HOOKER FURNISHINGS Corp: Form 10-K for the period ended Feb 1, 2026

Hooker Furnishings Corporation, incorporated in Virginia in 1924, is a designer, marketer and importer of casegoods (wooden and metal furniture), leather furniture, fabric-upholstered furniture, lighting, accessories, and home decor for the residential, hospitality and contract markets. We also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.

During fiscal 2026, management determined that the Pulaski Furniture (“PFC”) and Samuel Lawrence Furniture (“SLF”) brands within the Home Meridian segment no longer aligned with the Company’s long-term strategic direction. In recent years, the value-priced PFC and SLF businesses have faced substantial sales declines due to adverse macroeconomic conditions, including elevated housing prices and mortgage rates that have weakened the housing market, reduced consumer discretionary spending, inflationary pressures, and ongoing tariffs. These uncontrollable factors disproportionately affected the higher-volume, low-margin business model under which these brands operate. Despite implementing organizational restructuring and cost-reduction initiatives, the model no longer supports the Company’s strategy of achieving sustainable, long-term profitability. We believe that divesting the PFC and SLF businesses allows management to realign our portfolio around our strongest brands and position the Company for consistent, long-term performance.

On December 1, 2025, the Company entered into an Asset Purchase Agreement with a buyer to sell the PFC and SLF casegoods brands, including specified assets and liabilities associated with those brands. The Company will retain the Samuel Lawrence brand in connection with the operation of its hospitality business. On December 12, 2025, the Company completed the sale and received approximately $5.5 million in cash, representing the estimated net book value of the assets at closing less a holdback amount of approximately $611,000, in accordance with the terms of the agreement. Following their sale, the Home Meridian segment was eliminated, with its remaining Samuel Lawrence Hospitality brand reclassified into the “All Other” category. This divestiture represents a strategic shift for the Company and is expected to result in a significant change in the Company’s operations and financial reporting.

The analysis presented herein excludes discontinued operations, except where otherwise indicated.

Reportable Segments

Furnishings sales account for all of our net sales. For financial reporting purposes and as described further below, we are organized into two reportable segments, Hooker Branded and Domestic Upholstery. Our other businesses that are not individually reportable and intercompany eliminations are aggregated into “All Other”. See Note 17 -Segment Information to our Consolidated Financial Statements for additional financial information regarding our operating segments.

Products

Our product lines cover the design spectrum of residential furnishings: traditional, contemporary and transitional. Further, our product lines are in the “good”, “better” and “best” product categories, which carry medium and upper price points. Hooker Furnishings Corporation consists of the following two operating segments and “All Other”:

• The Hooker Branded segment which includes two businesses:

□ Hooker Casegoods, which covers a wide range of design categories and includes home entertainment, home office, accent, dining and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand; and

□ Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range.

• The Domestic Upholstery segment which includes the following operations:

□ Bradington-Young, a seating specialist in upscale motion and stationary leather furniture;

□ HF Custom (formerly Sam Moore Furniture), a specialist in fashion forward custom fabric upholstery offering a selection of chairs, sofas, sectionals, recliners and a variety of accent upholstery pieces;

□ Shenandoah Furniture, an upscale upholstered furniture business specializing in private label sectionals, modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers; and

□ Sunset West, a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture.

• All Other consisting of:

□ Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings targeted toward four and five-star hotels; and

□ Operating segments that are not individually reportable and intercompany eliminations.

Sourcing

Imported Products

We have sourced products from foreign manufacturers for over thirty years, predominantly from Asia. Imported casegoods and upholstered furniture together accounted for approximately 60%, 64%, and 63% of our net sales in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.

Our imported furniture business is subject to inherent risks in importing products manufactured abroad, including, but not limited to: policies and regulations affecting trade or the application of tariffs, such as the imposition of duties or tariffs by the U.S. administration or foreign governments, supply disruptions and delays due to a variety of reasons, including our foreign suppliers’ factory capacities, factory shutdowns and delays, fluctuations in ocean freight costs, container and vessel space availability, currency exchange rate fluctuations, as well as economic and political developments and instability, affecting the countries from which we source imported home furnishings and components.

Because of the large number and diverse nature of the foreign suppliers in Vietnam, China, Mexico, India, and Malaysia from which we source our imported products, we have flexibility in the sourcing of products among any particular supplier or country. However, a disruption in our supply chain from a major supplier or from Vietnam in general, could significantly compromise our ability to fill customer orders for products manufactured at that factory or in that country. Supply disruptions and delays on selected items could occur for six months or longer. If we were unable to obtain those products from alternative sources or at a comparable cost, our sales, earnings and liquidity could be adversely affected.

Given the sourcing capacity available in Vietnam and other low-cost producing countries such as China, Mexico, Malaysia, and India, as well as our supply chain diversification efforts, we believe the risks from these potential supply disruptions are manageable in the long-term. However, our insight into the probability of a wide scale global or regional disruptions, such as changes in trade policies and tariffs, pandemics, geopolitical conflicts, significant disruptions in global transportation networks, remains limited. Ongoing geopolitical conflicts have disrupted global energy markets, resulting in increased energy costs and reduced fuel availability that have raised manufacturing, transportation, and raw material costs, which could adversely affect our supply chain and operating expenses. See Item 1A, “Risk Factors” for additional information on our risks related to imported products.

For imported products, we generally negotiate firm pricing with foreign suppliers in U.S. Dollars, typically for a term of at least one year. However, under certain circumstances, we may re-negotiate pricing during the year. We accept the exposure to exchange rate movements during these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effects of any price increases from suppliers in the prices we charge for imported products. However, these price changes could adversely impact sales volume and profit margin during the affected periods, and potential competitive pricing pressures could limit the Company’s ability to pass cost increases to vendors or customers. Additionally, we generally do not apply price increases on order backlog, which could adversely affect our earnings. Conversely, a relative increase in the value of the U.S. Dollar compared to the currencies from which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins during the affected period. However, due to other factors, such as inflationary pressure, we may not fully realize savings when exchange rates fall. Therefore, lower exchange rates may only have a tempering effect on future price increases by merely delaying cost increases on imported products. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”

Raw Materials

Significant materials used in manufacturing our domestic upholstered furniture products include leather, fabric, foam, wooden and metal frames and electronic mechanisms. Most of the leather is imported from Italy and South America and is purchased as full hides and cut and sewn in our facilities or is purchased as pre-cut and sewn kits processed by our vendors to our pattern specifications. We believe our sources for raw materials are adequate and that we are not overly dependent on any one supplier. Our five largest domestic upholstery suppliers accounted for 30% of our raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2026. Should disruptions with these suppliers occur, other than macro disruptions affecting all such suppliers, we believe we could successfully source these products from other suppliers without significant disruption to our operations. After the implementation of the initial reciprocal tariffs in April 2025 and subsequent tariffs imposed under Section 232, we have experienced price increases in certain imported raw materials, including fabrics, steel, and hides. Generally, we seek to mitigate the impact of these tariffs through negotiations with our suppliers and other cost management initiatives. However, if we are unable to offset the tariff costs on these imported materials, it may lead to increased product costs, potentially adversely affecting net sales and profit margins.

Customers

Our home furnishings products are sold through a variety of retailers including independent furniture stores, department stores, mass merchants, national chains, catalog merchants, interior designers, and e-commerce retailers. No single customer accounted for more than 10% of our consolidated sales in fiscal 2026. Our top five customers accounted for approximately 26% of our fiscal 2026 consolidated sales. The loss of any one or more of these customers would have a material adverse impact on our business. Less than 1% of our sales in fiscal 2026 were to international customers. We define sales to international customers as sales to customers outside of the United States and Canada since our independent domestic sales force services both countries.

Competition

The furniture industry is highly competitive and includes a large number of foreign and domestic manufacturers and importers, none of which dominates the market in our price points. While the markets in which we compete include a large number of relatively small and medium-sized manufacturers, certain competitors have substantially greater sales volumes and financial resources than we do. U.S. imports of furniture produced overseas, such as from Vietnam and China, have stabilized in recent years. The primary competitive factors for home furnishings in our price points include price, style, availability, service, quality and durability. Competitive factors in the hospitality and contract furniture markets include product value and utility, lead times, on-time delivery and the ability to respond to requests for special and non-standard products. We believe our design capabilities, ability to import and/or manufacture upholstered furniture, product value, longstanding customer and supplier relationships, significant sales, distribution and inventory capabilities, ease of ordering, financial strength, experienced management and customer support are significant competitive advantages.

