What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-03 compared with 2024-10-10 · 102 added, 244 removed, 174 unchanged (67% of the section changed)

6 unchanged sentences

Important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements include:

fluctuations in the cost and availability of raw materials, fuel, labor, delivery costs and sourced products, including those which may result from supply chain disruptions and shortages and the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced products

fluctuations in the cost and availability of raw materials, fuel, labor, delivery costs and sourced products, including those which may result from supply chain disruptions and shortages and the imposition of new or increased tariffs, retaliatory tariffs, duties and trade limitations with respect to foreign-sourced products

competitive conditions in the home furnishings industry

3 unchanged sentences

the risk of additional asset impairment charges arising from the ongoing efforts to consolidate our retail warehouses.

ability to implement our Company-owned retail strategies and realize the benefits from such strategies, including our initiatives to expand and improve our digital marketing and advertising capabilities, as they are implemented

the risk of additional charges arising from our decision to close Noa Home Inc.

(“Noa Home”) during the fourth quarter of fiscal 2024.

ability to implement our Company-owned retail strategies and realize the benefits from such strategies

effectiveness and security of our information technology systems and possible disruptions due to cybersecurity threats, including any impacts from a network security incident;

11 unchanged sentences

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks.

The current fiscal year ending November 30, 2024 is a 53-week year, with the additional week being included in our first fiscal quarter.

Accordingly, the information presented below includes 40 weeks of operations for the nine months ended August 31, 2024 as compared to 39 weeks included in the quarter ended August 26, 2023.

The prior fiscal year ending November 30, 2024 was a 53-week year, with the additional week being included in the first fiscal quarter.

Accordingly, the information presented below includes 13 weeks of operations for the quarter ended March 1, 2025 as compared to 14 weeks included in the quarter ended March 2, 2024.

Bassett is a leading retailer, manufacturer and marketer of branded home furnishings.

Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers.

We also sell our products through our newly redesigned website at www.bassettfurniture.com .

We were founded in 1902 and incorporated under the laws of Virginia in 1930.

Our rich 123-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.

With 87 BHF stores at August 31, 2024, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly and casual environment for buying furniture and accessories.

Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service.

In order for the Bassett brand to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers.

We use a network of over 30 independent sales representatives who have stated geographical territories.

These sales representatives are compensated based on a standard commission rate.

We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.

The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories.

Approximately 60% of our wholesale sales arise from our network of 87 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores.

Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service.

The stores highlight our custom furniture design and manufacturing capabilities, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories.

Our philosophy is based on building strong long-term relationships with each customer.

1 unchanged sentence

Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.

Bassett also has a significant traditional wholesale business with more than 1,000 open market accounts.

Most of the open market sales are through Bassett Design Centers and Bassett Custom Studios which function as a store within a multi-line store featuring the Company’s custom furniture capabilities.

The wholesale business, including the Lane Venture outdoor brand, also services general furniture stores and a growing number of interior design firms through network of over 30 independent sales representatives who have stated geographical territories.

These sales representatives are compensated based on a standard commission rate.

We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant.

Digital outreach strategies have become the primary vehicle for brand advertising and customer acquisition.

We introduced a new web platform in August of 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation.

Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site.

We have also seen an increase in average order value that has resulted in increased e-commerce revenue.

While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities.

During the fourth quarter of fiscal 2022 we acquired Noa Home, a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada.

Noa Home has operations in Canada, Singapore, the United States and the United Kingdom.

After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and have decided to cease operations by selling the inventory in an orderly fashion over the next several months.

In the second quarter of 2024 we recognized non-cash charges totaling $2,401 related to the impairment of certain long-lived assets of Noa Home and the establishment of a reserve against Noa Home’s remaining inventory.

We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation.

We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com.

Although e-commerce sales continue to be small in relation to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase since the middle of 2024.

We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website.

During the fourth quarter of fiscal 2022 we acquired Noa Home Inc.

(“Noa Home”).

A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom.

After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion.

As of November 30, 2024, we had substantially completed the liquidation of Noa Home’s assets and liabilities.

We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings.

We also have factories in Martinsville and Bassett, Virginia that assemble and finish our custom bedroom and dining offerings.

In 2022, we purchased a facility which we had formerly leased in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.

In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam and China.

