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…

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…

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.