Warehousing and Distribution

We distribute furniture to retailers directly from factories and warehouses in Asia via our container direct programs and from our facilities in Virginia, North Carolina and California, and in limited cases, from customer operated warehouses in strategic locations. During fiscal 2026, we completed the planned exit of the Georgia warehouse, which primarily supported the discontinued PFC and SLF businesses. In addition, we launched a new Vietnam warehouse in May 2025 to support our container direct program and enhance our international logistics capabilities. This transition has reduced direct container lead times from approximately six months to four to six weeks, improving customer service, optimizing U.S. inventory levels, and enabling greater container customization while reducing reliance on domestic warehousing. When implementing these changes, we considered the timing and magnitude of restructuring charges, anticipated cost savings, and the potential impact on net sales and earnings.

Working Capital Practices

Inventory

We generally import casegoods inventory and certain upholstery items in amounts that enable us to meet the delivery requirements of our customers, our internal in-stock goals and minimum purchase requirements from our sourcing partners. The majority of products in the Hooker Branded segment are shipped from our U.S. warehouses. Our Domestic Upholstery segment products are made to order and shipped shortly after they are produced; however, this segment carries significant amounts of raw materials for production. We do not carry significant amounts of hospitality products, as most of these products are built to order and are shipped shortly after their manufacture directly to the customer.

Accounts receivable

Substantially all of our trade accounts receivable are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living products, which consist of a large number of entities with a broad geographic dispersion. We perform credit evaluations of our customers and generally do not require collateral. For qualified customers, we offer payment terms, generally requiring payment 30 days from shipment. However, we may offer extended payment terms in certain circumstances, including promoting sales of our product. We purchase accounts receivable insurance on certain customers if their risk profile warrants it and the insurance is available. Due to the highly customized nature of our hospitality products, we typically require a 50% deposit upon order, a 40% deposit before goods reach a U.S. port and the remaining 10% balance due within 30 days of the receipt of goods by the customer. For our outdoor furnishings, smaller orders require full prepayment and most larger orders require a 50% deposit upon order and the balance when production is started. Additionally, some customers request and qualify for payment terms.

Accounts payable

Payment for our imported products warehoused first in Asia is due 10 to 14 days after our quality audit inspections are complete and the vendor invoice is presented. Payment for goods which are shipped to our U.S. warehouses or container direct to our customers FOB Origin (free on board origin, which means the buyer is responsible for the costs and liability of the freight during transport) is generally due upon proof of lading onto a U.S.-bound vessel and invoice presentation; however, payment terms, depending on the supplier, can stretch up to 45 days from invoice date. Payment terms for domestic raw materials and non-inventory related charges vary but are generally 30 days from invoice date.

Order Backlog

At February 1, 2026, our backlog of unshipped orders was as follows:

In the discussion below and herein, we reference changes in sales orders or “orders” and sales order backlog (unshipped orders at a point in time) or “backlog” over and compared to certain periods of time and changes discussed are in sales dollars and not units of inventory, unless stated otherwise. We believe orders are generally good current indicators of sales momentum and business conditions. If the items ordered are in stock and the customer has requested immediate delivery, we generally ship products in about seven days or less from receipt of order; however, orders may be shipped later if they are out of stock or there are production or shipping delays or the customer has requested the order to be shipped at a later date or has requested that we ship the order “in-full”, meaning all products ordered for the end-user must ship together. It is our policy and industry practice to allow order cancellation for casegoods up to the time of shipment or, in the case of container direct orders, up until the time the container is booked with the ocean freight carrier; therefore, customer orders for casegoods are not firm. However, domestically produced upholstered products are predominantly custom-built and consequently, cannot be cancelled once the leather or fabric has been cut. Additionally, our hospitality products are highly customized and are generally not cancellable. Similarly, for our outdoor furnishings, most orders require a deposit upon order and the balance before production is started and hence are generally not cancellable.

We generally consider backlogs to be one helpful indicator of sales for the upcoming 30-day period, but because of our relatively quick delivery and our cancellation policies, we do not consider order backlogs to be a reliable indicator of expected long-term sales.

At the end of fiscal 2026, our consolidated order backlog increased $7.2 million, or 20%, as compared to the prior year-end. Backlog increased across Hooker Branded, Domestic Upholstery, and All Other. The increases in Domestic Upholstery and All Other were driven by higher incoming orders at Shenandoah and SLH. The increase in the Hooker Branded segment was also attributed to shipment timing, including vendor delays and weather-related disruptions affecting U.S. shipments.

Seasonality

Generally, sales in our fiscal first quarter are lower than our other fiscal quarters due to the post-Lunar New Year shipping lag and sales in our fiscal fourth quarter are generally stronger due to the pre-Lunar New Year surge in shipments from Asia.

Environmental Matters

As a part of our business operations, our manufacturing sites generate both non-hazardous and hazardous waste; the treatment, storage, transportation and disposal of which are subject to various local, state and federal laws relating to environmental protection. Our policy is to record monitoring commitments and environmental liabilities when expenses are probable and can be reasonably estimated. The costs associated with our environmental responsibilities, compliance with federal, state and local laws regulating the discharge of materials into the environment, or costs otherwise relating to the protection of the environment, have not had and are not expected to have a material effect on our financial position, results of operations, capital expenditures or competitive position.

We are actively working to refine and align our environmental stewardship based on current best practices, shareholder expectations and regulatory developments through our Environmental, Social and Governance (ESG) focused employee committee called CARE (Community Action & Responsibility for our Environment). It regularly updates management and updates the Board at least quarterly on these initiatives. We note the following recent and ongoing activities and new developments:

• We have put in place several initiatives focused on promoting sustainability and preserving natural resources. We maintain an annual Greenhouse Gas (GHG) emissions inventory and verification.
• Since 2021, we have started projects to reduce our carbon footprint by investment in renewable energy and in projects to reduce energy consumption. We have purchased renewable energy from solar farms for several domestic manufacturing facilities since 2022. Sunset West and HF Custom (formerly Sam Moore) are operating on 100% renewable energy. All remaining facilities will be added as renewable energy programs are available in those locations. We are recognized as an Appalachian Power 2024 Top Performer for energy efficiency in the Martinsville area.
• We continue to partner with the Arbor Day Foundation, the Sustainable Furnishings Council, and the Eco Ambassador Council for their commitment to environmental responsibility and sustainability, including financial assistance, educating employees on the necessity of preserving and replenishing resources, and supporting various projects within the Dan River Basin area. We also support the Virginia Museum of Natural History’s Cultural Heritage Monitoring lab, which provides global monitoring capability for cultural heritage sites threatened by armed conflict and natural disaster.

Human Capital Resources

As of February 1, 2026, we had 840 full-time employees, of which 298 were employed in our Hooker Branded segment and 542 were employed in our Domestic Upholstery segment. By geographical area, 756 employees were located in the United States and 84 were located in Asia. None of our employees are represented by a labor union. We consider our relations with our employees to be good.

Our employees are critical to our success, and we are committed to attracting, developing, and retaining top talent to drive our business forward. The core values of our Company include integrity, caring and inclusivity that affirms every individual. Our leadership team is committed to fostering an environment where everyone is welcomed, respected, listened to and valued for their unique contributions to the organization, and to providing a work environment that is free from all forms of harassment, discrimination and inequality. We recruit, employ, train, promote and compensate our employees without regard to race, ethnicity, age, gender, gender identity, religion, national origin, citizenship, marital status, veteran’s status, disability or any other characteristic protected by applicable federal, state, or local law. All facilities have established human resource departments with formal hiring processes and controls in place to ensure ethical and fair hiring practices. Some of the action steps we have taken recently or are working on currently include:

• We carefully evaluate the overall compensation and benefits packages regularly to ensure the economic security, health, and safety of our employees, including;
• compensating employees competitively relative to the industry and local labor markets, and in accordance with all applicable federal, state, and local wage, work hour, overtime, and benefits laws; and
• providing affordable and comprehensive health benefits to employees focused on financial, emotional, and physical health and well-being, including a standardized process of reporting worker’s compensation claims which we believe promotes the health and safety of our employees.
• We maintain standardized safety procedures and training at all locations including established safety committees, under the leadership of our Director of Facilities & Safety, which consist of management and employee representatives, with tasks of identifying and reporting hazards and unsafe work practices, removing obstacles to accident prevention, and minimizing the risks of accidents, injury and impacts on health. We are committed to implementing and improving safety measures to achieve a safe, healthy, secure, and productive workplace;
• We are committed to employees’ professional success and growth by providing extensive safety training, on-the-job coaching, formal training sessions, and online learning resources. The Company also provides continuing education opportunities, including an independently operated educational foundation originally funded by the Company, comprehensive leadership development programs, and a renewable tuition reimbursement program to children and spouses of all employees, excluding family members of current and former executive officers and board directors;
• We are committed to fostering a culture of opportunity and respect for all members of our team. We have done this by:
• Expanding Talent Pipelines
• We expanded our Furniture Market Internship, providing aspiring professionals with hands-on experience and exposure to the furniture industry in areas such as customer service, hospitality, marketing, and sales.
• We established a formal summer internship program aligned with roles of interest for recent graduates. The program is designed to rotate among departments over time, based on organizational needs and business priorities.
• We continued our focus on building diverse talent pipelines through sustained engagement with local colleges and universities and participation in career-related events. In addition, our staff participated in career readiness focused events.
• Enhancing Employee Training
• We completed the implementation of feedback and conflict management training for people leaders and continue to provide ongoing training to reinforce effective workplace communication and a collaborative environment.
• We continue to plan future training initiatives aimed at enhancing workforce effectiveness and supporting a high-performing, results-oriented organization.
• Strengthening Community Partnerships
• We continue to maintain and grow community partnerships in the communities where our employees live and work. Our employees dedicate their time to community engagement activities, and the Company supports fundraising initiatives benefiting a range of causes.
• In calendar 2025, we participated in job fairs, workshops, and university events, providing resume reviews, mock interviews, and insights into careers at Hooker Furnishings to strengthen community ties and support workforce development. Additionally, our staff participated in speaker panels focused on career readiness.
• We maintain a Code of Business Conduct and Ethics. All employees are required to sign off on the Code at hiring and reaffirm their understanding and compliance with the Code, as well as anti-corruption, cybersecurity and anti-bribery training. In addition, the Company has both import and domestic suppliers to sign a Vendor Code of Conduct. The Company also has audits in place for both Environmental Social and Governance (ESG) and the US Customs Trade Partnership Against Terrorism certification (CTPAT) and conducts them every 6 months and produces a scorecard that can be used in future purchasing decisions based upon the vendor’s performance. The CTPAT audit process involves a comprehensive self-assessment of our supply chain covering facilities, logistics, and personnel, IT, etc., and the implementation of security best practices, to ensure our entire supply chain is secure. This self-assessment is ultimately audited by US Customs and Border Protection. Adherence to this program allows for quicker processing of shipments through US Customs. Our ESG audit involves a systematic evaluation of our performance across the ESG spectrum aiming to identify strengths, weaknesses, opportunities, and risks, and to provide stakeholders with a comprehensive view of our sustainability efforts and adherence to ESG principles.

Patents and Trademarks

The Hooker Furnishings, Hooker Furniture, Bradington-Young, Sam Moore, Samuel Lawrence Hospitality, Shenandoah, H Contract, Sunset West, HF Custom and BOBO trade names represent many years of continued business. We believe these trade names are well-recognized and associated with quality and service in the furnishings industry. We also own a number of patents and trademarks, both domestically and internationally, none of which is considered to be material.

Governmental Regulations

Our company is subject to U.S. federal, state and local laws and regulations in the areas of safety, health, employment and environmental pollution controls, as well as U.S. and international trade laws and regulations, including tariffs. We are also subject to foreign laws and regulations. In the past, compliance with these laws and regulations has not had any material effect on our earnings, capital expenditures or competitive position in excess of those affecting others in our industry; however, the effect of compliance in the future cannot be predicted. We believe we are in material compliance with applicable U.S. and international laws and regulations.

Additional Information

You may visit us online at hookerfurnishings.com, shenandoahfurniture.com, slh-co.com, and hcontractfurniture.com. We make available, free of charge through our Hooker Furnishings website hookerfurnishings.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other documents as soon as practical after they are filed with or furnished to the Securities and Exchange Commission (“SEC”). A free copy of our annual report on Form 10-K may also be obtained by contacting Earl Armstrong, Chief Financial Officer and Senior Vice-President Finance at CorpSec@hookerfurnishings.com (mailto:CorpSec@hookerfurnishings.com) or by calling 276-632-2133.

Our business is subject to a variety of risks. The risk factors discussed below should be considered in conjunction with the other information contained in this annual report on Form 10-K. If any of these risks actually materialize, our business, results of operations, financial condition or future prospects could be negatively impacted. These risks are not the only ones we face. There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us.

Economic downturns could result in decreased sales, earnings and liquidity.

The furniture industry is particularly sensitive to cyclical variations in the general economy and the current macro-economic conditions that affect consumer spending. Economic uncertainty, including persistent inflationary pressures, elevated interest rates, and the slow housing market, may negatively impact consumer confidence and discretionary spending. Home furnishings purchases are generally considered discretionary and may be postponed by consumers during periods of economic downturns or reduced household purchasing power.

Demand for our products is influenced by a number of macroeconomic factors, including changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors. In recent years, the housing market has experienced periods of slowdown due in part to higher mortgage rates and affordability challenges, which have adversely affected demand of home furnishings. In addition, higher interest rates and tighter credit conditions reduce discretionary consumer spending, which in turn may reduce demand for home furnishings.

A recovery in our sales could lag significantly behind a general recovery in the economy after an economic downturn, due to, among other things, the nature and relatively significant cost of home furnishings purchases resulting in a temporary shift in consumer discretionary spending away from home furnishings, or scarcity of transportation and Asian manufacturing capacity during times of increased demand. Additionally, most of our sales are of wooden or metal Casegoods products, which have a slower replacement cycle than our upholstered home furnishings products.

These factors also impact retailers, who are our primary customers. If our retail customers experience reduced consumer demand, increased financial pressure, or inventory adjustments in response to economic conditions, our sales, earnings, financial condition and liquidity could be adversely affected.

We rely on offshore sourcing from Vietnam for most of our sales and source other products internationally as well. Consequently:

• Potential future increases in tariffs or new tariffs imposed on other countries from which we source, including Vietnam, China, or Mexico, could adversely affect our business.

Changes in U.S. trade policies, including the imposition of new tariffs, increases in existing tariffs, or other trade restrictions, could adversely affect our business. A significant portion of our products is sourced from foreign manufacturers, including Vietnam and China, which accounted for 87% and 5% of our total imports in fiscal 2026, respectively. As a result, our cost of goods sold and supply chain could be significantly affected by changes in tariffs or other trade measures imposed by the U.S. or other countries. Inability to mitigate the tariff impact and reduce product costs, pass through price increases or find other suitable manufacturing sources may have a material adverse impact on sales volume, earnings and liquidity. In addition, the tariffs, and our responses to the tariffs, may cause our products to become less competitive due to price increases or less profitable due to lower margins.

Changes in trade policies could also disrupt established sourcing strategies, require us to shift production to alternative countries or suppliers, and increase supply chain complexity. In response to evolving trade policies, we have taken steps in recent years to diversify our sourcing base and reduce reliance on certain countries, including shifting a portion of our sourcing from China to other countries such as Vietnam and Mexico. However, these efforts may not fully mitigate the impact of tariffs or other trade restrictions. Alternative sourcing locations may have higher production costs, limited manufacturing capacity, or logistical challenges that could increase costs or disrupt supply. The scope, timing, and duration of tariffs and other trade restrictions remain uncertain. Further increases in tariffs or expansion of countries and products subject to tariffs could materially increase the cost of goods sold and adversely affect our operating results, financial condition, and cash flows.

• Our inability to accurately forecast demand for our imported products could cause us to purchase too much, too little or the wrong mix of inventory.

Manufacturing and delivery lead times for our imported products necessitate that we make forecasts and assumptions regarding current and future demand for these products. If our forecasts and assumptions are inaccurate, we may purchase excess or insufficient amounts of inventory. If we purchase too much or the wrong mix of inventory, we may be forced to sell it at lower margins, which could adversely affect our sales, earnings, financial condition and liquidity. These risks may be even more pronounced with new product launches, like our current Margaritaville product launch. If we purchase too little or the wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken or damage customer relationships, which also could adversely affect our sales, earnings, financial condition and liquidity.

• A disruption in supply from Vietnam or from our most significant suppliers in Asia could adversely affect our ability to timely fill customer orders for these products and decrease our sales, earnings and liquidity.

In fiscal 2026, imported products sourced from Vietnam accounted for 87% of our import purchases and our top five suppliers in Vietnam accounted for 69% of our fiscal 2026 import purchases. Our supply chain could be adversely impacted by the uncertainties of health concerns such as COVID-19 or similar pandemics and governmental restrictions. A disruption in our supply chain, or from Vietnam in general, such as the COVID-19 related lockdown in certain parts of Asia in the Summer of calendar 2021, could significantly impact our ability to fill customer orders for products manufactured in those countries. In some cases, we believe we would have sufficient inventory on hand and in-transit or be able to provide substitutions from our domestic warehouses but may not be enough to entirely mitigate the lost sales. Supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures would be reflected in our results. If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam in general, could adversely affect our sales, earnings, financial condition and liquidity.

• Increased transportation costs, including freight costs on imported products, could decrease earnings and liquidity.

Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity. Ongoing geopolitical conflicts and instability, including disruptions to key shipping routes, have increased volatility in global shipping markets and have resulted in higher ocean freight rates, longer transit times, and reduced carrier capacity. In the recent past, especially after the COVID-19 pandemic, transportation costs, including ocean freight costs and domestic trucking costs, on imported products represented a significant portion of the cost of those products. We saw a significant spike in these costs during that time and our profitability was materially impacted. To mitigate the increased costs, we implemented price increases and surcharges; however, there can be no assurance that we will be successful in increasing prices or receiving freight surcharges in the future or that we can do it quickly enough to offset increased costs. Increased transportation costs, both domestically and internationally, in the future would likely adversely affect our earnings, financial condition and liquidity.

• Our dependence on suppliers could, over time, adversely affect our ability to service customers.

We rely heavily on suppliers we do not own or control, including a large number of non-U.S. suppliers. All of our suppliers may not provide goods that meet our quality, design or other specifications in a timely manner and at a competitive price. If our suppliers do not meet our specifications, we may need to find alternative suppliers, potentially at a higher cost, or may be forced to discontinue products. Also, delivery of goods from non-U.S. suppliers may be delayed for reasons not typically encountered for domestically manufactured furniture, such as shipment delays caused by customs issues, labor issues, port-related issues such as weather, congestion or port equipment, decreased availability of shipping containers and/or the inability to secure space aboard shipping vessels to transport our products. Our failure to timely fill customer orders due to an extended business interruption for a major supplier, or due to transportation issues, could negatively impact existing customer relationships and adversely affect our sales, earnings, financial condition and liquidity.

• We are subject to changes in U.S. and foreign government regulations and in the political, social and economic climates of the countries from which we source our products.

Changes in political, economic and social conditions, including geopolitical conflicts or instability affecting key global shipping routes and our suppliers, as well as in the laws and regulations in the foreign countries from which we source our products could adversely affect our sales, earnings, financial condition and liquidity. These changes could make it more difficult to provide products and service to our customers or could increase the cost of those products. International trade regulations and policies of the United States and the countries from which we source finished products could adversely affect us. Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports affecting our products could increase our costs and decrease our earnings.

• Changes in the value of the U.S. Dollar compared to the currencies for the countries from which we obtain our imported products could adversely affect our sales, earnings, financial condition and liquidity.

For imported products, we generally negotiate firm pricing with our foreign suppliers in U.S. Dollars, typically for periods of at least one year. We accept the exposure to exchange rate movements during these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we must pay for imported products beyond the negotiated periods. These price changes could decrease our sales, earnings, financial condition and liquidity during the periods affected.

• Supplier transitions, including cost or quality issues, could result in longer lead times and shipping delays.

In the past, inflation concerns, and to a lesser extent quality and supplier viability concerns, affecting some of our imported product suppliers located in China prompted us to source more of our products from lower cost suppliers located in other countries, such as Vietnam. Additionally, in the past we transitioned a significant portion of our imported product purchases from China to Vietnam due to the imposition of tariffs in 2018 on most furniture and component parts imported from China. As conditions dictate, we could be forced to make similar transitions in the future. When undertaken, transitions of this type involve significant planning and coordination by and between us and our new suppliers in these countries. Despite our best efforts and those of our new sourcing partners, these transition efforts are likely to result in longer lead times and shipping delays over the short term. Risks associated with product defects, including higher than expected costs associated with product quality and safety, and regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products, including product liability claims and costs to recall defective products. One or a combination of these issues could adversely affect our sales, earnings, financial condition and liquidity.

We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines. These activities could disrupt our business, divert management attention from our current business, pose integration concerns or difficulties, dilute our earnings per share, decrease the value of our common stock and decrease our earnings and liquidity.

Growth by acquisition is highly dependent upon finding attractive targets and there can be no assurance those targets will be found. We may acquire or invest in businesses such as those that offer complementary products or that we believe offer competitive advantages. However, we may fail to identify significant liabilities or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth. We may also have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations. Acquisitions or strategic alliances may disrupt or distract management from our ongoing business. We may pay for future acquisitions using cash, stock, the assumption of debt or a combination of these. Future acquisitions could result in dilution to existing shareholders and to earnings per share and decrease the value of our common stock. Outside of the acquisition framework, there are risks involved with new business lines and product line launches. We may pursue new business lines in which we have limited or no prior experience or expertise. Further, new product line launches always have inherent risks regarding attracting customers without an established track record or defined market expectations. Like with our current launch of the new Margaritaville product line, these pursuits may require substantial investment of capital, personnel and management attention. New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.

If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing or implementing cost-saving measures.

Our domestic manufacturing operations make only upholstered furniture. A decline in demand for our domestically produced upholstered furniture could result in the realignment of our domestic manufacturing operations and capabilities and the implementation of cost-saving measures. These programs could include the consolidation and integration of facilities, functions, systems and procedures. We may decide to source certain products from other suppliers instead of continuing to manufacture them. These realignments and cost-saving measures typically involve initial upfront costs and could result in decreases in our near-term earnings before the expected cost savings are realized, if they are realized at all. We may not always accomplish these actions as quickly as anticipated and may not achieve the expected cost savings, which could adversely affect our sales, earnings, financial condition and liquidity.

A disruption affecting our domestic facilities could disrupt our business.

The facilities in which we store our inventory in Virginia, North Carolina and California are critical to our success. Our corporate and divisional headquarters, which house our administration, sourcing, sales, finance, merchandising, customer service and logistics functions for our imported and domestic products are located in Virginia, North Carolina and California. Additionally, our primary showrooms are located in North Carolina.

Our domestic upholstery manufacturing facilities are located in Virginia, North Carolina and California. Furniture manufacturing creates large amounts of highly flammable wood dust and may utilize other highly flammable materials such as foam, varnishes and solvents in its manufacturing processes and is therefore subject to the risk of losses arising from explosions and fires. Additionally, our domestic operations could be negatively affected by natural disasters such as hurricanes and floods, and public health events. Any disruption affecting our domestic facilities, even for a relatively short period of time, could adversely affect our ability to ship our furniture products and disrupt our business, which could adversely affect our sales, earnings, financial condition and liquidity.

Fluctuations in the price (including tariffs), availability or quality of raw materials for our domestically manufactured upholstered furniture could cause manufacturing delays, adversely affect our ability to provide goods to our customers or increase our costs.

We use various types of wood, leather, fabric, foam and other filling material, high-carbon spring steel, bar and wire stock and other raw materials in manufacturing upholstered furniture. We depend on outside suppliers for raw materials and must obtain sufficient quantities of quality raw materials from these suppliers at acceptable prices and in a timely manner. We do not have long-term supply contracts with our suppliers. Unfavorable fluctuations in the price (including those due to the potential implementation of additional reciprocal tariffs), quality or availability of required raw materials could negatively affect our ability to meet the demands of our customers. We may not always be able to pass price increases on raw materials through to our customers due to competition and other market pressures. In addition, the price increases are frequently implemented on future orders instead of existing order backlogs. Considering our lead times during periods of high demand, the benefits of new pricing could be offset by continued price increases from our suppliers, which could impact us before we realize the benefit from our price increases. The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity.

We may not be able to maintain, raise prices, or raise prices in a timely manner in response to inflation and increasing costs.

Competitive and market forces could prohibit or delay future successful price increases for our products in order to offset increased costs of labor, finished goods, raw materials, freight and other product-related costs on a timely basis, which could adversely affect our sales, earnings, financial condition and liquidity.

We may experience impairment of our long-lived assets, which would decrease our earnings and net worth.

At February 1, 2026, we had $38.8 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill. Our goodwill, some trademarks and trade names have indefinite useful lives and, consequently, are not subject to amortization for financial reporting purposes, but are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. Our definite-lived assets consist of property, plant and equipment and certain intangible assets related to our recent acquisitions and are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. The outcome of impairment testing could result in the write-down of all or a portion of the value of these assets. A write-down of our assets would, in turn, reduce our earnings and net worth.

During fiscal 2026, we reviewed triggering events under ASU 2021-03, Intangibles – Goodwill and Other (Topic 350). Due to adverse economic conditions, including declines in our market value, as well as other changes in market dynamics, we identified triggering events that necessitated a valuation of our goodwill and intangible assets. We engaged an independent third-party valuation firm to assist in performing the assessment. Based on this analysis, we recorded non-cash impairment charges of $14.5 million related to the impairment of Sunset West goodwill within the Domestic Upholstery segment, $558,000 for the trade name in the remaining HMI business classified in All Other, and $556,000 for the Bradington-Young trade name in the Domestic Upholstery segment. See Note 9 to our Consolidated Financial Statements for additional information.

Our sales and operating results could be adversely affected by product safety concerns.

If our product offerings do not meet applicable safety standards or consumers’ expectations regarding safety, we could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose us to regulatory enforcement action and/or private litigation. While we carry general and umbrella liability insurance for such events, settlements or jury awards could exceed our policy limits. Reputational damage caused by real or perceived product safety concerns or failure to prevail in private litigation against us could adversely affect our business, sales, earnings, financial condition and liquidity.