Over 75% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

(Dollars in thousands except share and per share data)

Retail Stores

During the first quarter of 2024 we opened two new Corporate-owned stores located in Tampa, Florida and Houston, Texas.

As of August 31, 2024, we had 58 Corporate-owned stores operating.

One licensee-owned store in La Jolla, California was closed during the first quarter of 2024 and two licensee-owned stores in Seattle, Washington were closed during the third quarter of 2024.

As of August 31, 2024 there were 29 licensee-owned stores in operation.

Cybersecurity Incident

On July 10, 2024, we detected unauthorized occurrences on a portion of our information technology (IT) systems.

Upon detecting the unauthorized occurrences, we immediately began taking steps to contain, assess and remediate the cybersecurity incident, including beginning an investigation with leading external cybersecurity specialists, activating our incident response plan, and shutting down some systems.

As a result of these and other measures, we believe the threat actor was ejected from our IT systems on July 10, 2024.

After we shut down some of our systems, we experienced disruption to certain of our operations, including interrupted manufacturing at our domestic plants and delayed order fulfillment for our retail network and delay of some wholesale shipments.

Within a few days of the incident, we were able to resume retail order fulfillment and caught up on fulfilling wholesale orders that were delayed as a result of the cybersecurity incident.

We have fully restored the IT systems and data and our investigation has not found evidence that any of our core operating systems for manufacturing, wholesale and retail order processing and fulfillment, or financial reporting were impacted.

While we believe the impacts were not material to our financial condition and results of operations for the fiscal year, we estimate that between $1,000 and $2,000 of sales were lost due to the shutdown during the cybersecurity incident.

During the third quarter of 2024, we also incurred legal and remediation costs related to the incident of approximately $98 which are included in selling, general and administrative expenses.

In addition, cost of goods sold for the three and nine months ended August 31, 2024 includes $609 for wages paid to hourly production employees during the work stoppage resulting from the cybersecurity incident.

Because no inventory was produced during the temporary shutdown of our manufacturing operations, these wages were charged directly to expense.

We will be seeking reimbursement of costs, expenses and losses stemming from the cybersecurity incident by submitting claims to our cybersecurity insurers.

While the timing and amount of any such reimbursements is not known at this time, we are currently in the process of documenting our claim and expect to resolve the final amount during the fourth fiscal quarter of 2024.

We also have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings.

We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.

Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Results of Operations – Periods ended August 31, 2024 compared with the periods ended August 26, 2023:

Consolidated results of operations for the three and nine months ended August 31, 2024 and August 26, 2023 are as follows:

Results of Operations – Period ended March 1, 2025 compared with the period ended March 2, 2024:

Consolidated results of operations for the three months ended March 1, 2025 and March 2, 2024 are as follows:

Quarter Ended*

Nine Months Ended

August 31, 2024

August 26, 2023

August 31, 2024*

August 26, 2023

March 1, 2025

March 2, 2024

Net sales of furniture and accessories

1 unchanged sentence

SG&A expenses

Loss on contract abandonment

Asset impairment charges

Gain on revaluation of contingent consideration

Income (loss) from operations

1 unchanged sentence

Analysis of Quarterly Results:

Total sales revenue for the three months ended August 31, 2024 decreased $11,598 or 13% from the prior year period due primarily to a 16% decline in wholesale sales and a 10% decrease in retail sales through the Company-owned stores.

In addition, we estimate that between $1,000 and $2,000 of sales were lost due to the shutdown during the cybersecurity incident.

Gross margins for the three months ended August 31, 2024 increased 140 basis points over the prior year period primarily due to improved margins in both the retail and wholesale segments, partially offset by $609 of unproductive labor costs incurred during the temporary shutdown resulting from the cybersecurity incident.

Excluding these unproductive labor costs, our consolidated gross margin would have been 53.8%.

Selling, general and administrative (“SG&A”) expenses as a percentage of sales for the three months ended August 31, 2024 increased 380 basis points from 2023 primarily due to the deleverage of fixed costs caused by lower sales volumes.

Analysis of Year-to-Date Results:

Total sales revenue for the nine months ended August 31, 2024 decreased $49,851 or 17% from the prior year period primarily due to a 18% decline in wholesale sales and a 15% decrease in retail sales through the Company-owned stores.

Gross margins for the nine months ended August 31, 2024 increased 110 basis points over the prior year period.

