BSET 10-K & 10-Q changes, risk factors and insider trading

Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Should current economic conditions weaken, the current rate of housing starts continue to decline, or rising inflation persist, consumer confidence and demand for home furnishings could deteriorate which could adversely affect our business through its impact on the performance of our Company-owned stores, as well as our licensees and the ability of a number of them to meet their obligations to us.

We have a significant amount of accounts receivable attributable to our network of licensee-owned stores. We also guarantee one lease each for two licensees. If these stores do not generate the necessary level of sales and profits, the licensees may not be able to fulfill their obligations to us resulting in additional bad debt expenses and real estate related losseslosses.

Maintaining and enhancing our brand is critical to our ability to expand our base of customers and drive increased traffic at both Company-owned and licensee-owned stores and toon our website. WhileDigital digitaloutreach strategies have been the primary vehicle for brand advertising and customer acquisition. We began supplementing the digital outreach continue to dominate our marketing expenditures in 2024, we plan to supplement those strategies in 2025strategy with added direct mail and television.television late in 2024 and expect to continue with a balanced blend of both digital and traditional direct mail and television in 2026. We have also invested heavily in our website and e-commerce. We cannot provide assurance that our marketing, advertising and other efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial condition could be adversely affected.

Our primary and back-up computer systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, natural disasters and errors by employees. Though losses arising from some of these issues would be covered by insurance, interruptions of our critical business computer systems or failure of our back-up systems could reduce our sales or result in longer production times. If our critical business computer systems or back-up systems are damaged or cease to function properly, we may have to make a significant investment to repair or replace them. ForWe example,have webeen discloseda target of a cybersecurity incidentattack in Itemthe 1.05past, ofand Currentwhile Reportssuch attack did not result in a material impact on Formour 8-Koperations, andbusiness, 8-K/Acustomer filedrelationships or reputation, we can provide no assurance that cybersecurity attacks or incidents in the future will not have a material adverse impact on July 15, 2024 and August 6, 2024, respectively, relating to the detection of unauthorized occurrences on a portion of our information technology (IT) systems.business.

Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We also sell our products through our website at www.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 122-year123-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 86 Company-owned and licensee-owned Bassett Home Furnishings (“BHF”) stores. Our store program is designed to provide a single source home furnishings retail store with a unique combination of stylish, quality furniture and accessories with a high level of customer service. The BHF stores featurehighlight our custom orderfurniture 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.

We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Digital outreach strategies have becomebeen the primary vehicle for brand advertising and customer acquisition. We expectbegan to supplementsupplementing the digital outreach strategies in 2025strategy with added direct mail and television.television late in 2024 and expect to continue with a balanced blend of both digital and traditional direct mail and television in 2026.

We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. While traffic to the website decreased 8% during 2025, sales conversion rates increased 28% resulting in a 25% increase in total web sales. Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website.website While we have made it easier to purchase on-line, we willwhile not compromisecompromising on our in-store experience or the quality of our in-home makeover capabilities.

During the fourth quarter of fiscal 2022 we acquired Noa Home Inc. (“Noa Home”) (see Note 3 to the Consolidated Financial Statements for additional information regarding the acquisition). A mid-priced e-commerce furniture retailer headquartered in Montreal, Canada, Noa Home had operations in Canada, Australia, Singapore and the United Kingdom. After nearly two years of operating losses, we concluded during the second quarter of 2024 that Noa Home was not likely to achieve profitability at any time in the foreseeable future and decided to cease operations by selling the inventory in an orderly fashion. As of Novemberthe 30,end of 2024, we havehad substantially completed the liquidation of Noa Home’s assets and liabilities. In the second quarter of 2024 we recognized non-cash charges totaling $2,401 related to the impairment of certain long-lived assets of Noa Home and the establishment of a reserve against Noa Home’s remaining inventory at that time. Upon substantially completing the liquidation of Noa Home at the end of the fourth quarter of 2024, we recognized a charge of $962 associated with the transfer of the cumulative translation losses out of accumulated other comprehensive income.

We have factories in Newton, North Carolina that manufacture both stationary and motion upholstered furniture for inside the home along with our outdoor furniture offerings. We also have a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also ownhave 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. ApproximatelyOver 80%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.

