BASSETT FURNITURE INDUSTRIES INC 10-Q

bset20260530_10q.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________________ to _______________________ Commission File No. 000-00209 BASSETT FURNITURE INDUSTRIES, INCORPORATED (Exact name of Registrant as specified in its charter) Virginia 54-0135270 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3525 Fairystone Park Highway Bassett , Virginia 24055 (Address of principal executive offices) (Zip Code) ( 276 ) 629-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of exchange on which registered Common Stock ($5.00 par value) BSET NASDAQ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☐ Accelerated Filer ☒ Non-accelerated Filer ☐ Smaller Reporting Company ☒ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ At June 26, 2026 8,658,269 shares of common stock of the Registrant were outstanding. 1 of 35 BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES TABLE OF CONTENTS ITEM PAGE PART I - FINANCIAL INFORMATION 1. Condensed Consolidated Financial Statements as of May 30, 2026 (unaudited) and November 29, 2025 and for the three and six months ended May 30, 2026 (unaudited) and May 31, 2025 (unaudited) Condensed Consolidated Statements of Income 3 Condensed Consolidated Statements of Comprehensive Income 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 3. Quantitative and Qualitative Disclosures About Market Risk 32 4. Controls and Procedures 32 PART II - OTHER INFORMATION 1. Legal Proceedings 33 2. Unregistered Sales of Equity Securities and Use of Proceeds 33 3. Defaults Upon Senior Securities 33 5. Other Information 33 6. Exhibits 33 2 of 35 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED MAY 30, 2026 AND MAY 31, 2025 – UNAUDITED (In thousands except per share data) Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Net sales $ 83,753 $ 84,348 $ 164,093 $ 166,510 Cost of goods sold 36,406 37,439 71,581 72,771 Gross profit 47,347 46,909 92,512 93,739 Selling, general and administrative expenses 44,631 44,412 88,544 88,787 New store pre-opening costs 473 - 568 - Income from operations 2,243 2,497 3,400 4,952 Interest income 446 521 999 1,080 Other income (loss), net 87 ( 422 ) ( 105 ) ( 881 ) Income before income taxes 2,776 2,596 4,294 5,151 Income tax expense 737 678 1,139 1,379 Net income $ 2,039 $ 1,918 $ 3,155 $ 3,772 Basic earnings per share $ 0.24 $ 0.22 $ 0.37 $ 0.43 Diluted earnings per share $ 0.24 $ 0.22 $ 0.37 $ 0.43 Regular dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 3 of 35 PART I – FINANCIAL INFORMATION – CONTINUED ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIODS ENDED MAY 30, 2026 AND MAY 31, 2025 – UNAUDITED (In thousands) Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Net income $ 2,039 $ 1,918 $ 3,155 $ 3,772 Other comprehensive income (loss): Amortization associated with supplemental executive retirement defined benefit plan (SERP) ( 14 ) ( 16 ) ( 28 ) ( 32 ) Income taxes related to SERP 3 4 7 8 Other comprehensive loss, net of tax ( 11 ) ( 12 ) ( 21 ) ( 24 ) Total comprehensive income $ 2,028 $ 1,906 $ 3,134 $ 3,748 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 4 of 35 PART I – FINANCIAL INFORMATION – CONTINUED ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MAY 30, 2026 AND NOVEMBER 29, 2025 (In thousands) (Unaudited) May 30, 2026 November 29, 2025 Assets Current assets Cash and cash equivalents $ 35,902 $ 41,277 Short-term investments 17,988 17,963 Accounts receivable, net 12,559 14,410 Inventories 64,631 61,790 Recoverable income taxes 410 2,878 Other current assets 6,924 7,224 Total current assets 138,414 145,542 Property and equipment, net 71,930 73,175 Deferred income taxes 6,180 5,979 Goodwill 7,664 7,217 Intangible assets 6,881 6,910 Right of use assets under operating leases 77,488 76,727 Other 8,928 8,269 Total long-term assets 107,141 105,102 Total assets $ 317,485 $ 323,819 Liabilities and Stockholders ’ Equity Current liabilities Accounts payable $ 12,068 $ 14,739 Accrued compensation and benefits 6,772 10,227 Customer deposits 25,568 24,969 Current portion of operating lease obligations 17,689 19,299 Other current liabilites and accrued expenses 8,006 7,750 Total current liabilities 70,103 76,984 Long-term liabilities Post employment benefit obligations 12,048 11,379 Long-term portion of operating lease obligations 70,132 69,353 Other long-term liabilities 726 996 Total long-term liabilities 82,906 81,728 Stockholders ’ equity Common stock 43,157 43,256 Retained earnings 120,617 121,128 Additional paid-in capital - - Accumulated other comprehensive income 702 723 Total stockholders' equity 164,476 165,107 Total liabilities and stockholders ’ equity $ 317,485 $ 323,819 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 5 of 35 PART I – FINANCIAL INFORMATION – CONTINUED ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED MAY 30, 2026 AND MAY 31, 2025 – UNAUDITED (In thousands) Six Months Ended May 30, 2026 May 31, 2025 Operating activities: Net income $ 3,155 $ 3,772 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,517 4,478 Deferred income taxes ( 201 ) 1,374 Other, net 200 642 Changes in operating assets and liabilities: Accounts receivable 1,851 298 Inventories ( 2,771 ) ( 4,397 ) Recoverable income taxes and other current assets 2,768 1,352 Right of use assets under operating leases 8,475 8,474 Customer deposits 577 ( 1,713 ) Accounts payable and other liabilities ( 6,692 ) 978 Obligations under operating leases ( 9,983 ) ( 8,355 ) Net cash provided by operating activities 1,896 6,903 Investing activities: Purchases of property and equipment ( 2,592 ) ( 2,275 ) Cash paid for licensee acquisition ( 470 ) - Other ( 88 ) ( 74 ) Net cash used in investing activities ( 3,150 ) ( 2,349 ) Financing activities: Cash dividends ( 3,443 ) ( 3,476 ) Other issuance of common stock 173 165 Repurchases of common stock ( 653 ) ( 1,158 ) Taxes paid related to net share settlement of equity awards ( 76 ) ( 136 ) Repayments of finance lease obligations ( 122 ) ( 67 ) Net cash used in financing activities ( 4,121 ) ( 4,672 ) Change in cash and cash equivalents ( 5,375 ) ( 118 ) Cash and cash equivalents - beginning of period 41,277 39,551 Cash and cash equivalents - end of period $ 35,902 $ 39,433 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 6 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. References to “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our subsidiaries, all of which are wholly owned. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements. As of and for the periods ended May 30, 2026 and May 31, 2025 and as of November 29, 2025 we have concluded that none of the evaluated entities represent VIEs. Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of income net of estimates for returns and allowances. We exclude from revenues amounts collected from customers for sales tax. Certain amounts for the three and six months ended May 31, 2025 have been reclassified to conform to the current year’s presentation. See Note 13, Revenue Recognition. 2. Interim Financial Presentation and Other Information All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. The results of operations for the three and six months ended May 30, 2026 are not necessarily indicative of results for the full fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 29, 2025. Certain prior period amounts have been reclassified to conform to current period presentation. Income Taxes 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 26.5 % for the three and six months ended May 30, 2026. The effective rate 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 26.1 % and 26.8 % for the three and six months ended May 31, 2025, respectively. The effective rate differs from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences. Supplemental Cash Flow Information During the six months ended May 30, 2026 and May 31, 2025, $ 9,228 and $ 378 , respectively, of lease right-of-use assets were added through the recognition of the corresponding lease obligations. Income tax refunds received (taxes paid), net, during the six months ended May 30, 2026 and May 31, 2025 were as follows: Six Months Ended May 30, 2026 May 31, 2025 Federal $ 1,129 $ ( 200 ) State ( 11 ) ( 164 ) Total income tax refunds received (taxes paid), net $ 1,118 $ ( 364 ) 7 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) Interest paid during the six months ended May 30, 2026 and May 31, 2025 was $ 28 and $ 14 , respectively. Lessor Income We receive lease income as the lessor on a small number of leased premises which we have subleased to other tenants. Sublease income for closed stores and warehouses is included in selling, general and administrative expense in the accompanying condensed consolidated statements of income and was $ 155 and $ 309 for the three and six months ended May 30, 2026, respectively, and $ 148 and $ 251 for the three and six months ended May 31, 2025, respectively. We also sublease one location to a licensee. This sublease income is included in other income (loss), net in the accompanying condensed consolidated statements of income and was $ 118 and $ 236 for the three and six months ended May 30, 2026, respectively, and $ 114 and $ 228 for the three and six months ended May 31, 2025, respectively. Licensee Acquisition Effective March 1, 2026, we acquired the operations of the Bassett Home Furnishings (“BHF”) store located in Cherry Hill, New Jersey for an all-cash purchase price of $ 470 with no other forms of consideration transferred. The store had been owned and operated by a licensee that had determined that continued ownership of a BHF store was no longer consistent with its future business objectives. We believe that Cherry Hill, New Jersey represents a viable market for a BHF store. The preliminary purchase price allocation was as follows: Inventory $ 70 Customer deposits ( 22 ) Other current liabilities ( 25 ) Net assets acquired 23 Goodwill 447 Purchase price $ 470 The allocation of the fair value of the acquired business was based on a preliminary valuation. Our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary area of the preliminary allocation of the purchase price that is not yet finalized relates to the estimate of certain accrued liabilities. The inputs into our valuation of the acquired assets reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. See Note 6 regarding the allocation of the goodwill to our reportable segments. The recognized goodwill of $ 447 is deductible for income tax purposes. We believe that the primary factor supporting the recognized goodwill is that the licensee which formerly operated the Cherry Hill BHF store has established our brand in the greater Philadelphia, Pennsylvania market and this acquisition will enable us to maintain and grow our brand presence in that market. The acquisition is not material to our condensed consolidated financial statements and, accordingly, pro forma revenue and earnings disclosures are not material and have not been presented. Sales and operating losses generated by the Cherry Hill store subsequent to acquisition were not material for the three and six months ended May 30, 2026. Acquisition costs were immaterial. New Store Pre-Opening Costs Income from operations for the three and six months ended May 30, 2026 includes new store pre-opening costs of $ 473 and $ 568 , respectively. Such costs consist of expenses incurred at the new store location during the period prior to its opening and include, among other things, facility occupancy costs such as rent and utilities and local store personnel costs related to pre-opening activities including training. New store pre-opening costs do not include costs which are capitalized in accordance with our property and equipment capitalization policies, such as leasehold improvements and store fixtures and equipment. Such capitalized costs associated with new stores are depreciated commencing with the opening of the store. There are no pre-opening costs associated with stores acquired from licensees, as such locations were already in operation at the time of their acquisition. 3. Financial Instruments and Investments Financial Instruments Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit (CDs), accounts receivable, and accounts payable. Because of their short maturities, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. 8 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) Investments Our short-term investments of $ 17,988 and $ 17,963 at May 30, 2026 and November 29, 2025, respectively, consisted of CDs. At May 30, 2026, the CDs had original terms averaging seven months, bearing interest at rates ranging from 2.0 % to 4.1 % and the weighted average remaining time to maturity was approximately three months and the weighted average yield of the CDs was approximately 3.6 %. Each CD is placed with a federally insured financial institution and all deposits are within federal deposit insurance limits. Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at May 30, 2026 and November 29, 2025 approximates their fair value. 4. Accounts Receivable Accounts receivable consists of the following: May 30, 2026 November 29, 2025 Gross accounts receivable $ 13,067 $ 14,839 Allowance for credit losses ( 508 ) ( 429 ) Accounts receivable, net $ 12,559 $ 14,410 We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. The allowance for credit losses is based on a review of specifically identified 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 collectability of accounts receivable within each pool based on historical experience, current payment practices and current economic conditions. Actual credit losses could differ from those estimates. 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, which is generally ninety days or less. Activity in the allowance for credit losses for the six months ended May 30, 2026 and May 31, 2025 was as follows: Six Months Ended May 30, 2026 May 31, 2025 Beginning balance $ 429 $ 1,097 Additions charged to expense 97 40 Write-offs against allowance ( 18 ) ( 585 ) Ending balance $ 508 $ 552 Substantially all of the accounts receivable written off against the reserve during the three and six months ended May 30, 2026 and May 31, 2025 originated during our fiscal years ended November 29, 2025 and November 30, 2024, respectively. We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures . 9 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 5. Inventories Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value. Inventories were comprised of the following: May 30, 2026 November 29, 2025 Wholesale finished goods $ 31,028 $ 30,746 Work in process 612 544 Raw materials and supplies 16,949 16,040 Retail merchandise 33,930 32,503 Total inventories on first-in, first-out method 82,519 79,833 LIFO adjustment ( 12,193 ) ( 12,016 ) Reserve for excess and obsolete inventory ( 5,695 ) ( 6,027 ) $ 64,631 $ 61,790 We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses. Activity in the reserves for excess quantities and obsolete inventory by segment are as follows: Six Months Ended May 30, 2026 Wholesale Segment Retail Segment Total Balance at November 29, 2025 $ 4,585 $ 1,442 $ 6,027 Additions charged to expense 589 444 1,033 Write-offs ( 1,003 ) ( 362 ) ( 1,365 ) Balance at May 30, 2026 $ 4,171 $ 1,524 $ 5,695 Six Months Ended May 31, 2025 Wholesale Segment Retail Segment Total Balance at November 30, 2024 $ 4,158 $ 1,237 $ 5,395 Additions charged to expense 966 326 1,292 Write-offs ( 682 ) ( 191 ) ( 873 ) Balance at May 31, 2025 $ 4,442 $ 1,372 $ 5,814 Our estimates and assumptions have been reasonably accurate in the past. We have not made any significant changes to our methodology for determining inventory reserves in 2026 and do not anticipate that our methodology is likely to change in the foreseeable future. 10 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 6. Goodwill The carrying amounts of goodwill by reportable segment, net of accumulated impairment losses, were as follows: Wholesale Retail Corporate & Other Total Balance as of November 29, 2025 $ 7,217 $ - $ - $ 7,217 Goodwill arising from licensee acquisition (Note 2) 406 41 - 447 Balance as of May 30, 2026 $ 7,623 $ 41 $ - $ 7,664 Accumulated impairment losses at both May 30, 2026 and November 29, 2025 were as follows: Wholesale Retail Corporate & Other Total Accumulated impairment losses $ 1,971 $ 1,926 $ 5,409 $ 9,306 7. Intangible Assets Intangible assets at May 30, 2026 and November 29, 2025 consisted of the following: May 30, 2026 November 29, 2025 Intangibles subject to amortization: Customer relationships $ 512 $ 512 Less accumulated amortization ( 479 ) ( 450 ) Intangibles subject to amortization, net 33 62 Intangibles not subject to amortization: Trade names 6,848 6,848 Total intangible assets $ 6,881 $ 6,910 Amortization expense associated with intangible assets during the three and six months ended May 30, 2026 and May 31, 2025 was as follows: Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Intangible asset amortization expense $ 14 $ 14 $ 28 $ 28 Estimated future amortization expense for intangible assets that exist at May 30, 2026 is as follows: Remainder of fiscal 2026 $ 29 Fiscal 2027 4 Total $ 33 11 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 8. Bank Credit Facility On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $ 25,000 . At May 30, 2026, we had $ 5,866 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. Our bank charges a fee of 0.25 % on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth (as defined in the Credit Facility) shall at no time be less than $ 120,000 . 