Included in the current year gross margin are increased inventory valuation charges of $1,729 in the wholesale segment, $472 in the retail segment and $500 in the Noa Home operation, and unproductive labor costs of $609 incurred during the temporary shutdown resulting from the cybersecurity incident.

Excluding these charges, our consolidated gross margin would have been 55.0%.

SG&A expenses as a percentage of sales for the nine months ended August 31, 2024 increased 550 basis points from 2023 primarily due to the deleverage of fixed costs caused by lower sales volumes.

Total sales revenue for the three months ended March 1, 2025 decreased $4,392 or 5.1% from the prior year period due primarily to the additional week in the prior year quarter.

Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $1,790 or 2.2%.

Gross margins for the three months ended March 1, 2025 increased 170 basis points over the prior year period primarily due to improved margins in the wholesale segment.

Selling, general and administrative (“SG&A”) expenses as a percentage of sales for the three months ended March 1, 2025 decreased 150 basis points from 2024 primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Reconciliation of Gross Profit as Reported to Adjusted Gross Profit:

Quarter Ended

Nine Months Ended

August 31, 2024

August 26, 2023

August 31, 2024

August 26, 2023

Gross profit as reported

Wages paid during cyber incident shutdown

Additional inventory valuation charges

Adjusted gross profit

Segment Information

8 unchanged sentences

We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments.

As of and for the periods ended August 31, 2024 and August 26, 2023, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022.

All sales reported in our Corporate and other category are attributable to Noa Home, which generates substantially all of its sales outside of the United States.

During the second quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion over the next several months.

As of and for the period ended March 2, 2024, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022, subsequently closed during fiscal 2024 and substantially liquidated as of November 30, 2024.

All sales reported in our Corporate and other category during fiscal 2024 were attributable to Noa Home, which generated substantially all of its sales outside of the United States.

Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores.

4 unchanged sentences

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

4 unchanged sentences

The reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP is presented below along with the effects of various other intercompany eliminations on our consolidated results of operations.

Quarter Ended August 31, 2024

Quarter Ended March 1, 2025

Non-GAAP Presentation

3 unchanged sentences

Cost of furniture and accessories sold

Loss on contract abandonment

Income (loss) from operations

2 unchanged sentences

Income (loss) before income taxes

Quarter Ended August 26, 2023

Quarter Ended March 2, 2024

Non-GAAP Presentation

7 unchanged sentences

Income (loss) before income taxes

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

(Dollars in thousands except share and per share data)

Nine Months Ended August 31, 2024

Non-GAAP Presentation

GAAP Presentation

Non-Operating

Net sales of furniture and accessories

Cost of furniture and accessories sold

Loss on contract abandonment

Asset impairment charges

Income from operations

Interest income

Other loss, net

Income (loss) before income taxes

Nine Months Ended August 26, 2023

Non-GAAP Presentation

GAAP Presentation

Non-Operating

Net sales of furniture and accessories

Cost of furniture and accessories sold

Gain on revaluation of contingent consideration

Income from operations

Interest income

Other loss, net

Income (loss) before income taxes

Notes to segment consolidation table:

2 unchanged sentences

Represents the elimination of rent paid by our retail stores occupying Company-owned real estate.

Represents the charge for accruing the remaining minimum payments under a contract for logistical services in Riverside, CA which we no longer utilize.

Represents asset impairment charges of $2,887 and $727 in our retail and wholesale segments, respectively, a $1,827 charge for the impairment of the Noa Home trade name intangible asset, and a $74 charge for the impairment of Noa Home customized software.

Represents the gain resulting from the write-down of the contingent consideration payable on the acquisition of Noa Home.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Wholesale Segment

Results for the wholesale segment for the three and nine months ended August 31, 2024 and August 26, 2023 are as follows:

Results for the wholesale segment for the three months ended March 1, 2025 and March 2, 2024 are as follows:

Quarter Ended*

Nine Months Ended

August 31, 2024

August 26, 2023

August 31, 2024*

August 26, 2023

March 1, 2025

March 2, 2024

Gross profit (1)

6 unchanged sentences

Quarter Ended*

August 31, 2024

August 26, 2023*

Bassett Custom Upholstery

Bassett Leather

Bassett Custom Wood

Bassett Casegoods

Nine Months Ended

August 31, 2024

August 26, 2023*

March 1, 2025

March 2, 2024

Bassett Custom Upholstery

4 unchanged sentences

Analysis of Quarterly Results – Wholesale

Net sales for the three months ended August 31, 2024 decreased $8,832 or 16% from the prior year period due primarily to a 22% decrease in shipments to the open market, a 13% decrease in shipments to our retail store network and a 6% decrease in Lane Venture shipments.