A material part of our sales and accounts receivable are concentrated in a few customers. The loss of several large customers through business consolidations or otherwise, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including economic downturn and the adverse economic effects of a future pandemic or similar events, could adversely affect our business.

One customer accounted for approximately 9% of our consolidated sales in fiscal 2026, and our top five customers accounted for about 26% of our fiscal 2026 consolidated sales. Approximately 23% of our consolidated accounts receivable is concentrated in our top five customers. Should any one of these receivables become uncollectible, it would have an immediate and material adverse impact on our financial condition and liquidity. The loss of any one or more of these customers could adversely affect our sales, earnings, financial condition and liquidity. The loss of several of our major customers through business consolidations, the loss of major product placements, failures or otherwise, could adversely affect our sales, earnings, financial condition and liquidity and the resulting loss in sales may be difficult or impossible to replace. Amounts owed to us by a customer whose business fails, or is failing, may become uncollectible (in whole or in part), and we could lose future sales, any of which could adversely affect our sales, earnings, financial condition and liquidity.

We may not be able to collect amounts owed to us.

We grant payment terms to most customers ranging from 30 to 60 days and do not generally require collateral. However, in some instances we provide longer payment terms. We purchase credit insurance on certain customers’ receivables and factor certain other customer accounts. Some of our customers have experienced, and may in the future experience, credit-related issues. Were an economic downturn, pandemic or another major, unexpected event with negative economic effects to occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay. While we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable. Credit evaluations involve significant management diligence and judgment, especially in the current environment. We may be unable to obtain sufficient credit insurance on certain customers’ receivable balances. Should more customers than we anticipate experience liquidity issues, if payment is not received on a timely basis, or if a customer declares bankruptcy or closes stores, we may have difficulty collecting amounts owed to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity. In fiscal 2026 and 2025, we recorded approximately $1 million and $3.1 million in bad debt expense due to bankruptcies of two large customers.

Our existing and future debt obligations could impair our liquidity and financial condition.

Our Amended and Restated Loan Agreement, consisting of an asset-based lending facility of up to $70 million from Bank of America, is secured by substantially all of our assets and contains provisions that limit the amount of our future borrowings under that facility. Moreover, the terms of our Amended and Restated Loan Agreement also include financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness. If we violate any loan covenants and do not obtain a waiver from our lender, our indebtedness under this arrangement would become immediately due and payable, and the lender could foreclose on its security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

Labor shortages and rising labor costs could disrupt operations at our domestic warehousing and manufacturing facilities.

At times, especially during the post COVID-19 demand surge, we have experienced difficulties in recruiting skilled labor into our domestic upholstery plants and warehouses and in some skilled or professional positions. Lack of qualified workers and high turnover in a variety of positions caused increased training costs and adversely affected our production schedules and our ability to ship our furniture products. Furthermore, we experienced higher labor costs and persistent inflationary pressure. Should these issues re-occur or increase due to future pandemics or for other reasons, our sales, earnings, financial condition and liquidity could again be adversely affected.

We may lose market share due to furniture retailers by-passing us and sourcing directly from non-U.S. furnishings sources.

Some large furniture retailers are sourcing directly from non-U.S. furniture factories. Over time, this practice may expand to smaller retailers. As a result, we are continually subject to the risk of losing market share to these non-U.S. furnishings sources, which could adversely affect our sales, earnings, financial condition and liquidity.

Failure to anticipate or timely respond to changes in fashion and consumer tastes could adversely impact our business.

Furniture is a styled product and is subject to rapidly changing fashion trends and consumer tastes, as well as to increasingly shorter product life cycles. If we fail to anticipate or promptly respond to these changes, we may lose market share or be faced with the decision of whether to sell excess inventory at reduced prices. This could adversely affect our sales, earnings, financial condition and liquidity.

Our results of operations for any quarter are not necessarily indicative of our results of operations for a full year.

Home furnishings sales fluctuate from quarter to quarter due to factors such as changes in economic and competitive conditions, seasonality, weather conditions, availability of raw materials and finished inventory and changes in consumer order patterns. From time to time, we have experienced, and may continue to experience, volatility with respect to availability of and demand for our home furnishing products. Accordingly, our results of operations for any quarter are not necessarily indicative of the results of operations to be expected for a full year or the next quarter.

The interruption, inadequacy or security failure of our information systems or information technology infrastructure or the internet or inadequate levels of cyber insurance could adversely impact our business, sales, earnings, financial condition and liquidity.

Our information systems (software) and information technology (hardware) infrastructure platforms and those of third parties who provide these services to us, including internet service providers and third parties who store data for us on their servers (“the cloud”), facilitate and support every facet of our business, including the sourcing of raw materials and finished goods, planning, manufacturing, warehousing, customer service, shipping, accounting, payroll and human resources. Our systems, and those of third parties who provide services to us, are vulnerable to disruption or damage caused by a variety of factors including, but not limited to: power disruptions or outages; natural disasters or other so-called “Acts of God”; computer system or network failures; viruses or malware; physical or electronic break-ins; the theft of computers, tablets and smart phones utilized by our employees or contractors; unauthorized access, phishing and cyber-attacks. The risk of cyberattacks also includes attempted breaches of contractors, business partners, vendors and other third parties. We have a cybersecurity program designed to protect and preserve the integrity of our information systems. Additionally, we implemented a multi-factor authentication process in order to enhance the security of our remote work environment. We have experienced and expect to continue to experience actual or attempted cyberattacks of our information systems or networks; however, none of these actual or attempted cyberattacks had a material impact on our operations or financial condition. Additionally, while we carry cyber insurance, including insurance for social engineering fraud, the amounts of insurance we carry may be inadequate due either to inadequate limits available from the insurance markets or inadequate coverage purchased. Because cyberthreat scenarios are inherently difficult to predict and can take many forms, cyber insurance may not cover certain risks. Further, legislative or regulatory action in these areas is evolving, and we may be unable to adapt our information systems or to manage the information systems of third parties to accommodate these changes. If these information systems or technologies are interrupted or fail, or we are unable to adapt our systems or those of third parties as a result of legislative or regulatory actions, our operations and reputation may be adversely affected, we may be subject to legal proceedings, including regulatory investigations and actions, which could diminish investor and customer confidence which could adversely affect our sales, earnings, financial condition and liquidity.

Unauthorized disclosure of confidential information provided to us by our customers, employees, or third parties could harm our business.

We rely on the internet and other electronic methods to transmit confidential information, and we store confidential information on our networks. If there was a disclosure of confidential information by our employees or contractors, including accidental loss, inadvertent disclosure or unapproved dissemination of information, or if a third party were to gain access to the confidential information we possess, our reputation could be harmed, and we could be subject to civil or criminal liability and regulatory actions. A claim that is brought against us, successful or unsuccessful, that is uninsured, or under-insured could harm our business, result in substantial costs, divert management attention and adversely affect our sales, earnings, financial condition and liquidity.

We may fail to realize the benefits of the sale of Pulaski Furniture and Samuel Lawrence casegoods brands

We evaluate and may pursue the divestiture of businesses or product lines that we determine are underperforming or no longer align with our strategic priorities. During fiscal 2026, we determined that the two largest businesses in the Home Meridian segment no longer aligned with our long-term strategy to streamline our portfolio and enhance profitability by focusing on brands that generate consistent earnings, and we completed the sale of the Pulaski Furniture (“PFC”) and Samuel Lawrence Furniture (“SLF”) casegoods brands within this segment.

Divesting involves a number of risks and uncertainties. We may incur significant costs associated with such transactions, including transaction costs, employee-related costs, and costs associated with exiting facilities or other contractual obligations. Divestitures may also disrupt relationships with customers, suppliers, and employees, particularly where the divested business had operational or customer relationships that overlap with our remaining operations. In addition, we may retain certain liabilities associated with the divested business, including obligations related to the legacy PFC pension plan.

Furthermore, the anticipated benefits of a divestiture, including improved profitability, reduced complexity, or greater strategic focus, may not be realized within the expected timeframe or at all. If we are unable to successfully execute divestitures or achieve the expected benefits from such transactions, our business, financial condition, and results of operations could be adversely affected.

Risk Management and Strategy

The Company’s cybersecurity risk management program is integrated into the overall risk management framework, including risk identification, assessment, and mitigation across all business areas. We have collaborated with third-party consultants and built a cybersecurity program designed to protect and safeguard the confidentiality, integrity and availability of our information systems, which aligns with industry standards and regulatory requirements. Key components of our cybersecurity risk management and strategy include:

• Risk assessments, including vulnerability scans and penetration testing to identify potential system weaknesses. These assessments are performed internally and supported by third-party consultants;
• Alignment of our cybersecurity framework with industry standards;
• Employee training and awareness: all employees receive mandatory regular cybersecurity training, with additional specialized sessions for high-risk roles. We also conduct simulated phishing exercises to enhance awareness and preparedness;
• Continuous monitoring and threat detection: our IT security team utilizes advanced tools for real-time network and system monitoring, enabling rapid detection and response to potential threats; and
• Comprehensive cyber insurance coverage, including protection against social engineering fraud and other cyber incidents, to further mitigate potential financial losses.

We have previously experienced actual or attempted cyber-attacks on our information systems or networks; to date, none of these incidents had a material impact on our operations or financial condition. However, cybersecurity threats continue to evolve, and future incidents could have a material impact. For additional information on the impact of cyber risks, refer to Part I, Item 1A. Risk Factors on page 14.

Governance

The board of directors oversees the Company’s practice for assessing, identifying and managing material risks from cybersecurity threats. The Audit Committee, consisting of all of the board’s independent directors, with one member holding the CERT Certificate in Cybersecurity Oversight, reviews and discusses with management and the independent auditor on the Company’s significant financial risk exposures for matters related to cybersecurity risk, including the steps management has taken to monitor and manage such exposures.

Management is responsible for the day-to-day oversight and management of cybersecurity risks. The Company’s VP of Enterprise Systems and Applications leads the overall cybersecurity strategy and risk management program. This role oversees development and execution of risk assessments, implementation of security policies and procedures, regular cybersecurity training for our employees, and leadership of the IT security team and coordination with third-party consultants.

The VP of Enterprise Systems and Applications has over 30 years of experience in information technology, enterprise systems, and operational risk management, including responsibility for infrastructure and operations in complex, multi-site environments. This experience includes the implementation and oversight of IT governance and control frameworks aligned with recognized standards, including ITIL and ISO/IEC 20000, as well as the establishment of processes related to service continuity, supplier management, configuration management, and operational controls. In addition, the VP’s experience also includes leading enterprise technology initiatives, including system implementations, data center migrations, business continuity planning, and vendor and third-party risk management.

Senior executives, including the Company’s CEO and CFO, integrate cybersecurity risks into the overall business strategy and financial planning. The VP and IT security team provide regular updates to senior management on the Company’s identified vulnerabilities, progress on cybersecurity initiatives and remediation efforts, and details of ongoing incidents. Management notifies the board of directors when significant incidents occur and provides the Audit Committee with quarterly updates on the Company’s cybersecurity practices.

Set forth below is information with respect to our principal properties on April 17, 2026. We believe all of these properties are well-maintained and in good condition. During fiscal 2026, we estimate our upholstery plants operated at approximately 73% of capacity on a one-shift basis. All our production facilities are equipped with automatic sprinkler systems. All facilities maintain modern fire and spark detection systems, which we believe are adequate. We have leased certain warehouse facilities for our distribution and import operations, typically on a short or medium-term basis. We expect that we will be able to renew or extend these leases or find alternative facilities to meet our warehousing and distribution needs at a reasonable cost. All facilities set forth below are active and operational, representing in the aggregate approximately 2.8 million square feet of owned space, leased space or properties utilized under third-party operating agreements.

HB=Hooker Branded, DU=Domestic Upholstery, AO=All Other

As you read Management’s Discussion and Analysis, please refer to the consolidated financial statements, including the related notes, contained elsewhere in this annual report. We especially encourage you to familiarize yourself with:

• All of our recent public filings made with the SEC which are available, without charge, at www.sec.gov (http://www.sec.gov) and at http://investors.hookerfurnishings.com;
• The forward-looking statements disclaimer contained prior to Item 1 of this report, which describe the significant risks and uncertainties that could cause actual results to differ materially from those forward-looking statements made in this report, including those contained in this section of our annual report on Form 10-K;
• The company-specific risks found in Item 1A. “Risk Factors” of this report. This section contains critical information regarding significant risks and uncertainties that we face. If any of these risks materialize, our business, financial condition and future prospects could be adversely impacted; and
• Our commitments and contractual obligations and off-balance sheet arrangements described on page 28 and in Note 18 to our Consolidated Financial Statements on page F-30 of this report. This note describes commitments, contractual obligations and off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements.

In Management’s Discussion and Analysis, we analyze and explain the annual changes in some specific line items in the consolidated financial statements for fiscal 2026 compared to fiscal 2025. We also provide information regarding the performance of each of our operating segments and All Other. The discussion below comparing fiscal 2026 to fiscal 2025 excludes discontinued operations, except where otherwise noted. The analysis and discussions of fiscal 2025 compared to fiscal 2024 results are in our 2025 Form-10K available through Hooker Furnishings and SEC websites.

Unless otherwise indicated, references to the “Company,” “we,” “us” and “our” refer to Hooker Furnishings Corporation and its consolidated subsidiaries, unless specifically referring to segment information. All references to the “Hooker,” “Hooker Division(s),” “Hooker Legacy Brands” or “traditional Hooker” divisions or companies refer to all current business units and brands except for those in the former Home Meridian segment. The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery. The Domestic Upholstery segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West. All Other includes intercompany eliminations and operating segments that are not individually reportable.

Furnishings sales account for all of our net sales. For financial reporting purposes, we are organized into two reportable segments - Hooker Branded and Domestic Upholstery. Our other businesses that are not individually reportable and intercompany eliminations are aggregated into “All Other”. We regularly monitor our reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. See Note 17 to our consolidated financial statements for additional financial information regarding our segments.

Executive Summary - Fiscal 2026 Results of Operations

During fiscal 2026, we continued to operate in a challenging macroeconomic environment, including a slow housing market, soft demand for home furnishings, reduced consumer discretionary spending, and the impact of tariffs. In response, we focused on initiatives within our control, including the near completion of a multi-phase cost reduction program, the divestiture of certain underperforming businesses, the launch of the Margaritaville licensed collection at the High Point Market, and the opening of a new Vietnam warehouse, representing a shift in our warehousing strategy. We continued to focus on improving operating performance within our core Hooker Branded and Domestic Upholstery segments, with the Hooker Branded segment reporting operating income of $1.9 million compared to an operating loss in the prior year, and, the Domestic Upholstery segment reporting an operating loss of $16.9 million, driven by $15.0 million non-cash impairment charges, compared to an operating loss of $5.4 million in the prior year.

Net sales from continuing operations totaled $278.1 million for fiscal 2026, a decrease of $39.2 million, or 12.4%, compared to the prior fiscal year. The decrease was primarily attributable to the former Home Meridian segment’s hospitality business, which has been reclassified within All Other, due to the project-based nature of that business. Net sales in the Hooker Branded and Domestic Upholstery segments decreased modestly by 2.9% and 2.7%, respectively, partially due to the current fiscal year containing one fewer week than the prior year. Gross margin improved in both segments, and selling and administrative expenses decreased, due in part to cost reduction initiatives. The Company reported a operating loss of $16.5 million, primarily driven by $15.6 million of non-cash intangible asset impairment charges triggered by our stock price during the year, as well as operating losses within All Other due to lower sales volumes. Net loss from continuing operations was $12.8 million, or ($1.20) per diluted share.

Despite the operating and net losses, we maintained liquidity and financial flexibility. We reduced the outstanding principal balance of our term loan during the year to $3.6 million at fiscal year-end, compared to $21.7 million at the prior year-end. We also reduced our cash dividend by 50% per share, and our Board of Directors authorized a new $5 million share repurchase program as part of our capital allocation strategy. These actions enhanced our near-term liquidity and financial flexibility, enabling continued investment in key inventory, support for growth initiatives, and the ability to navigate ongoing macroeconomic uncertainty while maintaining a focus on long-term shareholder value.

Subsequent to fiscal year-end, in February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act were not authorized by statute. In March 2026, the U.S. Court of International Trade directed U.S. Customs and Border Protection to implement a refund process for previously collected duties. We are evaluating the potential recovery of these amounts, and potential new tariffs under different legal authorities.

Our fiscal 2026 performance is discussed in greater detail below under “Results of Operations”.

Results of Operations – Continuing Operations

The following table sets forth the percentage relationship to net sales of certain items for the annual periods included in the consolidated statements of operations:

Fiscal 2026 Compared to Fiscal 2025

Net Sales

Unit Volume and Average Selling Price (“ASP”)

20

Because we report on a fiscal year that ends on the Sunday closest to January 31st of each year, the 2026 fiscal year was one week shorter than the comparable 2025 fiscal year. The following table presents average net sales per shipping day in thousands for the 2026 and 2025 fiscal years:

Consolidated net sales decreased by $39.2 million, or 12.4%, year-over-year, driven primarily by lower sales in the hospitality business within All Other and, to a lesser extent, a shorter fiscal year.

