Bassett Furniture Industries (NASDAQ:BSET) reported a softer start to fiscal 2026 as winter weather disruptions and tariff-related margin pressure weighed on first-quarter results, even as management highlighted improving order momentum late in the quarter and outlined several growth initiatives.
Quarterly slowdown followed early strength
Chairman and CEO Rob Spilman said the company began the quarter well but saw demand weaken suddenly in mid-January. “After a solid start to the first seven weeks of fiscal 2026, the pace of business slowed abruptly in mid-January,” Spilman said, adding that consolidated sales fell 2.2% amid “ongoing weak residential housing activity” and severe weather that disrupted retail traffic and logistics.
Despite the weather-related headwinds, Spilman pointed to benefits from a marketing change that expanded the Presidents’ Day promotional period to three weeks, which helped lift retail sales in the back half of February. While written sales for the quarter were essentially flat, Spilman said the company posted a double-digit increase in written orders during the back half of February, with those orders expected to be delivered in the second quarter.
Revenue, margins, and earnings decline year over year
Senior Vice President and CFO Mike Daniel reported total consolidated revenue of $83.0 million, down $1.8 million, or 2.2%, from the year-ago period. The decline included a $700,000 decrease from retail stores and a $1.1 million drop in sales to external wholesale customers, which Daniel attributed primarily to winter weather impacts on store operations and logistics.
Gross margin was 56.2%, down 80 basis points year over year, reflecting lower margins in both retail and wholesale. Selling, general and administrative expenses excluding new store pre-opening costs were 54.7% of sales, up 70 basis points, which Daniel said reflected reduced leverage on fixed costs due to lower sales. Operating income declined to $1.2 million, or 1.4% of sales, compared to $2.5 million, or 3.0% of sales, in the prior-year quarter. Diluted earnings per share were $0.13 versus $0.21.
Wholesale and retail performance details
In wholesale, Daniel said net sales were $53 million, “essentially flat” year over year. Shipments to the retail core network increased 0.6% and Lane Venture shipments to wholesale customers rose 2.6%, partially offset by a 5.3% decline in open-market shipments. Daniel also noted that Bassett introduced the Lane Venture brand in Bassett Home Furnishings stores during the quarter. Including those store shipments, Lane Venture brand shipments increased 32%.
Wholesale gross margins fell 50 basis points, driven by lower margins in custom upholstery operations due to reduced fixed-cost leverage, partially offset by improved case goods margins from pricing strategy changes, Daniel said. Wholesale SG&A as a percentage of sales was essentially flat.
In retail, net sales were $52.5 million, down $800,000, or 1.4%, with winter weather again cited as the main driver. Written sales decreased 0.2%. Retail gross margin was 51.5%, down 170 basis points, which Daniel attributed to the company’s decision not to implement a tariff-related price increase until mid-January.
Spilman said the company “ate the tariff impact” until midway through the quarter, and he expects margins to improve now that tariff costs have been included in retail pricing. In response to an analyst question about second-quarter impacts, Spilman said margins should be “closer to what we had last year than what we just reported,” while adding, “I can’t predict exactly how these margins will come through in the quarter.”
Cost actions, store expansion, and digital investments
Spilman said the company’s SG&A remained “higher than we like for the revenue we delivered,” and management is taking steps to address it. He also said Bassett has initiatives expected to generate annual savings of $1.5 million to $2.0 million starting late in the second quarter.
Looking ahead, Spilman outlined five initiatives intended to support growth:
- Comp-store growth: Spilman cited positive consumer response to updated case goods collections and newer programs such as Z4 Sleeper and HideAway dining. He said the True Custom Upholstery program, “the most significant piece of our business,” posted a 6% increase in retail written sales in the first quarter. Bassett also plans to introduce new opening price point upholstery collections at the April High Point Market.
- New and converted retail locations: Bassett plans corporate store openings in Cincinnati and Orlando this year and a relocation on Long Island. Spilman said the Cincinnati store is under construction and work on Orlando will begin next week. He also noted opportunities to convert some licensed locations to corporate stores as owners retire, pointing to a recent conversion in the Greater Philadelphia market.
- E-commerce and omni-channel: Spilman said customers are responding to enhancements on the company’s website, and the company began national home delivery to previously unserved regions late last year. While overall site traffic was down, he said conversions rose 130% and orders increased 28% for the quarter. Spilman characterized e-commerce as “still a small number” and said the company has not elected to break out the channel separately in reporting.
- Bassett Design Centers and Custom Studios: The company added two Bassett Design Centers in the quarter and plans to improve visual merchandising and marketing programs. Spilman said the smaller Bassett Custom Studio concept has grown to 60 studios over two years, and Bassett recently completed three conversions of studios into full Design Centers.
- Interior design and commercial channels: Spilman said Bassett is enhancing its technology platform to cater to interior designers and plans to relocate its wholesale showroom this summer ahead of the October fall market, consolidating the Lane Venture brand into the new space. He also said the company is launching a Bassett Hospitality division to pursue contract business, though he cautioned it “will take time to gain traction.”
Liquidity, capital spending, and shareholder returns
Daniel said liquidity remained “solid,” with $51 million in cash and short-term investments. Operating cash flow was negative $5.5 million, which Daniel noted is typical given the first quarter is historically the lowest in cash generation and also reflected expected working capital changes.
For fiscal 2026, Bassett expects capital expenditures of $8 million to $12 million—above the $4.5 million spent last year—driven by tenant improvements related to two new stores, a relocation, and a planned move of the company’s High Point showroom.
The company paid $1.7 million in dividends and repurchased $147,000 of shares during the quarter, Daniel said. The board approved a $0.20 dividend to be paid May 29.
During the Q&A, Spilman said trends after quarter-end were “pretty much more of the same,” describing the environment as “grinding it out.” He also said Bassett is already experiencing weekly freight surcharges tied to diesel price fluctuations through its retail freight arrangement with J.B. Hunt, and noted pending increases in petroleum-derivative inputs such as foam and poly that the company expects to pass along to customers as they take effect.
On supply chain concerns tied to geopolitical tensions, Spilman said Bassett had not seen noticeable accessibility issues, adding that the company had not seen container prices spike and attributing that in part to “overall tepid demand across our industry and other consumer goods.”
About Bassett Furniture Industries (NASDAQ:BSET)
Bassett Furniture Industries, Inc (NASDAQ: BSET), headquartered in Bassett, Virginia, is a vertically integrated manufacturer and retailer of residential home furnishings. The company designs, produces and markets a range of furniture items, including upholstered seating, wood case goods, bedroom collections, dining room sets and home décor accessories. Bassett is known for its emphasis on craftsmanship, offering both ready-to-assemble pieces and made-to-order products that cater to varying design preferences and space requirements.
Bassett’s products are sold through a dual-channel distribution network comprising company-owned Bassett Home Furnishings stores, a franchise and independent dealer network, and an e-commerce platform that provides online shopping, virtual design consultations and customization tools.
