巴塞特家具 (BSET) 2026财年第三季度业绩电话会议：营收与利润率改善lg...

核心要点

• 在零售和批发业务增长的支撑下，2026财年第三季度综合营收同比增长3.4%，达到8280万美元。
• 营业利润从59.3万美元（占销售额的0.7%）升至280万美元（占销售额的3.4%）。摊薄每股收益从0.09美元增至0.24美元。
• 综合毛利率扩大130个基点至57.5%。公司在毛利中计入100万美元关税退税收入，同时批发业务毛利率改善也作出了贡献。
• 零售净销售额增长4.5%至5420万美元，而零售签约销售额增长4.4%。批发净销售额增长5.7%至5370万美元，Lane Venture的总出货量上升44%。
• 电商签约销售额增长48%，网站交付销售额增长超过42%，线上平均订单价值增长33%。
• 在产生610万美元的经营活动现金流后，巴塞特在本季度末拥有的现金和短期投资为5340万美元。

核心财务数据

业务与运营业绩

本土软体家具拉动了产品增长，其中定制软体家具和定制功能软体家具推动了批发签约销售额的大部分增长。BenchMade餐桌椅系列也表现出色。

批发签约订单增长7.9%，主要得益于本土软体家具和Lane Venture两位数的增长。向批发客户发货的Lane Venture增长了28%，而在将该户外品牌引入Bassett Home Furnishings门店后，Lane Venture的总出货量增长了44%。

直营门店的签约销售额增长了4.4%。为期四周的完整劳动节促销活动（部分跨入2026财年第四季度）带来了9%的签约销售额增长，且签约毛利率有所提高。管理层表示，活动期间各个区域均实现增长。

数字业务表现依然强劲。在固定软体家具和功能软体家具的推动下，电商签约销售额增长了48%，网站交付销售额增长了42%以上，线上平均订单价值增长了33%。

在美国最高法院于2026年2月作出裁定宣布2025年根据《国际紧急经济权力法》（IEEPA）征收的关税无效后，巴塞特收到了280万美元的关税退款。公司在第三财季毛利中计入了100万美元，并预计主要将在第四财季确认剩余部分。巴塞特进口产品的比例不足25%。

公司在该季度结束后开设了奥兰多门店，使其直营零售门店数量达到60家。公司还准备在高点家具展（High Point Market）上首次推出面积达4.4万平方英尺的新展厅，并计划于明年春天将Heather Chadduck系列推向零售门店。

管理层业绩指引

巴塞特将2026财年资本支出预期从1000万至1200万美元下调至900万至1100万美元。预计第四财季资本支出为200万至400万美元。

管理层表示，公司仍按计划将年化费用运行率再降低150万至200万美元。第三财季业绩已基本完整反映了这些成本节约带来的季度效益。

对于2027财年，巴塞特计划开设两家门店。其中一家将替代原有门店，净增加一家门店。

管理层表示，随着7月中旬推出的定价策略生效，9月份零售签约毛利率有所改善。相关交付预计将于第四财季开始对损益表产生影响，不过管理层未量化具体潜在收益。管理层预计批发毛利率不会发生重大变化。

风险与关注领域

管理层将消费者描述为持谨慎态度，尽管对大型项目类订单的需求依然坚挺，但客户需要更长时间才能决定购买。低迷的房产市场活动、较高的按揭贷款利率、通胀以及更广泛的不确定性仍是主要关切。

由于常规在售产品的促销力度加大，零售毛利率有所下降。受燃料成本增加驱动的运出货运费用上涨，也限制了批发业务的经营杠杆效能。

本季度库存有所下降，尤其是进口产品和Club Level功能家具。管理层预计将继续保持库存管控，但不会再出现像第三财季那样大幅度的降幅。

分析师问答环节亮点

管理层表示，批发业务的单品销量下降了低个位数百分比，而单品价格上涨了不到10%。零售业务也呈现出大致相似的趋势。

鉴于“黑色星期五”在财年末的重要性，巴塞特计划在该促销期间采取更积极的策略。管理层预计促销不会对毛利率产生重大不利影响。

公司每季度继续对股息进行评估，但表示其现金状况依然强劲，不存在削减派息的压力。管理层还指出，第四财季通常是巴塞特现金流生成能力最强的一个季度。

业绩电话会议完整文字记录

---

完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and thank you for standing by. Welcome to the Bassett Furniture Industries Q3 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mike Daniel, Chief Financial Officer. Please go ahead.

John Daniel

Thank you, Latanya, for the introduction. Welcome to the Bassett Furniture Industries earnings call for the third quarter of fiscal 2026, which ended August 29, 2026.

Joining me today is our Chairman and CEO, Robert Spilman. We issued our news release and Form 10-Q yesterday after the market closed, and they're available on our website. After today's remarks, Rob and I will be open for questions. We will also post a transcript of this call on Bassett's Investor Relations website following the call.

During this call, certain statements we make may be considered forward-looking statements and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward-looking statements. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investors tab.

Now I'll turn things over to Rob. Rob?

