Quarterly Report for Quarter Ending August 29, 2026 (Form 10-Q)

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, the imposition of new or increased tariffs, retaliatory tariffs, duties and trade limitations with respect to foreign-sourced products, and the economic impact of increases in the cost of fuel and materials resulting from the ongoing conflict with Iran.

•	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.

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 is the primary channel for brand advertising and customer acquisition, supplemented by balanced spending between direct mail, including catalogs, and advertising through streaming television services.

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 39% for the nine months ended August 29, 2026 while delivered sales increased 34%. 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 of 2026 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 in early October of 2026.

Results of Operations - Period ended August 29, 2026 compared with the period ended August 30, 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 are reluctant to sell their homes with the low-rate mortgages, and buyers are hesitant to commit amid high prices 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.

Tariff Refund:

During the second fiscal quarter of 2026, we received $2,832 in tariff refunds from U.S. Customs and Border Protection as a result of the U.S. Supreme Court's February 2026 decision invalidating the tariffs imposed by the President of the United States in 2025 under the International Emergency Economic Powers Act of 1977 ("IEEPA"). Of this amount, $956 was recorded as an increase in gross profit for the third quarter with additional amounts to be recorded primarily in the fourth quarter of 2026 as the related inventory is sold. 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 which had been capitalized into inventory that was sold through the end of the third quarter of 2026 were substantially offset by the tariff refund income recognized as a reduction in the income statement during the quarter.

Consolidated results of operations for the three and nine months ended August 29, 2026 and August 30, 2025 are as follows:

		Quarter Ended																Change								Nine Months Ended																Change
		August 29, 2026								August 30, 2025								Dollars				Percent				August 29, 2026								August 30, 2025								Dollars				Percent
Net sales		$	82,838				100.0	%		$	80,103				100.0	%		$	2,735				3.4	%		$	246,931				100.0	%		$	246,613				100.0	%		$	318				0.1	%
Cost of goods sold			35,222				42.5	%			35,109				43.8	%			113				0.3	%			106,803				43.3	%			107,880				43.7	%			(1,077	)			-1.0	%
Gross profit			47,616				57.5	%			44,994				56.2	%			2,622				5.8	%			140,128				56.7	%			138,733				56.3	%			1,395				1.0	%
SG&A expenses			44,690				53.9	%			44,401				55.4	%			289				0.7	%			133,234				54.0	%			133,188				54.0	%			46				0.0	%
New store pre-opening costs			144				0.2	%			-				0.0	%			144				100.0	%			712				0.3	%			-				0.0	%			712				100.0	%
Income from operations		$	2,782				3.4	%		$	593				0.7	%		$	2,189				369.1	%		$	6,182				2.5	%		$	5,545				2.2	%		$	637				11.5	%

Analysis of Quarterly Results:

Total sales revenue for the three months ended August 29, 2026 increased $2,735 or 3.4% over the prior year period. This consisted of a $391 or 1.4% increase in sales to external wholesale customers and a $2,344 or 4.5% increase in retail sales from our Company-owned stores.

Gross margins for the three months ended August 29, 2026 increased 130-basis points over the prior year due primarily to higher margins in the wholesale business resulting from the previously discussed IEEPA tariff refund partially offset by lower margins in the retail business. The increase in consolidated margins was also due to an increase in the portion of total sales from our retail business which carry a higher gross margin as compared to third-party wholesale sales.

Selling, general and administrative ("SG&A") expenses (excluding new store pre-opening costs) as a percentage of sales for the three months ended August 29, 2026 decreased 150 basis points from 2025 primarily due to increased leverage of fixed costs in our retail segment due to higher sales levels coupled with reduced corporate overhead expenses.

Refer to the following discussions of quarterly results by segment for additional details.

Analysis of Year-to-Date Results:

Total sales revenue for the nine months ended August 29, 2026 increased $318 or 0.1% over the prior year period. This consisted of a $2,910 or 1.8% increase in retail sales from our Company-owned stores largely offset by a $2,592 or 3.0% decrease in sales to external wholesale customers.

