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Good day, and thank you for standing by. Welcome to the Bassett Furniture Industries First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Daniel. Please go ahead.

Thank you so much, Latanya, for the introduction. Welcome to Bassett Furniture Industries Earnings Call for the First Quarter of fiscal 2026, which ended February 28, 2026. Joining me today is our Chairman and CEO, Rob Spilman. We issued our news release and Form 10-Q yesterday after the market closed, and it's available on our website. After today's remarks, Rob and I will be open for questions. We will also post a transcript of this call on Bassett Investor Relations website following the call. During this call, certain statements we make may be considered forward-looking statements and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate nor does it undertake any obligation to update such forward-looking statements. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investors tab. Now I'll turn things over to Rob. Rob?

Okay. Thanks, Mike. Good morning, everyone. First, I'll provide some perspective on the quarter and then lay out our initiatives going forward to grow the Bassett business. After a solid start to the first 7 weeks of fiscal 2026, the pace of business slowed abruptly in mid-January. As a result, consolidated sales declined by 2.2% due to a variety of factors. Against the backdrop of ongoing weak residential housing activity, severe weather interrupted both wholesale and retail sales as well as product distribution flow due to warehouse closures. We rely heavily on retail traffic during weekends. More than 50% of the retail fleet was closed due to weather through one weekend in January, followed by more than 25% of our locations being closed the following weekend. On the positive side, we benefited from changes to our marketing strategy this year, which expanded our President's Day promotional event to 3 weeks. This helped us drive retail sales up for the back half of February. While written sales were essentially flat for the first quarter, we had a double-digit increase in written orders for the back half of February. These sales will be delivered in the second quarter. We had margin pressure on our retail business from our decision to eat the tariff impact until midway through the quarter. In fact, retail gross margins were down 170 basis points because we did not pass this along on goods sold in the fourth quarter that were delivered in the first quarter. With the tariff costs now included in the retail pricing, we expect to see improved retail margins going forward. Wholesale margins decreased slightly primarily due to lower volume in our domestic upholstery operation. Mike will cover the details on the financials shortly. We've been conservative in designing our plan, but SG&A for the quarter remained higher than we like for the revenue we delivered, and we're addressing this. We're operating in a macro environment of challenging housing, higher political tensions, which continue as headwinds for our top line. To combat this, we have several initiatives in the works that are projected to save between $1.5 million and $2 million annually starting late in the second quarter. Looking ahead, we have organized our strategic thinking around 5 key initiatives to grow the Bassett business. The first is to generate comp store growth. We have a strong brand in Bassett. We feel good about the product offerings we have in place, and we're excited about what we have coming. Consumer response to our updated case goods collections has been good. We've also had good reception to the recent introductions of the Z4 Sleeper and the HideAway dining programs. Customers continue to love our true custom upholstery program, the most significant piece of our business, which showed a 6% increase in retail written sales in the first quarter. At the upcoming April High Point Market, Bassett will introduce new opening price point upholstery collections that offer excellent value with customized options for the consumer. As we shared previously, the Bassett Outdoor line has been absorbed into the Lane Venture brand to further leverage the strong reception and rich history behind Lane Venture, which is now more than 50 years old. Since we acquired Lane Venture in 2017, Bassett invested in domestic manufacturing infrastructure to offer custom options and to improve lead times. In addition to our teak and wicker offerings, our domestic aluminum product now represents 45% of our outdoor sales. Second, we expect further growth to come from investing to open additional retail store locations, both corporate and licensed. As we announced, we will open corporate stores in Cincinnati and Orlando this year and we will relocate a store on Long Island. The Cincinnati store is under construction, and we will begin work on our new Orlando location next week. Given the escalation of retail rents and construction costs since COVID, we will meticulously research the sales potential of future locations before we commit to a new store. Both the Cincinnati and Orlando locations have taken almost 2 years to come online by the time they open later this year. Also, we have opportunities to convert some current licensed location to corporate stores as owners retire and exit the business. We have just finished this kind of conversion in the greater Philadelphia market. The retirement of independent furniture operators with no succession plan is a trend that has picked up steam in the past several years, and Bassett licensed stores are not an exception. Under the right circumstances, this trend represents an opportunity for us to continue growing in existing markets by leveraging customer relationships and our brand. Third, we are investing to increase e-commerce sales and build a successfully integrated omnichannel experience. Retail customers are responding well to the enhancement in our e-commerce site, allowing them to see the full breadth of our offerings. The investments we've made in presentation and functionality allow us to reach many more markets where we don't have physical locations. And late last year, we began national home delivery to previously unserved geography. While overall traffic was down in the first quarter, more customers are generating more -- frequent transactions. Conversion was up 130% for the quarter, resulting in a 28% increase in orders. Our goal is to use our website to reach younger, higher income demographics to represent a strong growth opportunity. Fourth, we are enhancing the model for Bassett Design Centers, which remain a critical part of our wholesale growth strategy. With a footprint of 3,000 to 5,000 square feet, the BDC is the best representation of our brand outside of a Bassett Home Furnishing store. During the first quarter, we added 2 Bassett Design Centers and currently seek to improve the visual merchandising standards and marketing programs for the BDC fleet this year. The little sister Bassett Custom Studio concept at 1,000 feet serves as a wholesale gateway for us as we have opened 60 studios in the 2 years since its inception. The custom studio product offering focuses exclusively on the merits of our true custom upholstery program. No inventory is required and the turnaround time is short. The studio model is a great way for the open market to test the Bassett brand. We aim to convert the best customers under the Studio into full Bassett Design Centers and recently completed 3 such conversions. Fifth, we are focusing on building the interior design channel. We believe that the styling of our assortment and our ability to customize our products beautifully fit the needs of today's interior designer. We are enhancing our technology platform to cater to designers, and we are working with our independent wholesale sales force to equip them with the tools and mindset to adapt to the current world of design. To showcase our brand in a more design-centric fashion, this summer, we plan to relocate our wholesale showroom to better target this growing channel in time for the October fall market. Demolition is now progressing and extensive renovations are already taking place. This new consolidated showroom will include the Lane Venture brand, which historically has had showroom space separate from Bassett. In concert with the design effort, we are developing the hospitality and commercial channel by leveraging the quality and brand equity behind the Bassett name. The launch of the Bassett Hospitality division is underway, and we will go after contract business across various commercial areas from hotels to senior living. We have put the team in place, but this will take time to gain traction. This 5-point strategy articulates the blueprint that our management team is employing to ensure a bright future for Bassett. The challenging macro environment that we have experienced since the COVID boom makes for a difficult balance between investing to grow while controlling or cutting operating expenses. In short, we are doing both, reshaping our organization and technology to compete in a changing world and deliver improved shareholder returns. With that, I'll turn things over to Mike for details on the first quarter results.

