A traffic inflection after years of slump — Bassett's written sales finally turn
Written sales +9.5%, traffic up for the first time since the COVID boom, AI-driven marketing and tariff refunds start to flow — but retail margins and stubborn SG&A still weigh on the P&L.
BSET · Earnings Call · 2026-07-02
A turn in traffic — and a turn in tone
Bassett Furniture Industries' fiscal second-quarter call was the most optimistic in years, and the tape agrees: the stock is up roughly 35% over the past 90 days (though still ~13% off its mid-July peak). The headline number was a 9.5% jump in retail written sales, and for the first time since the COVID boom, foot traffic rose — 4% more shoppers came through during Memorial Day week, converting into written sales up 14%. Traffic is the single most telling metric for a company that has ground through a multi-year demand slump, and management attributes the turn to a new marketing playbook.
Our marketing organization has begun to consistently deliver greater efficiency on investment as our adjusted media mix drove more foot traffic to our stores for the first time since the COVID boom.
That efficiency comes from a new agency whose analytics platform now feeds a more precise digital strategy — augmented by a revival of direct mail and, new to Bassett's vocabulary, artificial intelligence for personalized customer outreach. Management saw the same momentum continue into June, and e-commerce accelerated sharply: “written web sales were up by 40%, marking 7 of the last 8 quarters with increases exceeding 20%” — Robert H. Spilman Jr., Chairman and Chief Executive Officer · 2026-07-02 — with average order value up 24%, helped by an updated fabric module that makes custom upholstery easier to configure online.
The margin tug-of-war
The demand inflection is real, but the profit picture is still two-sided. Consolidated gross margin rose 90bp to 56.5%, driven by a 110bp improvement in wholesale margins from better domestic factory efficiency and import pricing. Retail was the drag: gross margin fell 120bp to 51.2% as the company aggressively cleared returned goods and old floor samples, and the full effect of January's price increase had not yet cycled through. Management's fix is a mid-July retail increase: “we plan to raise retail gross margin in mid July. By 200 to 250 basis points.” — Robert H. Spilman Jr., Chairman and Chief Executive Officer · 2026-07-02 Mike Daniel cautioned that, given the build-and-deliver cycle, the benefit will not land until the fourth quarter. Partially offsetting it on the wholesale side are new opening price point collections from the April High Point market — a deliberate trade of margin for unit throughput in the factories.
SG&A remains the stubborn problem — 53.3% of sales, up 60bp year-on-year, though excluding last year's business interruption insurance proceeds it was actually down 20bp. Gross margin at 56.2% in the latest reported quarter is essentially flat year-on-year, with the wholesale-versus-retail mix doing most of the talking.
External currents: fuel up, tariffs down
Two macro forces are pulling in opposite directions. On the cost side, the Iranian conflict pushed fuel prices higher, and Bassett — which uses J.B. Hunt on the retail side — ate fuel surcharges that hit SG&A. This is not new; on the prior call management flagged receiving surcharges weekly: “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.” — Robert Spilman, Chairman and CEO · 2026-04-02
On the benefit side, tariff refunds are finally starting to flow. Last quarter, Rob Spilman was non-committal on the Supreme Court's tariff decision — “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.” — Robert Spilman, Chairman and CEO · 2026-04-02 Now the tone has shifted: “We have seen some so far. And we think there will be more to come. We do not know the magnitude of it. Entirely yet.” — Robert H. Spilman Jr., Chairman and Chief Executive Officer · 2026-07-02 Bassett sits inside a broader market narrative — IEEPA refunds are among the top global keywords this quarter, and fellow reporter Bang & Olufsen flagged the same tariff-refund benefit. With most of Bassett's manufacturing U.S.-based, the net tariff drag is small, but the refunds are incremental cash.
Spending into the turn
The company is investing its comfortable balance sheet into the inflection. A new 14,000 sq ft Cincinnati store opened May 8 and is already beating expectations — wholesale shipments to Cincinnati in eight weeks exceeded all of last year. Orlando opens in early October, a Nashville dealer converted to a full Bassett home furnishing store, and management is evaluating a Melville/Westbury relocation on Long Island. CapEx guidance for fiscal 2026 is $10–12M, up from $4.5M last year, funding new corporate stores within the store network plus the new High Point showroom debuting October 15.
The balance sheet supports it all: effective net cash of roughly $56M at the latest reported quarter, with the company generating $7.4M of operating cash flow in Q2 while still paying $1.7M in dividends and buying back $500K of stock. In the end, the clearest signal of the turnaround's credibility may be the tape rather than the transcript — a 35% 90-day advance on a name that still trades at only 0.4x trailing revenue. If the written-sales momentum holds and the retail margin increase lands in Q4, Bassett's operating-leverage story — higher average ticket, fixed-cost leverage, and once-moribund traffic returning — finally has a catalyst.