Gross margins for the three months ended August 31, 2024 increased 50 basis points over the prior year primarily due to the expected improvement in the Bassett Leather business.

As the Bassett Leather product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings.

Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts.

This improvement was partially offset by lower margins in the Bassett Custom Upholstery business due to deleverage of fixed costs from lower sales volumes and $609 of unproductive labor costs, or 1.3% of sales, incurred during the temporary shutdown resulting from the cybersecurity incident.

SG&A expenses as a percentage of sales increased 240 basis points primarily due to reduced leverage of fixed costs from decreased sales.

Net sales for the three months ended March 1, 2025 decreased $1,773 or 3.2% from the prior year period due primarily to the additional week in the prior year quarter.

Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $2,134 or 4.2%, consisting of a 6.1% increase in shipments to our retail store network, a 2.2% decrease in shipments to the open market, and an 11% increase in Lane Venture shipments.

Gross margins for the three months ended March 1, 2025 increased 250 basis points over the prior year due primarily to improved margins in our Bassett Custom Upholstery business from manufacturing efficiency gains, increased margins in our Lane Venture operations due to improved customer mix and improved margins in the Bassett Leather business.

SG&A expenses as a percentage of sales decreased 150 basis points primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024.

Wholesale Backlog

Wholesale backlog at March 1, 2025 was $19,515 as compared to $21,750 at November 30, 2024 and $19,491 at March 2, 2024.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Analysis of Year-to-Date Results – Wholesale

Net sales for the nine months ended August 31, 2024 decreased $33,180 or 18% from the prior year period due primarily to a 20% decrease in shipments to the open market, a 17% decrease in shipments to our retail store network and a 9% decrease in Lane Venture shipments.

Gross margins for the nine months ended August 31, 2024 increased 120 basis points over the prior year primarily due to the expected improvement in the Bassett Leather business.

Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts.

This increase was partially offset by significantly higher costs than are currently being realized on current product receipts.

Margins in our Bassett Casegoods business also improved as expected primarily due to shipping more product that contained lower in-bound freight costs partially offset by increased inventory valuation charges as we plan to be more aggressive in selling certain slow-moving products.

These improvements were partially offset by lower margins in the Bassett Custom Upholstery business due to deleverage of fixed costs from lower sales volumes.

SG&A expenses as a percentage of sales increased 220 basis points primarily due to reduced leverage of fixed costs from decreased sales.

Wholesale Backlog

Wholesale backlog at August 31, 2024 was $18,481 as compared to $18,478 at November 25, 2023 and $19,895 at August 26, 2023.

Retail – Company-owned Stores Segment

Results for the retail segment for the periods ended August 31, 2024 and August 26, 2023 are as follows:

Results for the retail segment for the periods ended March 1, 2025 and March 2, 2024 are as follows:

Quarter Ended*

Nine Months Ended

August 31, 2024

August 26, 2023

August 31, 2024*

August 26, 2023

March 1, 2025

March 2, 2024

Gross profit (1)

SG&A expenses

Income (loss) from operations

Loss from operations

Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany transactions.

1 unchanged sentence

*13 weeks for fiscal 2025 as compared with 14 weeks for fiscal 2024.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

(Dollars in thousands except share and per share data)

Retail sales by major product category are as follows:

Quarter Ended*

Nine Months Ended

August 31, 2024

August 26, 2023

August 31, 2024*

August 26, 2023

March 1, 2025

March 2, 2024

Bassett Custom Upholstery

6 unchanged sentences

Analysis of Quarterly Results - Retail

Net sales for the three months ended August 31, 2024 decreased $5,008 or 9.6% from the prior year period.

Written sales (the value of sales orders taken but not delivered) declined 4.8% from the third quarter of 2023.

Gross margin for the three months ended August 31, 2024 improved 120 basis points over the prior period due to higher margins on both in-line and clearance goods.

In addition, we were running two store closure sales in 2023 that reduced the gross margin for the third quarter of 2023.