Thank you, Rob. In my commentary, the comparisons I'll discuss will be the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, unless otherwise noted. Total consolidated revenue was $80.3 million, a decrease of $1.8 million or 2.2%, this consisted of a $700,000 decrease in revenue from our retail stores and a $1.1 million decrease to our external wholesale customers, primarily due to the impacts of winter weather on store operations and retail and wholesale logistics. Gross margin at 56.2% represented an 80 basis point decrease when compared to the prior year, primarily driven by lower margins in both the retail and wholesale business. Selling, general and administrative expenses, excluding new store preopening costs were 54.7% of sales, 70 basis points higher than the prior year, reflecting reduced leverage of fixed costs due to lower sales levels. Operating income was $1.2 million or 1.4% of sales as compared to income of $2.5 million or 3% of sales in the prior period. Diluted earnings per share were $0.13 versus $0.21. Now let me cover more details on our wholesale operations. Net sales were $53 million, essentially flat to last year. Net sales were impacted by a 0.6% increase in shipments to our [indiscernible] network and a 2.6% increase in Lane Venture shipments to wholesale customers, partially offset by a 5.3% decrease in shipments to the open market. As previously discussed, we introduced the Lane Venture brand in the Bassett Home Furnishing stores during the first quarter of 2026 and have included those shipments in the above change in the 0.6% increase for the retail stores. Including those shipments in the total Lane Venture brand, shipments of that brand increased 32%. Shipments were negatively impacted by winter weather because our major distribution centers were closed for multiple days during the quarter. Gross margins decreased 50 basis points from prior period as margin decreases in custom upholstery operations due to reduced leverage of fixed costs that were partially offset by improved margins in the Bassett Casegoods operations due to improved pricing strategies. SG&A expenses as a percent of sales were essentially flat compared with the prior year period. Now moving on to our retail store operations. Net sales of $52.5 million represented an $800,000 or a 1.4% decrease, again, primarily due to the impacts of the winter weather. Written sales, the value of sales orders taken but not delivered decreased 0.2%. Gross margin at 51.5% represented a decline of 170 basis points due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff cost until mid-January. Total SG&A expenses as a percent of sales increased 20 basis points, primarily due to the preopening costs associated with the new stores in Cincinnati and Orlando and reduced leverage of fixed costs due to lower sales levels, partially offset by improved efficiency in the warehouse and delivery operation. Prior to opening a new store, we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200,000 to $400,000 per store depending on the overall rent cost 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. These costs should be higher in the second quarter. Now let me address our liquidity position. Our liquidity remains solid with $51 million of cash in short-term investments. With the first quarter historically being the lowest in cash generation, operating cash flow was a negative $5.5 million, which also included certain negative working capital changes, which were expected. As we previously mentioned, we plan to open 2 new stores, relocate another store and move our existing High Point showroom during the year, which will result in additional capital spending for tenant improvements. As a result, we expect total capital expenditures to be between $8 million and $12 million for 2026, considerably more than the $4.5 million we spent last year. We continue to pay our quarterly dividend and repurchase shares opportunistically. We spent $1.7 million on dividends and $147,000 on share buybacks in the quarter. We remain committed to delivering shareholder returns through dividends and when appropriate, share buybacks. Our Board also approved a $0.20 dividend to be paid May 29. Now we'll open up the line for questions. Latanya, please provide instructions to do so.

