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Third Quarter Operating Results
Total sales revenue for the three months ended August 26, 2023 decreased $30.8 million, or 26%, to $87.2 million from $118.0 million due to a&nbsp;28% decline in wholesale sales along with a 23% decrease in retail sales through the Company-owned stores, partially offset by the addition of Noa Home in 2023. Gross margins were flat at 51.6% compared to 51.5% last year, although gross profit decreased to $45.0 million from $60.8 million due to the decrease in sales.
SG&amp;A expenses for the quarter were $48.8 million, or 56% of revenue, compared to $54.7 million, or 46.3%, in the previous year, or an increase of $5.9 million, or 9.7%, due to the&nbsp;the deleverage of fixed costs caused by lower sales volumes. During the quarter last year, Bassett recognized a gain of $4.6 million from the&nbsp;sale of the real estate at a former retail location in Houston, Texas.&nbsp; 
Bassett reported a net loss of $3.8 million, or $0.30 per share, compared to net income of $10.7 million, or $0.82 per share, in the prior year. Excluding discontinued operations, net income last year was $7.8 million or EPS of $0.84.
Segments
Net sales for the wholesale segment for Bassett decreased $22.3 million or 28% from last year due&nbsp;primarily to a 25% decrease in shipments to the open market, a 28% decrease in shipments to Bassett's retail store network and a 32% decrease in Lane Venture shipments. Gross margins for the segment&nbsp;declined 80 basis points from the prior year primarily due to lower margins in the Bassett Leather business due to increased product discounting and excess and obsolete reserve charges, partially offset by increased margins in the Company's Custom Upholstery business as Bassett was able to recognize a greater portion of previously implemented price increases in current period sales coupled with overall lower unit costs as measured on a last-in, first-out (LIFO) basis. Margins for Bassett Custom Wood products in the current quarter were lower due to lower sales volume. SG&amp;A expenses as a percentage of sales increased 60 basis points primarily due to reduced leverage of fixed costs from decreased sales.
Income from operations for the segment was $6.3 million, or 11.2% as a percentage of revenue, compared to $10.0 million, or 12.7% last year, representing a decrease of $3.6 million.&nbsp;Wholesale backlog at August 26, 2023 was $19.9 million, as compared to $35.3 million at November 26, 2022 and $41.7 million at August 27, 2022.
 For Bassett's retail segment, net sales decreased $18.6 million or 26.3% from the previous year. Written sales for the quarter declined 13% from&nbsp;the third quarter of 2022. Gross margin&nbsp;was essentially flat compared to the prior period as lower margins from store closure sales in the current quarter were offset by improved margins on in-line goods. SG&amp;A expenses decreased to $30.0 million, compared to $32.7 million in the prior year, or a decrease of $2.7 million. As a percentage of revenue, SG&amp;A was 57.4% versus 46.1%, or a 1,130 basis points increase,&nbsp;primarily due to decreased leverage of fixed costs from lower sales volumes coupled with increased advertising, warehousing and delivery costs.
Loss from operations in the segment was $3.0 million, or (5.8%) of revenue, compared to income of $3.9 million, or 5.5%, in the prior year, a decrease of $6.9 million. Retail backlog at August 26, 2023 was $32.7 million compared to $51.0 million at November 26, 2022 and $59.9 million at August 27, 2022.
Balance Sheet Remains a Strength
 Although the operating environment has remained challenging longer than we had anticipated, Bassett's balance sheet remains a strength, in our view, and provides the Company with a significant advantage in riding out the current situation.&nbsp;Cash and equivalents at quarter's end totaled $65.8 million, or $7.45&nbsp;per share. The Company had no outstanding long-term debt. CFFO in the first nine months totaled $10.2 million and we expect overall inventories to continue to be reduced, given the current environment.
Current Environment
The Conference Board&nbsp;Consumer Confidence Index&nbsp;declined again in September to 103.0, down from an upwardly revised 108.7 in August.&nbsp;The decline in consumer confidence was evident across all age groups, notably among consumers with household incomes of $50,000 or more, a key demographic for furniture purchases. The&nbsp;Expectations Indexâ€”based on consumersâ€™ short-term outlook for income, business, and labor market conditionsâ€”declined to 73.7 in September, after falling to 83.3 in August. Expectations fell back below 80â€”the level that historically signals a recession within the next year. Consumer fears of an impending recession also ticked back up, consistent with the short and shallow economic contraction we anticipate for the first half of 2024. On the positive side,&nbsp;The&nbsp;Present Situation Indexâ€”based on consumersâ€™ assessment of current business and labor market conditionsâ€”rose slightly to 147.1 from 146.7.
According to the Conference Board release,
â€œExpectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about&nbsp;future&nbsp;business conditions,&nbsp;job availability, and&nbsp;incomes. Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to riseâ€”making big-ticket items more expensive. Expectations for interest rates declined in September after surging in the prior month, but the outlook for stock prices continued to fall. Notably,&nbsp;average 12-month inflation expectations&nbsp;have held steady over the past three months despite ongoing complaints about higher prices. Still, the measure of&nbsp;expected&nbsp;family financial situation, six months hence&nbsp;(not included in the&nbsp;Expectations Index) worsened further."
 