The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 20242025 as compared to fiscal year 2023.2024. For additional analysis of the fiscal year 20232024 results as compared to fiscal year 2022,2023, see “Analysis of Continuing Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 20232024 Annual Report on Form 10-K, filed with the SEC on JanuaryFebruary 25,10, 2024.2025.

Total sales revenue for the year ended November 30,29, 2024,2025, decreasedincreased $60,213$5,357 or approximately 15%1.6% from the prior year period primarily due to increases in delivered retail sales partially offset by decreases in wholesale shipments to both the open market and lost sales from the BHFclosure storeof networkNoa andHome decreasesat inthe retailend deliveredof sales.fiscal 2024. Excluding the lost sales from Noa Home, total sales revenue increased 3.1%.

Gross margins for the year ended November 30,29, 20242025 increased 150190 basis points from 2023.2024. IncludedGross margins in the currentprior year grosswere marginadversely areimpacted by increased inventory valuation charges of $1,729 in the wholesale segment, $472 in the retail segment and $500 in the Noa Home operation, andas well as $609 of unproductive labor costs of $609 incurred during thea temporary shutdown resulting from thea cybersecurity incident. Excluding thesethe charges,above-mentioned ouradditional consolidatedinventory valuation charges and unproductive labor costs in 2024, gross marginmargins would have beenincreased 55.4%.90 basis points primarily due to improved margins in the wholesale segment, partially offset by lower margins in the retail operations.

SG&A expenses as a percentage of sales for the year ended November 30,29, 20242025 increaseddecreased 420300 basis points reflecting benefits from 2023 primarily due to the deleverageprior year restructuring plan and on-going cost containment activities coupled with greater leverage of fixed costs causedfrom by lowerhigher sales volumes.levels.

During fiscal 2024, we recognized charges of $5,515 for asset impairments, $1,240 resulting from a contract abandonment, $962 from the realization of cumulative translation losses on Noa Home, and a restructuring charge for severance of $440. This restructuring charge resulted from a workforce reduction which we expect will result in annual savings of approximately $2,500 beginning in 2025, mostly in SG&A expenses. See Note 14 to our consolidated financial statements for additional information regarding these charges.

Certain other items affecting comparability between fiscal 20242025 and 20232024 are discussed below in “Other Items Affecting Net Income (Loss)”.

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 benefitting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the periods ended November 29, 2025, November 30, 2024,2024 and November 25, 2023 and November 26, 2022,2023, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022. All sales reported in our Corporate and other category are attributable to Noa Home, which generated substantially all of its sales outside of the United States. During the second fiscal quarter of 2024 we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and have ceased operations as of Novemberthe 30,end of 2024 by selling the remaining inventory in an orderly fashion over the second half of fiscal 2024.

To supplement the segment financial measures prepared in accordance with GAAP, we also present gross profit by segment inclusive of the effects of intercompany sales by our wholesale segment to our retail segment. Because these intercompany transactions are not eliminated from our segment presentations and because we do not present gross profit as a measure of segment profitability in the accompanying condensed consolidated financial statements, the presentation of gross profit by segment is considered to be a non-GAAP financial measure. In addition, certain special gains or charges that 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.

Retail sales by major product category for the fiscal years ended November 25,29, 2023,2025, November 26,30, 20222024 and November 27,25, 2021were2023 were as follows:

Net sales for the year ended November 30,29, 20242025 decreasedincreased $31,377$12,118 or 13%5.9% from fiscal 2023.2024. Written sales (the value of sales orders taken but not delivered) declinedincreased 2.8%1.2% from fiscal 2023.2024. Gross margin for the year ended November 30,29, 20242025 improveddeclined 6080 basis points overfrom fiscal 20232024. primarilyExcluding duethe to$471 higher margins on both in-line and clearance goods partially offset byof additional inventory valuation charges in the secondprior quarteryear ofperiod, 2024gross margins would have decreased by 100 basis points due to ourlower strategymargins tofor beboth in-line and clearance goods as we have become more aggressive in sellingcycling clearancethrough goodsunproductive inventory coupled with increased promotional activity. In addition, the Company-owned stores did not take a price increase related to betterthe controlincrease inventoryin levels.tariff costs until January 2026. SG&A expenses as a percentage of sales for the year ended November 30,29, 20242025 increaseddecreased 350420 basis points primarily due to decreasedthe benefit of cost reductions implemented during the second half of fiscal 2024, lower advertising and marketing costs, efficiency gains in our warehouse and delivery operation along with greater leverage of fixed costs fromdue lowerto higher sales volumes.levels.

