Thank you, Latonya, for the introduction. Welcome to the Bassett Furniture Industries earnings call for the third quarter of fiscal 2026, which ended August 29, 2026.

Joining me today is our Chairman and CEO, Rob Spilman. We issued our news release and Form 10-Q yesterday after the market closed, and they're available on our website.

After today's remarks, Rob and I will be open 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?

Thank you, Mike. Good morning, everyone.

We are pleased to report a 3.4% increase in consolidated revenue, bolstered by increases in both retail and wholesale sales. All product categories were positive, with domestic upholstery leading the way.

Written retail sales from company-owned stores increased 4.4%, continuing the momentum from the second quarter in spite of one less week of the Labor Day promotion in the quarter compared to last year. Wholesale written orders were up 7.9%, led by double-digit gains in domestic upholstery and the Lane Venture outdoor division.

Operating profit showed nice improvements, thanks to sales increases in key product categories, improved expense control, and tariff refunds that offset tariff costs that were embedded in our balance sheet. It's important to note that Bassett imports less than 25% of our products.

Therefore, refunds are much lower for us than for others. Mike will give you more color on the net impact of tariff refunds in his financial review.

Consolidated gross margins grew by 130 basis points, primarily due to improved wholesale margins and, to a lesser extent, tariff refunds. While retail gross profit fell by 80 basis points, we are encouraged by the gross margin improvement that we have seen since the pricing strategies that we implemented in July have started to take effect.

The full four-week Labor Day promotion that spilled into the current quarter generated a 9% written sales increase with improved written gross margins. We've made progress on reducing operating expenses, which remains a key goal for our management team.

SG&A, excluding pre-opening costs for the Orlando store, was 150 basis points lower than last year's third quarter. We're on track to meet our goal of reducing the annual run rate of expenses by an additional $1.5 to $2 million.

I'm pleased with the gains we've made on our strategic initiatives, especially those to grow sales from new and existing stores. Our marketing team's ability to optimize and refine the media mix continues to produce positive outcomes.

We had excellent response to our 84-page fall catalog, which featured curated room layouts and styling tips, along with new collections. We have improved the visual presentation of our products on the website, helping consumers on their path to fully experience the Bassett brand.

These efforts are paying off, with e-commerce written sales up 48% this quarter and website delivered sales rising more than 42%. Average order value on the web was up 33%, which was propelled by stationary and motion upholstery categories.

Our technology investments during the past two years continue to enhance the website presentation and navigation, benefiting the user experience and driving the sales results that I just mentioned. Once again, our domestic custom furniture products drove the majority of our written wholesale sales gain.

Custom upholstery and custom motion upholstery in particular was very strong. Also, on the domestic front, our Bench*Made dining program had a nice quarter.

Once again, Lane Venture performed very well. Our product team continues to seek new expressions of comfort and innovation to add to the assortment.

We are extremely excited about the debut of our new 44,000-square-foot showroom at the High Point Market on October 15. We are in a new location, designed to provide greater traffic and visibility while inspiring customers with a broad range of new products.

Our teams have worked hard to enhance the styling and appeal of the Bassett brand, which is embodied in the new showroom presentation. We recently announced our partnership with Birmingham-based interior decorator and textile designer Heather Chadduck.

Heather is highly respected for her portfolio of design projects and for her successful line of textiles. The highlight of our events in High Point will be the launch of a major new collection on which Heather collaborated with our internal team.

The whole home collection features 30 furniture pieces with five finishes and 70 inline fabrics that she has personally curated. Heather says the collection feels timeless, but very organic and fresh.

The Heather Chadduck Collection for Bassett will be in retail stores next spring. Our priority remains growth from existing and new stores, and we're happy to add another location, bringing our corporate retail store total to 60.

Tomorrow, we are opening a new store in Orlando, which has a similar footprint to the 14,000-square-foot store we opened in May in Cincinnati. These are important markets and position us in quality real estate catering to our targeted demographic profile.

We rely on our two dedicated distribution concepts, Bassett Design Centers and Bassett Custom Studios, for growth in the open market. Our 94 Design Centers and 64 Custom Studios currently represent over half of our wholesale business outside of the Bassett store network.

With the low end of the market dominating so much of furniture retail in US mid-sized towns, we view our dedicated dealer network as our local showcase of well-crafted, custom home furnishings. Our executive team has been traveling to these Bassett partner locations this summer with the goal of strengthening our collaboration with the dedicated network.