Also last week, The Commerce Department reported that consumer spending gained 0.4% last month, although some of the rise in consumer spending reflects higher prices. Underlying inflation moderated to 4.0%, excluding food and energy.
Updated Projections
 
Given the current economic environment, we believe operating conditions will remain challenging for Bassett. While we had previously expected the second half of fiscal 2023 to show operating improvements, economic conditions remain uncertain. As a result, we are significantly lowering our expectations for the fiscal fourth quarter. We are now projecting revenue of $90 million, down from a previous $110 million. We expect to see sequential improvement in gross margin as a significant portion of the higher cost inventory has been worked through the system over the past couple of quarters. SG&amp;A expenses are projected to be relatively flat as the Company reacts to the current environment. We are now projecting a net loss of $1.0 million, or a loss of $0.11 per share, compared to our prior projection of net income of $3.75 million, or $0.43 per share. In the fourth quarter of fiscal 2022, Bassett produced revenue of $121.0 million and net income of $5.0 million, or $0.61 per share on a continuing basis, or $0.55 per share on a reported basis.

Third Quarter Operating Results
Total sales revenue for the three months ended August 26, 2023 decreased $30.8 million, or 26%, to $87.2 million from $118.0 million due to a&nbsp;28% decline in wholesale sales along with a 23% decrease in retail sales through the Company-owned stores, partially offset by the addition of Noa Home in 2023. Gross margins were flat at 51.6% compared to 51.5% last year, although gross profit decreased to $45.0 million from $60.8 million due to the decrease in sales.
SG&amp;A expenses for the quarter were $48.8 million, or 56% of revenue, compared to $54.7 million, or 46.3%, in the previous year, or an increase of $5.9 million, or 9.7%, due to the&nbsp;the deleverage of fixed costs caused by lower sales volumes. During the quarter last year, Bassett recognized a gain of $4.6 million from the&nbsp;sale of the real estate at a former retail location in Houston, Texas.&nbsp; 
Bassett reported a net loss of $3.8 million, or $0.30 per share, compared to net income of $10.7 million, or $0.82 per share, in the prior year. Excluding discontinued operations, net income last year was $7.8 million or EPS of $0.84.
Segments
Net sales for the wholesale segment for Bassett decreased $22.3 million or 28% from last year due&nbsp;primarily to a 25% decrease in shipments to the open market, a 28% decrease in shipments to Bassett&#8217;s retail store network and a 32% decrease in Lane Venture shipments. Gross margins for the segment&nbsp;declined 80 basis points from the prior year primarily due to lower margins in the Bassett Leather business due to increased product discounting and excess and obsolete reserve charges, partially offset by increased margins in the Company&#8217;s Custom Upholstery business as Bassett was able to recognize a greater portion of previously implemented price increases in current period sales coupled with overall lower unit costs as measured on a last-in, first-out (LIFO) basis. Margins for Bassett Custom Wood products in the current quarter were lower due to lower sales volume. SG&amp;A expenses as a percentage of sales increased 60 basis points primarily due to reduced leverage of fixed costs from decreased sales.
Income from operations for the segment was $6.3 million, or 11.2% as a percentage of revenue, compared to $10.0 million, or 12.7% last year, representing a decrease of $3.6 million.&nbsp;Wholesale backlog at August 26, 2023 was $19.9 million, as compared to $35.3 million at November 26, 2022 and $41.7 million at August 27, 2022.
 For Bassett&#8217;s retail segment, net sales decreased $18.6 million or 26.3% from the previous year. Written sales for the quarter declined 13% from&nbsp;the third quarter of 2022. Gross margin&nbsp;was essentially flat compared to the prior period as lower margins from store closure sales in the current quarter were offset by improved margins on in-line goods. SG&amp;A expenses decreased to $30.0 million, compared to $32.7 million in the prior year, or a decrease of $2.7 million. As a percentage of revenue, SG&amp;A was 57.4% versus 46.1%, or a 1,130 basis points increase,&nbsp;primarily due to decreased leverage of fixed costs from lower sales volumes coupled with increased advertising, warehousing and delivery costs.