We recorded an income tax benefit of $4,675 on the loss from continuing operations for 2024. In 2023, we recorded income tax expense on(benefit) of $2,660, $(4,675) and $683 for fiscal 2025, 2024 and 2023, respectively. Our effective tax rate of 30.4% for 2025 differs from the lossfederal fromstatutory continuing operationsrate of $68321.0% primarily due to the effects of state income taxes and invarious 2022,permanent wedifferences, recordedcapital $8,702loss ofcarrybacks, incomeprovision taxto expensereturn onadjustments theand incomeother from continuing operations.charges. Our effective tax rate of 32.5% for 2024 differs from the federal statutory rate of 21.0% due to the increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, the nondeductible impairment of the Noa Home tradename, the tax benefit recorded for the capital loss associated with the cumulative investment in Noa Home due to the shutdown of the operations, and the effects of state income taxes andtaxes, various permanent differences.differences, Our effective tax rate of (27.5%) for 2023 differs from the federal statutory rate of 21.0% dueprovision to thereturn non-taxable goodwill impairmentadjustments and non-taxableother gain on revaluation of contingent consideration both of which are associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, and the effects of state income taxes and various permanent differences.charges.

We have net deferred tax assets of $6,867$5,979 as of November 30,29, 2024,2025, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years. It will require approximately $31,700$28,500 of future taxable income to utilize our net deferred tax assets. See Note 13 to the Consolidated Financial Statements for additional information regarding income taxes.

Cash provided by operations for the year ended November 30,29, 20242025 was $4,050$13,491 compared to cash provided by operations of $18,724$4,050 for the year ended November 25,30, 2023,2024, representing aan decreaseincrease of $14,674$9,441 in cash flows from operations. This decreaseincrease was primarily the result of improved operating income and changes in working capital due to the timing impact of expenditures as a result of an additional week in the first quarter of 2024 coupled with larger net loss in fiscal 2024.

Our overall cash position declinedincreased $12,993$1,726 duringfor fiscal 2024.2025. During fiscal 2024, weWe spent $5,211$4,530 on purchases of property and equipmentequipment, primarily$6,939 consistingin dividends and $2,150 to repurchase shares under our existing stock repurchase program. As of theNovember upfit29, of2025, the$18,254 newremains Tampa,available Floridafor andfuture Houston,purchases Texasunder storesour thatstock openedrepurchase in the first quarter of 2024, final payments on the Austin, Texas store remodel, update of the façade of the Greensboro, North Carolina store location and expenditures related to various information technology and manufacturing plant projects.plan. During the fourth quarter of fiscal 2024 ,we purchased2025, a $2,500 CD which hashad formerly been pledged as collateral against our merchant services agreement with a bank.bank Wematured alsoand paidwas $6,654not in dividends during fiscal 2024. During 2024, we spent $1,420 to repurchase shares under our existing stock repurchase program as compared to $4,176 in 2023. As of November 30, 2024, $20,403 remains available for future purchases under our stock repurchase plan.reinvested. With cash and cash equivalents and short-term investments totaling $59,911$59,240 on hand at November 30,29, 2024,2025, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Since our used commitment was less than $8,250 at November 30,29, 2024,2025, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. HadHowever, had we been required to test those ratios, we would not have been ablein tofull achieve the required levels for either of these ratios.compliance. Consequently, our availability under the Credit Facility is currently limited$16,818. As of November 29, 2025 the Credit Facility was scheduled to anexpire additionalon $2,237.January 31, 2027. Subsequent to November 29, 2025, the Credit Facility has been extended through January 31, 2029 under substantially the same terms.

