Bassett Defies Slow Housing Market With 6.4% Revenue Growth

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $4.4M increase, 5.1% growth YOY; excluding Noa Home closure, 6.4% growth YOY
• EPS: $0.18 per diluted share, compared to $0.38 in prior year quarter; excluding prior year tax benefit, $0.08 YOY
• Gross Margin: 56.3%, down 30 basis points YOY
• Operating Margin: 2.6% of sales, up from 2.8% in prior year; excluding restructuring costs, 3.2% YOY

Business Commentary:

Revenue Growth and Market Conditions:

• Bassett Furniture Industries reported a 5.1% increase in consolidated revenue for the fourth quarter of fiscal 2025, with a 6.4% increase when excluding sales from the closed Noa Home division.
• The growth occurred despite a slow housing market and ongoing challenges with housing and mortgage rates, demonstrating the company's ability to adapt and increase sales through strategic initiatives and product innovation.

Wholesale and Retail Segment Performance:

• The wholesale business experienced an 8.3% increase in net sales, driven by a 14% increase in shipments to the retail store network and a 3.4% increase in shipments to the open market, while shipments for Lane Venture decreased by 13%.
• Retail sales increased by 7.9%, supported by new product introductions and strong demand for specific product lines such as wood furniture and custom upholstery.

Cost Management and Restructuring Efforts:

• Selling, general, and administrative expenses were reduced to 53.2% of sales, a 60 basis points decrease from the prior year, due to benefits from restructuring programs and ongoing cost optimization.
• The company has maintained a focus on running a leaner business model, reducing headcount by 11% in the previous year and an additional 4% recently, to position itself effectively in a challenging market environment.

Product Innovation and Design Initiatives:

• Sales of the repositioned wood furniture line, specifically the Copenhagen and HomeWork lines, showed strong performance, with wood business offerings up over 50% in the quarter.
• The company has emphasized product newness and design, adapting to market demands and integrating technology to enhance its competitive position in the home furnishings industry.

E-commerce and Digital Strategy:

• E-commerce sales increased by 14% in the fourth quarter, with a full-year growth of 27%, supported by enhancements to the consumer-facing e-commerce site and improved conversion rates.
• This growth is part of a broader strategy that includes moving from one catalog to two to supplement digital plans, reflecting a focused effort on expanding online sales channels.

Sentiment Analysis:

Overall Tone: Neutral

• Management cites 'ongoing challenges' with housing and mortgage rates, a 'slow' market, and recent weather disruptions negatively impacting sales. However, they note 'a solid fourth quarter,' 'increased sales and profits,' and are 'pleased with the progress' on new products and operating efficiencies.

Q&A:

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Can you comment on pricing versus unit volumes in Q4 related to tariffs?
  Response: Retail prices were held steady in Q4 to manage tariff volatility, impacting margins; a surcharge was later rolled into wholesale and then retail pricing. On wholesale, sales were up 8% YOY, suggesting a mix of price increases and volume growth.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Can you comment on written retail sales trends in Q4 and early fiscal '26?
  Response: Written sales were strong initially in Q4, tempered later by severe weather, with overall written sales up 4% for the quarter. The early weeks of fiscal '26 were solid, but recent weather has been disruptive.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Do you expect to open more Bassett Design Studios and Design Centers in fiscal '26?
  Response: Yes, the company continues to focus on opening more of both, with the smaller studio concept being prioritized, but exact numbers are not specified.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): What is the long-term goal for the retail store network?
  Response: The company plans to continue opening 2-4 stores per year, considering geography and ROI, while also leveraging other channels like the open market and design trade for growth.

• Question from Douglas Lane (Water Tower Research LLC): Will price increases on January 1 be enough to improve retail gross margins YOY in 2026?
  Response: Margins are expected to stabilize around historical levels (52%-54%). Initial weeks after the price increase show some improvement, but managing inventory and sales timing also plays a role.

• Question from Douglas Lane (Water Tower Research LLC): How do new store openings impact the P&L, and do they cause lumpiness?
  Response: New stores create a preopening SG&A expense hit (historically $400k-$500k) due to rent and occupancy costs before sales ramp up, but they have minimal impact on gross margin.