SG&A expenses as a percentage of sales for the three months ended August 31, 2024 increased 150 basis points primarily due to decreased leverage of fixed costs from lower sales volumes partially offset by reduced advertising and fixed delivery costs.

Analysis of Year-to-Date Results - Retail

Net sales for the nine months ended August 31, 2024 decreased $26,526 or 15% from the prior year period.

Written sales (the value of sales orders taken but not delivered) declined 3.6% from the first nine months of 2023.

Gross margin for the nine months ended August 31, 2024 improved 80 basis points over the prior period primarily due to higher margins on both in-line and clearance goods partially offset by $472 of additional inventory valuation charges in the second quarter of 2024 due to our strategy to be more aggressive in selling clearance goods to better control inventory levels.

SG&A expenses as a percentage of sales for the nine months ended August 31, 2024 increased 480 basis points primarily due to decreased leverage of fixed costs from lower sales volumes.

Net sales for the three months ended March 1, 2025 decreased $460 or 0.9% from the prior year period.

Written sales (the value of sales orders taken but not delivered) declined 2.1% from the first quarter of 2024.

Normalizing the first fiscal quarter of 2024 to adjust for the additional week, sales revenue for the first quarter of fiscal 2025 increased $3,380 or 6.8% over the prior year period while written sales increased 5.4%.

Gross margin for the three months ended March 1, 2025 declined 80 basis points over the prior period due to lower margins for both in-line and clearance goods as we have become slightly more aggressive in cycling through unproductive inventory.

SG&A expenses as a percentage of sales for the three months ended March 1, 2025 decreased 370 basis points primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024 coupled with lower advertising and marketing costs and efficiency gains in our warehouse and delivery operation.

Retail Backlog

Retail backlog at August 31, 2024 was $33,251 compared to $30,902 at November 25, 2023 and $32,702 at August 26, 2023.

Retail backlog at March 1, 2025 was $36,143 compared to $37,053 at November 30, 2024 and $31,307 at March 2, 2024.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

1 unchanged sentence

In addition to the two reportable segments discussed above, we include our remaining business activities and assets in a reconciling category known as Corporate and other, which includes the shared costs of various corporate functions along with any operating segments that do not meet the requirements to be reportable segments.

Therefore, Noa Home is included within the Corporate and other reconciling category and accounts for all of the sales and gross profit within this reconciling category.

Revenues, costs and expenses of Corporate and other for the periods ended August 31, 2024 and August 26, 2023 are as follows:

Therefore, prior to fiscal 2025, Noa Home was included within the Corporate and other reconciling category and accounted for all of the sales and gross profit within this reconciling category.

Revenues, costs and expenses of Corporate and other for the periods ended March 1, 2025 and March 2, 2024 are as follows:

Quarter Ended*

Nine Months Ended

August 31, 2024

August 26, 2023

June 1, 2024*

August 26, 2023

March 1, 2025

March 2, 2024

SG&A expenses

1 unchanged sentence

Analysis of Quarterly Results – Corporate and Other

Sales and gross profit declined from the prior year period as we began our wind-down of Noa Home’s operations and continued to sell the remaining inventory over the next several months.

The $888 decrease in SG&A expenses was primarily due to reduced advertising and warehouse costs for Noa Home as a result of the on-going wind-down of operations and decreased corporate overhead spending from better expense management, partially offset by costs incurred in connection with the cybersecurity incident.

Analysis of Year-to-Date Results – Corporate and Other

Sales and gross profit declined from the prior year period as we began our wind-down of Noa Home’s operations and continued to sell the remaining inventory over the next several months.

Included in the gross profit is an inventory valuation charge of $500 recognized during the second quarter of 2024 due to our decision to cease operations at Noa Home.

The $2,777 decrease in SG&A expenses was primarily due to decreased advertising and warehouse costs for Noa Home as a result of the on-going wind-down of operations and decreased corporate overhead spending from better expense management.

Other Gains and Losses

During the three and nine months ended August 31, 2024, we recognized a charge of $1,240 to accrue the remaining minimum charges under a logistical services contract with a vendor in Riverside, California.

We ceased utilizing those services during the third quarter of 2024 and expect to pay the minimum monthly charge through January of 2026.

During the nine months ended August 31.

