRIES INC

Previous wording

Approximately 60% of our wholesale sales arise from our network of 86 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores. Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service. The stores highlight our custom furniture design and manufacturing capabilities, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.

Current wording

Approximately 60% of our wholesale sales arise from our network of 87 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores. Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service. The stores highlight our custom furniture design and manufacturing capabilities, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories. Our philosophy is based on building strong long-term relationships with each customer. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.

Previous wording

We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Building on the 25% increase in web sales for fiscal 2025, written sales orders for the web increased 28% for the quarter while delivered sales increased 46%. Although e-commerce sales continue to be small relative to in-store sales, we will continue to invest in ongoing improvements to the aesthetics and user experience on our website while not compromising on our in-store experience or the quality of our in-home makeover capabilities.

Current wording

We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Building on the 25% increase in web sales for fiscal 2025, written sales orders for the web increased 34% for the six months ended May 30, 2026 while delivered sales increased 30%. Although e-commerce sales continue to be small relative to in-store sales, we will continue to invest in ongoing improvements to the aesthetics and user experience on our website while not compromising on our in-store experience or the quality of our in-home makeover capabilities.

Previous wording

Consolidated results of operations for the three months ended February 28, 2026 and March 1, 2025 are as follows:

Current wording

Consolidated results of operations for the three and six months ended May 30, 2026 and May 31, 2025 are as follows:

Previous wording

Total sales revenue for the three months ended February 28, 2026 decreased $1,822 or 2.2% from the prior year period primarily due to the impact of widespread winter weather disruptions in late January on store operations and retail and wholesale logistics. This consisted of a $749 or 1.4% decrease in retail sales from our Company-owned stores and a $1,073 or 3.7% decrease in sales to external wholesale customers.

Current wording

Total sales revenue for the three months ended May 30, 2026 decreased $595 or 0.7% from the prior year period. This consisted of a $1,911 or 6.3% decrease in sales to external wholesale customers partially offset by a $1,316 or 2.4% increase in retail sales from our Company-owned stores.

Previous wording

In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the three months ended February 28, 2026 and March 1, 2025, Corporate and other included no other operating segments.

Current wording

In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefiting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the three and six months ended May 30, 2026 and May 31, 2025, Corporate and other included no other operating segments.

Previous wording

Results for the wholesale segment for the three months ended February 28, 2026 and March 1, 2025 are as follows:

Current wording

Results for the wholesale segment for the three and six months ended May 30, 2026 and May 31, 2025 are as follows:

Previous wording

Net sales for the three months ended February 28, 2026 increased $34 or 0.1% over the prior year, consisting of a 0.6% increase in shipments to our retail store network and a 2.6% increase in Lane Venture shipments to wholesale customers partially offset by a 5.3% decrease in shipments to the open market. As previously mentioned, we introduced the Lane Venture brand in the Bassett Home Furnishings stores during the first quarter of 2026 and have included those shipments in the above change in shipments to the retail store network. Including those shipments in the total Lane Venture brand, shipments of that brand increased 32%. Shipments were negatively impacted by winter weather as our major distribution centers were closed for multiple days during the quarter. Gross margins for the three months ended February 28, 2026 decreased 50 basis points from the prior year period as margin decreases in the Bassett Custom Upholstery operations due to reduced leverage on fixed costs were partially offset by improved margins in the Bassett Casegoods operations due to improved pricing strategies. SG&A expenses as a percentage of sales were essentially flat compared with the prior year period.

Current wording

Net sales for the three months ended May 30, 2026 decreased $1,082 or 2.0% from the prior year, consisting of a 5.5% decrease in shipments to the open market partially offset by a 1.0% increase in Lane Venture shipments to wholesale customers and a 0.8% increase in shipments to our retail store network. The increase in shipments to our retail store network includes shipments of the Lane Venture brand, which we introduced in the BHF stores during the first quarter of 2026. Total shipments of the Lane Venture brand, including the shipments to the retail store network, increased 17.9% from the prior year. Gross margins for the three months ended May 30, 2026 increased 110 basis points from the prior year period primarily due to improved efficiencies in our domestic upholstery and wood operations coupled with improved pricing strategies in our imported wood offerings. SG&A expenses as a percentage of sales increased 90 basis points compared with the prior year period primarily due to increased outbound freight expenses from higher fuel costs.