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

So just thinking about the retail margins, can you help us better understand the impact of the delayed price increases that you took in mid-January and how that should impact the second quarter?

Well, that's unfolding as we speak, Anthony, but we have seen since we implemented that. The tariff thing last year was difficult for the whole industry to deal with, and everybody had their own take on it. And of course, we've got a wholesale consideration and a retail consideration. So I'm giving you a little bit of the logic behind our decision. So we increased wholesale and retail prices in July. And then there were some further adjustments to the tariffs. And at that point in the fall, we said, given the environment, we don't want to put on another price increase within 60 days of what we just did. So we elected to go with it. And as we've mentioned already and you're asking about, we had that 170 basis point decline. But I can't predict exactly how these margins will come through in the quarter, but they will be closer to what we had last year than what we just reported. And so I can't give you any more insight than that. Mike, maybe you can help. I don't know if we'll get all the way back up to 170 basis points, but we are seeing improved margins so far this quarter since we have implemented the increase.

And so given the recent spike in fuel prices, are you thinking about potential additional pricing actions and/or surcharges to offset the higher delivery and shipping costs? Just wondering how you guys are thinking about what's been going on since your quarter ended.

Well, in our -- on our retail side, we have a captive freight situation with J.B. Hunt, and we're receiving surcharges weekly on that depending which fluctuates with diesel prices. So yes, that's already happening. And we're also getting increases from petroleum derivative products such as foam and poly and that kind of thing. And those are fairly significant, and we will have to pass those along in the next -- they actually have not been implemented yet, but there is a -- the various dates in the next few weeks that these things will take effect. And we will have to adjust for those increases.

And Anthony, yes, on the freight surcharge -- fuel surcharge side, we do turn-in and build back from a wholesale perspective, the freight -- or the freight surcharge that we are charged from our freight partner. So yes, that fluctuates along -- that surcharge that we bill out fluctuates with what we're getting charged from our partner.

Got you. Got it. Okay. And then just wondering if you can comment on the trends that you've seen in the business since the end of your quarter, which coincides with the start of the conflict in Iran, whether you've seen any noticeable differences in trends. I know your target customer is generally a higher income consumer, so maybe not as much impacted by fuel prices as lower income consumers. But obviously, we've seen a stock market react negatively since then. So just wondering if you could talk at a high level as to what you've seen so far the first few weeks of the -- of your current quarter.