2024, we recognized non-cash charges for asset impairments totaling $5,515 which consisted of the following:

$2,887 in our retail segment which included $1,978 related to the impairment of leasehold improvements and $750 from the impairment of right-of-use assets at certain underperforming retail stores, as well as $159 for the impairment of right-of-use assets at certain warehouse locations resulting from the consolidation of our retail warehouses.

$727 for the impairment of plant and equipment in our wholesale segment related to the consolidation of our domestic wood production facilities.

$1,901 for the impairment of long-lived assets at Noa Home.

During the second quarter we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and decided to cease operations by selling the remaining inventory in an orderly fashion over the next several months.

$1,827 of these charges are for the full impairment of the Noa Home trade name intangible asset, and $74 relates to the full impairment of customized software used in the Noa Home operations.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

(Dollars in thousands except share and per share data)

During the nine months ended August 26, 2023, we recognized a non-cash gain of $1,013 resulting from the write-down of our contingent consideration obligation to the former owners of Noa Home.

Subsequent to the acquisition of Noa Home on September 2, 2022, the parties concluded that the revenue and EBITDA targets originally set forth in the purchase agreement by which the Noa Home co-founders were to earn the contingent consideration were likely not to be met within the originally anticipated time frame and therefore agreed to replace the contingent consideration payable that was recognized at the acquisition date with two fixed payments of C$200 each.

The first payment was made in June of 2023 and the second payment will be made in December of 2024.

Sales and gross profit declined from the prior year period due to the closure and liquidation of Noa Home during fiscal 2024.

The $2,422 decrease in SG&A expenses was primarily due to closure of Noa Home and decreased corporate overhead spending from better expense management, including the benefit of cost reductions implemented during the second half of fiscal 2024.

Other Items Affecting Net Income (Loss)

Interest Income

Interest income for the three and nine months ended August 31, 2024 was $692 and $2,075, respectively, compared to $923 and $1,644 for the three and nine months, respectively, ended August 26, 2023.

The third quarter decline from the prior year period is primarily due to lower balances of interest-bearing cash and cash equivalents, while for the nine months ended August 31, 2024 the rates earned on our cash and cash equivalents and investments in CDs averaged higher than the preceding year.

Interest income for the three months ended March 1, 2025 was $559 compared to $756 for the three months ended March 2, 2024.

The decline from the prior year period is primarily due to lower balances of interest-bearing cash and cash equivalents, as well as lower average rates earned on our cash and cash equivalents and investments in CDs compared to the preceding year.

Other Loss, Net

Other loss, net, for the three and nine months ended August 31, 2024 was $276 and $380, respectively, compared to $505 and $1,072 for the three and nine months, respectively, ended August 26, 2023.

The net change from the prior year periods was primarily due to lower costs associated with Company-owned life insurance.

Other loss, net, for the three months ended March 1, 2025 was $459 compared to $104 for the three months ended March 2, 2024.

The net change from the prior year period was primarily due to higher costs associated with Company-owned life insurance.

We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income or loss and use that effective tax rate to record our year-to-date income tax provision.

Any change in annual projections of pretax income or loss could have a significant impact on our effective tax rate for the respective quarter.

Our effective tax rate was 22.0% and 17.3% for the three and nine months ended August 31, 2024, respectively.

The effective rates for the three and nine months ended August 31, 2024 differ from the federal statutory rate of 21% primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home, the effects of state income taxes and various permanent differences.

Our effective tax rate was 18.8% and 43.3% for the three and nine months ended August 26, 2023, respectively.

The effective rates for the three and nine months ended August 26, 2023 differ from the federal statutory rate of 21% primarily due to the non-taxable gain on revaluation of contingent consideration associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets associated with Noa Home and the effects of state income taxes and various permanent differences.

Liquidity and Capital Resources

Cash used in operations for the first nine months of fiscal 2024 was $2,323 compared to cash provided by operations of $10,249 for the first nine of fiscal 2023, representing a decrease of $12,572 in cash flows from operations.

This decrease was primarily the result of changes in working capital due to the timing impact of expenditures as a result of an additional week in the first quarter of 2024 coupled with lower net income.

Our overall cash position declined $14,078 during the first nine months of 2024.

During the first nine months of fiscal 2024, we spent $4,720 on purchases of property and equipment primarily consisting of the upfit of the new Tampa, Florida and Houston, Texas stores that opened in the first quarter of 2024, final payments on the Austin, Texas store remodel, update of the façade of the Greensboro, North Carolina store location and expenditures related to various information technology and manufacturing plant projects.