• Question from Douglas Lane (Water Tower Research LLC): Where is market share being gained from in the current environment?
  Response: Growth is attributed to new product launches (e.g., Bassett Casegoods, wood offerings) and the retirement of independent furniture store operators, which benefits Bassett's retail channel.

• Question from Douglas Lane (Water Tower Research LLC): What is the attitude towards share repurchase in 2026?
  Response: Share repurchases remain opportunistic, driven by stock price levels and the company's cash position, with no plans for a more aggressive program than in 2025.

Contradiction Point 1

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

Will the January 1, 2026 retail price increase be sufficient to increase retail gross margins year-over-year, or are other factors likely to hinder this? - Douglas Lane (Water Tower Research LLC)

2025Q4: expects retail gross margins to stabilize around the historical 52%-54% range. - Robert Spilman(CEO)

With returning consistent revenue, what gross margin upside should we expect? - Anthony Lebiedzinski (Sidoti)

2025Q3: does not expect gross margins to improve dramatically beyond the 55% to 56% range. - Robert Spilman(CEO)

Contradiction Point 2

Tariff Impact Quantification

It involves changes in the ability to quantify the financial impact of tariffs, affecting understanding of cost management and financial forecasting.

Will the January 1, 2026 retail price increase be sufficient to improve year-over-year gross margins, or are other factors likely to hinder this? - Douglas Lane (Water Tower Research LLC)

2025Q4: The recent price increase has already helped margins slightly, but the company must balance this with keeping inventory clean... - Robert Spilman(CEO) [Implies some understanding and management of the tariff impact]

Have you quantified the net tariff impact on annual financials? - Douglas Lane (Water Tower Research)

2025Q3: It is difficult to quantify precisely, as the company is still wrestling with the pricing philosophy (absorbing costs or maintaining margin dollars). The impact is complex and unprecedented... - John Daniel(CFO) & Robert Spilman(CEO)

Contradiction Point 3

Store Growth Pace and Strategy

It involves changes in market strategy regarding the sustainability and ambition of new retail store openings, affecting long-term growth expectations.

What are your long-term plans for the retail store network, including specific goals for store count or growth plans over the next 3-5 years? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2025Q4: The pace of 2-4 new stores per year is seen as sustainable... Growth is also driven by open market channels, design trade efforts... - Robert Spilman(CEO)

How do you plan to expand in Cincinnati and Orlando over the next 2-5 years, and which markets are of particular interest? - Anthony Chester Lebiedzinski (Sidoti & Company, LLC)

2025Q2: They view 2-4 new stores per year as a manageable pace... The focus is also on the design channel, which offers reach without a physical presence. - Robert Spilman(CEO), J. Michael Daniel(CFO)

Contradiction Point 4

Impact of Tariffs on the Design Trade Channel

It involves changes in the description of tariff impact on a specific market channel, affecting the understanding of business segment resilience.

In the current challenging macro environment, from where are you gaining market share? - Douglas Lane (Water Tower Research LLC)

2025Q4: The tariffs have had less impact on the design trade compared to retail. - Robert Spilman(CEO)

How is the design trade initiative progressing, and how have tariffs affected the design trade compared to retail and design studios? - Brian Gordon (Water Tower Research LLC)

2025Q2: The tariffs have had less impact on the design trade compared to retail. Designers prioritize great product and service over extreme cost scrutiny... - Robert Spilman(CEO)

Contradiction Point 5

Tariff Strategy and Pricing Impact

It involves changes in the financial impact and mitigation strategy for tariffs, affecting pricing and margin strategies.

How did pricing and unit volumes in Q4 perform, primarily due to tariffs? - Anthony Lebiedzinski (Sidoti & Company, LLC)

2025Q4: Retail prices were held steady... a tariff surcharge was applied to wholesale prices. This created margin pressure. - Robert Spilman(CEO) and John Daniel(CFO)

Have you observed meaningful changes in business trends due to the recent drop in consumer confidence, and can you comment on inventory health—whether it was increased to preempt potential tariffs—and share initial thoughts on the new tariff strategy, including the feasibility of manufacturing imported products in the U.S.? - Anthony Lebiedzinski (Sidoti & Company)

2025Q1: Tariffs may affect materials and the remaining 21% of imports. The company is studying the full impact... A potential tariff-driven price increase on some goods is a wild card, but a big margin decline is not foreseen. - Rob Spilman(CEO)