We have been gathering input to formulate enhancements to the concepts for 2027 and beyond. For the quarter, shipments to our dedicated concepts were essentially flat, while orders increased by two by 4.2%.

A natural extension of our wholesale outreach is our Bassett Hospitality division, now operating for about nine months. We've had several orders, but acknowledge that this effort will take time while we are gaining a foothold in the hospitality segment.

All in all, we were pleased with our third quarter trajectory. Housing remains slow, and mortgage rates are in lockstep with the Federal Reserve's recent rate increases.

The ongoing effect of high inflation rates on the US consumer continues to be a major concern. That said, we remain optimistic about managing through these challenges.

Now, I'll turn things over to Mike.

Thank you, Rob. In my commentary, the comparisons I'll discuss will be the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, unless otherwise noted.

Let me let me start by discussing the $2.8 million in tariff refunds that we've we received from US Customs and Border Protection as a result of the US Supreme Court's February 2026 decision invalidating the IEEPA tariffs imposed by the president in 2025. Of this amount, $1 million was recorded as an increase in gross profit for this quarter, with additional amounts to be recorded primarily in the fourth quarter of 2026.

Tariff costs are capitalized into inventory at the time they are incurred, and subsequently recognized in the income statement when those goods are sold to a third party. The high tariff costs recognized in the quarter were subsequently or substantially offset by the tariff refund income that we recorded.

As Rob pointed out, we import less than 25% of our products. Total consolidated revenue was $82.8 million, an increase of $2.7 million or 3.4%.

This consisted of a $2.3 million or 4.5% increase in retail sales from our corporate-owned stores and a $400,000 or 1.4% decrease or increase in sales to external wholesale customers. Gross margin of 57.5% represented a 130-basis-point increase when compared to the prior year, primarily driven by the previously discussed tariff refund and partially offset by lower margins in the retail business.

The margin increase was also due to a higher mix of retail sales, which carry a higher gross margin than third-party wholesale sales. Selling, general, and administrative expenses, excluding new store pre-opening costs, was 53.9% of sales, 150 basis points lower than the prior year.

This decrease was driven primarily by increased leverage of fixed costs on higher sales in our retail segment, coupled with lower corporate expenses. Operating income was $2.8 million or 3.4% of sales, as compared to income of $593,000 or 0.7% of sales in the prior period.

Diluted earnings per share were 24 cents versus 9 cents last year. I'll never I'll now cover more details on our wholesale operations.

Net sales were $53.7 million, up 5.7% compared to last year. This increase consisted of a 7.5% rise in shipments to the retail store network, a 28% increase in Lane Venture shipments to wholesale customers, and 3.7% more shipments to the open market.

As previously discussed, we introduced Lane Venture outdoor brand in the Bassett Home Furnishings store during the first quarter of 2026, and have included those shipments to the store network in the 7.5% increase for the retail stores. In total, shipment of Lane shipments of Lane Venture were up 44%.

Gross margins rose 150 basis points, primarily due to the previously discussed IEEPA tariff refund, along with improved margins in both the domestic wood and the Lane Venture operations. The increase was partially offset by lower margins in the imported wood and upholstery, which carry tariff costs.

SG&A expenses as a percentage of sales were flat, as the effects of greater leverage of fixed costs from higher sales were offset by greater outbound freight expenses, primarily driven by higher fuel costs. Now moving on to our retail store operations, net sales of $54.2 million represented a $2.3 million or 4.5% increase over the prior year.

Written sales, the value of sales orders taken but not delivered, increased 4.4%. Gross margin of 51.5% is a decline of 90 basis points, primarily due to lower margins on inline goods from increased promotional activity.

Total SG&A expenses, excluding new store pre-opening costs, as a percentage of sales decreased 100 base 130 basis points due to greater leverage of fixed costs from higher sales levels and lower advertising and marketing costs, partially offset by higher employee costs. During the quarter, we incurred $144,000 of new store pre-opening costs associated with our Orlando location opening tomorrow.

Before opening a new store, we incur such expenses as rent, training costs, and other payroll-related costs. These costs generally range between $200,000 and $400,000 per store, depending on the location and the period of time between when we take physical possession of the store space and the opening.

Now I will cover our liquidity position, which remains strong, with $53.4 million of cash and short-term investments. During the quarter, we generated $6.1 million of operating cash flow.

We also spent $4.3 million on capital expenditures, which was significantly higher than the recent run rate. This increased spending was primarily related to the Orlando store that opens tomorrow, and the build-out of our new showroom in High Point.