Gross margins for the nine months ended August 29, 2026 increased 40 basis points over the prior year due primarily to higher margins in the wholesale business resulting from the previously discussed IEEPA tariff refund partially offset by lower margins in the retail business. The increase in consolidated margins was also due to an increase in the portion of total sales from our retail business which carry a higher gross margin as compared to third-party wholesale sales.

SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the nine months ended August 29, 2026 were flat compared to the prior year period. 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 30 basis points as compared to 2025.

Refer to the following discussions of quarterly results by segment for additional details.

Segment Information

We have strategically aligned our business into two reportable segments as defined in ASC Topic 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.

Intercompany net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Intercompany 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 intercompany income elimination also includes rent paid by our retail stores occupying Company-owned real estate.

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 by segment 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 which 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 August 29, 2026
		Non-GAAP Presentation																									GAAP Presentation
		Wholesale				Retail				Corporate & Other				Eliminations					Special Items				Non-Operating				Consolidated
Net sales		$	53,692			$	54,235			$	-			$	(25,089	)	(1)		$	-			$	-			$	82,838
Cost of goods sold			34,024				26,317				-				(25,119	)	(2)			-				-				35,222
Gross profit			19,668				27,918				-				30					-				-				47,616
SG&A expense			10,351				28,027				6,620				(308	)	(3)			-				-				44,690
New store pre-opening costs			-				144				-				-					-								144
Income (loss) from operations			9,317				(253	)			(6,620	)			338					-				-				2,782
Interest income			-				-				-				-					-				480				480
Other income, net			-				-				-				-					-				(375	)			(375	)
Income (loss) before income taxes		$	9,317			$	(253	)		$	(6,620	)		$	338				$	-			$	105			$	2,887

		Quarter Ended August 30, 2025
		Non-GAAP Presentation																									GAAP Presentation
		Wholesale				Retail				Corporate & Other				Eliminations					Special Items				Non-Operating				Consolidated
Net sales		$	50,787			$	51,891			$	-			$	(22,575	)	(1)		$	-			$	-			$	80,103
Cost of goods sold			32,950				24,710				-				(22,551	)	(2)			-				-				35,109
Gross profit			17,837				27,181				-				(24	)				-				-				44,994
SG&A expense			9,782				27,514				7,419				(314	)	(3)			-				-				44,401
Income (loss) from operations			8,055				(333	)			(7,419	)			290					-				-				593
Interest income			-				-				-				-					-				472				472
Other loss, net			-				-				-				-					-				30				30
Income (loss) before income taxes		$	8,055			$	(333	)		$	(7,419	)		$	290				$	-			$	502			$	1,095

		Nine Months Ended August 29, 2026
		Non-GAAP Presentation																									GAAP Presentation
		Wholesale				Retail				Corporate & Other				Eliminations					Special Items				Non-Operating				Consolidated
Net sales		$	159,800			$	162,327			$	-			$	(75,196	)	(1)		$	-			$	-			$	246,931
Cost of goods sold			102,847				78,879				-				(74,923	)	(2)			-				-				106,803
Gross profit			56,953				83,448				-				(273	)				-				-				140,128
SG&A expense			31,013				84,354				18,797				(930	)	(3)			-				-				133,234
New store pre-opening costs			-				712				-				-					-				-				712
Income (loss) from operations			25,940				(1,618	)			(18,797	)			657					-				-				6,182
Interest income			-				-				-				-					-				1,479				1,479
Other loss, net			-				-				-				-					-				(480	)			(480	)
Income (loss) before income taxes		$	25,940			$	(1,618	)		$	(18,797	)		$	657				$	-			$	999			$	7,181

		Nine Months Ended August 30, 2025
		Non-GAAP Presentation																									GAAP Presentation
		Wholesale				Retail				Corporate & Other				Eliminations					Special Items				Non-Operating				Consolidated
Net sales		$	157,943			$	159,417			$	-			$	(70,747	)	(1)		$	-			$	-			$	246,613
Cost of goods sold			102,789				75,485				-				(70,394	)	(2)			-				-				107,880
Gross profit			55,154				83,932				-				(353	)				-				-				138,733
SG&A expense			30,124				83,831				20,166				(933	)	(3)			-				-				133,188
Income (loss) from operations			25,030				101				(20,166	)			580					-				-				5,545
Interest income			-				-				-				-					-				1,552				1,552
Other loss, net			-				-				-				-					-				(851	)			(851	)
Income (loss) before income taxes		$	25,030			$	101			$	(20,166	)		$	580				$	-			$	701			$	6,246

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.

