Core Points - President Trump announced new tariffs, including a 50% tariff on kitchen cabinets and upholstered furniture, effective October 1 [3][4] - The tariffs are aimed at protecting U.S. manufacturing from what Trump described as unfair foreign competition [5] Impact on Companies - Ikea, a major player in the home furnishing market, is expected to be significantly affected as only about 10% of its products are manufactured in North or South America, with 90% imported [8][9] - Ikea acknowledged that the new tariffs will impact prices for U.S. consumers, despite efforts to keep costs low through domestic sourcing and manufacturing [11] - Other publicly traded furniture companies showed mixed stock reactions, with some stocks remaining relatively flat despite the tariff news [15][16] Consumer Impact - Homeowners and renters are likely to face increased prices for furniture due to the tariffs, as companies may pass on the costs to consumers [12][14] - Companies are expected to first seek price concessions from suppliers before raising prices for consumers [13]

Industry Overview - The Zacks Furniture industry is experiencing significant challenges due to persistent inflation, which is weakening household purchasing power and dampening demand for discretionary items [1][4] - Despite modest growth in overall retail activity, furniture sales are under pressure as consumers are cautious about big-ticket purchases [1][4] - Rising labor, occupancy, and marketing expenses, along with intense price competition and supply-chain inefficiencies, are straining profitability [1][5] Trends and Innovations - The industry is focusing on digital transformation, including e-commerce expansion, AR/VR integration, AI-driven personalization, and multifunctional product innovation [2][6] - There is a rising demand for multifunctional furniture, particularly among millennials and Gen Z consumers [2][6] - Companies are investing in product innovation and digital marketing to enhance customer experience and expand market reach [7][8] Economic Conditions - Economic uncertainties continue to pressure the U.S. furniture industry, with inflation remaining stubborn and the Consumer Price Index increasing by 2.9% year over year [4] - Furniture sales declined by 0.3% from July, while overall retail sales rose by 0.6% in August [4] - The Federal Reserve projects unemployment to rise to 4.5% in 2025, and GDP growth is forecasted at just 1.6% for the current year [4] Competitive Landscape - The furniture industry is highly competitive, with traditional retailers facing challenges from online platforms like Etsy, Costco, and Amazon [5] - Companies are making incremental investments to adapt to an expanding omnichannel environment, which is essential for maintaining market share [5][6] - Rising SG&A rates and increased labor costs are placing additional strain on profit margins [5] Company Performance - Flexsteel Industries, Inc. is focusing on strategic execution, product innovation, and market expansion, leading to share gains and improved customer experience [21][22] - Flexsteel's earnings estimates for 2025 have increased to $3.85 per share, reflecting analysts' optimism [23] - Bassett Furniture Industries is benefiting from product innovation and operational efficiency, with e-commerce sales rising over 30% in Q2 2025 [25][26] Valuation Metrics - The Zacks Furniture industry is currently trading at a forward P/E of 10.69X, significantly lower than the S&P 500's 23.36X [16] - Over the past five years, the industry's P/E has ranged from 8.14X to 15.03X, with a median of 10.64X [16]

Group 1 - Bassett Furniture (BSET) is part of the Consumer Discretionary sector, which includes 255 individual stocks and currently holds a Zacks Sector Rank of 10 [2] - The Zacks Rank system emphasizes earnings estimates and revisions, with Bassett Furniture currently holding a Zacks Rank of 2 (Buy) [3] - The Zacks Consensus Estimate for BSET's full-year earnings has increased by 17.9% in the past quarter, indicating improved analyst sentiment [3] Group 2 - Year-to-date, Bassett Furniture has gained approximately 17%, outperforming the average 6.5% gain of the Consumer Discretionary group [4] - Bassett Furniture is part of the Furniture industry, which consists of 8 companies and currently ranks 214 in the Zacks Industry Rank; this industry has seen a decline of about 18.4% this year [5] - In comparison, Perdoceo Education (PRDO), another Consumer Discretionary stock, has returned 18.2% year-to-date and has a Zacks Rank of 2 (Buy) [4][6]