We expect capital expenditures in the fourth quarter to be between $2 and $4 million, and updating our full capital expectations for 2026 to to range between $9 million and $11 million versus our prior forecast of $10 million to $12 million. We continue to pay our quarterly dividend and repurchase shares optimistically, or opportunistically, I should say.

We've spent $1.7 million on dividends and $126,000 on share buybacks in the quarter. We remain committed to delivering shareholder returns through dividends and, when appropriate, share buybacks.

Now, we'll open up the line for questions. Latonya, please provide instructions on how to do so.

Thank you very much, and good morning, everyone, and certainly nice job improving the top and bottom line in the quarter. As we look at the reported revenue, can you give us just a rough idea as far as the impact of pricing versus unit volumes that you saw in the quarter?

Mike's digging that out right now, Anthony. You asked that last quarter as well.

Thanks. Just as we think about all the noise with the Yeah.

It's a good question given what's going on in the world today.

Yeah. Here we go.

Yes, on the wholesale side, units were down slightly. I won't give you the exact percent, but it was low single digits.

Unit price was up and I would say up in the less than double-digit range.

Got you. That's very helpful.

That's on the wholesale side. On the retail side, pretty similar.

Let's just leave it at that.

Fair enough. Got you.

Then, certainly it was encouraging to hear that you guys did very well during your Labor Day promotion with your written sales. Just curious, did you see any notable regional differences throughout the country, or was it more or less kind of consistent?

No, it's pretty consistent. All the regions were up.

That's good to hear. Okay.

Then, earlier this year you guys opened a new store and then acquired another dealer store, and you're about to open a new store in Orlando tomorrow. As we kind of look forward, how do we think about the additional store locations and in FY '27 and beyond, just kind of what's the latest thinking on that?

We will open two stores next year, Anthony, and honestly, beyond that, we don't have one in the queue. We are looking at upgrading existing locations as part of our consideration on future capital expenses.

At the moment, we have two for '27.

Anthony, let me just add, one of those is a reposition, there'll be a closure and an opening, it's net up one.

Got you. Thanks for that.

Then my last question before I pass it on to others: so, as it relates to your comment about being more aggressive with Black Friday promotions, can you provide more details as to what your plans are, how do we think about the impact that may have on margins?

I don't think it's going to have a big impact on the margin, Anthony. It's just Black Friday has for us grown into such a big event, and closes the year, that we just want to make sure that we end the year with the bang.

I don't anticipate a perceptible diminution of margin as a result.

That's good to hear. All right, well, thank you very much, Rob and Mike.

Thank you.

Thank you, Anthony.

Yes. Hi, thank you.

I just wanted to ask about your retail sales growth in the quarter was pretty good, and you've had a couple quarters here of pretty decent growth. However, the growth is not as strong as what you saw in FY '25.

Just stepping back in terms of the larger picture, I'm wondering how would you characterize consumer behavior right now? Are they still buying to replace things that they bought during the pandemic, and here it is six years later and they want to buy something new?

If so, what do you think is making the slower growth? Is it just the concern from the war in the Middle East?

Then what general impact do you think the higher mortgage rates, interest rates will have on your business going forward? Do you think it'll slow it even further?

Thank you.

Linda, this is Rob. We haven't met yet.

Look forward to meeting you. Look, there's a lot of facets to the answer to your question.

I would say that for us, we feel the consumer remains cautious. We have nice interest and project business, which drives an appreciable part of our business.

The bigger-ticket business was very good in the quarter. I do feel that folks are taking longer to pull the trigger.

We're doing the work, and they may not always pull the trigger. It's not what I would characterize as an easy environment at the moment for us.

I would say, yes, just the momentum, and this is not unique to us by any means, and you can certainly read about it, and you know about it, the just the general malaise in the housing sector. We were looking for more of an uptick actually than we've experienced this year, and it hasn't materialized in that regard.

Certainly, if you raise mortgage rates further than they were, that is not providing a tailwind in that regard. I think our guys did a nice job of closing the business that came through the door, and again, our project business it has been strong.

Cautious, conservative, and you can understand why. There's a lot of uncertainty out there right now.

Linda, I would add to what Rob said. If you look at the pace of business over the course of the year, and you look back at our first quarter, our first quarter was pretty slow.

I think we were up 9.5% written in Q2, and we did see a nice pick up in the May timeframe, and we had a very successful Memorial Day event. The other thing I would say is, and if you look at our quarter, you have to remember at least Labor Day last year was basically two days after the quarter end last year, compared to this year, which was a week and two days after quarter end.

There's a week time shift in that promotion, and that's why Rob pointed out that for the four-week promotion, we were actually up 9%, but it doesn't show at least in the pace of business for the quarter because a big chunk of that ends up in the fourth quarter.

Okay. Thank you.

That's very helpful color. Turning to margins, your gross margin was up nicely, and I think it was up even if you want to strip out that positive refund effect.

It was up year-over-year. Do you think with more effect from the retail price increase in the fourth quarter that the gross margin can be up even more year-over-year, let's say excluding the tariff refund?

Do you think that could be the case in the fourth quarter?

We are still in the first month of the fourth quarter, Linda. It ends tomorrow.

We haven't seen the retail gross margins strategy on a piece of paper yet on a P&L. The written margins are looking better for the month of September and at retail.

We are very hopeful that that's going to materialize. We think it will.

That is something that will help us in the fourth quarter. I don't expect to see a lot of difference in the wholesale margin.

We do have that going for us. It's hard to quantify at this moment because we instituted the pricing strategy in mid-July, and those deliveries will be showing through on the P&L here this month, show this month.

Thank you. Then, I'm just curious on the SG&A expense.

It was up slightly in dollar terms, both year-over-year and sequentially from the second quarter. I'm just wondering your $1.5 to $2 million of savings, is that primarily reflected in SG&A or not?

Did we see any of that in the quarter, or are we going to see more of a positive effect of that in the fourth quarter? Thank you.

Yes. During the quarter, we essentially did realize all of the quarterly effect of that $1.5 to $2 million.

When you look at the SG&A by itself, you've got to remember more of our sales, consolidated sales, came from retail, which carries more SG&A expense. I think, as you're analyzing that SG&A, that's kind of the big difference.

Okay. That's helpful.

Thank you. Then, I noticed that your inventory reduction was very, very good in the quarter, and it did boost your operating cash flow, which was quite strong, even excluding that tariff refund.

What is going on there? Why did the inventory come down so much?

Then can we expect more inventory reduction in the fourth quarter?

You want to talk about the tariff

Keep in mind there's a chunk in inventory related to the tariff that's going to be coming through on the P&L this quarter. Ex that, we still had nice reduction in inventory, primarily around frankly, imported product.

Our club-level motion product inventory came down nicely, and we've been working on that. Also, we're doing less of the cut and sew fabric where we bring the kits in from offshore.

It's still important to us, but our consumers are gravitating more and more to the special order, and that's cut and sewn domestically so we don't have the carrying cost of the pre-sewn kits. We're certainly working hard to continue reductions.

I don't think you're going to see something in this next quarter as dramatic as you just saw this quarter.

Okay. Sounds good.

Then, my last question just has to do with sort of your capital allocation policy. Your cash dividends per year are nearly $7 million, and in most of the recent years, you have been using balance sheet cash to pay the dividend.

I'm not sure how it's going to turn out this year, but it looks like that might be the case again for FY '26, that you'll use balance sheet cash to pay at least part of it. Have you considered reducing the dividend just to be able to invest more behind growth initiatives in your business?

We consider the dividend every quarter. We think it's a very important part of what we do.

We think our cash balance is appropriate and strong, and yes, every quarter, we discuss capital allocations for whether it be growth or return to shareholders. I think Bassett has a history of returning dividend to shareholders, and I don't think we're anywhere near a situation where we would feel like we're under pressure on the dividend.

Frankly, we need to vet any kind of capital expenses based on the returns that we receive from those, and so we're pretty conservative about that. Yes, we certainly look at all these things as we should, and as appropriate, and obviously, we would strive to pay the dividend out of operating cash flow, and we haven't done it every year, but we've done it a lot of years.

That's our objective. We do view the dividend as an important part of the picture, so long as the board feels the same way.

One thing I'd add to that, Linda, is keep in mind that the fourth quarter is our best cash generation quarter. As you look at it right now, certainly come to the conclusion you just did for the year, but hopefully, the cash will come through as we expect for the fourth quarter.

Great. That sounds good.

Thank you very much for taking my questions.

Thank you, Linda.

Okay. Thank you very much.

We look forward to seeing some of you soon in our new showroom in High Point, and we look forward to touring you around this space. We're very excited about it.

I'll close by just saying thank you for your interest in Bassett Furniture, and for your support of our business. Good day.