Wholesale Segment

Results for the wholesale segment for the three and nine months ended August 29, 2026 and August 30, 2025 are as follows:

		Quarter Ended																Change								Nine Months Ended																Change
		August 29, 2026								August 30, 2025								Dollars				Percent				August 29, 2026								August 30, 2025								Dollars				Percent
Net sales		$	53,692				100.0	%		$	50,787				100.0	%		$	2,905				5.7	%		$	159,800				100.0	%		$	157,943				100.0	%		$	1,857				1.2	%
Gross profit (1)			19,668				36.6	%			17,837				35.1	%			1,831				10.3	%			56,953				35.6	%			55,154				34.9	%			1,799				3.3	%
SG&A expenses			10,351				19.3	%			9,782				19.3	%			569				5.8	%			31,013				19.4	%			30,124				19.1	%			889				3.0	%
Income from operations		$	9,317				17.4	%		$	8,055				15.9	%		$	1,262				15.7	%		$	25,940				16.2	%		$	25,030				15.8	%		$	910				3.6	%

(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
		August 29, 2026																August 30, 2025																Total Change
		External				Intercompany				Total								External				Intercompany				Total								Dollars				Percent
Bassett Custom Upholstery		$	19,759			$	15,479			$	35,238				65.6	%		$	18,704			$	14,208			$	32,912				64.8	%		$	2,326				7.1	%
Bassett Leather Imports			3,816				1,134				4,950				9.2	%			3,865				743				4,608				9.1	%			342				7.4	%
Bassett Custom Wood			2,626				3,891				6,517				12.1	%			2,669				3,604				6,273				12.4	%			244				3.9	%
Bassett Casegoods			2,402				4,585				6,987				13.0	%			2,974				4,020				6,994				13.8	%			(7	)			-0.1	%
Total		$	28,603			$	25,089			$	53,692				100.0	%		$	28,212			$	22,575			$	50,787				100.0	%		$	2,905				5.7	%

		Nine Months Ended
		August 29, 2026																August 30, 2025																Total Change
		External				Intercompany				Total								External				Intercompany				Total								Dollars				Percent
Bassett Custom Upholstery		$	56,879			$	46,108			$	102,987				64.4	%		$	57,555			$	44,285			$	101,840				64.5	%		$	1,147				1.1	%
Bassett Leather Imports			11,916				3,490				15,406				9.6	%			11,894				2,164				14,058				8.9	%			1,348				9.6	%
Bassett Custom Wood			8,137				12,029				20,166				12.6	%			9,016				12,015				21,031				13.3	%			(865	)			-4.1	%
Bassett Casegoods			7,672				13,569				21,241				13.3	%			8,731				12,283				21,014				13.3	%			227				1.1	%
Total		$	84,604			$	75,196			$	159,800				100.0	%		$	87,196			$	70,747			$	157,943				100.0	%		$	1,857				1.2	%

Analysis of Quarterly Results - Wholesale

Net sales for the three months ended August 29, 2026 increased $2,905 or 5.7% from the prior year, consisting of a 7.5% increase in shipments to the retail store network, a 28% increase in Lane Venture shipments to wholesale customers and a 3.7% increase in shipments to the open market. Shipments to our retail store network also include 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 both the retail store network and to wholesale customers, increased 44% from the prior year. Gross margins for the three months ended August 29, 2026 increased 150 basis points from the prior year period primarily due to the previously discussed IEEPA tariff refund along with improved margins in both the domestic wood and the Lane Venture operations, partially offset by lower margins in the imported wood and imported upholstery operations due to the realization of higher tariff costs. SG&A expenses as a percentage of sales were flat at 19.3% as the effects of greater leverage of fixed costs from higher sales were offset by increased outbound freight expenses from higher fuel costs.