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehouse space used in our retail segment. We also lease local delivery trucks used in our wholesale and retail segment.segments. The total future minimum lease payments for leases with terms in excess of one year at November 30,29, 20242025 is $128,530$105,045 the present value of which is $106,445$89,392 and is included in our accompanying consolidated balance sheet at November 30,29, 2024.2025. We were contingently liable under licensee lease obligation guarantees in the amount of $5,131$4,148 at November 30,29, 2024.2025. The remaining terms under these lease guarantees range from approximately one to five years. See Note 15 to our consolidatedConsolidated financialFinancial statementsStatements for a schedule of future cash payments on our lease obligations and additional details regarding our leases and lease guarantees.

During fiscal 2024,2025, we declared and paid four quarterly dividends totaling $6,654,$6,939, or $0.76$0.80 per share. During fiscal 2024,2025, we repurchased 101,305142,121 shares of our stock for $1,420an aggregate of $2,150 under our share repurchase program. The weighted-average effect of these share repurchases on basic earnings per share from continuing operations was less than $0.01 per share. On March 9, 2022, our Board of Directors increased the remaining limit of the repurchase plan to $40,000. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program as of November 30,29, 20242025 was $20,403.$18,254.

We currently anticipate that total capital expenditures for fiscal 20252026 will be between $8 million and $12 million, which will be used for remodelingtenant variousimprovements on new retail stores and additional investments in information technology, including enhancements to our website. Our capital expenditure and working capital requirements in the foreseeable future may change depending on many factors, including but not limited to the overall performance of the store program, our rate of growth, our operating results and any adjustments in our operating plan needed in response to industry conditions, competition or unexpected events. We believe that our existing cash, together with cash from operations, will be sufficient to meet our capital expenditure and working capital requirements for the foreseeable future.

We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. Our primary non-recurring fair value estimates, typically involving the valuation of business acquisitions (see Note 3 to the Consolidated Financial Statements), goodwill impairments (see Note 87 to the Consolidated Financial Statements) and asset impairments (see Note 14 to the Consolidated Financial Statements) have utilized Level 3 inputs.

We are involved in various claims and litigation as well as environmental matters,matters which arise in the normal course of business. Although the final outcome of these legal and environmental matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which requires that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. We use our best judgment in valuing these estimates and may, as warranted, solicit external advice. Estimates are based on current facts and circumstances, prior experience and other assumptions believed to be reasonable. The following critical accounting policies,estimates, some of which are impacted significantly by judgments, assumptions and estimates, affect our consolidated financial statements.

Allowance for credit losses - We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. Our accounts receivable reserves were $1,097$429 and $535$1,097 at November 30,29, 20242025 and November 25,30, 2023,2024, respectively, representing 7.7%2.9% and 3.7%7.7% of our gross accounts receivable balances at those dates, respectively. The allowance for credit losses is based on a review of specifically identified customer accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the collectibility of accounts receivable within each pool based on historical experience, current payment practices and current economic trends basedWe onhave ourelected expectationsto use the practical expedient under ASC Topic 326 which allows us to assume that current conditions as of the balance sheet date do not change over the expected life of the receivables,receivables which(see isRecent generallyAccounting ninetyPronouncements daysbelow orregarding less.the early adoption of ASU 2025-05). Although actual losses have not differed materially from our previous estimates, future losses could differ from our current estimates. Unforeseen events such as a licensee or customer bankruptcy filing could have a material impact on our results of operations.

InventoriesInventory Reserves - Inventories accounted for under the first-in, first out (“FIFO”) method are stated at the lower of cost or net realizable value, and inventory accounted for under the last-in, first out method (“LIFO”) is stated at the lower of cost or market. Cost is determined for domestic furniture inventories, excluding outdoor furniture products, using the LIFO method. The cost of imported inventories, domestic outdoor furniture products and Noa Home product inventories is determined on a FIFO basis. We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions. Our reserves for excess and obsolete inventory were $5,395$6,027 and $5,183$5,395 at November 30,29, 20242025 and November 25,30, 2023,2024, respectively, representing 8.9% and 7.6%, respectively, of our inventories on a LIFO basis.basis at both years. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. We know that we are driving a significant percentage of the retail foot traffic to our store network and our open market customers through engagement with www.bassettfurniture.com. Digital outreach strategies have beenis the primary vehiclechannel for brand advertising and customer acquisition.acquisition, Wesupplemented beganby supplementingbalanced thespending digital outreach strategy with addedbetween direct mailmail, including catalogs, and televisionadvertising latethrough in 2024 and expect to continue with a balanced blend of both digital and traditional direct mail andstreaming television in 2026.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 34%39% for the sixnine months ended MayAugust 30,29, 2026 while delivered sales increased 30%.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.

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 byin theearly endOctober of fiscal 2026.

Results of Operations – Period ended MayAugust 30,29, 2026 compared with the period ended MayAugust 31,30, 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 with historically low mortgage rates are reluctant to sell their homes,homes with the low‑rate mortgages, and buyers are hesitant to commit amid high prices, higher mortgage ratesprices and economic uncertainty. As a result, housing activity is significantly slower than historical trends resulting in reduced demand for furniture and home furnishings. This has put pressure on furniture and home furnishings retailers and we have seen an increase in those retailers exiting the industry. While our sales levels have decreased from the COVID period, we believe our sales have somewhat stabilized over the last couple of years. In addition, we have gained efficiencies in our operations and reduced our overall expense structure to improve our results of operations.

Consolidated results of operations for the three and sixnine months ended MayAugust 30,29, 2026 and MayAugust 31,30, 2025 are as follows:

Total sales revenue for the three months ended MayAugust 30,29, 2026 decreasedincreased $595$2,735 or 0.7%3.4% fromover the prior year period. This consisted of a $1,911$391 or 6.3%1.4% decreaseincrease in sales to external wholesale customers partially offset byand a $1,316$2,344 or 2.4%4.5% increase in retail sales from our Company-owned stores.

Gross margins for the three months ended MayAugust 30,29, 2026 increased 90 basis130-basis points over the prior year perioddue primarily due 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 MayAugust 30,29, 2026 increaseddecreased 60150 basis points from 2025.2025 Excludingprimarily $698due to increased leverage of proceedsfixed fromcosts businessin interruptionour insuranceretail recordedsegment as a reductiondue 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 ofhigher sales decreasedlevels 20coupled basiswith pointsreduced ascorporate comparedoverhead to 2025.expenses.

Total sales revenue for the sixnine months ended MayAugust 30,29, 2026 decreasedincreased $2,417$318 or 1.5%0.1% fromover the prior year period. This consisted of a $2,984$2,910 or 5.1% decrease in sales to external wholesale customers partially offset by a $567 or 0.5%1.8% increase in retail sales from our Company-owned stores.stores largely offset by a $2,592 or 3.0% decrease in sales to external wholesale customers.

Gross margins for the sixnine months ended MayAugust 30,29, 2026 increased 1040 basis points over the prior year perioddue primarily dueto tohigher margins in the wholesale business resulting from the previously discussed IEEPA tariff refund partially offset by lower margins in the retail businessbusiness. partiallyThe offsetincrease byin improvedconsolidated 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 business.sales.

SG&A expenses (excluding new store pre-opening costs) as a percentage of sales for the sixnine months ended MayAugust 30,29, 2026 increasedwere 70flat basiscompared pointsto fromthe 2025.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 increaseddecreased 30 basis points as compared to 2025.

We have strategically aligned our business into two reportable segments as defined in ASC Topic 280, Segment Reporting, and as described below:

In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefiting both wholesale and retail operations. In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs. We consider our corporate functions to be other business activities and have aggregated them with any of our operating segments that do not meet the requirements to be reportable segments. As of and for the three and six months ended May 30, 2026 and May 31, 2025, Corporate and other included no other operating segments.activities.

Inter-companyIntercompany net sales elimination represents the elimination of wholesale sales to our Company-owned stores. Inter-companyIntercompany income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-companyintercompany income elimination also includes rent paid by our retail stores occupying Company-owned real estate.

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.

Results for the wholesale segment for the three and sixnine months ended MayAugust 30,29, 2026 and MayAugust 31,30, 2025 are as follows:

Net sales for the three months ended MayAugust 30,29, 2026 decreasedincreased $1,082$2,905 or 2.0%5.7% from the prior year, consisting of a 5.5%7.5% decreaseincrease in shipments to the openretail marketstore partially offset bynetwork, a 1.0%28% increase in Lane Venture shipments to wholesale customers and a 0.8%3.7% increase in shipments to ourthe retailopen storemarket. network. The increase in shipmentsShipments to our retail store network includesalso 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,network and to wholesale customers, increased 17.9%44% from the prior year. Gross margins for the three months ended MayAugust 30,29, 2026 increased 110150 basis points from the prior year period primarily due to improvedthe efficienciespreviously indiscussed ourIEEPA domestictariff upholsteryrefund and wood operations coupledalong with improved pricing strategiesmargins in ourboth the domestic wood and the Lane Venture operations, partially offset by lower margins in the imported wood offerings.and imported upholstery operations due to the realization of higher tariff costs. SG&A expenses as a percentage of sales increasedwere 90flat basisat points19.3% compared withas the prioreffects yearof periodgreater primarilyleverage dueof tofixed costs from higher sales were offset by increased outbound freight expenses from higher fuel costs.

Net sales for the sixnine months ended MayAugust 30,29, 2026 decreasedincreased $1,048$1,857 or 1.0%1.2% fromover the prior year, consisting of a 5.4% decrease in shipments to the open market partially offset by a 0.7%2.9% increase in shipments to our retail store network andalong with a 3.4%12.3% increase in Lane Venture shipments to wholesale customers.customers, Thepartially increaseoffset by a 2.5% decrease in shipments to the open market. Shipments to our retail store network includesalso 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,network and to wholesale customers, increased 23.6%31% from the prior year. Gross margins for the sixnine months ended MayAugust 30,29, 2026 increased 3070 basis points from the prior year period primarily due to the previously discussed IEEPA tariff refund along with improved efficienciesmargins in ourboth the domestic wood operationsand coupledthe withLane improvedVenture pricingoperations, strategiespartially offset by lower margins in ourthe imported woodupholstery offerings.operations due to the realization of higher tariff costs. SG&A expenses as a percentage of sales increased 5030 basis points compared with the prior year period primarily due to increased outbound freight expenses from higher fuel costs.

Wholesale backlog at MayAugust 30,29, 2026 was $18,859$16,917 as compared to $19,519 at November 29, 2025 and $18,418$16,596 at MayAugust 31,30, 2025.

Results for the retail segment for the periods ended MayAugust 30,29, 2026 and MayAugust 31,30, 2025 are as follows:

Net sales for the three months ended MayAugust 30,29, 2026 increased $1,316$2,344 or 2.4%4.5% over the prior year period. Written sales (the value of sales orders taken but not delivered) increased 9.5%4.4% over the secondthird quarter of 2025. Gross margin for the three months ended MayAugust 30,29, 2026 declined 12090 basis points from the prior period primarily due to lower margins on in-line goods asfrom theincreased fullpromotional effect of the mid-January price increase was not realized for the entire quarter coupled with lower margins on clearance goods as we continue to be more aggressive in cycling through returned goods and floor samples.activities. SG&A expenses (excludingwhich do not include new store pre-opening costs) as a percentage of sales for the three months ended MayAugust 30,29, 2026 decreased 50130 basis points from the prior year period. Excluding $569 of proceeds from business interruption insurance recorded as a reduction to SG&A expense in the second quarter of 2025 as a result of a cyber incident in fiscal 2024, SG&A expenses as a percentage of sales decreased 150 basis points as compared to 2025. This decrease was primarilyperiod due to lowergreater healthleverage insuranceof and workers compensationfixed costs from betterhigher claimsales experiencelevels and improvedlower efficiency in the warehouseadvertising and deliverymarketing operation.costs, partially offset by higher employee costs.

During the three months ended MayAugust 30,29, 2026, we incurred $473$144 of new store pre-opening costs associated with a new storesstore in the Cincinnati, Ohio market, which opened late in the second quarter, and Orlando, Florida market, expected to open byin theearly endOctober of the third quarter of fiscal 2026. Prior to opening a new store we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200 to $400 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight-line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 to 45 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $400 to $600 per store. We generally expect that new stores will operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break even, we do realize additional wholesale sales volume sold through each new store that leverages the fixed costs in our wholesale business.

