Bassett Furniture Industries (NASDAQ:BSET) reported modestly lower second-quarter fiscal 2026 revenue but improved adjusted operating performance, as management pointed to stronger retail order trends, higher wholesale margins and continued investment in stores, e-commerce and wholesale distribution.
Chairman and CEO Rob Spilman said operating profit on an adjusted basis improved in the quarter ended May 30, despite “slightly lower consolidated revenue.” He highlighted a pickup in customer activity late in the period, with retail written sales rising 9.5% for the quarter and wholesale orders increasing 5.2%.
Revenue slips, earnings per share improve
SVP and CFO Mike Daniel said consolidated revenue was $83.8 million, down $500,000, or 0.7%, from the prior-year quarter. The decline reflected a $1.9 million, or 6.3%, decrease in sales to external wholesale customers, partly offset by a $1.3 million, or 2.4%, increase in retail sales from company-owned stores.
Gross margin rose 90 basis points to 56.5%, driven primarily by higher wholesale margins, though retail margins declined. Operating income was $2.2 million, or 2.7% of sales, compared with $2.5 million, or 3% of sales, in the year-earlier period. Diluted earnings per share increased to $0.24 from $0.22.
Daniel said wholesale net sales were $53.1 million, down 2%, due to lower shipments to the open market. That was partly offset by higher shipments to Bassett’s retail store network and a 1% increase in Lane Venture shipments to wholesale customers. Including shipments of Lane Venture products to Bassett stores, Daniel said shipments of that brand increased 18%.
Wholesale gross margin increased 110 basis points, which Daniel attributed to improved efficiencies in domestic upholstery and wood operations, as well as improved pricing strategies in import wood offerings. Wholesale SG&A expense as a percentage of sales increased 90 basis points, primarily because of higher outbound freight expense tied to fuel costs.
Retail orders rise, but margins pressured by clearance activity
Retail net sales were $55.5 million, up $1.3 million from the prior year. Written sales, representing orders taken but not delivered, rose 9.5%.
Retail gross margin declined 120 basis points to 51.2%. Daniel said the decline was primarily due to lower margins on inline goods because the full effect of a mid-January price increase was not realized for the full quarter, as well as lower margins on clearance goods. He said the company has been more aggressive in moving returned goods and phased-out floor samples.
Spilman said Bassett plans to raise retail gross margins in mid-July by 200 to 250 basis points. During the question-and-answer session, he said the retail side represents an area of opportunity for gross margin improvement. Daniel cautioned that the benefit from the July margin action would likely not appear meaningfully until the fourth quarter because Bassett must manufacture and deliver the furniture before recognizing sales.
Management also discussed SG&A expenses, which Spilman described as “stubbornly high” despite recent cost-cutting. He said part of the issue is the higher percentage of overall sales represented by corporate retail, which carries a structurally higher SG&A burden than the traditional wholesale model. Bassett remains focused on reducing annual expenses by an additional $1.5 million to $2 million, a target management discussed on the prior quarter’s call.
Cash position remains strong as capital spending rises
Bassett generated $7.4 million of operating cash flow during the quarter and ended the period with $53.9 million in cash and short-term investments. Daniel said cash and short-term investments increased by $2.9 million during the quarter after normal investing and financing outflows.
The company paid $1.7 million in dividends and spent $500,000 on share repurchases during the quarter. Daniel said Bassett remains committed to shareholder returns through dividends and, when appropriate, share buybacks.
Capital expenditures are expected to rise sharply this year. Daniel said Bassett expects total capital spending of $10 million to $12 million in fiscal 2026, compared with $4.5 million last year. The increase reflects a new store opened in Cincinnati, a planned Orlando store, and construction of tenant improvements for a new showroom in High Point that Bassett expects to unveil at the fall furniture market.
Store expansion, e-commerce and wholesale initiatives continue
Spilman outlined several initiatives intended to drive growth. Bassett opened a 14,000-square-foot store in Cincinnati on May 8, marking a return to that market. He said early traffic and written sales were encouraging, and that on the wholesale side, Bassett sold more products in Cincinnati in eight weeks than it did in all of last year. The company plans to open a similar-sized store in Orlando in early October.
After the quarter ended, an existing open-market dealer in Nashville, Tennessee, converted an existing location into a 12,000-square-foot Bassett Home Furnishings store. Bassett currently operates 59 corporate stores and has 28 licensed stores.
Spilman said e-commerce continues to show progress. Web traffic increased more than 3% during the quarter, while written web sales rose 40%, marking seven of the past eight quarters with increases of more than 20%. Average order value increased 24%. He said upholstery sales saw the largest jump, helped by an updated fabric module designed to improve customization, along with navigation improvements and a national home delivery program serving the contiguous 48 states.
In wholesale, Spilman said Bassett is working to expand through Bassett Design Centers and Bassett Custom Studios, which together represent well over half of the company’s open-market business. Combined orders for those formats rose 1.3% in the quarter, while shipments declined 4.5%. The company opened four custom studios during the quarter, bringing the total to 64.
Bassett is also pursuing the professional interior design channel and its six-month-old Bassett Hospitality division. Spilman said the hospitality business has written orders with hospitals, boutique hotels and senior living communities, and has recently quoted some large hospitality projects.
Analysts press management on demand trends and margins
During the Q&A session, Sidoti analyst Anthony Lebiedzinski asked whether the recent sales momentum was broad-based or concentrated in upholstery. Spilman said the strength was “slightly more in upholstery” but “pretty good across the board.”
Lebiedzinski also asked what was driving improved demand. Spilman cited newer personnel, better customer understanding, improved analytics from a new agency and more efficient marketing investments. “It’s really a combination of things,” he said, adding that Bassett has only begun integrating artificial intelligence into its marketing efforts.
Water Tower Research analyst Doug Lane asked about the Memorial Day promotion and why a 4% traffic increase translated into a 14% increase in written sales. Spilman said Bassett’s model can be “lumpy,” noting that the company wrote “a couple tickets over $100,000” during the quarter. Daniel added that Bassett is doing a better job converting store traffic.
Lane also asked about e-commerce. Spilman said Bassett’s online channel historically served mostly as a closeout vehicle, then shifted toward more inline wood products. More recently, he said, improvements to the site have helped drive more upholstery and custom upholstery sales online. “Generally speaking, our web customer is a Bassett customer that also shops in the store,” Spilman said.
Spilman closed the call by saying the company is energized by recent order trends and focused on executing its plan. Bassett expects to report again in October, around the debut of its new High Point showroom.
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.
