Bassett Furniture's Q2 2025 Earnings Call: Unpacking Contradictions on Tariffs, Margins, and Studio Growth

Tariff mitigation strategy, gross margin sustainability, Bassett Design Studio growth expectations, gross margin expectations and strategy, expected number of design studios are the key contradictions discussed in Bassett Furniture Industries' latest 2025Q2 earnings call.



Sales and Operating Profit Improvement:
- Bassett Furniture reported an increase in consolidated sales by 1.1% compared to the same quarter last year, excluding the impact of Noa Home Inc. which closed in 2024, resulting in a 2.5% increase in ongoing business sales.
- The company achieved an operating profit of $2.5 million or 3% of sales, compared to a loss in the same period last year.
- The improvement was attributed to strategic cost reduction initiatives and higher operating efficiencies in both wholesale and retail segments.

Tariff Impact and Price Adjustments:
- Bassett Furniture raised wholesale prices by 3% to 5% in the quarter due to increased tariffs, particularly affecting fabric, plywood, componentry, and finished goods imported from countries like Vietnam and India.
- The company worked closely with fabric vendors to mitigate further price hikes and is monitoring tariff activity daily.
- This was necessary due to supply chain disruptions and the impact on consumer confidence.

E-commerce Expansion and Retail Performance:
- Written sales at bassettfurniture.com increased by 31% in the second quarter, following a 36% increase in the first quarter.
- Despite a challenging housing market, the company's e-commerce platform is growing, driven by higher conversion rates and reaching customers in markets without physical stores.
- The company is enhancing user experience and site conversions through technology improvements and marketing efforts.

Wholesale and Retail Sales Mix:
- Shipments to the Bassett retail store network increased by 12.6%, offset by a 2.6% decrease in shipments to the open market and a 22% decrease in Lane Venture shipments.
- The decline in the open market was mainly due to lower sales in the Club Level program, with some accounts hesitating to commit to imported goods amid tariff uncertainty.
- The company is focusing on growing its retail store network and design studio presence to offset open market declines.

Investment in New Product Lines and Design Trade:
- Bassett Furniture is expanding its presence in the design trade, with sales in this area growing by double digits for the quarter.
- The company is investing in new product lines, marketing, and systems to enhance its offerings and services for interior designers.
- The focus on design trade growth is part of a strategic effort to adapt to the growing importance of this channel in the industry.