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 Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed 3.35 times. At May 30, 2026, we were in compliance with the Consolidated Minimum Tangible Net Worth requirement. Since our used commitment was less than $ 8,250 at May 30, 2026, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. However, had we been required to test those ratios, we would have been in full compliance. Our availability under the Credit Facility is currently $ 19,134 . On January 9, 2026, the Credit Facility was amended to extend the expiration to January 31, 2029. 9. Post Employment Benefit Obligations Defined Benefit Plans We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for the Supplemental Plan was $ 5,622 and $ 5,611 as of May 30, 2026 and November 29, 2025, respectively. We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, non-qualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $ 2,000 to five current and former management employees in the amount of $ 400 each. We are accounting for the LTC Awards as a defined benefit pension plan. Currently, two of those employees have retired and are receiving benefits. The liability for the LTC Awards was $ 1,328 and $ 1,379 as of May 30, 2026 and November 29, 2025, respectively. Components of net periodic pension costs for our defined benefit plans for the three and six months ended May 30, 2026 and May 31, 2025 are as follows: Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Service cost $ - $ 4 $ - $ 8 Interest cost 74 81 148 163 Amortization of loss ( 14 ) ( 16 ) ( 28 ) ( 32 ) Net periodic pension cost $ 60 $ 69 $ 120 $ 139 The components of net periodic pension cost other than the service cost component, which is included in selling, general and administrative expenses, are included in other income (loss), net in our condensed consolidated statements of income. Deferred Compensation Plans We have an unfunded deferred compensation plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or deferrals permitted. Our liability under this plan was $ 1,598 and $ 1,562 as of May 30, 2026 and November 29, 2025, respectively. We have an additional unfunded deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan. Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $ 4,642 and $ 3,968 as of May 30, 2026 and November 29, 2025, respectively. 12 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) The non-current portion of the obligations under our defined benefit and deferred compensation plans are included in post employment benefit obligations in the accompanying balance sheets as follows: May 30, 2026 November 29, 2025 Defined benefit plans: Supplemental Plan $ 4,927 $ 4,917 LTC Awards 1,208 1,258 Total defined benefit plans 6,135 6,175 Deferred compensation plans: Management Savings Plan 4,642 3,968 Deferred Compensation Plan 1,271 1,236 Total deferred compensation plans 5,913 5,204 Post employment benefit obligations $ 12,048 $ 11,379 The current portion of these post employment benefit obligations totaled $ 1,142 at both May 30, 2026 and November 29, 2025 and is included in accrued compensation and benefits in the accompanying condensed consolidated balance sheets. We recognized expense under our deferred compensation arrangements during the three and six months ended May 30, 2026 and May 31, 2025 as follows: Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Deferred compensation expense $ 397 $ 82 $ 409 $ 116 10. Commitments and Contingencies We are involved in various legal and environmental matters which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations. Lease Guarantees We were contingently liable under licensee lease obligation guarantees in the amounts of $ 3,656 and $ 4,148 at May 30, 2026 and November 29, 2025, respectively. The remaining term under these lease guarantees extends for approximately five years. In the event of default by the licensee, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement licensee or liquidating the collateral (primarily inventory). The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligation, net of recorded reserves. The fair value of these lease guarantees (an estimate of the cost to the Company to perform on the guarantee) at May 30, 2026 and November 29, 2025 was not material. 13 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) Lease Commitments At May 30, 2026, we had a commitment for one lease of real property which is expected to commence during fiscal 2026. This lease calls for total annual rents averaging approximately $ 403 per year for an initial term of ten years. The lease has two five -year renewal options. 11. Earnings Per Share Basic earnings per common share is computed by dividing net income allocable to common shares by the weighted average number of common shares outstanding, adjusted for participating securities, if any. The following reconciles basic and diluted earnings per share: Net Income Weighted Average Shares Earnings Per Share For the quarter ended May 30, 2026: Basic earnings per share $ 2,039 8,618,419 $ 0.24 Add effect of dilutive securities: Restricted shares - 17,850 - Diluted earnings per share $ 2,039 8,636,269 $ 0.24 For the quarter ended May 31, 2025: Basic earnings per share $ 1,918 8,667,908 $ 0.22 Add effect of dilutive securities: Restricted shares - 11,966 - Diluted earnings per share $ 1,918 8,679,874 $ 0.22 For the six months ended May 30, 2026: Basic earnings per share $ 3,155 8,617,003 $ 0.37 Add effect of dilutive securities: Restricted shares - 26,491 - Diluted earnings per share $ 3,155 8,643,494 $ 0.37 For the six months ended May 31, 2025: Basic earnings per share $ 3,772 8,673,339 $ 0.43 Add effect of dilutive securities: Restricted shares - 20,261 - Diluted earnings per share $ 3,772 8,693,600 $ 0.43 For the three and six months ended May 30, 2026 and May 31, 2025, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive: Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Unvested shares 5,000 17,556 27,856 17,556 14 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 12. Segment Information We report segment information consistent with the way our chief operating decision maker (the “CODM”), a single individual who serves as our Board Chair, President and Chief Executive Officer, evaluates the operating results and performance of the Company. We have strategically aligned our business into two reportable segments as defined in ASC 280, Segment Reporting , and as described below: ● Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations, which includes Lane Venture. ● Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers. In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefiting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. 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 three and six months ended May 30, 2026 and May 31, 2025, Corporate and other included no other operating segments. Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate. For the purpose of evaluating segment performance and allocating resources, our CODM uses a measure of income (loss) from operations excluding special items. These excluded items include such things as asset impairment charges, restructuring charges, and other unusual or infrequent gains and losses which management does not expect to recur on a regular routine basis. During the three and six months ended May 30, 2026 and May 31, 2025, there were no special items recognized in our results of operations. The CODM assesses performance by regularly reviewing each segment’s significant expense categories which include total cost of goods sold and total selling, general and administrative (“SG&A”) expenses. If these significant expense categories deviate from expected results, the CODM will delegate to his direct reports the task of investigating the underlying causes and, when necessary, making recommendations for remedial action to the CODM for his consideration and approval. 