Net sales for the sixnine months ended MayAugust 30,29, 2026 increased $567$2,910 or 0.5%1.8% over the prior year. Written sales (the value of sales orders taken but not delivered) increased 4.6% over the first sixnine months of 2025. Gross margin for the sixnine months ended MayAugust 30,29, 2026 declined 140120 basis points from the prior period primarily due to lower margins on in-line goods as we did not institute a price increase related to thefrom increased tariffpromotional costs until mid-January of 2026activities 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 (excludingwhich do not include new store pre-opening costs) as a percentage of sales for the sixnine months ended MayAugust 30,29, 2026 decreased 3060 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 8090 basis points as compared to 2025. This decrease was primarily due to lowergreater healthleverage insuranceof and workers compensationfixed costs from betterhigher claimsales experiencelevels andcoupled improved efficiency inwith the warehouserealization andof deliveryother operation.cost savings implemented during the year.

During the sixnine months ended MayAugust 30,29, 2026, we incurred $568$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 byin theearly endOctober of the third quarter of fiscal 2026.

Retail backlog at MayAugust 30,29, 2026 was $34,701$33,512 compared to $34,402 at November 29, 2025 and $34,091$32,206 at MayAugust 31,30, 2025.

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 MayAugust 30,29, 2026 and MayAugust 31,30, 2025 are as follows:

SG&A expenses included in Corporate and other for the three and sixnine months ended MayAugust 30,29, 2026 decreased $462$799 or 7.1%,10.8%, and $571$1,369 or 4.5%,6.8%, respectively, from the prior year periods due primarily to lower incentive compensation costs.

Interest income for the three months ended MayAugust 30,29, 2026 declinedincreased $75$8 or 14.4%1.7% fromover 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 sixnine months ended MayAugust 30,29, 2026 declined $81$73 or 7.5%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, for the three months ended MayAugust 30,29, 2026 was $87$375 compared to aother income, net loss of $422$30 for the prior year period, primarily due to increases in the cash surrender value of Company-owned life insurance.insurance in the prior year quarter. Other loss, net, for the sixnine months ended MayAugust 30,29, 2026 declinedimproved $776$371 or 88%43.6% from the prior year period due to increases in the cash surrender value of Company-owned life insurance partially offset by increased interest expense from finance leases compared toduring the priorcurrent year period.year.

Our effective tax raterates waswere 26.1%27.2% and 26.8% for the three and sixnine months ended MayAugust 31,29, 2025,2026, 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.

Cash provided by operating activities for the first sixnine months of fiscal 2026 was $1,896$8,013 compared to cash provided by operations of $6,903$5,726 for the first sixnine months of fiscal 2025, representing aan declineincrease of $5,007$2,287 in cash flows from operations. This decreaseincrease was primarily the result of lowerimproved income levelslevels, the receipt of the IEEPA tariff refunds and negative changes inbetter working capital which had been expected.management.

Our overall cash position declined $5,375$5,905 during the first sixnine months of 2026. During the first sixnine months of fiscal 2026, we spent $2,592$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 athe BHF store located in Cherry Hill, New Jersey. We also paid $3,443$5,179 in dividends during the first sixnine months of 2026. We repurchased $653$779 worth of shares under our stock repurchase program during the first sixnine months of 2026 compared to repurchases of $1,158$1,522 in the prior year period. We expect capital expenditures for the full year to range from $10$9 million to $12$11 million. As of MayAugust 30,29, 2026, $17,601$17,475 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $53,890$53,395 on hand at MayAugust 30,29, 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.

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 MayAugust 30,29, 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:

At MayAugust 30,29, 2026, we were in compliance with the Consolidated Minimum Tangible Net Worth requirement. Since our used commitment was less than $8,250 at MayAugust 30,29, 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 MayAugust 30,29, 2026 is $88,517$83,345 and is included in our accompanying condensed consolidated balance sheet at MayAugust 30,29, 2026. We were contingently liable under licensee lease obligation guarantees in the amount of $3,656$3,410 at MayAugust 30,29, 2026. The remaining terms under these lease guarantees extend for fiveapproximately four years. See Note 1010, 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 $6,950$6,970 at MayAugust 30,29, 2026, the current portion of which is $815. We also have deferred compensation plans with a total liability of $6,240$6,410 at MayAugust 30,29, 2026, the current portion of which is $327. See Note 99, Post Employment Benefit Obligations, to our condensed consolidated financial statements for additional information regarding these plans.

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 1010, Commitments and Contingencies, to our condensed consolidated financial statements for further information regarding certain contingencies as of MayAugust 30,29, 2026.