Loss from operations in the segment was $3.0 million, or (5.8%) of revenue, compared to income of $3.9 million, or 5.5%, in the prior year, a decrease of $6.9 million. Retail backlog at August 26, 2023 was $32.7 million compared to $51.0 million at November 26, 2022 and $59.9 million at August 27, 2022.
Balance Sheet Remains a Strength
 Although the operating environment has remained challenging longer than we had anticipated, Bassett&#8217;s balance sheet remains a strength, in our view, and provides the Company with a significant advantage in riding out the current situation.&nbsp;Cash and equivalents at quarter&#8217;s end totaled $65.8 million, or $7.45&nbsp;per share. The Company had no outstanding long-term debt. CFFO in the first nine months totaled $10.2 million and we expect overall inventories to continue to be reduced, given the current environment.
Current Environment
The Conference Board&nbsp;Consumer Confidence Index&nbsp;declined again in September to 103.0, down from an upwardly revised 108.7 in August.&nbsp;The decline in consumer confidence was evident across all age groups, notably among consumers with household incomes of $50,000 or more, a key demographic for furniture purchases. The&nbsp;Expectations Indexâ€”based on consumersâ€™ short-term outlook for income, business, and labor market conditionsâ€”declined to 73.7 in September, after falling to 83.3 in August. Expectations fell back below 80â€”the level that historically signals a recession within the next year. Consumer fears of an impending recession also ticked back up, consistent with the short and shallow economic contraction we anticipate for the first half of 2024. On the positive side,&nbsp;The&nbsp;Present Situation Indexâ€”based on consumersâ€™ assessment of current business and labor market conditionsâ€”rose slightly to 147.1 from 146.7.
According to the Conference Board release,
â€œExpectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about&nbsp;future&nbsp;business conditions,&nbsp;job availability, and&nbsp;incomes. Consumers may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to riseâ€”making big-ticket items more expensive. Expectations for interest rates declined in September after surging in the prior month, but the outlook for stock prices continued to fall. Notably,&nbsp;average 12-month inflation expectations&nbsp;have held steady over the past three months despite ongoing complaints about higher prices. Still, the measure of&nbsp;expected&nbsp;family financial situation, six months hence&nbsp;(not included in the&nbsp;Expectations Index) worsened further.&#8221;
   
Also last week, The Commerce Department reported that consumer spending gained 0.4% last month, although some of the rise in consumer spending reflects higher prices. Underlying inflation moderated to 4.0%, excluding food and energy.
Updated Projections
   
Given the current economic environment, we believe operating conditions will remain challenging for Bassett. While we had previously expected the second half of fiscal 2023 to show operating improvements, economic conditions remain uncertain. As a result, we are significantly lowering our expectations for the fiscal fourth quarter. We are now projecting revenue of $90 million, down from a previous $110 million. We expect to see sequential improvement in gross margin as a significant portion of the higher cost inventory has been worked through the system over the past couple of quarters. SG&amp;A expenses are projected to be relatively flat as the Company reacts to the current environment. We are now projecting a net loss of $1.0 million, or a loss of $0.11 per share, compared to our prior projection of net income of $3.75 million, or $0.43 per share. In the fourth quarter of fiscal 2022, Bassett produced revenue of $121.0 million and net income of $5.0 million, or $0.61 per share on a continuing basis, or $0.55 per share on a reported basis.