Group 1 - Bassett Furniture Industries, Inc. has elected James E. Goergen to its Board of Directors effective July 22, 2025, bringing extensive industry experience to the company [1] - Rob Spilman, Chairman and CEO, expressed excitement about Goergen's background in interior design, sourcing, and technology, which will enhance strategic planning and operational execution [1] - Goergen has over 20 years of C-Level experience in the furniture industry, focusing on high-end commercial and luxury residential design firms [1] Group 2 - Bassett Furniture Industries, Inc. is a leading provider of high-quality home furnishings, with approximately 60% of its products sold through 87 company- and licensee-owned stores [2] - The company also has a significant traditional wholesale business with over 1,000 open market accounts, including Bassett Design Centers and Custom Studios [2] - Bassett products are available directly to consumers through its website, enhancing accessibility and customer engagement [2]

Financial Data and Key Metrics Changes - Consolidated sales increased by 1.1% year-over-year, with ongoing business revenue rising by 2.5% after excluding Noah Home, Inc [7][20] - Operating income reached $2.5 million, or 3% of sales, compared to a loss of $8.5 million in the previous year [21] - Diluted earnings per share improved to $0.22 from a loss of $0.82 [21] Business Line Data and Key Metrics Changes - Wholesale net sales increased by $1.6 million, or 3%, driven by a 12.6% increase in shipments to Bassett retail stores, while shipments to the open market decreased by 2.6% [21] - Retail net sales rose by $3.8 million, or 7.5%, although written sales declined by 0.8% [23] Market Data and Key Metrics Changes - Orders to the combined corporate and licensed store network grew by 9.6%, while wholesale business from the open market declined by 6.6% [11] - Written sales at bassetfurniture.com increased by 31% in the second quarter compared to the previous year [15] Company Strategy and Development Direction - The company is focused on a five-point restructuring strategy aimed at growth and profitability, including product innovation and cost reduction [5][6] - Plans to open new stores in Cincinnati and Orlando, with construction expected to start in the fall [19][70] Management's Comments on Operating Environment and Future Outlook - The management highlighted a challenging sales environment due to a weak housing market and high interest rates, impacting consumer confidence [6][8] - The company remains optimistic about the impact of its strategic investments and restructuring efforts on future performance [70] Other Important Information - The company plans to continue paying dividends and opportunistically repurchase shares, with a quarterly cash dividend of $0.20 per share under consideration [19][25] - The liquidity position is solid, with $59.8 million in cash and short-term investments and no outstanding debt [24] Q&A Session Summary Question: Update on design studios and future plans - The company currently has 54 design studios and expects to maintain a pace of opening six to eight studios per quarter [28][31] Question: Metrics on design studios' performance - While specific metrics are not shared externally, the dealer base is pleased with the performance of the design studios [32][33] Question: Impact of tariffs on design trade versus retail - Tariffs have had less impact on the design trade compared to retail, which is more cost-conscious [39] Question: Shipment timing and expectations for the third quarter - The decline in Lane Venture shipments was seen as an anomaly, and improvements are expected in the third quarter [44][46] Question: Future margin impacts from discounting - The company is focused on cleaning inventory, which may slightly affect margins but is seen as a prudent exercise [56][58] Question: Plans for new store openings and market strategy - The company aims to grow its store base conservatively, with a focus on leveraging existing infrastructure [60][62]