Robert Spilman

Thank you, Mike. Good morning, everyone. We are pleased to report a 3.4% increase in consolidated revenue, bolstered by increases in both retail and wholesale sales. All product categories were positive, with domestic upholstery leading the way. Written retail sales from company-owned stores increased 4.4%, continuing the momentum from the second quarter in spite of 1 less week of the Labor Day promotion in the quarter compared to last year. Wholesale written orders were up 7.9% led by double-digit gains in domestic upholstery and the Lane Venture outdoor division.

Operating profit showed nice improvements thanks to sales increases in key product categories, improved expense control, and tariff refunds that offset tariff costs that were embedded in our balance sheet. It's important to note that Bassett imports less than 25% of our products. Therefore, refunds are much lower for us than for others. Mike will give you more color on the net impact of tariff refunds in his financial review.

Consolidated gross margins grew by 130 basis points, primarily due to improved wholesale margins and, to a lesser extent, tariff refunds. Retail gross profit fell by 80 basis points. We are encouraged by the gross margin improvement that we have seen since the pricing strategies that we implemented in July have started to take effect. The full 4-week Labor Day promotion that spilled into the current quarter generated a 9% written sales increase with improved written gross margins.

We've made progress on reducing operating expenses, which remains a key goal for our management team. SG&A, excluding pre-opening costs for the Orlando store, was 150 basis points lower than last year's third quarter. We're on track to meet our goal of reducing the annual run rate of expenses by an additional $1.5 million to $2 million. I'm pleased with the gains we've made on our strategic initiative, especially that is to grow sales from new and existing stores.

Our marketing team's ability to optimize and refine the media mix continues to produce positive outcomes. We had excellent response to our 84-page fall catalog, which featured curated room layouts and styling tips, along with new collections.

We have improved the visual presentation of our products on the website, helping consumers on their path to fully experience the Bassett brand. These efforts are paying off with e-commerce written sales up 48% this quarter and website delivered sales rising more than 42%. Average order value on the web was up 33%, which was propelled by stationary and motion upholstery categories.

Our technology investments during the past 2 years continue to enhance the website presentation and navigation, benefiting the user experience and driving the sales results that I just mentioned. Once again, our domestic custom furniture products drove the majority of our written wholesale sales gain. Custom upholstery and custom motion upholstery in particular was very strong. Also on the domestic front, our BenchMade dining program had a nice quarter. And once again, Lane Venture performed very well.

Our product team continues to seek new expressions of comfort and innovation to add to the assortment. We are extremely excited about the debut of our new 44,000-square-foot showroom at the High Point Market on October 15. We are in a new location designed to provide greater traffic and visibility while inspiring customers with a broad range of new products.

Our teams have worked hard to enhance the styling and appeal of the Bassett brand, which is embodied in the new showroom presentation. We recently announced our partnership with Birmingham-based interior decorator and textile designer Heather Chadduck. Heather is highly respected for her portfolio of design projects and for her successful line of textiles.

The highlight of our events in High Point will be the launch of a major new collection on which Heather collaborated with our internal team. The whole home collection features 30 furniture pieces with 5 finishes and 70 inline fabrics that she has personally curated. Heather says the collection feels timeless, but very organic and fresh.

The Heather Chadduck collection for Bassett will be in retail stores next spring. Our priority remains growth from existing and new stores, and we're happy to add another location, bringing our corporate retail store total to 60. Tomorrow, we are opening a new store in Orlando, which has a similar footprint to the 14,000-square-foot store we opened in May 2017 in Cincinnati. These are important markets and position us in quality real estate, catering to our targeted demographic profile.

We rely on our 2 dedicated distribution concepts, Bassett Design Centers and Bassett Custom Studios, for growth in the open market. Our 94 Design Centers and 64 Custom Studios currently represent over half of our wholesale business outside of the Bassett store network. With the low end of the market dominating so much of furniture retail in U.S. mid-sized towns, we view our dedicated dealer network as our local showcase of well-crafted custom home furnishings.

Our executive team has been traveling to these Bassett partner locations this summer with the goal of strengthening our collaboration with the dedicated network. We have been gathering input to formulate enhancements to the concepts for 2027 and beyond. For the quarter, shipments to our dedicated concepts were essentially flat, while our orders increased by 4.2%.

The natural extension of our wholesale outreach is our Bassett Hospitality Division, now operating for about 9 months. We've had several orders, but acknowledge that this effort will take time while we are gaining a foothold in the hospitality segment. All in all, we were pleased with our third quarter trajectory. Housing remains slow, and mortgage rates are in lockstep with the Federal Reserve's recent rate increases.

The ongoing effect of high inflation rates on the U.S. consumer continues to be a major concern. That said, we remain optimistic about managing through these challenges.

Now, I'll turn things over to Mike.

John Daniel

Thank you, Rob. In my commentary, the comparisons I'll discuss will be the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, unless otherwise noted. And let me start by discussing the $2.8 million in tariff refunds that we received from U.S. Customs and Border Protection as a result of the U.S. Supreme Court's February 2026 decision invalidating the IEEPA tariffs imposed by the President in 2025. Of this amount, $1 million was recorded as an increase in gross profit for this quarter, with additional amounts to be recorded primarily in the fourth quarter of 2026.

Tariff costs are capitalized into inventory at the time they are incurred and subsequently recognized in the income statement when those goods are sold to a third party. The high tariff costs recognized in the quarter were substantially offset by the tariff refund income that we recorded. As Rob pointed out, we import less than 25% of our products.