Pretty much more of the same, I would say, Anthony. We haven't had a tremendous decline, but we haven't had an uptick either. So it's still grinding it out pretty much the way I would describe it. We -- obviously, this is Easter weekend, and we're closed on Sunday and the week around Easter is always a tough week. So we're going to deal with that. But more of the same is what we're seeing. Not a lot up or down.

And our next question will be coming from the line of Doug Lane of Water Tower Research.

Staying on the conflict in the Middle East, are you seeing any -- are you expecting price increases? You mentioned foam and some of the plastic derivatives. What about accessibility? Do you have any -- are you worried about accessibility to some components, maybe even aluminum, a lot of aluminum goes through that part of the world. Just what's the outlook for accessibility to your materials in the near future?

Doug, the only thing that really goes through that area and the Hormuz over there is product from India. And for us, and we really haven't had a noticeable issue on this, and we haven't seen container prices spike. I think that's just because of overall tepid demand across our industry and other consumer goods since all this stuff has started. But at the moment, I haven't seen an accessibility issue.

Okay. Fair enough. Then switching over to the retail margins, segment margins down about $1 million. Second quarter, I guess, we benefit from better pricing, but we still have new store openings. Can you give us a feel for just directionally where we're going? Are we going to continue to have some losses on the retail side until the back half of the year, maybe even the fourth quarter when those stores come online and start producing sales and profits? How does that look?

That's probably accurate. I think we can do better than we did this quarter with the better margins, and that will help quite a bit. But we've only baked in one of the store opening costs so far, and now we're going to have 2 coming this quarter. And then in our model, we don't have things on the shelf. The -- we have -- 80% of the time, we have to go make the furniture when they buy it. And so that takes another 4 weeks or 5 weeks to turn into revenue. So yes, we'll be dealing with that the rest of the year, but we're certainly not budgeting to have the margin that we just had in the first quarter.

Right. And just to clarify what Rob said, so what happens, store opens, we'll have a couple of 3 months of losses, as Rob said, kind of filling that pipeline before we get to a steady state. So that's just the nature of the beast the way our model is.

Got it. And have you talked about the potential for any tariff refunds with the Supreme Court decision, how did that decision impact the tariff landscape for 2026?

I would say we don't know. Yes, we've had some conversations on that, but I don't have anything definitive to answer that question, Doug.

Okay. Fair enough. Then you mentioned weather. And just help me understand, I get that the weekends is bad timing and you had 2 weekends in a row, you were impacted. But are those actually lost sales or just deferred sales?

We certainly hope they're deferred, but they seem to be lost. And I've talked to a couple of guys on our Board who have been in retail and we were kind of crying in our beer about that. But yes, I mean, look, December is our weakest month of the year for written business. People don't buy a lot of Bassett Furniture or other furniture in the month of December around the holidays. So January becomes a very important month and February as well. That really starts the year off, and we're going to -- we need it. And so we started the year off pretty well until we got this. So we did mention that we had a nice increase in February. I can't really say that it was making up for what happened in those last 2 weeks of January. It's hard to point to that. But I mean, it hurt us and also hurt our deliveries quite a bit in the quarter. So I -- it feel like they're lost. I hope they're deferred, but they feel like they're lost.

Okay. Fair enough.

A little bit more -- to give that a little bit more color. So for that first 7 weeks, we were up retail written mid-single digits -- low to mid-single digits. And then after that 2-week period, for that 9-week period, we went from up low to mid-single digits to down almost double digits for that 9-week period. So that 2-week period that we had the weather pretty dramatic on retail written sales and wholesale orders.

No, that was impactful. No kidding. Just one more for me. On the e-commerce sales, they're up 28%, continues to be a strong channel for you. What -- how much does e-commerce represent of your sales? And is this something you would consider breaking out separately when you report in the future?

We haven't done that in the past and we'd have to think about doing it. It's still a small number, but we've had -- I think, 6 quarters now, 5 or 6 of nice double-digit growth in this. And so we're excited about it, and we continue to work on all the little nuances to improve the navigation of the site. But we haven't to date expected to break that out.

And I'm showing no further questions at this time. I would now like to turn the conference back to Rob for closing remarks.

Well, thank you for attending today, and I hope everybody has a good holiday weekend, and we will talk to you again in late June. So thank you very much.

And this concludes today's program. Thank you for participating. You may now disconnect. Have a good day.