Analysis of Year-to-Date Results - Wholesale

Net sales for the nine months ended August 29, 2026 increased $1,857 or 1.2% over the prior year, consisting of a 2.9% increase in shipments to our retail store network along with a 12.3% increase in Lane Venture shipments to wholesale customers, partially offset by a 2.5% decrease in shipments to the open market. Shipments to our retail store network also include 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 both the retail store network and to wholesale customers, increased 31% from the prior year. Gross margins for the nine months ended August 29, 2026 increased 70 basis points from the prior year period primarily due to the previously discussed IEEPA tariff refund along with improved margins in both the domestic wood and the Lane Venture operations, partially offset by lower margins in the imported upholstery operations due to the realization of higher tariff costs. SG&A expenses as a percentage of sales increased 30 basis points compared with the prior year period primarily due to increased outbound freight expenses from higher fuel costs.

Wholesale Backlog

Wholesale backlog at August 29, 2026 was $16,917 as compared to $19,519 at November 29, 2025 and $16,596 at August 30, 2025.

Retail -Company-owned Stores Segment

Results for the retail segment for the periods ended August 29, 2026 and August 30, 2025 are as follows:

		Quarter Ended																Change								Nine Months Ended																Change
		August 29, 2026								August 30, 2025								Dollars				Percent				August 29, 2026								August 30, 2025								Dollars				Percent
Net sales		$	54,235				100.0	%		$	51,891				100.0	%		$	2,344				4.5	%		$	162,327				100.0	%		$	159,417				100.0	%		$	2,910				1.8	%
Gross profit (1)			27,918				51.5	%			27,181				52.4	%			737				2.7	%			83,448				51.4	%			83,932				52.6	%			(484	)			-0.6	%
SG&A expenses			28,027				51.7	%			27,514				53.0	%			513				1.9	%			84,354				52.0	%			83,831				52.6	%			523				0.6	%
New store pre-opening costs			144				0.3	%			-				0.0	%			144				100.0	%			712				0.4	%			-				0.0	%			712				100.0	%
Loss from operations		$	(253	)			-0.5	%		$	(333	)			-0.6	%		$	80			N/M				$	(1,618	)			-1.0	%		$	101				0.1	%		$	(1,719	)		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								Nine Months Ended																Change
		August 29, 2026								August 30, 2025 (1)								Dollars				Percent				August 29, 2026								August 30, 2025 (1)								Dollars				Percent
Bassett Custom Upholstery		$	31,064				57.3	%		$	30,387				58.6	%		$	677				2.2	%		$	92,688				57.1	%		$	92,572				58.1	%		$	116				0.1	%
Bassett Leather Imports			731				1.3	%			490				0.9	%			241				49.2	%			2,050				1.3	%			1,058				0.7	%			992				93.8	%
Bassett Custom Wood			8,017				14.8	%			6,783				13.1	%			1,234				18.2	%			24,277				15.0	%			22,957				14.4	%			1,320				5.7	%
Bassett Casegoods			7,366				13.6	%			7,308				14.1	%			58				0.8	%			22,173				13.7	%			21,031				13.2	%			1,142				5.4	%
Accessories, mattresses and other (2)			7,057				13.0	%			6,923				13.3	%			134				1.9	%			21,139				13.0	%			21,799				13.7	%			(660	)			-3.0	%
Total		$	54,235				100.0	%		$	51,891				100.0	%		$	2,344				4.5	%		$	162,327				100.0	%		$	159,417				100.0	%		$	2,910				1.8	%

(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 August 29, 2026 increased $2,344 or 4.5% over the prior year period. Written sales (the value of sales orders taken but not delivered) increased 4.4% over the third quarter of 2025. Gross margin for the three months ended August 29, 2026 declined 90 basis points from the prior period primarily due to lower margins on in-line goods from increased promotional activities. SG&A expenses (which do not include new store pre-opening costs) as a percentage of sales for the three months ended August 29, 2026 decreased 130 basis points from the prior year period due to greater leverage of fixed costs from higher sales levels and lower advertising and marketing costs, partially offset by higher employee costs.