Previous wording

Wholesale backlog at February 28, 2026 was $16,745 as compared to $19,519 at November 29, 2025 and $19,515 at March 1, 2025.

Current wording

Wholesale backlog at May 30, 2026 was $18,859 as compared to $19,519 at November 29, 2025 and $18,418 at May 31, 2025.

Previous wording

During the three months ended February 28, 2026, we incurred $95 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio and Orlando, Florida markets, expected to open by the end of the second and third quarters of fiscal 2026, respectively. Prior to opening a new store we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight-line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 to 45 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to $600 per store. We generally expect that new stores will operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break even, we do realize additional wholesale sales volume that leverages the fixed costs in our wholesale business.

Current wording

During the three months ended May 30, 2026, we incurred $473 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio market, which opened late in the second quarter, and Orlando, Florida market, expected to open by the end of the third quarter of fiscal 2026. Prior to opening a new store we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight-line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 to 45 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to $600 per store. We generally expect that new stores will operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break even, we do realize additional wholesale sales volume sold through each new store that leverages the fixed costs in our wholesale business.

Previous wording

Net sales for the three months ended February 28, 2026 decreased $749 or 1.4% from the prior year period due primarily to the previously mentioned winter weather disruptions during the last two weeks of January. Written sales (the value of sales orders taken but not delivered) decreased 0.2% from the first quarter of 2025. Gross margin for the three months ended February 28, 2026 declined 170 basis points from the prior period primarily due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff costs until mid-January of 2026. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended February 28, 2026 were unchanged from the prior year period as reduced leverage of fixed costs due to lower sales levels was substantially offset by improved efficiency in the warehouse and delivery operation.

Current wording

Net sales for the six months ended May 30, 2026 increased $567 or 0.5% over the prior year. Written sales (the value of sales orders taken but not delivered) increased 4.6% over the first six months of 2025. Gross margin for the six months ended May 30, 2026 declined 140 basis points from the prior period primarily due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff costs until mid-January of 2026 coupled with lower margins on clearance goods as we continue to be more aggressive in cycling through returned goods and floor samples. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the six months ended May 30, 2026 decreased 30 basis points from the prior year period. Excluding $569 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales decreased 80 basis points as compared to 2025. This decrease was primarily due to lower health insurance and workers compensation costs from better claim experience and improved efficiency in the warehouse and delivery operation.

Previous wording

Retail backlog at February 28, 2026 was $34,247 compared to $34,402 at November 29, 2025 and $36,143 at March 1, 2025.

Current wording

Retail backlog at May 30, 2026 was $34,701 compared to $34,402 at November 29, 2025 and $34,091 at May 31, 2025.

Previous wording

Other Items Affecting Net Income (Loss)

Current wording

Other Items Affecting Net Income

Previous wording

Interest income for the three months ended February 28, 2026 and March 1, 2025 was $553 and $559, respectively, a decrease of $6. Lower interest income on CDs and interest-bearing cash equivalents was largely offset by $99 of interest received as a Federal income tax refund during the first quarter of fiscal 2026.

Current wording

Interest income for the three months ended May 30, 2026 declined $75 or 14.4% from the prior year due to lower interest income from CDs and interest-bearing cash. Interest income for the six months ended May 30, 2026 declined $81 or 7.5% from the prior year as lower interest income on CDs and interest-bearing cash equivalents was partially offset by $99 of interest received as a Federal income tax refund during the first quarter of fiscal 2026.

Previous wording

Other loss, net, for the three months ended February 28, 2026 and March 1, 2025 was $192 and $459, respectively, a decline of $267 from the prior year period. The net change from the prior year quarter and year to date was primarily due to lower net costs associated with Company-owned life insurance partially offset by increased interest expense from finance leases compared to the prior year period.