Total consolidated revenue was $82.8 million, an increase of $2.7 million, or 3.4%. This consisted of a $2.3 million or 4.5% increase in retail sales from our corporate-owned stores and a $400,000 or 1.4% decrease or increase in sales to external wholesale customers. Gross margin of 57.5% represented a 130-basis-point increase when compared to the prior year, primarily driven by the previously discussed tariff refund and partially offset by lower margins in the retail business.

The margin increase was also due to a higher mix of retail sales, which carry a higher gross margin than third-party wholesale sales. Selling, general and administrative expenses, excluding new store pre-opening costs, was 53.9% of sales, 150 basis points lower than the prior year. This decrease was driven primarily by increased leverage and fixed costs on higher sales in our retail segment, coupled with lower corporate expenses.

Operating income was $2.8 million or 3.4% of sales as compared to income of $593,000 or 0.7% of sales in the prior period. Diluted earnings per share were $0.24 versus $0.09 last year.

I'll now cover more details on our wholesale operations. Net sales were $53.7 million, up 5.7% compared to last year. This increase consisted of a 7.5% rise in shipments to the retail store network, a 28% increase in Lane Venture shipments to wholesale customers, and 3.7% more shipments to the open market. As previously discussed, we introduced Lane Venture outdoor brands in the Bassett Home Furnishings store during the first quarter of 2026 and have included those shipments to the store network in the 7.5% increase for the retail stores.

In total, shipments of Lane Venture were up 44%. Gross margins rose 150 basis points, primarily due to the previously discussed IEEPA tariff refund, along with improved margins in both the domestic wood and the Lane Venture operations. The increase was partially offset by lower margins in the imported wood and upholstery, which carried tariff costs.

SG&A expenses as a percentage of sales were flat as the effects of greater leverage of fixed costs from higher sales were offset by greater outbound freight expenses, primarily driven by higher fuel costs.

Now, moving on to our retail store operations, net sales of $54.2 million represented a $2.3 million or 4.5% increase over the prior year. Written sales, the value of sales orders taken but not delivered, increased 4.4%. Gross margin at 51.5% is a decline of 90 basis points, primarily due to lower margins on inline goods from increased promotional activity. Total SG&A expenses, excluding new store pre-opening costs, as a percentage of sales decreased 130 basis points due to greater leverage of fixed costs, higher sales levels, and lower advertising and marketing costs, partially offset by higher employee costs.

During the quarter, we incurred $144,000 of new store pre-opening costs associated with our Orlando location opening tomorrow. Before opening a new store, we incur such expenses as rent, training costs, and other payroll-related costs. These costs generally range between $200,000 and $400,000 per store, depending on the location and the period of time between when we take physical possession of the store space and the opening.

Now, I will cover our liquidity position, which remains strong with $53.4 million of cash and short-term investments. During the quarter, we generated $6.1 million of operating cash flow. We also spent $4.3 million on capital expenditures, which was significantly higher than the recent run rate. This increased spending was primarily related to the Orlando store that opens tomorrow and the build-out of our new showroom in High Point.

We expect capital expenditures in the fourth quarter to be between $2 million and $4 million and are updating our full capital expectations for 2026 to range between $9 million and $11 million versus our prior forecast of $10 million to $12 million. We continue to pay our quarterly dividend and repurchase shares optimistically or opportunistically, I should say. We spent $1.7 million on dividends and $126,000 on share buybacks in the quarter. We remain committed to delivering shareholder returns through dividends and, when appropriate, share buybacks.

Now we'll open up the line for questions. Latanya, please provide instructions on how to do so.

Operator

[Operator Instructions] Our first question will be coming from the line of Anthony Lebiedzinski of Sidoti.

分析师问答

Anthony Lebiedzinski

And certainly nice job improving the top and bottom line in the quarter. So, yes -- as we look at the reported revenue, can you give us just a rough idea as far as the impact of pricing versus unit volumes that you saw in the quarter?

Robert Spilman

Mike's digging that out right now. Anthony, you asked that last quarter as well.

Anthony Lebiedzinski

Yes, well, just as we think about all the noise with the...

Robert Spilman

That's a good question given what's going on in the world today.

John Daniel

Yes, here we go. So yes, on the wholesale side, units were down slightly. I won't give you the exact percent, but it was low single digits. And unit price was up, and I would say up in the less than double-digit range. -- and the -- on the retail side, pretty similar, pretty similar. Let's just leave it at that.

Anthony Lebiedzinski

Okay, fair enough. Got you. And then, certainly it was encouraging to hear that you guys did very well during your Labor Day promotion with your written sales. Just curious, did you see any notable regional differences throughout the country, or was it more or less kind of consistent?

Robert Spilman

No, it's pretty consistent. All the regions were up.

Anthony Lebiedzinski

That's good to hear. Okay. And then, so earlier this year you guys opened a new store and acquired another dealer store, and you're about to open a new store in Orlando tomorrow. So as we kind of look forward, I mean, how do we think about the additional store locations in FY '27 and beyond? What's the latest thinking on that?

Robert Spilman

We will open 2 stores next year, Anthony. And honestly, beyond that, we don't have 1 in the queue.We are looking at upgrading existing locations as part of our consideration on future capital expenses. But at the moment, we have 2 for '27.

John Daniel

And Anthony, let me just add, one of those is a reposition, so there'll be a closure and an opening. So it's net up 1.

Anthony Lebiedzinski

Got you. Okay. Okay. And then my last question before I pass it on to others. So as it relates to your comment about being more aggressive with Black Friday promotions, can you provide more details as to what your plans are? How do we think about the impact that may have on margins? I don't think it's going to have a big impact.

Robert Spilman

I don't think it's going to have a big impact on the margin, Anthony. It's just Black Friday has for us grown into such a big event and closes the year, that we just want to make sure that we end the year with a bang, but I don't anticipate an acceptable diminishing of margin as a result.

Operator

And our next question will be coming from the line of Linda Bolton-Weiser of Water Tower Research.

Linda Weiser

Yes. So I just wanted to ask about your retail sales growth in the quarter was pretty good. And you've had a couple quarters here of pretty decent growth. However, the growth is not as strong as what you saw in Q4. So, just stepping back in terms of the larger picture, I'm wondering, how would you characterize consumer behavior right now? Are they still buying to replace things that they bought during the pandemic, and here it is 6 years later and they want to buy something new?

And if so, what do you think is making the slower growth? Is it just the concern from the war in the Middle East?

And then what general impact do you think the higher mortgage rates, interest rates will have on your business going forward? Do you think it'll slow it even further?

Robert Spilman

Well, Linda, this is Rob. We haven't met yet. I look forward to meeting you. But look, there's a lot of facets to the answer to your question. I would say for us, we feel the consumer remains cautious. We have nice interest in project business, which drives an appreciable part of our business. So the bigger ticket business was very good in the quarter. But I do feel that folks are taking longer to pull the trigger. We are doing the work, and they may not always pull the trigger.

So it's not what I would characterize as an easy environment at the moment for us. I would say yes. Just the momentum, and this is not unique to us by any means, and you can certainly read about it and you know about it. Just the general malaise in the housing sector, we were looking for more of an uptick nationally than we've experienced this year, and it hasn't materialized in that regard.

And certainly, if you raise mortgage rates further than they were, that is not providing a tailwind in that regard. So, I think our guys did a nice job of closing the business that came through the door, and again, our project business has been strong but cautious, conservative, and you can understand why. There's a lot of uncertainty out there right now.

John Daniel

And Linda, I would add to what Rob said. If you look at the pace of business over the course of the year, you look back at our first quarter, our first quarter was pretty slow. I think we were up 9.5% written in Q2. And we did see a nice pickup in the May timeframe, and we had a very successful Memorial Day event.

The other thing I would say is if you look at our quarter, you have to remember, at least Labor Day last year was basically 2 days after the quarter end last year compared to this year, which was a week and 2 days after quarter end. So there's a week time shift in that promotion, and that's why Rob pointed out that for the 4-week promotion, we were actually up 9%, but it doesn't show, at least in the pace of business for the quarter, because a big chunk of that ends up in the fourth quarter.

Linda Weiser

Okay. That's very helpful color. So turning to margins, your gross margin was up nicely, and I think it was up even if you want to strip out that positive refund effect. So it was up year-over-year. Do you think with more effect from the retail price increase in the fourth quarter that the gross margin can be up even more year-over-year? Let's say excluding the tariff refund. Do you think that could be the case in the fourth quarter?

Robert Spilman

Well, we are still in the first month of the fourth quarter, Linda. It is tomorrow. So we haven't seen the retail gross margin strategy on a piece of paper yet, on a P&L. But the written margins are looking better for the month of September at retail. We are very hopeful that that's going to materialize. We think it will.

So that is something that will help us in the fourth quarter. I don't expect to see a lot of difference in the wholesale margin. So we do have that going for us. It's hard to quantify at this moment because we instituted a new pricing strategy in mid-July, and those deliveries will be showing through on the P&L here this month, or begin to show this month.

Linda Weiser

Okay. And then, I'm just curious, the SG&A expense, it was up slightly in dollar terms both year-over-year and sequentially from the second quarter. I'm just wondering, like your $1.5 million to $2 million of savings, is that primarily reflected in SG&A or not?

And did we see any of that in the quarter, or are we going to see more of a positive effect of that in the fourth quarter?

John Daniel

Yes, so during the quarter, we essentially did realize all of the quarterly effect of that $1.5 million to $2 million. But when you look at the SG&A by itself, you got to remember more of our sales, consolidated sales came from retail, which carries more SG&A expense. So I think, as you're analyzing that SG&A, that's kind of the big difference.

Linda Weiser

Okay. Okay. That's helpful. And then, I noticed that your inventory reduction was very, very good in the quarter, and it did boost your operating cash flow, which was quite strong, even excluding that tariff refund. So what is going on there? Why did the inventory come down so much? And then can we expect more inventory reduction in the fourth quarter?

Robert Spilman

Well, do you want to talk about the tariff?

John Daniel

Well, keep in mind there's a chunk in inventory related to the tariff that's going to be coming through on the P&L this quarter. But, ex that, we still had nice reduction in inventory primarily around, frankly, imported product.

Robert Spilman

Our Club Level motion product inventory came down nicely, and we've been working on that. Also, we're doing less of the cut and sew fabric where we bring the kits in from offshore, still important to us. But our consumers are gravitating more and more to the special order, and that's cut and sewn domestically, so we don't have the carrying cost of the pre-sewn kits. So we're certainly working hard to continue reductions, but I don't think you're going to see something in this next quarter as dramatic as you just saw this quarter.

Linda Weiser

Okay, sounds good. And then my last question just has to do with sort of your capital allocation policy. Your cash dividends per year are nearly $7 million. And in most of the recent years, you have been using balance sheet cash to pay the dividend. And I'm not sure how it's going to turn out this year, but it looks like that might be the case again for FY '26, that you'll use balance sheet cash to pay at least part of it. Have you considered reducing the dividend just to be able to invest more behind growth initiatives in your business?

Robert Spilman

We consider the dividend every quarter. We think it's a very important part of what we do. We think our cash balance is appropriate and strong. And yes, every quarter we discuss capital allocations for whether it be growth or return to shareholders. But I think Bassett has a history of returning dividends to shareholders, and I don't think we're anywhere near a situation where we would feel like we're under pressure on the dividend.

And, frankly, we need to vet any kind of capital expenses based on the returns that we receive from those. And so we're pretty conservative about that. So, yes, we certainly look at all these things as we should and as appropriate. And obviously, we would strive to pay the dividend out of operating cash flow, and we haven't done it every year, but we've done a lot of years, so we -- that's our objective, but we do view the dividend as an important part of the picture so long as the Board feels the same way.

John Daniel

And one thing I'd add to that, Linda, is keep in mind that the fourth quarter is our best cash generation quarter. So, if you look at it right now, you certainly get that come to the conclusion you just did for the year, but hopefully, the cash will come through as we expect for the fourth quarter.

Operator

I'm showing no further questions. I would now like to turn the call to Rob Spilman, Chairman and CEO, for closing remarks.

Robert Spilman

Okay, thank you very much. We look forward to seeing some of you soon in our new showroom in High Point, touring you around this space. We're very excited about it.

I'll close by just saying, thank you for your interest in Bassett Furniture and for your support of our business. Good day.

Operator

This concludes today's conference. Thank you for participating. You may now disconnect.

Operator

Good day, and thank you for standing by. Welcome to the Bassett Furniture Industries Q3 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mike Daniel, Chief Financial Officer. Please go ahead.

John Daniel

Thank you, Latanya, for the introduction. Welcome to the Bassett Furniture Industries earnings call for the third quarter of fiscal 2026, which ended August 29, 2026.

Joining me today is our Chairman and CEO, Robert Spilman. We issued our news release and Form 10-Q yesterday after the market closed, and they're available on our website. After today's remarks, Rob and I will be open for questions. We will also post a transcript of this call on Bassett's Investor Relations website following the call.

During this call, certain statements we make may be considered forward-looking statements and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward-looking statements. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investors tab.

Now I'll turn things over to Rob. Rob?

Robert Spilman

Thank you, Mike. Good morning, everyone. We are pleased to report a 3.4% increase in consolidated revenue, bolstered by increases in both retail and wholesale sales. All product categories were positive, with domestic upholstery leading the way. Written retail sales from company-owned stores increased 4.4%, continuing the momentum from the second quarter in spite of 1 less week of the Labor Day promotion in the quarter compared to last year. Wholesale written orders were up 7.9% led by double-digit gains in domestic upholstery and the Lane Venture outdoor division.

Operating profit showed nice improvements thanks to sales increases in key product categories, improved expense control, and tariff refunds that offset tariff costs that were embedded in our balance sheet. It's important to note that Bassett imports less than 25% of our products. Therefore, refunds are much lower for us than for others. Mike will give you more color on the net impact of tariff refunds in his financial review.

Consolidated gross margins grew by 130 basis points, primarily due to improved wholesale margins and, to a lesser extent, tariff refunds. Retail gross profit fell by 80 basis points. We are encouraged by the gross margin improvement that we have seen since the pricing strategies that we implemented in July have started to take effect. The full 4-week Labor Day promotion that spilled into the current quarter generated a 9% written sales increase with improved written gross margins.

We've made progress on reducing operating expenses, which remains a key goal for our management team. SG&A, excluding pre-opening costs for the Orlando store, was 150 basis points lower than last year's third quarter. We're on track to meet our goal of reducing the annual run rate of expenses by an additional $1.5 million to $2 million. I'm pleased with the gains we've made on our strategic initiative, especially that is to grow sales from new and existing stores.

Our marketing team's ability to optimize and refine the media mix continues to produce positive outcomes. We had excellent response to our 84-page fall catalog, which featured curated room layouts and styling tips, along with new collections.

We have improved the visual presentation of our products on the website, helping consumers on their path to fully experience the Bassett brand. These efforts are paying off with e-commerce written sales up 48% this quarter and website delivered sales rising more than 42%. Average order value on the web was up 33%, which was propelled by stationary and motion upholstery categories.

Our technology investments during the past 2 years continue to enhance the website presentation and navigation, benefiting the user experience and driving the sales results that I just mentioned. Once again, our domestic custom furniture products drove the majority of our written wholesale sales gain. Custom upholstery and custom motion upholstery in particular was very strong. Also on the domestic front, our BenchMade dining program had a nice quarter. And once again, Lane Venture performed very well.

Our product team continues to seek new expressions of comfort and innovation to add to the assortment. We are extremely excited about the debut of our new 44,000-square-foot showroom at the High Point Market on October 15. We are in a new location designed to provide greater traffic and visibility while inspiring customers with a broad range of new products.

Our teams have worked hard to enhance the styling and appeal of the Bassett brand, which is embodied in the new showroom presentation. We recently announced our partnership with Birmingham-based interior decorator and textile designer Heather Chadduck. Heather is highly respected for her portfolio of design projects and for her successful line of textiles.

The highlight of our events in High Point will be the launch of a major new collection on which Heather collaborated with our internal team. The whole home collection features 30 furniture pieces with 5 finishes and 70 inline fabrics that she has personally curated. Heather says the collection feels timeless, but very organic and fresh.

The Heather Chadduck collection for Bassett will be in retail stores next spring. Our priority remains growth from existing and new stores, and we're happy to add another location, bringing our corporate retail store total to 60. Tomorrow, we are opening a new store in Orlando, which has a similar footprint to the 14,000-square-foot store we opened in May 2017 in Cincinnati. These are important markets and position us in quality real estate, catering to our targeted demographic profile.

We rely on our 2 dedicated distribution concepts, Bassett Design Centers and Bassett Custom Studios, for growth in the open market. Our 94 Design Centers and 64 Custom Studios currently represent over half of our wholesale business outside of the Bassett store network. With the low end of the market dominating so much of furniture retail in U.S. mid-sized towns, we view our dedicated dealer network as our local showcase of well-crafted custom home furnishings.

Our executive team has been traveling to these Bassett partner locations this summer with the goal of strengthening our collaboration with the dedicated network. We have been gathering input to formulate enhancements to the concepts for 2027 and beyond. For the quarter, shipments to our dedicated concepts were essentially flat, while our orders increased by 4.2%.

The natural extension of our wholesale outreach is our Bassett Hospitality Division, now operating for about 9 months. We've had several orders, but acknowledge that this effort will take time while we are gaining a foothold in the hospitality segment. All in all, we were pleased with our third quarter trajectory. Housing remains slow, and mortgage rates are in lockstep with the Federal Reserve's recent rate increases.

The ongoing effect of high inflation rates on the U.S. consumer continues to be a major concern. That said, we remain optimistic about managing through these challenges.

Now, I'll turn things over to Mike.

John Daniel

Thank you, Rob. In my commentary, the comparisons I'll discuss will be the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, unless otherwise noted. And let me start by discussing the $2.8 million in tariff refunds that we received from U.S. Customs and Border Protection as a result of the U.S. Supreme Court's February 2026 decision invalidating the IEEPA tariffs imposed by the President in 2025. Of this amount, $1 million was recorded as an increase in gross profit for this quarter, with additional amounts to be recorded primarily in the fourth quarter of 2026.

Tariff costs are capitalized into inventory at the time they are incurred and subsequently recognized in the income statement when those goods are sold to a third party. The high tariff costs recognized in the quarter were substantially offset by the tariff refund income that we recorded. As Rob pointed out, we import less than 25% of our products.

Total consolidated revenue was $82.8 million, an increase of $2.7 million, or 3.4%. This consisted of a $2.3 million or 4.5% increase in retail sales from our corporate-owned stores and a $400,000 or 1.4% decrease or increase in sales to external wholesale customers. Gross margin of 57.5% represented a 130-basis-point increase when compared to the prior year, primarily driven by the previously discussed tariff refund and partially offset by lower margins in the retail business.

The margin increase was also due to a higher mix of retail sales, which carry a higher gross margin than third-party wholesale sales. Selling, general and administrative expenses, excluding new store pre-opening costs, was 53.9% of sales, 150 basis points lower than the prior year. This decrease was driven primarily by increased leverage and fixed costs on higher sales in our retail segment, coupled with lower corporate expenses.

Operating income was $2.8 million or 3.4% of sales as compared to income of $593,000 or 0.7% of sales in the prior period. Diluted earnings per share were $0.24 versus $0.09 last year.

I'll now cover more details on our wholesale operations. Net sales were $53.7 million, up 5.7% compared to last year. This increase consisted of a 7.5% rise in shipments to the retail store network, a 28% increase in Lane Venture shipments to wholesale customers, and 3.7% more shipments to the open market. As previously discussed, we introduced Lane Venture outdoor brands in the Bassett Home Furnishings store during the first quarter of 2026 and have included those shipments to the store network in the 7.5% increase for the retail stores.

In total, shipments of Lane Venture were up 44%. Gross margins rose 150 basis points, primarily due to the previously discussed IEEPA tariff refund, along with improved margins in both the domestic wood and the Lane Venture operations. The increase was partially offset by lower margins in the imported wood and upholstery, which carried tariff costs.

SG&A expenses as a percentage of sales were flat as the effects of greater leverage of fixed costs from higher sales were offset by greater outbound freight expenses, primarily driven by higher fuel costs.

Now, moving on to our retail store operations, net sales of $54.2 million represented a $2.3 million or 4.5% increase over the prior year. Written sales, the value of sales orders taken but not delivered, increased 4.4%. Gross margin at 51.5% is a decline of 90 basis points, primarily due to lower margins on inline goods from increased promotional activity. Total SG&A expenses, excluding new store pre-opening costs, as a percentage of sales decreased 130 basis points due to greater leverage of fixed costs, higher sales levels, and lower advertising and marketing costs, partially offset by higher employee costs.

During the quarter, we incurred $144,000 of new store pre-opening costs associated with our Orlando location opening tomorrow. Before opening a new store, we incur such expenses as rent, training costs, and other payroll-related costs. These costs generally range between $200,000 and $400,000 per store, depending on the location and the period of time between when we take physical possession of the store space and the opening.

Now, I will cover our liquidity position, which remains strong with $53.4 million of cash and short-term investments. During the quarter, we generated $6.1 million of operating cash flow. We also spent $4.3 million on capital expenditures, which was significantly higher than the recent run rate. This increased spending was primarily related to the Orlando store that opens tomorrow and the build-out of our new showroom in High Point.

We expect capital expenditures in the fourth quarter to be between $2 million and $4 million and are updating our full capital expectations for 2026 to range between $9 million and $11 million versus our prior forecast of $10 million to $12 million. We continue to pay our quarterly dividend and repurchase shares optimistically or opportunistically, I should say. We spent $1.7 million on dividends and $126,000 on share buybacks in the quarter. We remain committed to delivering shareholder returns through dividends and, when appropriate, share buybacks.

Now we'll open up the line for questions. Latanya, please provide instructions on how to do so.

Operator

[Operator Instructions] Our first question will be coming from the line of Anthony Lebiedzinski of Sidoti.

Anthony Lebiedzinski

And certainly nice job improving the top and bottom line in the quarter. So, yes -- as we look at the reported revenue, can you give us just a rough idea as far as the impact of pricing versus unit volumes that you saw in the quarter?

Robert Spilman

Mike's digging that out right now. Anthony, you asked that last quarter as well.

Anthony Lebiedzinski

Yes, well, just as we think about all the noise with the...

Robert Spilman

That's a good question given what's going on in the world today.

John Daniel

Yes, here we go. So yes, on the wholesale side, units were down slightly. I won't give you the exact percent, but it was low single digits. And unit price was up, and I would say up in the less than double-digit range. -- and the -- on the retail side, pretty similar, pretty similar. Let's just leave it at that.

Anthony Lebiedzinski

Okay, fair enough. Got you. And then, certainly it was encouraging to hear that you guys did very well during your Labor Day promotion with your written sales. Just curious, did you see any notable regional differences throughout the country, or was it more or less kind of consistent?

Robert Spilman

No, it's pretty consistent. All the regions were up.

Anthony Lebiedzinski

That's good to hear. Okay. And then, so earlier this year you guys opened a new store and acquired another dealer store, and you're about to open a new store in Orlando tomorrow. So as we kind of look forward, I mean, how do we think about the additional store locations in FY '27 and beyond? What's the latest thinking on that?

Robert Spilman

We will open 2 stores next year, Anthony. And honestly, beyond that, we don't have 1 in the queue.We are looking at upgrading existing locations as part of our consideration on future capital expenses. But at the moment, we have 2 for '27.

John Daniel

And Anthony, let me just add, one of those is a reposition, so there'll be a closure and an opening. So it's net up 1.

Anthony Lebiedzinski

Got you. Okay. Okay. And then my last question before I pass it on to others. So as it relates to your comment about being more aggressive with Black Friday promotions, can you provide more details as to what your plans are? How do we think about the impact that may have on margins? I don't think it's going to have a big impact.

Robert Spilman

I don't think it's going to have a big impact on the margin, Anthony. It's just Black Friday has for us grown into such a big event and closes the year, that we just want to make sure that we end the year with a bang, but I don't anticipate an acceptable diminishing of margin as a result.

Operator

And our next question will be coming from the line of Linda Bolton-Weiser of Water Tower Research.

Linda Weiser

Yes. So I just wanted to ask about your retail sales growth in the quarter was pretty good. And you've had a couple quarters here of pretty decent growth. However, the growth is not as strong as what you saw in Q4. So, just stepping back in terms of the larger picture, I'm wondering, how would you characterize consumer behavior right now? Are they still buying to replace things that they bought during the pandemic, and here it is 6 years later and they want to buy something new?

And if so, what do you think is making the slower growth? Is it just the concern from the war in the Middle East?

And then what general impact do you think the higher mortgage rates, interest rates will have on your business going forward? Do you think it'll slow it even further?

Robert Spilman

Well, Linda, this is Rob. We haven't met yet. I look forward to meeting you. But look, there's a lot of facets to the answer to your question. I would say for us, we feel the consumer remains cautious. We have nice interest in project business, which drives an appreciable part of our business. So the bigger ticket business was very good in the quarter. But I do feel that folks are taking longer to pull the trigger. We are doing the work, and they may not always pull the trigger.

So it's not what I would characterize as an easy environment at the moment for us. I would say yes. Just the momentum, and this is not unique to us by any means, and you can certainly read about it and you know about it. Just the general malaise in the housing sector, we were looking for more of an uptick nationally than we've experienced this year, and it hasn't materialized in that regard.

And certainly, if you raise mortgage rates further than they were, that is not providing a tailwind in that regard. So, I think our guys did a nice job of closing the business that came through the door, and again, our project business has been strong but cautious, conservative, and you can understand why. There's a lot of uncertainty out there right now.

John Daniel

And Linda, I would add to what Rob said. If you look at the pace of business over the course of the year, you look back at our first quarter, our first quarter was pretty slow. I think we were up 9.5% written in Q2. And we did see a nice pickup in the May timeframe, and we had a very successful Memorial Day event.

The other thing I would say is if you look at our quarter, you have to remember, at least Labor Day last year was basically 2 days after the quarter end last year compared to this year, which was a week and 2 days after quarter end. So there's a week time shift in that promotion, and that's why Rob pointed out that for the 4-week promotion, we were actually up 9%, but it doesn't show, at least in the pace of business for the quarter, because a big chunk of that ends up in the fourth quarter.

Linda Weiser

Okay. That's very helpful color. So turning to margins, your gross margin was up nicely, and I think it was up even if you want to strip out that positive refund effect. So it was up year-over-year. Do you think with more effect from the retail price increase in the fourth quarter that the gross margin can be up even more year-over-year? Let's say excluding the tariff refund. Do you think that could be the case in the fourth quarter?

Robert Spilman

Well, we are still in the first month of the fourth quarter, Linda. It is tomorrow. So we haven't seen the retail gross margin strategy on a piece of paper yet, on a P&L. But the written margins are looking better for the month of September at retail. We are very hopeful that that's going to materialize. We think it will.

So that is something that will help us in the fourth quarter. I don't expect to see a lot of difference in the wholesale margin. So we do have that going for us. It's hard to quantify at this moment because we instituted a new pricing strategy in mid-July, and those deliveries will be showing through on the P&L here this month, or begin to show this month.

Linda Weiser

Okay. And then, I'm just curious, the SG&A expense, it was up slightly in dollar terms both year-over-year and sequentially from the second quarter. I'm just wondering, like your $1.5 million to $2 million of savings, is that primarily reflected in SG&A or not?

And did we see any of that in the quarter, or are we going to see more of a positive effect of that in the fourth quarter?

John Daniel

Yes, so during the quarter, we essentially did realize all of the quarterly effect of that $1.5 million to $2 million. But when you look at the SG&A by itself, you got to remember more of our sales, consolidated sales came from retail, which carries more SG&A expense. So I think, as you're analyzing that SG&A, that's kind of the big difference.

Linda Weiser

Okay. Okay. That's helpful. And then, I noticed that your inventory reduction was very, very good in the quarter, and it did boost your operating cash flow, which was quite strong, even excluding that tariff refund. So what is going on there? Why did the inventory come down so much? And then can we expect more inventory reduction in the fourth quarter?

Robert Spilman

Well, do you want to talk about the tariff?

John Daniel

Well, keep in mind there's a chunk in inventory related to the tariff that's going to be coming through on the P&L this quarter. But, ex that, we still had nice reduction in inventory primarily around, frankly, imported product.

Robert Spilman

Our Club Level motion product inventory came down nicely, and we've been working on that. Also, we're doing less of the cut and sew fabric where we bring the kits in from offshore, still important to us. But our consumers are gravitating more and more to the special order, and that's cut and sewn domestically, so we don't have the carrying cost of the pre-sewn kits. So we're certainly working hard to continue reductions, but I don't think you're going to see something in this next quarter as dramatic as you just saw this quarter.

Linda Weiser

Okay, sounds good. And then my last question just has to do with sort of your capital allocation policy. Your cash dividends per year are nearly $7 million. And in most of the recent years, you have been using balance sheet cash to pay the dividend. And I'm not sure how it's going to turn out this year, but it looks like that might be the case again for FY '26, that you'll use balance sheet cash to pay at least part of it. Have you considered reducing the dividend just to be able to invest more behind growth initiatives in your business?

Robert Spilman

We consider the dividend every quarter. We think it's a very important part of what we do. We think our cash balance is appropriate and strong. And yes, every quarter we discuss capital allocations for whether it be growth or return to shareholders. But I think Bassett has a history of returning dividends to shareholders, and I don't think we're anywhere near a situation where we would feel like we're under pressure on the dividend.

And, frankly, we need to vet any kind of capital expenses based on the returns that we receive from those. And so we're pretty conservative about that. So, yes, we certainly look at all these things as we should and as appropriate. And obviously, we would strive to pay the dividend out of operating cash flow, and we haven't done it every year, but we've done a lot of years, so we -- that's our objective, but we do view the dividend as an important part of the picture so long as the Board feels the same way.

John Daniel

And one thing I'd add to that, Linda, is keep in mind that the fourth quarter is our best cash generation quarter. So, if you look at it right now, you certainly get that come to the conclusion you just did for the year, but hopefully, the cash will come through as we expect for the fourth quarter.

Operator

I'm showing no further questions. I would now like to turn the call to Rob Spilman, Chairman and CEO, for closing remarks.

Robert Spilman

Okay, thank you very much. We look forward to seeing some of you soon in our new showroom in High Point, touring you around this space. We're very excited about it.

I'll close by just saying, thank you for your interest in Bassett Furniture and for your support of our business. Good day.

Operator

This concludes today's conference. Thank you for participating. You may now disconnect.

原文链接