We also paid $4,909 in dividends during the first nine months of 2024.

During the second quarter of 2024 we resumed purchasing shares under our stock repurchase program and repurchased $1,127 during the first nine months of 2024 compared to $4,056 repurchased in the prior year period.

We expect capital expenditures for the full year to range from $6 million to $8 million.

As of August 31, 2024, $20,696 remains available for future purchases under our stock repurchase plan.

With cash and cash equivalents and short-term investments totaling $56,163 on hand at August 31, 2024, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Our effective tax rate was 27.4% for the three months ended March 1, 2025.

The effective rate for the three months ended March 1, 2025 differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences.

Our effective tax rate was 30.0% for the three months ended March 2, 2024.

The effective rate for the three months ended March 2, 2024 differs from the federal statutory rate of 21% primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home, the effects of state income taxes and various permanent differences.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Liquidity and Capital Resources

Cash used in operations for the first quarter of fiscal 2025 was $52 compared to cash used in operations of $7,739 for the first quarter of fiscal 2024, representing an improvement of $7,687 in cash flows from operations.

This increase was primarily the result of improved operating income and changes in working capital due to the timing impact of expenditures as a result of an additional week in the first quarter of 2024.

Our overall cash position declined $3,489 during the first quarter of 2025.

During the first quarter of fiscal 2025, we spent $871 on purchases of property and equipment.

We also paid $1,734 in dividends during the first quarter of 2025.

We repurchased $721 of shares under our stock repurchase program during the first quarter of 2025 compared to no repurchases in the prior year period.

We expect capital expenditures for the full year to range from $8 million to $12 million.

As of March 1, 2025, $19,682 remains available for future purchases under our stock repurchase plan.

With cash and cash equivalents and short-term investments totaling $56,422 on hand at March 1, 2025, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Debt and Other Obligations

1 unchanged sentence

This Credit Facility provides for a line of credit of up to $25,000.

At August 31, 2024, we had $6,013 outstanding under standby letters of credit against our line.

At March 1, 2025, we had $5,682 outstanding under standby letters of credit against our line.

The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75% and is secured by our accounts receivable and inventory.

4 unchanged sentences

Consolidated Lease Adjusted Leverage to EBITDAR Ratio not to exceed 3.35 times.

Since our used commitment was less than $8,250 at August 31, 2024, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio.

Had we been required to test those ratios, we would not have been able to achieve the required levels for either ratio.

Since our used commitment was less than $8,250 at March 1, 2025, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio.

Had we been required to test those ratios, we would not have been in full compliance.

Consequently, our availability under the Credit Facility is currently limited to an additional $2,568.

1 unchanged sentence

We also lease local delivery trucks used in our retail segment.

The present value of our obligations for leases with terms in excess of one year at August 31, 2024 is $104,133 and is included in our accompanying condensed consolidated balance sheet at August 31, 2024.

We were contingently liable under licensee lease obligation guarantees in the amount of $5,226 at August 31, 2024.

The present value of our obligations for leases with terms in excess of one year at March 1, 2025 is $101,742 and is included in our accompanying condensed consolidated balance sheet at March 1, 2025.

We were contingently liable under licensee lease obligation guarantees in the amount of $4,885 at March 1, 2025.

The remaining terms under these lease guarantees extend for six years.

2 unchanged sentences

We have a substantial investment in real estate acquired for use as retail locations and occupied by Company-owned retail stores.

Such real estate is included in property and equipment, net, in the accompanying condensed consolidated balance sheets and consists of eight properties with an aggregate square footage of 203,465 and a net book value of $24,306 at August 31, 2024.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

MARCH 1, 2025

(Dollars in thousands except share and per share data)

Critical Accounting Policies and Estimates

4 unchanged sentences

See Note 10 to our condensed consolidated financial statements for further discussion of lease guarantees, including descriptions of the terms of such commitments and methods used to mitigate risks associated with these arrangements.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES

AUGUST 31, 2024

(Dollars in thousands except share and per share data)

Contingencies

1 unchanged sentence

Although the final outcome of these matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

See Note 10 to our condensed consolidated financial statements for further information regarding certain contingencies as of August 31, 2024.

See Note 10 to our condensed consolidated financial statements for further information regarding certain contingencies as of March 1, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis