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Item 7. Management’s Discussion and Analysis

2026-02-05 compared with 2025-02-10 · 87 added, 156 removed, 243 unchanged (50% of the section changed)

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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 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 November 30, 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 86 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.

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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 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 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.

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.

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

We expect to supplement the digital outreach strategies in 2025 with added direct mail and television.

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

We began supplementing the digital outreach strategy with added direct mail and television late in 2024 and expect to continue with a balanced blend of both digital and traditional direct mail and television in 2026.

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

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

Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year.

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

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.

While traffic to the website decreased 8% during 2025, sales conversion rates increased 28% resulting in a 25% increase in total web sales.

Although e-commerce sales continue to be small relative to in-store sales, we will continue to invest in ongoing improvements to the aesthetics and user experience on our website while not compromising on our in-store experience or the quality of our in-home makeover capabilities.

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

(“Noa Home”) (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition).

(“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 have substantially completed the liquidation of Noa Home’s assets and liabilities.

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

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 at that time.

Upon substantially completing the liquidation of Noa Home at the end of the fourth quarter of 2024, we recognized a charge of $962 associated with the transfer of the cumulative translation losses out of accumulated other comprehensive income.

In 2018, we added outdoor furniture to our offerings with the acquisition of the Lane Venture brand.

Our strategy is to distribute these products outside of our BHF store network through independent sales representatives each of which have a stated geographic territory.

Using Lane Venture as a platform, we developed the Bassett Outdoor brand that is only marketed through the BHF store network.

This allows Bassett branded products to move from inside the home to outside the home to capitalize on the growing trend of outdoor living.

In the second quarter of 2023, we debuted the Bassett Outdoor contract line at the HD Expo Show in Las Vegas targeting the hospitality segment.

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 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.

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

We also have a facility 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.

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.

Sale of the Assets of Zenith Freight Lines, LLC

During the first quarter of 2022, we entered into a definitive agreement to sell substantially all of the assets of our wholly-owned subsidiary, Zenith, to J.B.

Hunt for $86,939 in cash (see Note 18 to the Consolidated Financial Statements for additional information regarding the sale of Zenith).

On February 28, 2022 the transaction was completed with us receiving $85,521 after the payment of $418 in certain transaction costs and the funding of $1,000 held in escrow, which was released to us on the first anniversary of the sale.

The final purchase price was subject to a customary post-closing working capital adjustment, which was settled in the amount of $987 resulting in a pre-tax gain of $52,534 on this transaction.

As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income and in the following discussion as discontinued operations.

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 fiscal 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 are seeking reimbursement of certain costs, expenses and losses stemming from the cybersecurity incident and have submitted a claim to our cybersecurity insurer.

We expect final resolution and payment of the claim during the first half of 2025.

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.

Analysis of Continuing Operations

The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2025 as compared to fiscal year 2024.

For additional analysis of the fiscal year 2023 results as compared to fiscal year 2022, see “Analysis of Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on January 25, 2024.

For additional analysis of the fiscal year 2024 results as compared to fiscal year 2023, see “Analysis of Continuing Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2024 Annual Report on Form 10-K, filed with the SEC on February 10, 2025.

Net sales revenue, cost of furniture and accessories sold, selling, general and administrative (“SG&A”) expense, other charges, and income from operations were as follows for the years ended November 29, 2025, November 30, 2024 and November 25, 2023:

Comparative Change

Net sales of furniture and accessories

Cost of furniture and accessories sold

Cost of goods sold

Asset impairment charges

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Gain on revaluation of contingent consideration

Gain on sale of real estate

Income (loss) from continuing operations

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*53 weeks for fiscal 2024 as compared with 52 weeks for fiscal 2025 and 2023.

Total sales revenue for the year ended November 30, 2024, decreased $60,213 or approximately 15% from the prior year period primarily due to decreases in wholesale shipments to both the open market and the BHF store network and decreases in retail delivered sales.

Total sales revenue for the year ended November 29, 2025, increased $5,357 or approximately 1.6% from the prior year period primarily due to increases in delivered retail sales partially offset by decreases in wholesale shipments to the open market and lost sales from the closure of Noa Home at the end of fiscal 2024.

Excluding the lost sales from Noa Home, total sales revenue increased 3.1%.

Gross margins for the year ended November 29, 2025 increased 190 basis points from 2024.

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 55.4%.

SG&A expenses as a percentage of sales for the year ended November 30, 2024 increased 420 basis points from 2023 primarily due to the deleverage of fixed costs caused by lower sales volumes.

During fiscal 2024, we recognized charges of $5,515 for asset impairments, $1,240 resulting from a contract abandonment, $962 from the realization of cumulative translation losses on Noa Home, and a restructuring charge of $440.

This restructuring charge resulted from a workforce reduction which we expect will result in annual savings of approximately $2,500 beginning in 2025, mostly in SG&A expenses.

Gross margins in the prior year were adversely impacted by increased inventory valuation charges of $1,729 in the wholesale segment, $472 in the retail segment and $500 in the Noa Home operation, as well as $609 of unproductive labor costs incurred during a temporary shutdown resulting from a cybersecurity incident.

Excluding the above-mentioned additional inventory valuation charges and unproductive labor costs in 2024, gross margins would have increased 90 basis points primarily due to improved margins in the wholesale segment, partially offset by lower margins in the retail operations.

SG&A expenses as a percentage of sales for the year ended November 29, 2025 decreased 300 basis points reflecting benefits from the prior year restructuring plan and on-going cost containment activities coupled with greater leverage of fixed costs from higher sales levels.

During fiscal 2025, we recognized an asset impairment charge of $498 related to an underperforming retail store expected to be closed in late fiscal 2026.

See Note 14 to our consolidated financial statements for additional information regarding these charges.

During fiscal 2023, we recognized a goodwill impairment charge of $5,409 and a gain of $1,013 resulting from the write-down of our contingent consideration obligation both of which are associated with the acquisition of Noa Home.

See Note 3 to the consolidated financial statements.

During the year ended November 26, 2022, we recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.

Certain other items affecting comparability between fiscal 2024 and 2023 are discussed below in “Other Items Affecting Net Income”.

Certain other items affecting comparability between fiscal 2025 and 2024 are discussed below in “Other Items Affecting Net Income (Loss)”.

Segment Information

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

During the second fiscal quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and have ceased operations as of November 30, 2024 by selling the remaining inventory in an orderly fashion over the second half of fiscal 2024.

During the second fiscal quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and ceased operations as of the end of 2024 by selling the remaining inventory in an orderly fashion over the second half of fiscal 2024.

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

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The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate.

Our former logistical services segment which represented the operations of Zenith is presented as a discontinued operation.

Reconciliation of Segment Results to Consolidated Results of Operations

To supplement the financial measures prepared in accordance with GAAP, we present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment.

To supplement the segment financial measures prepared in accordance with GAAP, we also present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment.

Because these intercompany transactions are not eliminated from our segment presentations and because we do not present gross profit as a measure of segment profitability in the accompanying condensed consolidated financial statements, the presentation of gross profit by segment is considered to be a non-GAAP financial measure.

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Non-GAAP Presentation

Net sales of furniture and accessories

Cost of furniture and accessories sold

Cost of goods sold

Asset impairment charges

Loss on contract abandonment

Loss upon realization of cumulative translation adjustment

Restructuring charges

Income (loss) from continuing operations

Income (loss) from operations

Interest income

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Other loss, net

Income (loss) from continuing operations before income taxes

Income (loss) before income taxes

Year Ended November 30, 2024

Non-GAAP Presentation

Net sales of furniture and accessories

Cost of furniture and accessories sold

Goodwill impairment charge

Gain on revaluation of contingent consideration

Income (loss) from continuing operations

Cost of goods sold

Asset impairment charges

Loss on contract abandonment

Loss upon realization of cumulative translation adjustment

Restructuring charges

Income (loss) from operations

Interest income

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Other loss, net

Income (loss) from continuing operations before income taxes

Income (loss) before income taxes

Year Ended November 25, 2023

Non-GAAP Presentation

Net sales of furniture and accessories

Cost of furniture and accessories sold

Gain on sale of real estate

Income (loss) from continuing operations

Cost of goods sold

Goodwill impairment charge

Gain on revaluation of contingent consideration

Income (loss) from operations

Interest income

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Other loss, net

Income (loss) from continuing operations before income taxes

Income (loss) before income taxes

Notes to Segment Consolidation Table:

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

Represents an asset impairment charge of $498 in our retail segment.

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.

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Represents a charge for the accrual of severance pay due to restructuring.

This is expected to be paid out through the second quarter of fiscal 2025.

Represents the charge for the full impairment of the goodwill associated with Noa Home.

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

Represents the gain on the sale of the real estate at a former retail location.

Wholesale Segment

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Fiscal 2025 as Compared to Fiscal 2024

Net sales for the year ended November 30, 2024 decreased $41,449 or 17% from fiscal 2023 due primarily to a 19% decrease in shipments to the open market, a 16% decrease in shipments to our retail store network and a 3% decrease in Lane Venture shipments.

Gross margins for the year ended November 30, 2024 increased 170 basis points over fiscal 2023 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.

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 recorded in the second quarter of fiscal 2024 as we have been more aggressive in selling certain slow-moving products.

These improvements were partially offset by slightly 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 180 basis points primarily due to reduced leverage of fixed costs from decreased sales.

Net sales for the year ended November 29, 2025 increased $7,152 or 3.4% from fiscal 2024 due primarily to a 8.2% increase in shipments to our retail store network partially offset by a 2% decrease in shipments to the open market and a 9% decrease in Lane Venture shipments.

Gross margins for the year ended November 29, 2025 increased 250 basis points over fiscal 2024 year.

Excluding $1,729 of increased inventory valuation charges in 2024 and $609 of unproductive labor costs incurred during a temporary shutdown resulting from a cybersecurity incident in 2024, gross margins would have increased by 140 basis points due primarily to improved pricing strategies in both the upholstery and wood operations coupled with greater leverage of fixed costs from higher sales levels.

SG&A expenses as a percentage of sales decreased 160 basis points primarily due to to the benefit of cost reductions implemented during the second half of fiscal 2024 coupled with greater leverage of fixed costs from higher sales levels and lower bad debt costs.

The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $19,519 at November 29, 2025 and $21,750 at November 30, 2024.

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Fiscal 2025 as Compared to Fiscal 2024

Net sales for the year ended November 30, 2024 decreased $31,377 or 13% from fiscal 2023.

Written sales (the value of sales orders taken but not delivered) declined 2.8% from fiscal 2023.

Gross margin for the year ended November 30, 2024 improved 60 basis points over fiscal 2023 primarily due to higher margins on both in-line and clearance goods partially offset by 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 year ended November 30, 2024 increased 350 basis points primarily due to decreased leverage of fixed costs from lower sales volumes.

Net sales for the year ended November 29, 2025 increased $12,118 or 5.9% from fiscal 2024.

Written sales (the value of sales orders taken but not delivered) increased 1.2% from fiscal 2024.

Gross margin for the year ended November 29, 2025 declined 80 basis points from fiscal 2024.

Excluding the $471 of additional inventory valuation charges in the prior year period, gross margins would have decreased by 100 basis points due to lower margins for both in-line and clearance goods as we have become more aggressive in cycling through unproductive inventory coupled with increased promotional activity.

In addition, the Company-owned stores did not take a price increase related to the increase in tariff costs until January 2026.

SG&A expenses as a percentage of sales for the year ended November 29, 2025 decreased 420 basis points primarily due to the benefit of cost reductions implemented during the second half of fiscal 2024, lower advertising and marketing costs, efficiency gains in our warehouse and delivery operation along with greater leverage of fixed costs due to higher sales levels.

Retail backlog at November 29, 2025 was $34,402 compared to $37,053 at November 30, 2024.

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Fiscal 2025 as Compared to Fiscal 2024

Sales and gross profit for the year ended November 30, 2024 declined from fiscal 2023 as we concluded our wind-down of Noa Home’s operations and sold off the remaining inventory during the second half of fiscal 2024.

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 $4,156 decrease in SG&A expenses was primarily due to decreased advertising and warehouse costs for Noa Home as a result of the cessation of operations and decreased corporate overhead spending from better expense management.

Discontinued Operations - Logistical Services

Revenues, operating expenses and income from operations for our logistical services segment were as follows for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022:

Comparative Change

Logistical services revenue

Cost of logistical services

Other loss, net

Income from discontinued operations

Analysis of Discontinued Operations – Logistical Services

The amounts shown above represent the results of Zenith’s business transactions with third parties.

Zenith only operated as a subsidiary of the Company for the first quarter of fiscal 2022, during which period Zenith charged Bassett $9,121 for logistical services provided to our wholesale segment.

These shipping and handling costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.

We entered into a service agreement with J.B.

Hunt for the continuation of these services for a period of seven years following the sale of Zenith.

Subsequent to the sale, we incurred $22,721, $26,125 and $27,604 of expense during fiscal 2024, 2023 and 2022, respectively, for the performance of logistical services by J.B.

Sales and gross profit for the year ended November 29, 2025 declined from fiscal 2024 due to the closure and liquidation of Noa Home during fiscal 2024.

The $2,920 decrease in SG&A expenses from fiscal 2024 was primarily due to the 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, partially offset by increased incentive compensation.

Other Items Affecting Net Income (Loss)

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Consists of interest income arising from our short-term investments and interest-bearing cash equivalents.

The increase in interest income for fiscal 2024 as compared with fiscal 2023 was due primarily to higher interest rates paid on certificates of deposit.

The decrease in interest income for fiscal 2025 as compared with fiscal 2024 was due primarily to lower interest rates paid on certificates of deposit.

See Note 3 to the Consolidated Financial Statements for additional information regarding our investments in certificates of deposit.

Interest expense is attributable to finance leases for computer and office equipment.

Interest expense is attributable to finance leases for trucks and computer and office equipment.

See Note 15 to the Consolidated Financial Statements for additional information regarding our leases.

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See Note 10 to the Consolidated Financial Statements for additional information related to our defined benefit pension plans.

Includes a gain arising from death benefits from Company-owned life insurance of $1,441 in fiscal 2022.

Provision for Income taxes

We recorded an income tax benefit of $4,675 on the loss from continuing operations for 2024.

In 2023, we recorded income tax expense on the loss from continuing operations of $683 and in 2022, we recorded $8,702 of income tax expense on the income from continuing operations.

Our effective tax rate of 32.5% for 2024 differs from the federal statutory rate of 21.0% due to the increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, the nondeductible impairment of the Noa Home tradename, the tax benefit recorded for the capital loss associated with the cumulative investment in Noa Home due to the shutdown of the operations, and the effects of state income taxes and various permanent differences.

Our effective tax rate of (27.5%) for 2023 differs from the federal statutory rate of 21.0% due to the non-taxable goodwill impairment and non-taxable gain on revaluation of contingent consideration both of which are associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, and the effects of state income taxes and various permanent differences.

We recorded income tax expense (benefit) of $2,660, $(4,675) and $683 for fiscal 2025, 2024 and 2023, respectively.

Our effective tax rate of 30.4% for 2025 differs from the federal statutory rate of 21.0% primarily due to the effects of state income taxes and various permanent differences, capital loss carrybacks, provision to return adjustments and other charges.

Our effective tax rate of 32.5% for 2024 differs from the federal statutory rate of 21.0% due to the increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, the nondeductible impairment of the Noa Home tradename, the tax benefit recorded for the capital loss associated with the cumulative investment in Noa Home due to the shutdown of the operations, the effects of state income taxes, various permanent differences, provision to return adjustments and other charges.

We have net deferred tax assets of $5,979 as of November 29, 2025, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years.

It will require approximately $28,500 of future taxable income to utilize our net deferred tax assets.

See Note 13 to the Consolidated Financial Statements for additional information regarding income taxes.

Liquidity and Capital Resources

We are committed to maintaining a strong balance sheet in order to weather difficult industry conditions, to allow us to take advantage of opportunities as market conditions improve, and to execute our long-term retail strategies.

Cash provided by operations for the year ended November 30, 2024 was $4,050 compared to cash provided by operations of $18,724 for the year ended November 25, 2023, representing a decrease of $14,674 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 larger net loss in fiscal 2024.

Our overall cash position declined $12,993 during fiscal 2024.

During fiscal 2024, we spent $5,211 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.

During the fourth quarter of fiscal 2024 ,we purchased a $2,500 CD which has been pledged as collateral against our merchant services agreement with a bank.

We also paid $6,654 in dividends during fiscal 2024.

During 2024, we spent $1,420 to repurchase shares under our existing stock repurchase program as compared to $4,176 in 2023.

Cash provided by operations for the year ended November 29, 2025 was $13,491 compared to cash provided by operations of $4,050 for the year ended November 30, 2024, representing an increase of $9,441 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 increased $1,726 for fiscal 2025.

We spent $4,530 on purchases of property and equipment, $6,939 in dividends and $2,150 to repurchase shares under our existing stock repurchase program.

As of November 29, 2025, $18,254 remains available for future purchases under our stock repurchase plan.

During the fourth quarter of fiscal 2025, a $2,500 CD which had formerly been pledged as collateral against our merchant services agreement with a bank matured and was not reinvested.

With cash and cash equivalents and short-term investments totaling $59,240 on hand at November 29, 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.

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In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $8,250:

Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.2 times and

Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.2 times;

Consolidated Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed 3.35 times.

Since our used commitment was less than $8,250 at November 29, 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 able to achieve the required levels for either of these ratios.

Consequently, our availability under the Credit Facility is currently limited to an additional $2,237.

However, had we been required to test those ratios, we would have been in full compliance.

Consequently, our availability under the Credit Facility is currently $16,818.

As of November 29, 2025 the Credit Facility was scheduled to expire on January 31, 2027.

Subsequent to November 29, 2025, the Credit Facility has been extended through January 31, 2029 under substantially the same terms.

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehouse space used in our retail segment.

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

We also lease trucks used in our wholesale and retail segments.

The total future minimum lease payments for leases with terms in excess of one year at November 29, 2025 is $105,045 the present value of which is $89,392 and is included in our accompanying consolidated balance sheet at November 29, 2025.

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See Note 15 to our Consolidated Financial Statements for a schedule of future cash payments on our lease obligations and additional details regarding our leases and lease guarantees.

Post-Employment Benefits

We provide post-employment benefits to certain current and former executives and management level employees of the Company.

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During fiscal 2025, we declared and paid four quarterly dividends totaling $6,939, or $0.80 per share.

During fiscal 2024, we repurchased 101,305 shares of our stock for $1,420 under our share repurchase program.

During fiscal 2025, we repurchased 142,121 shares of our stock for an aggregate of $2,150 under our share repurchase program.

The weighted-average effect of these share repurchases on basic earnings per share from continuing operations was less than $0.01 per share.

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Capital Expenditures

We currently anticipate that total capital expenditures for fiscal 2025 will be between $8 million and $12 million, which will be used for remodeling various retail stores and additional investments in information technology, including enhancements to our website.

We currently anticipate that total capital expenditures for fiscal 2026 will be between $8 million and $12 million, which will be used for tenant improvements on new retail stores and additional investments in information technology, including enhancements to our website.

Our capital expenditure and working capital requirements in the foreseeable future may change depending on many factors, including but not limited to the overall performance of the store program, our rate of growth, our operating results and any adjustments in our operating plan needed in response to industry conditions, competition or unexpected events.

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We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items.

Our primary non-recurring fair value estimates, typically involving the valuation of business acquisitions (see Note 3 to the Consolidated Financial Statements), goodwill impairments (see Note 8 to the Consolidated Financial Statements) and asset impairments (see Note 14 to the Consolidated Financial Statements) have utilized Level 3 inputs.

Our primary non-recurring fair value estimates, typically involving the valuation of goodwill impairments (see Note 7 to the Consolidated Financial Statements) and asset impairments (see Note 14 to the Consolidated Financial Statements) have utilized Level 3 inputs.

Off-Balance Sheet Arrangements

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Although the final outcome of these legal and environmental 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.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which requires that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes.

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Estimates are based on current facts and circumstances, prior experience and other assumptions believed to be reasonable.

The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect our consolidated financial statements.

Revenue Recognition - We recognize revenue when we transfer promised goods to our customers in an amount that reflects the consideration that we expect to receive in exchange for those goods.

For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer.

At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores.

We offer payment terms varying from 30 to 60 days for wholesale customers.

Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns.

The contracts with our licensee store owners do not provide for any royalty or license fee to be paid to us.

At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer.

We typically collect a significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery.

These deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $25,742 and $22,788 as of November 30, 2024 and November 25, 2023, respectively.

Substantially all of the customer deposits held at November 25, 2023 related to performance obligations satisfied during fiscal 2024 and have therefore been recognized in revenue for the year ended November 30, 2024.

Estimates for returns and allowances have been recorded as a reduction of revenue based on our historical return patterns.

We also sell furniture protection plans to our retail customers on behalf of a third party which is responsible for the performance obligations under the plans.

Revenue from the sale of these plans is recognized upon delivery of the goods net of amounts payable to the third-party service provider.

The following critical accounting estimates, some of which are impacted significantly by judgments, assumptions and estimates, affect our consolidated financial statements.

Returns and Allowances – We record an estimate for returns and allowances as a reduction of revenue based on our historical return patterns.

The estimate for returns and allowances was $2,732, $3,970 and $4,883 at November 29, 2025, November 30, 2024 and November 25, 2023.

Allowance for credit losses - We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments.

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The allowance for credit losses is based on a review of specifically identified customer accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics.

Judgments are made with respect to the collectibility of accounts receivable within each pool based on historical experience, current payment practices and current economic trends We have elected to use the practical expedient under ASC Topic 326 which allows us to assume that current conditions as of the balance sheet date do not change over the expected life of the receivables (see Recent Accounting Pronouncements below regarding the early adoption of ASU 2025-05).

Although actual losses have not differed materially from our previous estimates, future losses could differ from our current estimates.

Unforeseen events such as a licensee or customer bankruptcy filing could have a material impact on our results of operations.

Inventories - Inventories accounted for under the first-in, first out (“FIFO”) method are stated at the lower of cost or net realizable value, and inventory accounted for under the last-in, first out method (“LIFO”) is stated at the lower of cost or market.

Cost is determined for domestic furniture inventories, excluding outdoor furniture products, using the LIFO method.

The cost of imported inventories, domestic outdoor furniture products and Noa Home product inventories is determined on a FIFO basis.

We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions.

Our reserves for excess and obsolete inventory were $5,395 and $5,183 at November 30, 2024 and November 25, 2023, respectively, representing 8.9% and 7.6%, respectively, of our inventories on a LIFO basis.

Inventory Reserves - We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions.

Our reserves for excess and obsolete inventory were $6,027 and $5,395 at November 29, 2025 and November 30, 2024, respectively, representing 8.9% of our inventories on a LIFO basis at both years.

If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

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We review goodwill at the reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be impaired.

In accordance with ASC Topic 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350 (as amended by Accounting Standards Update No.

2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ).

The more likely than not threshold is defined as having a likelihood of more than 50 percent.

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However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the quantitative evaluation process.

For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2024, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of the goodwill allocated to that reporting unit as of November 30, 2024.

For the annual test of the goodwill performed as of the beginning of the fourth quarter of fiscal 2023, we concluded that there was no impairment of the goodwill allocated to our upholstery reporting unit, however with respect to our Noa Home reporting unit, we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired as the difficult environment for companies selling furniture on the web resulted in Noa Home performing well below initial projections and expectations.

For the annual test of goodwill performed as of the beginning of the fourth fiscal quarter of 2022, we performed the qualitative assessment as described above and concluded that there was no impairment of our goodwill as of November 26, 2022.

For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2025, 2024 and 2023 we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of goodwill.

With respect to our former Noa Home reporting unit, for the annual test of goodwill as of the beginning of the fourth quarter of fiscal 2023 we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired.

The quantitative evaluation compares the carrying value of each reporting unit that has goodwill with the estimated fair value of the respective reporting unit.

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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-K

Item 7. Management’s Discussion and Analysis