Financial Data and Key Metrics Changes - Consolidated revenue increased by $938,000 or 1.1% year-over-year, with a 2.5% increase when excluding sales from Noah Home, Inc [20] - Consolidated gross margin improved by 310 basis points to 55.6%, despite additional inventory valuation charges in the prior quarter [20] - Operating income was $2,500,000 or 3% of sales, a significant improvement from a loss of $8,500,000 in the prior year [21] - Diluted earnings per share were $0.22 compared to a loss of $0.82 in the previous year [21] Business Line Data and Key Metrics Changes - Net sales in the wholesale operations increased by $1,600,000 or 3%, driven by a 12.6% increase in shipments to Bassett retail stores, while shipments to the open market decreased by 2.6% [21] - Retail store net sales increased by $3,800,000 or 7.5%, although written sales declined by 0.8% [23] - Retail backlog was $34,100,000, down from $37,100,000 at the end of November 2024 [24] Market Data and Key Metrics Changes - Orders to the corporate and licensed store network grew by 9.6%, while wholesale business from the open market declined by 6.6% [11] - Written sales at bassetfurniture.com increased by 31% in the second quarter compared to the previous year, following a 36% increase in Q1 [15] Company Strategy and Development Direction - The company is focused on executing a five-point restructuring strategy aimed at growth and profitability, including product innovation and cost reduction [5][6] - Plans to open two new retail stores in Cincinnati and Orlando, with construction expected to start in the fall [18] - The company aims to enhance its presence in the interior design community and is committed to integrating further into this channel [73] Management's Comments on Operating Environment and Future Outlook - The management highlighted the challenging housing market and consumer confidence issues affecting the home furnishings industry [6][8] - Despite the tough environment, the company remains optimistic about the impact of its restructuring efforts and new product lines on future performance [73] - Management is closely monitoring tariff impacts and is working to mitigate their effects on pricing and supply chain [10][72] Other Important Information - The company generated $7,000,000 in operating cash flow during the quarter and ended with $59,800,000 in cash and short-term investments, with no outstanding debt [24][25] - The board of directors will consider a regular quarterly cash dividend of $0.20 per share [19] Q&A Session Summary Question: Update on design studios and future plans - The company currently has 54 design studios and expects to maintain a pace of opening six to eight studios per quarter [27][30] Question: Metrics on design studios' performance - The company is monitoring the performance of design studios but has not shared specific metrics externally [31] Question: Impact of tariffs on design trade versus retail - Tariffs have had less impact on the design trade compared to retail, which is more cost-conscious [36] Question: Shipment timing and expectations for the third quarter - A significant customer affected Lane Venture shipments, but improvements are expected in the third quarter [42][46] Question: Future margin impacts from discounting - The company is working to clean inventory, which may slightly affect margins but is seen as a prudent exercise [56][59] Question: Plans for store expansion - The company aims for a conservative growth strategy, targeting two to three net new stores per year [62][67]

Part I - Financial Information [Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company reported a significant financial turnaround, achieving net income for the quarter and six months ended May 31, 2025, and dramatically improving operating cash flow compared to prior-year losses [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Consolidated Statement of Operations Highlights (in thousands, except per share data) | Financial Metric | Quarter Ended May 31, 2025 | Quarter Ended June 1, 2024 | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $84,348 | $83,410 | $166,510 | $169,964 | | **Gross profit** | $46,909 | $43,760 | $93,739 | $91,627 | | **Income (loss) from operations** | $2,497 | $(8,462) | $4,952 | $(10,819) | | **Net income (loss)** | $1,918 | $(7,201) | $3,772 | $(8,394) | | **Diluted earnings (loss) per share** | $0.22 | $(0.82) | $0.43 | $(0.96) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2025 (Unaudited) | November 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $39,433 | $39,551 | | Inventories | $59,362 | $54,965 | | Total current assets | $144,193 | $141,539 | | Total assets | $331,333 | $341,170 | | Total current liabilities | $74,524 | $73,403 | | Total liabilities | $164,557 | $173,843 | | Total stockholders' equity | $166,776 | $167,327 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended May 31, 2025 | Six Months Ended June 1, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,903 | $(1,919) | | Net cash used in investing activities | $(2,349) | $(4,066) | | Net cash used in financing activities | $(4,672) | $(3,777) | | **Change in cash and cash equivalents** | **$(118)** | **$(9,761)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes outline the company's two reportable segments, the closure of the Noa Home business, revenue recognition policies, and details of its **$25 million credit facility** with **$16.8 million available** - The company's fiscal year 2024 contained 53 weeks, with the extra week in the first quarter, resulting in 27 weeks of operations for the six-month period ended June 1, 2024, versus 26 weeks for the period ended May 31, 2025[19](index=19&type=chunk) - The company maintains a **$25 million credit facility**, secured by accounts receivable and inventory, with **$8.2 million outstanding** under standby letters of credit and **$16.8 million available** as of May 31, 2025[40](index=40&type=chunk) - The company operates two reportable segments, Wholesale and Retail, with 'Corporate and other' including shared costs and the now-closed Noa Home business[59](index=59&type=chunk)[61](index=61&type=chunk) - In Q2 2025, the company received **$698,000** from a business interruption insurance claim related to a 2024 cybersecurity incident, recorded as a gain reducing SG&A expenses[48](index=48&type=chunk) [Management's Discussion and Analysis (MD&A)](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes improved performance to cost reductions and the absence of prior-year impairment charges, with the Retail segment returning to profitability and the Wholesale segment improving operating income, supported by strong liquidity [Company Overview](index=25&type=section&id=Overview) - Bassett operates through a network of **87 Company-owned and licensee-owned Bassett Home Furnishings (BHF) stores**, accounting for approximately **60% of wholesale sales**[79](index=79&type=chunk) - The company is focusing on its digital presence, noting a **greater than 35% increase in e-commerce sales** for the first six months of fiscal 2025 compared to the prior year[81](index=81&type=chunk) - The Noa Home e-commerce business, acquired in 2022, was closed and liquidated in fiscal 2024 after continued operating losses[82](index=82&type=chunk) - Approximately **80% of wholesale revenues** are derived from products manufactured in the United States[84](index=84&type=chunk) [Consolidated Results of Operations](index=26&type=section&id=Consolidated%20Results%20of%20Operations) - Q2 2025 consolidated sales increased **1.1% YoY**, while H1 2025 sales decreased **2.0% YoY**, though normalizing for the extra week in H1 2024 shows a **1.7% increase**[86](index=86&type=chunk)[89](index=89&type=chunk) - Gross margin for Q2 2025 increased by **310 basis points**, and SG&A as a percentage of sales decreased by **330 basis points**, primarily due to cost reductions and the absence of prior-year inventory valuation and asset impairment charges[87](index=87&type=chunk)[88](index=88&type=chunk) Consolidated Results Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $84,348 | $83,410 | 1.1% | $166,510 | $169,964 | -2.0% | | Gross profit | $46,909 | $43,760 | 7.2% | $93,739 | $91,627 | 2.3% | | SG&A expenses | $44,412 | $46,707 | -4.9% | $88,787 | $96,931 | -8.4% | | Income (loss) from operations | $2,497 | $(8,462) | N/M | $4,952 | $(10,819) | N/M | [Segment Analysis](index=27&type=section&id=Segment%20Analysis) The Wholesale segment significantly increased operating income, while the Retail segment achieved profitability through higher sales and cost reductions, with the 'Corporate and Other' segment reflecting the Noa Home business closure Operating Income (Loss) by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Wholesale | $8,290 | $5,687 | $16,975 | $12,446 | | Retail - Company-owned stores | $482 | $(2,222) | $434 | $(3,834) | | Net expenses - Corporate and other | $(6,521) | $(6,942) | $(12,747) | $(14,537) | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash provided by operating activities was **$6.9 million** for H1 2025, a significant improvement from **$1.9 million cash used** in H1 2024, primarily due to improved operating income[122](index=122&type=chunk) - The company has a strong liquidity position with **$59.8 million in cash, cash equivalents, and short-term investments** as of May 31, 2025[123](index=123&type=chunk) - During H1 2025, the company paid **$3.5 million in dividends** and repurchased **$1.2 million of its common stock**, with **$19.2 million remaining available** under the stock repurchase plan[123](index=123&type=chunk) - The company has a **$25 million credit facility** with **$16.8 million available** as of May 31, 2025[126](index=126&type=chunk) [Market Risk Disclosures](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include raw material and fuel cost fluctuations, alongside exposure to the commercial real estate market through owned properties and leased right-of-use assets totaling over **$100 million** - The company is exposed to market risk from the cost of raw materials like wood, fabric, and petroleum-based foam products[133](index=133&type=chunk) - The company has potential exposure to the commercial real estate market through its owned retail properties (net book value of **$23.8 million**) and leased locations (right-of-use assets of **$84.8 million**)[135](index=135&type=chunk) - The company is contingently liable for **$4.6 million** in licensee lease obligation guarantees[135](index=135&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed effective as of May 31, 2025, with no material changes to internal controls over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[136](index=136&type=chunk) Part II - Other Information [Share Repurchases and Other Information](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported no material legal proceedings and continued its stock repurchase program during the quarter, with **$19.2 million** remaining authorized for future repurchases - The company has no material legal proceedings to report[138](index=138&type=chunk) Stock Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | March 2 - April 5, 2025 | 23,155 | $15.79 | | April 6 - May 3, 2025 | 4,000 | $15.44 | | May 4 - May 31, 2025 | 582 | $16.28 | - As of May 31, 2025, **$19.2 million remained available** for share repurchases under the company's plan[138](index=138&type=chunk)

Company Performance - Bassett Furniture (BSET) reported quarterly earnings of $0.22 per share, exceeding the Zacks Consensus Estimate of $0.15 per share, and compared to a loss of $0.19 per share a year ago, representing an earnings surprise of +46.67% [1] - The company posted revenues of $84.35 million for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 3.88%, and compared to year-ago revenues of $83.41 million [2] - Over the last four quarters, Bassett has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Outlook - Bassett shares have increased approximately 17.3% since the beginning of the year, outperforming the S&P 500's gain of 5.9% [3] - The current consensus EPS estimate for the coming quarter is $0.20 on $83.6 million in revenues, and for the current fiscal year, it is $0.88 on $334.66 million in revenues [7] - The estimate revisions trend for Bassett was favorable ahead of the earnings release, resulting in a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Furniture industry, to which Bassett belongs, is currently in the top 37% of over 250 Zacks industries, suggesting a favorable outlook as the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8] - Another company in the same industry, Legget & Platt (LEG), is expected to report quarterly earnings of $0.29 per share, with revenues anticipated to be $1.06 billion, down 5.8% from the year-ago quarter [9]

Core Insights - Bassett Furniture Industries, Inc. reported a consolidated revenue increase of 1.1% year-over-year for Q2 2025, reaching $84.3 million, with a notable operating income of $2.5 million compared to a loss of $8.5 million in Q2 2024 [1][5]. Financial Performance - Consolidated sales for Q2 2025 were $84.3 million, up from $83.4 million in Q2 2024, reflecting a 1.1% increase [1]. - Excluding the impact of Noa Home Inc., which closed in late 2024, consolidated revenues increased by 2.5% [5]. - Operating income was $2.5 million, representing 3.0% of sales, a significant recovery from the previous year's loss of $(8.5) million [5][8]. - Gross margin improved to 55.6%, a 310 basis point increase from the prior year, primarily due to the absence of inventory valuation charges that affected the previous year's results [5][8]. - Selling, general, and administrative expenses decreased to 52.7% of sales, down 330 basis points from the prior year, attributed to restructuring and cost containment efforts [5][8]. Segment Performance - Wholesale sales increased to $54.2 million, a 3.1% rise from $52.6 million in the previous year [1][15]. - Retail sales also saw an increase, reaching $54.2 million, up 7.5% from $50.5 million in Q2 2024 [1][15]. - The Corporate & Other segment reported a loss of $(6.5) million, reflecting the closure of Noa Home Inc. [1][15]. Management Commentary - The CEO highlighted improvements in revenue and operating income despite challenges such as a weak housing market and trade tariff uncertainties [3]. - The company emphasized its focus on operational efficiency, product launches, and enhanced e-commerce capabilities as key factors in navigating the current market conditions [3]. Cash Flow and Earnings - The company generated $7.0 million in operating cash flow during the quarter [5]. - Diluted earnings per share were reported at $0.22, a recovery from a loss of $(0.82) in the prior year [5][9]. Balance Sheet Overview - Total assets as of May 31, 2025, were $331.3 million, a decrease from $341.2 million at the end of the previous fiscal year [11][12]. - Current assets increased to $144.2 million, up from $141.5 million [11]. - Total liabilities were reported at $164.6 million, with current liabilities at $74.5 million [12]. Future Outlook - The company is positioned to leverage its strong U.S. manufacturing base to serve both wholesale and retail markets effectively in the second half of fiscal 2025 [3].

Group 1 - Bassett Furniture (BSET) is currently outperforming its Consumer Discretionary peers with a year-to-date return of 13.1%, compared to the sector average of 12.1% [4] - The Zacks Rank for Bassett Furniture is 1 (Strong Buy), indicating a positive outlook based on earnings estimate revisions and improving earnings sentiment [3] - Over the past three months, the Zacks Consensus Estimate for BSET's full-year earnings has increased by 25.7%, reflecting a positive trend in analyst sentiment [4] Group 2 - Bassett Furniture belongs to the Furniture industry, which has 8 individual stocks and is currently ranked 67 in the Zacks Industry Rank; this industry has seen a decline of about 15.8% year-to-date [6] - In contrast, Roblox (RBLX), another Consumer Discretionary stock, has returned 77% since the beginning of the year and has a Zacks Rank of 2 (Buy) [5] - The Gaming industry, which includes Roblox, has 39 stocks and is ranked 87, with an average increase of 16.3% year-to-date [6]