15 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) The following tables present our segment information: Quarter Ended May 30, 2026 Corporate & Intersegment Wholesale Retail Other Eliminations Consolidated Net sales to external customers $ 28,205 $ 55,548 $ - $ - $ 83,753 Intersegment sales 24,942 - - ( 24,942 ) - Total net sales 53,147 55,548 - ( 24,942 ) 83,753 Cost of goods sold 34,356 27,085 - ( 25,035 ) 36,406 SG&A expense 10,560 28,320 6,059 ( 308 ) 44,631 Other segment items - new store pre-opening costs - 473 - - 473 Income (loss) from operations $ 8,231 $ ( 330 ) $ ( 6,059 ) $ 401 2,243 Interest income 446 Other income, net 87 Income before income taxes $ 2,776 Quarter Ended May 31, 2025 Corporate & Intersegment Wholesale Retail Other Eliminations Consolidated Net sales to external customers $ 30,116 $ 54,232 $ - $ - $ 84,348 Intersegment sales 24,113 - - ( 24,113 ) - Total net sales 54,229 54,232 - ( 24,113 ) 84,348 Cost of goods sold 35,649 25,838 - ( 24,048 ) 37,439 SG&A expense 10,290 27,912 6,521 ( 311 ) 44,412 Income (loss) from operations $ 8,290 $ 482 $ ( 6,521 ) $ 246 2,497 Interest income 521 Other loss, net ( 422 ) Income before income taxes $ 2,596 16 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) Six Months Ended May 30, 2026 Corporate & Intersegment Wholesale Retail Other Eliminations Consolidated Net sales to external customers $ 56,000 $ 108,093 $ - $ - $ 164,093 Intersegment sales 50,108 - - ( 50,108 ) - Total net sales 106,108 108,093 - ( 50,108 ) 164,093 Cost of goods sold 68,823 52,562 - ( 49,804 ) 71,581 SG&A expense 20,658 56,327 12,176 ( 617 ) 88,544 Other segment items - new store pre-opening costs - 568 - - 568 Income (loss) from operations $ 16,627 $ ( 1,364 ) $ ( 12,176 ) $ 313 3,400 Interest income 999 Other loss, net ( 105 ) Income before income taxes $ 4,294 Six Months Ended May 31, 2025 Corporate & Intersegment Wholesale Retail Other Eliminations Consolidated Net sales to external customers $ 58,984 $ 107,526 $ - $ - $ 166,510 Intersegment sales 48,172 - - ( 48,172 ) - Total net sales 107,156 107,526 - ( 48,172 ) 166,510 Cost of goods sold 69,840 50,775 - ( 47,844 ) 72,771 SG&A expense 20,341 56,317 12,747 ( 618 ) 88,787 Income (loss) from operations $ 16,975 $ 434 $ ( 12,747 ) $ 290 4,952 Interest income 1,080 Other loss, net ( 881 ) Income before income taxes $ 5,151 Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Depreciation and Amortization Wholesale $ 589 $ 596 $ 1,175 $ 1,186 Retail - Company-owned stores 1,046 982 2,049 1,992 Corporate and other 646 654 1,293 1,300 Consolidated $ 2,281 $ 2,232 $ 4,517 $ 4,478 Capital Expenditures Wholesale $ 294 $ 362 $ 340 $ 1,115 Retail - Company-owned stores 1,310 712 1,941 781 Corporate and other 125 331 311 379 Consolidated $ 1,729 $ 1,405 $ 2,592 $ 2,275 As of As of Identifiable Assets May 30, 2026 November 29, 2025 Wholesale $ 96,413 $ 92,805 Retail - Company-owned stores 138,533 140,507 Corporate and other 82,539 90,507 Consolidated $ 317,485 $ 323,819 See Note 13, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments. 17 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 13. Revenue Recognition We recognize revenue when we transfer promised goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. 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. At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. All wholesale and retail revenues are recorded net of estimated returns and allowances based on historical patterns. Our accounts receivable, net, which are associated with our wholesale segment, were $ 12,559 , $ 14,410 , $ 12,883 and $ 13,181 at May 30, 2026, November 29, 2025, May 31, 2025 and November 30, 2024, respectively. We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected at the time delivery is scheduled. These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 25,568 , $ 24,969 , $ 24,029 and $ 25,742 as of May 30, 2026, November 29, 2025, May 31, 2025 and November 30, 2024, respectively. Substantially all of the customer deposits held as of November 29, 2025 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the six months ended May 30, 2026. Similarly, substantially all of the customer deposits held at May 30, 2026 are expected to be recognized as revenue within the next twelve months. Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less. Sales commissions at wholesale are accrued upon the shipment of goods. Sales commissions at retail are accrued at the time a sale is written (i.e. – when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized. At May 30, 2026, November 29, 2025, May 31, 2025 and November 30, 2024, our balance of prepaid commissions included in other current assets was $ 2,716 , $ 2,662 , $ 2,663 and $ 2,928 , respectively. We exclude from revenue all amounts collected from customers for sales tax. We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less. Disaggregated revenue information for sales of furniture and accessories by product category for the three and six months ended May 30, 2026 and May 31, 2025, excluding intercompany transactions between our segments, is as follows: Quarter Ended May 30, 2026 May 31, 2025 (1) Wholesale Retail Total Wholesale Retail Total Bassett Custom Upholstery $ 19,132 $ 32,301 $ 51,433 $ 20,004 $ 30,998 $ 51,002 Bassett Leather Imports 4,012 772 4,784 3,917 333 4,250 Bassett Custom Wood 2,693 8,119 10,812 3,021 8,468 11,489 Bassett Casegoods 2,368 7,080 9,448 3,174 7,072 10,246 Accessories, mattresses and other (2) - 7,276 7,276 - 7,361 7,361 Consolidated net sales of furniture and accessories $ 28,205 $ 55,548 $ 83,753 $ 30,116 $ 54,232 $ 84,348 Six Months Ended May 30, 2026 May 31, 2025 (1) Wholesale Retail Total Wholesale Retail Total Bassett Custom Upholstery $ 37,111 $ 61,625 $ 98,736 $ 38,850 $ 62,185 $ 101,035 Bassett Leather Imports 8,103 1,319 9,422 8,030 568 8,598 Bassett Custom Wood 5,514 16,261 21,775 6,006 16,174 22,180 Bassett Casegoods 5,272 14,807 20,079 6,098 13,724 19,822 Accessories, mattresses and other (2) - 14,081 14,081 - 14,875 14,875 Consolidated net sales of furniture and accessories $ 56,000 $ 108,093 $ 164,093 $ 58,984 $ 107,526 $ 166,510 (1) Certain amounts within each category have been reclassified to conform to the 2026 presentation. (2) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. 18 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 14. Changes to Stockholders ’ Equity The following changes in our stockholders’ equity occurred during the three and six months ended May 30, 2026 and May 31, 2025: Quarter Ended Six Months Ended May 30, 2026 May 31, 2025 May 30, 2026 May 31, 2025 Common Stock: Beginning of period $ 43,249 $ 43,462 $ 43,256 $ 43,681 Issuance of common stock 85 87 148 166 Purchase and retirement of common stock ( 177 ) ( 139 ) ( 247 ) ( 437 ) End of period $ 43,157 $ 43,410 $ 43,157 $ 43,410 Common Shares Issued and Outstanding: Beginning of period 8,649,567 8,692,134 8,651,054 8,736,046 Issuance of common stock 16,956 17,454 29,584 33,189 Purchase and retirement of common stock ( 35,230 ) ( 27,737 ) ( 49,345 ) ( 87,384 ) End of period 8,631,293 8,681,851 8,631,293 8,681,851 Additional Paid-in Capital: Beginning of period $ - $ - $ - $ 6 Issuance of common stock 10 ( 3 ) 25 ( 1 ) Purchase and retirement of common stock ( 139 ) ( 163 ) ( 259 ) ( 311 ) Stock based compensation 129 166 234 306 End of period $ - $ - $ - $ - Retained Earnings: Beginning of period $ 120,484 $ 122,556 $ 121,128 $ 122,847 Net income for the period 2,039 1,918 3,155 3,772 Purchase and retirement of common stock ( 193 ) ( 135 ) ( 223 ) ( 546 ) Cash dividends declared and paid ( 1,713 ) ( 1,742 ) ( 3,443 ) ( 3,476 ) End of period $ 120,617 $ 122,597 $ 120,617 $ 122,597 Accumulated Other Comprehensive Income: Beginning of period $ 713 $ 781 $ 723 $ 793 Amortization of pension costs, net of tax ( 11 ) ( 12 ) ( 21 ) ( 24 ) End of period $ 702 $ 769 $ 702 $ 769 19 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 30, 2026 (Dollars in thousands except share and per share data) 15. Recent Accounting Pronouncements Effective November 29, 2025, we adopted Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 280) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require: that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); and that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The enhanced disclosures required by ASU 2023-07 are reflected in our segment disclosures in Note 12. The adoption of this guidance related solely to disclosures and did not have an impact upon our financial position or results of operations. In December 2023, the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 become effective for us as of the end of our 2026 fiscal year. We are still assessing the impact of this guidance on our disclosures and plan to adopt ASU 2023-09 for our financial statements for the year ending November 28, 2026. In November 2024, the FASB issued Accounting Standards Update 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic ASC 220-40) Disaggregation of Income Statement Expenses. The amendments in this ASU require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The amendments in ASU 2024-03 will become effective for us for our 2028 fiscal year and for interim periods beginning with our 2029 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations. 