• Hooker Branded segment’s net sales decreased by $4.3 million, or 2.9%, compared to the prior fiscal year. The entire decrease occurred in the fourth quarter, with net sales down $5.5 million, offsetting modest increases recorded during the first three quarters of the fiscal year. The decrease was primarily attributable to the fourth quarter of the current fiscal year being one week shorter than the prior year period, which reduced net sales by approximately $2.9 million based on average daily sales, and, to a lesser extent, supplier production delays that limited product availability for shipment, as well as temporary weather-related shipping disruptions. Unit volume decreased by 8.8%, primarily due to a 27% decrease in fourth quarter volume versus the prior year, marking the lowest quarterly level in two years. This decrease was partially offset by a 5.7% increase in average selling price, implemented in August 2025 to mitigate higher product costs and tariffs.
• Domestic Upholstery segment’s net sales decreased by $3.0 million, or 2.7%, compared to the prior year. Results varied across divisions, with sales decreases in divisions focused on upscale leather and custom fabric furniture due in part to a shorter fiscal period and lower incoming orders, while divisions serving private label, contract and senior living, and outdoor furniture channels reported sales growth. Average selling prices remained relatively stable across all divisions. The overall decrease in net sales was primarily driven by lower unit volume in the underperforming divisions, partially offset by higher unit volume in the divisions with sales growth.
• All Other’s net sales decreased by $31.9 million, or 61.5%, compared to the prior year. The decrease was entirely attributable to lower sales in the hospitality business, reflecting the project-based nature of this business, in which certain large projects shipped in the prior year did not recur in the current year.

Gross Profit and Margin

Consolidated gross profit decreased by $4.6 million, primarily due to lower sales at All Other, partially offset by increased gross profit in the Hooker Branded and Domestic Upholstery segments. Consolidated gross margin increased, reflecting margin improvements in the Hooker Branded and Domestic Upholstery segments.

• The Hooker Branded segment’s gross profit increased by $1.6 million, and gross margin increased by 200 basis points compared to the prior fiscal year, despite a slight decrease in net sales. The margin improvement was primarily driven by a 210 basis point reduction in cost of goods sold as a percentage of net sales, largely due to favorable freight costs, and to a lesser extent, pricing actions. Tariffs are expected to have a greater impact on margins in future periods.
• Domestic Upholstery segment’s gross profit increased by $2.1 million, and gross margin increased by 230 basis points compared to the prior fiscal year. The margin improvement was primarily driven by lower direct material costs, which decreased by 150 basis points. Direct labor, indirect, and warehousing and distribution costs each decreased by approximately 20 to 40 basis points, reflecting reduced headcount and the exit of the Savannah warehouse, partially offset by costs associated with Sunset West inventory relocation to Virginia.
• All Other’s gross profit and gross margin both decreased compared to the prior year, primarily due to a 61.5% decrease in net sales in the hospitality business, as discussed above.

Selling and Administrative Expenses (“S&A”)

Consolidated S&A expenses decreased by $11.9 million, or 50 basis points, compared to the prior year, primarily driven by the Company’s restructuring efforts, including the exit of unprofitable businesses at All Other, as well as cost reductions across the other segments.

• Hooker Branded segment’s S&A expenses decreased by $776,000 compared to the prior year. The decrease was primarily driven by cost reduction initiatives, which resulted in approximately $3.3 million in savings, including lower compensation costs due to reduced headcount, as well as reductions in showroom and rent expenses, bad debt, banking fees, and other operating costs. These reductions were largely offset by higher professional services and maintenance expenses, including a $2.1 million increase in IT-related maintenance driven by higher software licensing fees and post-implementation support and maintenance costs associated with the Company’s ERP system, as well as additional consulting fees related to compliance, corporate strategy, and investor relations activities.
• Domestic Upholstery segment’s S&A expenses decreased by $1.3 million, or 60 basis points, compared to the prior year. The decrease was primarily driven by approximately $665,000 lower operating expenses, including reductions in advertising and supplies, compensation costs, and compliance expenses related to a non-recurring item in the prior year, as well as other cost savings. The decrease also reflects lower restructuring and selling costs.
• All Other’s S&A expenses decreased by $9.9 million compared to the prior year, primarily due to the absence of $7.2 million of operating expenses associated with a previously exited HMI business classified in All Other, including $3.1 million of bad debt expense related to the bankruptcy of its major customer. The decrease also reflects, to a lesser extent, absence of $1.7 million in restructuring costs incurred in the prior year related to another previously exited lighting and home décor business.

Intangible Asset Impairment and Amortization

The Company recorded $15.6 million of non-cash impairment charges during fiscal 2026. These charges included $14.5 million related to goodwill in the Sunset West division and $556,000 related to the Bradington-Young trade name, both within the Domestic Upholstery segment, as well as $558,000 related to the remaining HMI-related business classified in All Other.

Intangible asset amortization expense decreased slightly in fiscal 2026, primarily due to the absence of amortization related to the Sam Moore trade name and reduced amortization associated with the remaining HMI business classified in All Other. See Note 9, Intangible Assets and Goodwill, to the Consolidated Financial Statements for additional information regarding impairment charges and amortizable intangible assets.

Operating (Loss) / Income and Margin

The Company reported an operating loss of $16.5 million in fiscal 2026 due to $15.6 million non-cash impairment charge, decreased overall net sales, approximately $2.0 million in restructuring costs, as well as other factors discussed above.

Interest Expense, net

23

Consolidated interest expense decreased in fiscal 2026, primarily due to a significantly lower average principal balance throughout the year compared to the prior fiscal year.

Income Taxes

Income tax benefit from continuing operations was $4.3 million for fiscal 2026, compared to $1.9 million for fiscal 2025. The effective tax rates were 25.0% and 23.6% for fiscal 2026 and fiscal 2025, respectively. The increase in the effective tax rate in fiscal 2026 was primarily due to higher state tax benefits. See Note 16 Income Taxes to our Consolidated Financial Statements for additional information about our income taxes.

Net (Loss) from Continuing Operations and Earnings Per Share

Results of Operations – Discontinued Operations

24

Combined net sales for PFC and SLF decreased by $37.3 million, or 87.2%, in fiscal 2026, primarily due to 52.6% lower unit volume. The decrease also reflects the divestiture of these businesses in early December 2025, resulting in approximately ten months of sales being recognized in fiscal 2026. Lower unit volume was driven by continued macroeconomic pressures and tariff-related purchasing hesitancy among value-oriented customers, particularly major furniture chains.

The Company recorded restructuring costs of $3.9 million in fiscal 2026, including $2.4 million associated with the exit of the Savannah warehouse, which primarily supported the PFC and SLF businesses. These costs included fixed asset write-offs, inventory liquidation and relocation expenses, and severance. In connection with the divestiture, the Company recorded a $6.9 million loss on sale of the discontinued businesses, including $2.6 million related to trade name impairments, approximately $3.5 million related to write-downs of accounts receivable, inventory, and other fixed and intangible assets, and approximately $735,000 of selling costs. In addition, these businesses incurred approximately $1.0 million of bad debt expense related to a customer bankruptcy.

The operating losses for fiscal 2026 were primarily attributable to the significant decline in sales volume and unfavorable product and customer mix, as well as restructuring costs and valuation adjustments associated with the divestiture. These impacts are not expected to recur following the divestiture.

The analysis and discussion of fiscal 2025 compared to fiscal 2024 results are available in Item 7 of our 2025 Annual Report on Form-10K available through Hooker Furnishings and SEC websites.

Financial Condition, Liquidity and Capital Resources

Summary Cash Flow Information – Operating, Investing and Financing Activities

During fiscal 2026, cash decreased by $5.2 million compared to the prior fiscal year. Cash used in financing activities, primarily related to repayments on the term loan and revolving credit facility, as well as dividend payments, was largely offset by cash provided by operating activities and, to a lesser extent, cash provided by investing activities, which benefited from proceeds from the sale of discontinued operations.

• Cash provided by operating activities totaled $18.3 million in fiscal 2026, compared to $22.0 million used in the prior fiscal year. The improvement was driven primarily by favorable changes in working capital and non-cash adjustments. Key drivers of operating cash flow increase:
• Despite a higher net loss from continuing operations of $12.8 million, compared to $6.2 million in the prior year, operating cash flow benefited from significant non-cash adjustments, including $15.6 million of trade name impairment charges, which were added back in the reconciliation to operating cash flow.
• Trade receivables: Collections of trade accounts receivable generated $8.1 million of cash inflows, compared to $11.3 million outflows in the prior fiscal year, primarily due to improved collections, including large, project-based receipts.
• Inventories: Generated $17.5 million of cash inflows, compared to a use of $13.2 million outflows in the prior year, reflecting deliberate inventory reduction efforts. The decrease was concentrated in the Hooker Branded segment as inventory levels normalized following prior elevated build-ups.
• Offsetting factors
• A $5.8 million decrease in accounts payable, representing a use of cash compared to a $4.8 million source in the prior year, as we reduced purchasing activity and did not continue building inventory levels during the current fiscal year.