Current wording

Other income, net, for the three months ended May 30, 2026 was $87 compared to a net loss of $422 for the prior year period, primarily due to increases in the cash surrender value of Company-owned life insurance. Other loss, net, for the six months ended May 30, 2026 declined $776 or 88% from the prior year period due to increases in the cash surrender value of Company-owned life insurance partially offset by increased interest expense from finance leases compared to the prior year period.

Previous wording

Our effective tax rate was 26.5% for the three months ended February 28, 2026. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.

Current wording

Our effective tax rate was 26.5% for the three and six months ended May 30, 2026. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.

Previous wording

Our effective tax rate was 27.4% for the three months ended March 1, 2025. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.

Current wording

Our effective tax rate was 26.1% and 26.8% for the three and six months ended May 31, 2025, respectively. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.

Previous wording

Cash used in operating activities for the first three months of fiscal 2026 was $5,468 compared to cash used in operations of $52 for the first three months of fiscal 2025, representing a decline of $5,416 in cash flows from operations. This decrease was primarily the result of lower income levels and negative changes in working capital which had been expected.

Current wording

Cash provided by operating activities for the first six months of fiscal 2026 was $1,896 compared to cash provided by operations of $6,903 for the first six months of fiscal 2025, representing a decline of $5,007 in cash flows from operations. This decrease was primarily the result of lower income levels and negative changes in working capital which had been expected.

Previous wording

Our overall cash position declined $8,288 during the first three months of 2026. During the first three months of fiscal 2026, we spent $863 on purchases of property and equipment. We also paid $1,730 in dividends during the first three months of 2026. We repurchased $147 of shares under our stock repurchase program during the first three months of 2026 compared to repurchases of $721 in the prior year period. We expect capital expenditures for the full year to range from $8 million to $12 million. As of February 28, 2026, $18,106 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $50,952 on hand at February 28, 2026, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Current wording

Our overall cash position declined $5,375 during the first six months of 2026. During the first six months of fiscal 2026, we spent $2,592 on purchases of property and equipment, including tenant improvements to our new locations in Cincinnati, Ohio and Orlando, Florida as well as our new wholesale showroom space in High Point, North Carolina. We paid $470 to a former licensee to acquire a BHF located in Cherry Hill, New Jersey. We also paid $3,443 in dividends during the first six months of 2026. We repurchased $653 worth of shares under our stock repurchase program during the first six months of 2026 compared to repurchases of $1,158 in the prior year period. We expect capital expenditures for the full year to range from $10 million to $12 million. As of May 30, 2026, $17,601 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $53,890 on hand at May 30, 2026, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Previous wording

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of one of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease certain personal property such as lift trucks, office equipment and local delivery trucks. The present value of our obligations for leases with terms in excess of one year at February 28, 2026 is $85,791 and is included in our accompanying condensed consolidated balance sheet at February 28, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,902 at February 28, 2026. The remaining terms under these lease guarantees extend for six years. See Note 10 to our condensed consolidated financial statements for additional details regarding our lease guarantees.

Current wording

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of one of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease certain personal property such as lift trucks, office equipment and local delivery trucks. The present value of our obligations for leases with terms in excess of one year at May 30, 2026 is $88,517 and is included in our accompanying condensed consolidated balance sheet at May 30, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,656 at May 30, 2026. The remaining terms under these lease guarantees extend for five years. See Note 10 to our condensed consolidated financial statements for additional details regarding our lease guarantees.

Previous wording

We provide post-employment benefits to certain current and former executives and management level employees of the Company. Included among these benefits are two defined-benefit plans with a combined projected benefit obligation of $7,010 at February 28, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $5,764 at February 28, 2026, the current portion of which is $330. See Note 9 to our condensed consolidated financial statements for additional information regarding these plans.

Current wording

We provide post-employment benefits to certain current and former executives and management level employees of the Company. Included among these benefits are two defined-benefit plans with a combined projected benefit obligation of $6,950 at May 30, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $6,240 at May 30, 2026, the current portion of which is $327. See Note 9 to our condensed consolidated financial statements for additional information regarding these plans.