20 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Safe-harbor, forward-looking statements: This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “ anticipates ”, “ believes ”, “ plans ”, “ estimates ”, “ expects ”, “ aims ” and “ intends ” or words or phrases of similar expression. These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters will be realized. 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 tariffs, retaliatory tariffs, duties and trade limitations with respect to foreign-sourced products • competitive conditions in the home furnishings industry • overall retail traffic levels in stores and on the web and consumer demand for home furnishings • ability of our customers and consumers to obtain affordable credit due to increased interest rates • the profitability of the stores (independent licensees and Company-owned retail stores) which may result in future store closings • 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 • effectiveness and security of our information technology systems and possible disruptions due to cybersecurity threats, including any impacts from a network security incident; and the sufficiency of our insurance coverage, including cybersecurity insurance • future tax legislation, or regulatory or judicial positions • ability to efficiently manage the import supply chain to minimize business interruption • concentration of domestic manufacturing, particularly of upholstery products, and the resulting exposure to business interruption from accidents, weather and other events and circumstances beyond our control Additionally, other risks that could cause actual results to differ materially from those contemplated by such forward-looking statements are set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended November 29, 2025. You should keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this report or elsewhere might not occur. 21 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Overview Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 124-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. 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. Salespeople are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor. 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. The Lane Venture outdoor brand was recently introduced in the Bassett Home Furnishings stores representing a new outlet for that brand. 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 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. 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. Building on the 25% increase in web sales for fiscal 2025, written sales orders for the web increased 34% for the six months ended May 30, 2026 while delivered sales increased 30%. 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. 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 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. 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. During the second fiscal quarter we acquired one retail store from a former licensee in Cherry Hill, New Jersey and opened a new Company-owned store in the Cincinnati, Ohio market. A second new Company-owned store in the Orlando, Florida market is expected to open by the end of fiscal 2026. 22 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Results of Operations – Period ended May 30, 2026 compared with the period ended May 31, 2025: Historically, housing activity, both new home sales and sales of existing homes, is a primary driver of furniture and home furnishings sales. Since the COVID boom, housing prices have increased significantly along with the mortgage rates charged for home loans. Many homeowners with historically low mortgage rates are reluctant to sell their homes, and buyers are hesitant to commit amid high prices, higher mortgage rates and economic uncertainty. As a result, housing activity is significantly slower than historical trends resulting in reduced demand for furniture and home furnishings. This has put pressure on furniture and home furnishings retailers and we have seen an increase in those retailers exiting the industry. While our sales levels have decreased from the COVID period, we believe our sales have somewhat stabilized over the last couple of years. In addition, we have gained efficiencies in our operations and reduced our overall expense structure to improve our results of operations. Consolidated results of operations for the three and six months ended May 30, 2026 and May 31, 2025 are as follows: Quarter Ended Change Six Months Ended Change May 30, 2026 May 31, 2025 Dollars Percent May 30, 2026 May 31, 2025 Dollars Percent Net sales $ 83,753 100.0 % $ 84,348 100.0 % $ (595 ) -0.7 % $ 164,093 100.0 % $ 166,510 100.0 % $ (2,417 ) -1.5 % Cost of goods sold 36,406 43.5 % 37,439 44.4 % (1,033 ) -2.8 % 71,581 43.6 % 72,771 43.7 % (1,190 ) -1.6 % Gross profit 47,347 56.5 % 46,909 55.6 % 438 0.9 % 92,512 56.4 % 93,739 56.3 % (1,227 ) -1.3 % SG&A expenses 44,631 53.3 % 44,412 52.7 % 219 0.5 % 88,544 54.0 % 88,787 53.3 % (243 ) -0.3 % New store pre-opening costs 473 0.6 % - 0.0 % 473 100.0 % 568 0.3 % - 0.0 % 568 100.0 % Income from operations $ 2,243 2.7 % $ 2,497 3.0 % $ (254 ) -10.2 % $ 3,400 2.1 % $ 4,952 3.0 % $ (1,552 ) -31.3 % Analysis of Quarterly Results: Total sales revenue for the three months ended May 30, 2026 decreased $595 or 0.7% from the prior year period. This consisted of a $1,911 or 6.3% decrease in sales to external wholesale customers partially offset by a $1,316 or 2.4% increase in retail sales from our Company-owned stores. Gross margins for the three months ended May 30, 2026 increased 90 basis points over the prior year period primarily due to higher margins in the wholesale business partially offset by lower margins in the retail business. Selling, general and administrative (“SG&A”) expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended May 30, 2026 increased 60 basis points from 2025. Excluding $698 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales decreased 20 basis points as compared to 2025. Refer to the following discussions of quarterly results by segment for additional details. Analysis of Year-to-Date Results: Total sales revenue for the six months ended May 30, 2026 decreased $2,417 or 1.5% from the prior year period. This consisted of a $2,984 or 5.1% decrease in sales to external wholesale customers partially offset by a $567 or 0.5% increase in retail sales from our Company-owned stores. Gross margins for the six months ended May 30, 2026 increased 10 basis points over the prior year period primarily due to lower margins in the retail business partially offset by improved margins in the wholesale business. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the six months ended May 30, 2026 increased 70 basis points from 2025. Excluding $698 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales increased 30 basis points as compared to 2025. Refer to the following discussions of quarterly results by segment for additional details. 23 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Segment Information We have strategically aligned our business into two reportable segments as defined in ASC 280, Segment Reporting , and as described below: ● Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations, which includes Lane Venture. ● Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers. In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefiting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. 