During the three months ended August 29, 2026, we incurred $144 of new store pre-opening costs associated with a new store in the Orlando, Florida market, expected to open in early October of 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 nine months ended August 29, 2026 increased $2,910 or 1.8% over the prior year. Written sales (the value of sales orders taken but not delivered) increased 4.6% over the first nine months of 2025. Gross margin for the nine months ended August 29, 2026 declined 120 basis points from the prior period primarily due to lower margins on in-line goods from increased promotional activities 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 (which do not include new store pre-opening costs) as a percentage of sales for the nine months ended August 29, 2026 decreased 60 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 90 basis points as compared to 2025. This decrease was primarily due to greater leverage of fixed costs from higher sales levels coupled with the realization of other cost savings implemented during the year.

During the nine months ended August 29, 2026, we incurred $712 of new store pre-opening costs associated with new stores in the Cincinnati, Ohio market, which opened late in the second quarter, and the Orlando, Florida market, expected to open in early October of 2026.

Retail Backlog

Retail backlog at August 29, 2026 was $33,512 compared to $34,402 at November 29, 2025 and $32,206 at August 30, 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 August 29, 2026 and August 30, 2025 are as follows:

		Quarter Ended								Change								Six Months Ended								Change
		August 29, 2026				August 30, 2025				Dollars				Percent				August 29, 2026				August 30, 2025				Dollars				Percent
SG&A expenses		$	6,620			$	7,419			$	(799	)			-10.8	%		$	18,797			$	20,166			$	(1,369	)			-6.8	%

Analysis of Results - Corporate and Other

SG&A expenses included in Corporate and other for the three and nine months ended August 29, 2026 decreased $799 or 10.8%, and $1,369 or 6.8%, 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 August 29, 2026 increased $8 or 1.7% over the prior year due to $94 of interest received in connection with the IEEPA tariff refund partially offset by lower interest income from CDs and interest-bearing cash. Interest income for the nine months ended August 29, 2026 declined $73 or 4.7% from the prior year as lower interest income on CDs and interest-bearing cash equivalents was partially offset by $94 of interest received in connection with the IEEPA tariff refund and $99 of interest received as a Federal income tax refund during the first quarter of fiscal 2026.

Other Income (Loss), Net

Other loss, net, for the three months ended August 29, 2026 was $375 compared to other income, net of $30 for the prior year period, primarily due to increases in the cash surrender value of Company-owned life insurance in the prior year quarter. Other loss, net, for the nine months ended August 29, 2026 improved $371 or 43.6% from the prior year period due to increases in the cash surrender value of Company-owned life insurance during the current year.

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 rates were 27.2% and 26.8% for the three and nine months ended August 29, 2026, 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.

Our effective tax rate was 26.8% for both the three and nine months ended August 30, 2025. 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 nine months of fiscal 2026 was $8,013 compared to cash provided by operations of $5,726 for the first nine months of fiscal 2025, representing an increase of $2,287 in cash flows from operations. This increase was primarily the result of improved income levels, the receipt of the IEEPA tariff refunds and better working capital management.

Our overall cash position declined $5,905 during the first nine months of 2026. During the first nine months of fiscal 2026, we spent $6,875 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 the BHF store located in Cherry Hill, New Jersey. We also paid $5,179 in dividends during the first nine months of 2026. We repurchased $779 worth of shares under our stock repurchase program during the first nine months of 2026 compared to repurchases of $1,522 in the prior year period. We expect capital expenditures for the full year to range from $9 million to $11 million. As of August 29, 2026, $17,475 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $53,395 on hand at August 29, 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.

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 August 29, 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 August 29, 2026, we were in compliance with the Consolidated Minimum Tangible Net Worth requirement. Since our used commitment was less than $8,250 at August 29, 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 August 29, 2026 is $83,345 and is included in our accompanying condensed consolidated balance sheet at August 29, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,410 at August 29, 2026. The remaining terms under these lease guarantees extend for approximately four years. See Note 10, Commitments, 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 $6,970 at August 29, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $6,410 at August 29, 2026, the current portion of which is $327. See Note 9, Post Employment Benefit Obligations, 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, Commitments and Contingencies, to our condensed consolidated financial statements for further information regarding certain contingencies as of August 29, 2026.