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 three and six months ended May 30, 2026 and May 31, 2025, Corporate and other included no other operating segments. Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate. 24 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes 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. 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. In addition, certain special gains or charges as well as non-operating income and expenses are included in consolidated income (loss) before income taxes are not included in the measures of segment profitability. 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 May 30, 2026 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales $ 53,147 $ 55,548 $ - $ (24,942 ) (1) $ - $ - $ 83,753 Cost of goods sold 34,356 27,085 - (25,035 ) (2) - - 36,406 Gross profit 18,791 28,463 - 93 - - 47,347 SG&A expense 10,560 28,320 6,059 (308 ) (3) - - 44,631 New store pre-opening costs - 473 - - - 473 Income (loss) from operations 8,231 (330 ) (6,059 ) 401 - - 2,243 Interest income - - - - - 446 446 Other income, net - - - - - 87 87 Income (loss) before income taxes $ 8,231 $ (330 ) $ (6,059 ) $ 401 $ - $ 533 $ 2,776 Quarter Ended May 31, 2025 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales $ 54,229 $ 54,232 $ - $ (24,113 ) (1) $ - $ - $ 84,348 Cost of goods sold 35,649 25,838 - (24,048 ) (2) - - 37,439 Gross profit 18,580 28,394 - (65 ) - - 46,909 SG&A expense 10,290 27,912 6,521 (311 ) (3) - - 44,412 Income (loss) from operations 8,290 482 (6,521 ) 246 - - 2,497 Interest income - - - - - 521 521 Other loss, net - - - - - (422 ) (422 ) Income (loss) before income taxes $ 8,290 $ 482 $ (6,521 ) $ 246 $ - $ 99 $ 2,596 25 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Six Months Ended May 30, 2026 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales $ 106,108 $ 108,093 $ - $ (50,108 ) (1) $ - $ - $ 164,093 Cost of goods sold 68,823 52,562 - (49,804 ) (2) - - 71,581 Gross profit 37,285 55,531 - (304 ) - - 92,512 SG&A expense 20,658 56,327 12,176 (617 ) (3) - - 88,544 New store pre-opening costs - 568 - - - - 568 Income (loss) from operations 16,627 (1,364 ) (12,176 ) 313 - - 3,400 Interest income - - - - - 999 999 Other loss, net - - - - - (105 ) (105 ) Income (loss) before income taxes $ 16,627 $ (1,364 ) $ (12,176 ) $ 313 $ - $ 894 $ 4,294 Six Months Ended May 31, 2025 Non-GAAP Presentation GAAP Presentation Wholesale Retail Corporate & Other Eliminations Special Items Non-Operating Consolidated Net sales $ 107,156 $ 107,526 $ - $ (48,172 ) (1) $ - $ - $ 166,510 Cost of goods sold 69,840 50,775 - (47,844 ) (2) - - 72,771 Gross profit 37,316 56,751 - (328 ) - - 93,739 SG&A expense 20,341 56,317 12,747 (618 ) (3) - - 88,787 Income (loss) from operations 16,975 434 (12,747 ) 290 - - 4,952 Interest income - - - - - 1,080 1,080 Other loss, net - - - - - (881 ) (881 ) Income (loss) before income taxes $ 16,975 $ 434 $ (12,747 ) $ 290 $ - $ 199 $ 5,151 Notes to segment consolidation table: (1) Represents the elimination of sales from our wholesale segment to our Company-owned BHF stores. (2) Represents the elimination of purchases by our Company-owned BHF stores from our wholesale segment, as well as the change for the period in the elimination of intercompany profit in ending retail inventory. (3) Represents the elimination of rent paid by our retail stores occupying Company-owned real estate. 26 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Wholesale Segment Results for the wholesale segment for the three and six months ended May 30, 2026 and May 31, 2025 are as follows: Quarter Ended Change Six Months Ended Change May 30, 2026 May 31, 2025 Dollars Percent May 30, 2026 May 31, 2025 Dollars Percent Net sales $ 53,147 100.0 % $ 54,229 100.0 % $ (1,082 ) -2.0 % $ 106,108 100.0 % $ 107,156 100.0 % $ (1,048 ) -1.0 % Gross profit (1) 18,791 35.4 % 18,580 34.3 % 211 1.1 % 37,285 35.1 % 37,316 34.8 % (31 ) -0.1 % SG&A expenses 10,560 19.9 % 10,290 19.0 % 270 2.6 % 20,658 19.5 % 20,341 19.0 % 317 1.6 % Income from operations $ 8,231 15.5 % $ 8,290 15.3 % $ (59 ) -0.7 % $ 16,627 15.7 % $ 16,975 15.8 % $ (348 ) -2.1 % (1) Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany transactions. Refer to the reconciliation of gross profit by segment to consolidated gross profit presented under the Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes above. Wholesale sales by major product category are as follows: Quarter Ended May 30, 2026 May 31, 2025 (1) Total Change External Intercompany Total External Intercompany Total Dollars Percent Bassett Custom Upholstery $ 19,132 $ 15,188 $ 34,320 64.6 % $ 20,004 $ 14,517 $ 34,521 63.7 % $ (201 ) -0.6 % Bassett Leather Imports 4,012 1,381 5,393 10.1 % 3,917 788 4,705 8.7 % 688 14.6 % Bassett Custom Wood 2,693 4,003 6,696 12.6 % 3,021 4,587 7,608 14.0 % (912 ) -12.0 % Bassett Casegoods 2,368 4,370 6,738 12.7 % 3,174 4,221 7,395 13.6 % (657 ) -8.9 % Total $ 28,205 $ 24,942 $ 53,147 100.0 % $ 30,116 $ 24,113 $ 54,229 100.0 % $ (1,082 ) -2.0 % Six Months Ended May 30, 2026 May 31, 2025 (1) Total Change External Intercompany Total External Intercompany Total Dollars Percent Bassett Custom Upholstery $ 37,111 $ 30,632 $ 67,743 63.8 % $ 38,850 $ 30,077 $ 68,927 64.3 % $ (1,184 ) -1.7 % Bassett Leather 8,103 2,355 10,458 9.9 % 8,030 1,420 9,450 8.8 % 1,008 10.7 % Bassett Custom Wood 5,514 8,138 13,652 12.9 % 6,006 8,753 14,759 13.8 % (1,107 ) -7.5 % Bassett Casegoods 5,272 8,983 14,255 13.4 % 6,098 7,922 14,020 13.1 % 235 1.7 % Total $ 56,000 $ 50,108 $ 106,108 100.0 % $ 58,984 $ 48,172 $ 107,156 100.0 % $ (1,048 ) -1.0 % (1) Certain amounts within the Bassett Custom Wood and Bassett Casegoods categories have been reclassified to conform with the 2026 presentation. Analysis of Quarterly Results – Wholesale Net sales for the three months ended May 30, 2026 decreased $1,082 or 2.0% from the prior year, consisting of a 5.5% decrease in shipments to the open market partially offset by a 1.0% increase in Lane Venture shipments to wholesale customers and a 0.8% increase in shipments to our retail store network. The increase in shipments to our retail store network includes shipments of the Lane Venture brand, which we introduced in the BHF stores during the first quarter of 2026. Total shipments of the Lane Venture brand, including the shipments to the retail store network, increased 17.9% from the prior year. Gross margins for the three months ended May 30, 2026 increased 110 basis points from the prior year period primarily due to improved efficiencies in our domestic upholstery and wood operations coupled with improved pricing strategies in our imported wood offerings. SG&A expenses as a percentage of sales increased 90 basis points compared with the prior year period primarily due to increased outbound freight expenses from higher fuel costs. 27 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Analysis of Year-to-Date Results – Wholesale Net sales for the six months ended May 30, 2026 decreased $1,048 or 1.0% from the prior year, consisting of a 5.4% decrease in shipments to the open market partially offset by a 0.7% increase in shipments to our retail store network and a 3.4% increase in Lane Venture shipments to wholesale customers. The increase in shipments to our retail store network includes shipments of the Lane Venture brand, which we introduced in the BHF stores during the first quarter of 2026. Total shipments of the Lane Venture brand, including the shipments to the retail store network, increased 23.6% from the prior year. Gross margins for the six months ended May 30, 2026 increased 30 basis points from the prior year period primarily due to improved efficiencies in our domestic wood operations coupled with improved pricing strategies in our imported wood offerings. SG&A expenses as a percentage of sales increased 50 basis points compared with the prior year period primarily due to increased outbound freight expenses from higher fuel costs. Wholesale Backlog Wholesale backlog at May 30, 2026 was $18,859 as compared to $19,519 at November 29, 2025 and $18,418 at May 31, 2025. Retail – Company-owned Stores Segment Results for the retail segment for the periods ended May 30, 2026 and May 31, 2025 are as follows: Quarter Ended Change Six Months Ended Change May 30, 2026 May 31, 2025 Dollars Percent May 30, 2026 May 31, 2025 Dollars Percent Net sales $ 55,548 100.0 % $ 54,232 100.0 % $ 1,316 2.4 % $ 108,093 100.0 % $ 107,526 100.0 % $ 567 0.5 % Gross profit (1) 28,463 51.2 % 28,394 52.4 % 69 0.2 % 55,531 51.4 % 56,751 52.8 % (1,220 ) -2.1 % SG&A expenses 28,320 51.0 % 27,912 51.5 % 408 1.5 % 56,327 52.1 % 56,317 52.4 % 10 0.0 % New store pre-opening costs 473 0.9 % - 0.0 % 473 100.0 % 568 0.5 % - 0.0 % 568 100.0 % Loss from operations $ (330 ) -0.6 % $ 482 0.9 % $ (812 ) N/M $ (1,364 ) -1.3 % $ 434 0.4 % $ (1,798 ) N/M (1) Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany transactions. Refer to the reconciliation of gross profit by segment to consolidated gross profit presented under the Reconciliation of Segment Results to Consolidated Income (Loss) Before Income Taxes above. Retail sales by major product category are as follows: Quarter Ended Change Six Months Ended Change May 30, 2026 May 31, 2025 (1) Dollars Percent May 30, 2026 May 31, 2025 (1) Dollars Percent Bassett Custom Upholstery $ 32,301 58.1 % $ 30,998 57.2 % $ 1,303 4.2 % $ 61,625 57.0 % $ 62,185 57.8 % $ (560 ) -0.9 % Bassett Leather Imports 772 1.4 % 333 0.6 % 439 131.8 % 1,319 1.2 % 568 0.5 % 751 132.2 % Bassett Custom Wood 8,119 14.6 % 8,468 15.6 % (349 ) -4.1 % 16,261 15.0 % 16,174 15.0 % 87 0.5 % Bassett Casegoods 7,080 12.7 % 7,072 13.0 % 8 0.1 % 14,807 13.7 % 13,724 12.8 % 1,083 7.9 % Accessories, mattresses and other (2) 7,276 13.1 % 7,361 13.6 % (85 ) -1.2 % 14,081 13.0 % 14,875 13.8 % (794 ) -5.3 % Total $ 55,548 100.0 % $ 54,232 100.0 % $ 1,316 2.4 % $ 108,093 100.0 % $ 107,526 100.0 % $ 567 0.5 % (1) Certain amounts within Bassett Custom Upholstery and Bassett Leather Imports have been reclassified to conform to the 2026 presentation. (2) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. Analysis of Quarterly Results - Retail Net sales for the three months ended May 30, 2026 increased $1,316 or 2.4% over the prior year period. Written sales (the value of sales orders taken but not delivered) increased 9.5% over the second quarter of 2025. Gross margin for the three months ended May 30, 2026 declined 120 basis points from the prior period primarily due to lower margins on in-line goods as the full effect of the mid-January price increase was not realized for the entire quarter coupled with lower margins on clearance goods as we continue to be more aggressive in cycling through returned goods and floor samples. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended May 30, 2026 decreased 50 basis points from the prior year period. Excluding $569 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales decreased 150 basis points as compared to 2025. This decrease was primarily due to lower health insurance and workers compensation costs from better claim experience and improved efficiency in the warehouse and delivery operation. 28 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) During the three months ended May 30, 2026, we incurred $473 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio market, which opened late in the second quarter, and Orlando, Florida market, expected to open by the end of the third quarter of fiscal 2026. Prior to opening a new store we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight-line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 to 45 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to $600 per store. We generally expect that new stores will operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break even, we do realize additional wholesale sales volume sold through each new store that leverages the fixed costs in our wholesale business. Analysis of Year-to-Date Results - Retail Net sales for the six months ended May 30, 2026 increased $567 or 0.5% over the prior year. Written sales (the value of sales orders taken but not delivered) increased 4.6% over the first six months of 2025. Gross margin for the six months ended May 30, 2026 declined 140 basis points from the prior period primarily due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff costs until mid-January of 2026 coupled with lower margins on clearance goods as we continue to be more aggressive in cycling through returned goods and floor samples. SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the six months ended May 30, 2026 decreased 30 basis points from the prior year period. Excluding $569 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales decreased 80 basis points as compared to 2025. This decrease was primarily due to lower health insurance and workers compensation costs from better claim experience and improved efficiency in the warehouse and delivery operation. During the six months ended May 30, 2026, we incurred $568 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio market, which opened late in the second quarter, and Orlando, Florida market, expected to open by the end of the third quarter of fiscal 2026. Retail Backlog Retail backlog at May 30, 2026 was $34,701 compared to $34,402 at November 29, 2025 and $34,091 at May 31, 2025. Corporate and Other 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. SG&A expenses of Corporate and other for the periods ended May 30, 2026 and May 31, 2025 are as follows: Quarter Ended Change Six Months Ended Change May 30, 2026 May 31, 2025 Dollars Percent May 30, 2026 May 31, 2025 Dollars Percent SG&A expenses $ 6,059 $ 6,521 $ (462 ) -7.1 % $ 12,176 $ 12,747 $ (571 ) -4.5 % 29 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Analysis of Results – Corporate and Other SG&A expenses included in Corporate and other for the three and six months ended May 30, 2026 decreased $462 or 7.1%, and $571 or 4.5%, respectively, from the prior year periods due primarily to lower incentive compensation costs. Other Items Affecting Net Income Interest Income Interest income for the three months ended May 30, 2026 declined $75 or 14.4% from the prior year due to lower interest income from CDs and interest-bearing cash. Interest income for the six months ended May 30, 2026 declined $81 or 7.5% from the prior year as lower interest income on CDs and interest-bearing cash equivalents was partially offset by $99 of interest received as a Federal income tax refund during the first quarter of fiscal 2026. Other Income (Loss), Net Other income, net, for the three months ended May 30, 2026 was $87 compared to a net loss of $422 for the prior year period, primarily due to increases in the cash surrender value of Company-owned life insurance. Other loss, net, for the six months ended May 30, 2026 declined $776 or 88% from the prior year period due to increases in the cash surrender value of Company-owned life insurance partially offset by increased interest expense from finance leases compared to the prior year period. Income Taxes 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 26.5% for the three and six months ended May 30, 2026. The effective rate 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 26.1% and 26.8% for the three and six months ended May 31, 2025, respectively. The effective rate differs from the federal statutory rate of 21% primarily due to the effects of state income taxes and various permanent differences. Liquidity and Capital Resources Cash Flows Cash provided by operating activities for the first six months of fiscal 2026 was $1,896 compared to cash provided by operations of $6,903 for the first six months of fiscal 2025, representing a decline of $5,007 in cash flows from operations. This decrease was primarily the result of lower income levels and negative changes in working capital which had been expected. Our overall cash position declined $5,375 during the first six months of 2026. During the first six months of fiscal 2026, we spent $2,592 on purchases of property and equipment, including tenant improvements to our new locations in Cincinnati, Ohio and Orlando, Florida as well as our new wholesale showroom space in High Point, North Carolina. We paid $470 to a former licensee to acquire a BHF located in Cherry Hill, New Jersey. We also paid $3,443 in dividends during the first six months of 2026. We repurchased $653 worth of shares under our stock repurchase program during the first six months of 2026 compared to repurchases of $1,158 in the prior year period. We expect capital expenditures for the full year to range from $10 million to $12 million. As of May 30, 2026, $17,601 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $53,890 on hand at May 30, 2026, 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. 30 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Debt and Other Obligations On May 15, 2024, we entered into the Credit Facility with our bank. This Credit Facility provides for a line of credit of up to $25,000. At May 30, 2026, we had $5,866 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. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth shall at no time be less than $120,000. 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 of not less than 1.2 times and ● Consolidated Lease Adjusted Leverage to EBITDAR Ratio not to exceed 3.35 times. At May 30, 2026, we were in compliance with the Consolidated Minimum Tangible Net Worth requirement. Since our used commitment was less than $8,250 at May 30, 2026, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. However, had we been required to test those ratios, we would have been in full compliance. Our availability under the Credit Facility is currently $19,134. On January 9, 2026, the Credit Facility was amended to extend the expiration date to January 31, 2029. We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of one of our licensee-owned stores, and we lease land and buildings used in our wholesale manufacturing operations. We also lease certain personal property such as lift trucks, office equipment and local delivery trucks. The present value of our obligations for leases with terms in excess of one year at May 30, 2026 is $88,517 and is included in our accompanying condensed consolidated balance sheet at May 30, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,656 at May 30, 2026. The remaining terms under these lease guarantees extend for five years. See Note 10 to our condensed consolidated financial statements for additional details regarding our lease guarantees. We provide post-employment benefits to certain current and former executives and management level employees of the Company. Included among these benefits are two defined-benefit plans with a combined projected benefit obligation of $6,950 at May 30, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $6,240 at May 30, 2026, the current portion of which is $327. See Note 9 to our condensed consolidated financial statements for additional information regarding these plans. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal year ended November 29, 2025. Off-Balance Sheet Arrangements We utilize stand-by letters of credit in the procurement of certain goods in the normal course of business. In addition, we have guaranteed certain lease obligations of licensee operators for some of their store locations. 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. Contingencies We are involved in various legal and environmental matters which arise in the normal course of business. 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 May 30, 2026. 31 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Item 3. Quantitative and Qualitative Disclosure about Market Risk: We are exposed to market risk from changes in the value of foreign currencies. Substantially all of our imports purchased outside of North America are denominated in U.S. dollars. Therefore, we believe that gains or losses resulting from changes in the value of foreign currencies relating to foreign purchases not denominated in U.S. dollars would not be material to our results from operations. We are exposed to market risk from changes in the cost and availability of raw materials used in our manufacturing processes, principally wood, woven fabric, and foam products. The cost of foam products, which are petroleum-based, is sensitive to changes in the price of oil. We are also exposed to commodity price risk related to diesel fuel prices for fuel used in our retail segment for home delivery as well as through amounts we are charged for logistical services by our service providers. We manage our exposure to that risk primarily through the application of fuel surcharges to our customers. We have potential exposure to market risk related to conditions in the commercial real estate market. Our retail real estate holdings of $23,179 at May 30, 2026 for Company-owned stores could suffer significant impairment in value if we are forced to close additional stores and sell or lease the related properties during periods of weakness in certain markets. Additionally, if we are required to assume responsibility for payment under the lease obligations of $3,656 which we have guaranteed on behalf of certain licensees as of May 30, 2026 we may not be able to secure sufficient sub-lease income in the current market to offset the payments required under the guarantees. We are also exposed to risk related to conditions in the commercial real estate rental market with respect to the right-of-use assets we carry on our balance sheet for leased retail store locations, manufacturing and warehouse facilities. At May 30, 2026, the unamortized balance of such right-of-use assets used in continuing operations totaled $77,453. Should we have to close or otherwise abandon one of these leased locations, we could incur additional impairment charges if rental market conditions do not support a fair value for the right of use asset in excess of its carrying value. Item 4. Controls and Procedures: The Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 32 of 35 PART II - OTHER INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Item 1. Legal Proceedings None Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The following table summarizes the stock repurchase activity by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act, for the three and six months ended May 30, 2026 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program: Total Shares Purchased Average Price Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) March 1, 2026 -April 4, 2026 22,210 (2) $ 14.45 22,000 $ 17,788 April 5, 2026 - May 2, 2026 - $ - - $ 17,788 May 3, 2026 - May 30, 2026 13,020 $ 14.40 13,020 $ 17,601 (1) The Company is authorized to repurchase Company stock under a plan which was originally announced in 1998. On March 9, 2022, the Board of Directors increased the remaining limit of the repurchase plan to $40,000. At May 30, 2026, $17,601 remained available for share repurchases under the plan. (2) Includes 210 shares deemed to be repurchased in connection with the vesting of awards. Item 3. Defaults Upon Senior Securities None. Item 5. Other Information (c) During the fiscal quarter ended May 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K) for the purchase or sale of the Company’s securities. Item 6. Exhibits a. Exhibits: Exhibit 3a – Articles of Incorporation as amended to date are incorporated herein by reference to the Exhibit to Form 10-Q for the fiscal quarter ended February 28, 1994. Exhibit 3b – By-laws as amended to date are incorporated herein by reference to Exhibit 3.1 to Form 8-K filed with the SEC on July 22, 2025 . Exhibit 10 – First Amendment to Eighth Amended and Restated Credit Agreement with Truist Bank dated January 9, 2026 is incorporated herein by reference to Exhibit 4B to Form 10-K filed with the SEC on February 5, 2026. Exhibit 31a – Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 33 of 35 PART II - OTHER INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES MAY 30, 2026 (Dollars in thousands except share and per share data) Exhibit 31b – Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32a – Chief Executive Officer’s certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 32b – Chief Financial Officer’s certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 101.INS Inline XBRL Instance Exhibit 101.SCH Inline XBRL Taxonomy Extension Schema Exhibit 101.CAL Inline XBRL Taxonomy Extension Calculation Exhibit 101.DEF Inline XBRL Taxonomy Extension Definition Exhibit 101.LAB Inline XBRL Taxonomy Extension Labels Exhibit 101.PRE Inline XBRL Taxonomy Extension Presentation Exhibit 104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 34 of 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. BASSETT FURNITURE INDUSTRIES, INCORPORATED /s/ Robert H. Spilman, Jr. Robert H. Spilman, Jr., Chairman and Chief Executive Officer July 1, 2026 /s/ J. Michael Daniel J. Michael Daniel, Senior Vice President and Chief Financial Officer July 1, 2026 35 of 35