Cash provided by investing activities totaled $2.0 million, compared to $2.5 million used in the prior fiscal year. The increase was primarily due to $5.5 million proceeds from the sale of discontinued operations, partially offset by capital expenditure.

Cash used in financing activities was $27.4 million, compared to $11.1 million in the prior fiscal year, primarily due to $18.5 million of repayments on the revolving credit facility during the current fiscal year.

Cash provided by discontinued operations was $1.9 million, compared to $1.1 million used in the prior fiscal year, primarily due to favorable operating adjustments, including non-cash valuation allowance and asset disposal impacts added back to net loss.

Liquidity, Financial Resources and Capital Expenditures

Our sources of liquidity are:

• available cash and cash equivalents, which are highly dependent on incoming order rates and our operating performance;
• expected cash flow from operations;
• available lines of credit; and
• cash surrender value of Company-owned life-insurance.

The most significant components of our working capital are inventory, accounts receivable and cash and cash equivalents reduced by accounts payable and accrued expenses.

Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for inventory, lease payments and payroll), quarterly dividend payments and capital expenditures related primarily to our showroom renovations and upgrading systems, buildings and equipment. The timing of our working capital needs can vary greatly depending on demand for and availability of raw materials and imported finished goods but is generally the greatest in the mid-summer as a result of inventory build-up for the traditional fall selling season. Long-term cash requirements relate primarily to funding lease payments.

Loan Agreements and Revolving Credit Facility

On December 5, 2024, the Company and its wholly owned subsidiaries, Bradington-Young, LLC, Sam Moore Furniture LLC and Home Meridian Group, LLC (together with the Company, the “Borrowers”), entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Bank of America, N.A. (“BofA”), as lender. The Amended and Restated Loan Agreement amends, restates and replaces the Second Amended and Restated Loan Agreement, dated as of September 29, 2017, between the Borrowers and BofA, as amended (the “Existing Loan Agreement”). The outstanding principal amount of loans and letters of credit issued under the Existing Loan Agreement and used to collateralize certain insurance arrangements and for imported product purchases will remain outstanding as loans and letters of credit under the Amended and Restated Loan Agreement.

The Amended and Restated Loan Agreement provides for a revolving credit facility in a committed principal amount of up to $70,000,000 (the “Revolving Commitment”), including subline of $8,000,000 for letters of credit, and an option to increase the Revolving Commitment by up to $30,000,000 upon meeting certain conditions, including agreement by BofA to increase the Revolving Commitment by such amount. Proceeds of loans and letters of credit under the Amended and Restated Loan Agreement are available for general working capital and other corporate purposes of the Borrower.

Availability of loans and letters of credit under the Revolving Commitment is capped by a borrowing base formula calculated as of any date as the sum for the Borrowers of (a) the value of their accounts receivable, (b) the value of their inventory, (c) the value of their in-transit inventory and (d) the life insurance cash surrender value of company-owned life insurance policies, in each case subject to eligibility requirements, advance rates, valuation metrics, reductions for write-offs and other dilutive items and reserves (the “Borrowing Base”). The lesser of the Revolving Commitment and the Borrowing Base, in each case net of the principal amount of outstanding loans and the face amount of letters of credit, constitutes “Availability” under the Amended and Restated Credit Agreement.

Outstanding loans under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. Letters of credit are subject to a letter of credit fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 1.75% and a fronting fee equal to the actual daily amount of undrawn letters of credit multiplied by a per annum rate of 0.125%. We must also pay a monthly unused commitment fee that is based on the average daily unused amount of Revolving Commitment multiplied by a per annum rate of 0.25%. All accrued interest and fees are payable in cash monthly in arrears.

We may prepay any outstanding principal amounts borrowed under the Amended and Restated Loan Agreement at any time, without penalty provided that any payment is accompanied by all accrued interest owed. Subject to the Borrowers having sufficient borrowing base capacity and customary conditions precedent to borrowing, amounts repaid may be reborrowed. The Revolving Commitment will terminate, and all amounts outstanding thereunder will be due and payable, on December 5, 2029.

The obligations under the Amended and Restated Loan Agreement are secured by a first priority security interest in substantially all of the assets of the Borrowers, other than real estate, including all Company-owned life insurance policies, all accounts receivable, all inventory, all intellectual property, all equipment and all other personal property.

The Amended and Restated Loan Agreement includes customary representations and warranties and requires the Borrowers to comply with customary affirmative and negative covenants, including, among other things, a financial covenant requiring the maintenance of a ratio of (x) EBITDA net of capital expenditures (to the extent not paid using Borrowed Money) to (y) the sum of debt service and dividends paid, in each case as of the last day of each month for the trailing twelve-month period ending on such day, of at least 1.0 to 1.0, if an event of default has occurred and is continuing or Availability has fallen below 10% of the Revolving Commitment at any time (until such time as both Availability is 10% or greater and no event of default exists, for the 30 consecutive days prior to such month end).

The Amended and Restated Loan Agreement also limits the Borrowers’ right to incur other indebtedness, make certain investments and create liens upon our assets, subject to certain exceptions, among other restrictions. The Amended and Restated Loan Agreement does not restrict the Company’s ability to pay cash dividends on, or repurchase, shares of its common stock, subject to (a) no default existing prior to or resulting from such dividend or repurchase, (b) Availability is not less than 15% of the Revolving Commitment for each of the preceding 45 days prior to announcement of such dividend or repurchase and after giving pro forma effect to such dividend or repurchase and (c) if Availability is less than 20% of the Revolving Commitment on any day in such 45-day period, the Borrowers are in compliance with the financial covenant described above after giving effect to such dividend or repurchase.

We incurred $480,000 in fiscal 2025 and an additional $118,000 in fiscal 2026 in debt issuance costs in connection with our term loans. As of February 1, 2026, unamortized loan costs of $476,000 were netted against the carrying value of our term loans on our consolidated balance sheets.

As of February 1, 2026, we had $3.6 million principal amount of outstanding loans and $3.6 million face amount of letters of credit. We had $62.8 million of Availability based on the current Borrowing Base. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of February 1, 2026. We believe that our existing liquidity and capital resources are sufficient to meet our anticipated needs over the next 12 months.

Share Repurchase Authorization

In fiscal 2026 fourth quarter, our Board of Directors authorized the repurchase of up to $5 million of the Company’s common shares. The authorization did not obligate us to acquire a specific number of shares during any period and did not have an expiration date, but it could be modified, suspended, or discontinued at any time at the discretion of our Board of Directors. Repurchases could be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to our cash requirements for other purposes, compliance with the covenants under the Amended and Restated Loan Agreement and other factors we deem relevant. We did not repurchase any of our common shares during fiscal 2026.

Capital Expenditures

We expect to spend approximately $3 million in capital expenditures in fiscal 2027 to maintain and enhance our operating systems and facilities.

Material Capital Commitments

Our material capital commitments primarily consist of lease payments, obligations for leased space or properties under third-party operating agreements, and future benefit payments under two retirement plans.

As of February 1, 2026, future minimum annual commitments under leases and operating agreements are $8.7 million in fiscal 2027, $6.8 million in fiscal 2028, $6.1 million in each of fiscal 2029 and 2030, and $5.4 million in fiscal 2031.

Additionally, the Revolving Commitment will terminate, and all outstanding amounts thereunder will be due and payable, on December 5, 2029.

Dividends

We declared and paid dividends of $0.805 per share or approximately $8.8 million in fiscal 2026, a decrease of 12.5% or $0.115 per share compared to $0.92 per share or approximately $9.9 million in fiscal 2025. During the third quarter of fiscal 2026, the Board approved a reduction of the annual dividend to $0.46 per share, or 50%, effective beginning with the December 31, 2025 dividend payment. This action reflects a recalibration of our capital allocation strategy to align with current operating conditions, liquidity requirements, and our strategic transition to a leaner, growth-oriented business model. The reduced dividend, together with the share repurchase program, is intended to preserve financial flexibility and support ongoing investment in the business while continuing to return capital to shareholders.

On March 5, 2026, our Board of Directors declared a quarterly cash dividend of $0.115 per share, payable on March 31, 2026 to shareholders of record at March 16, 2026.

Our Board of Directors will continue to evaluate the appropriateness of the current dividend rate considering our performance and economic conditions in future quarters.

Recently Issued Accounting Pronouncements

See the Recently Adopted Accounting Standards section of Note 1 to our Consolidated Financial Statements for further details of recent accounting pronouncements.

Outlook

In the Hooker Branded and Domestic Upholstery segments, incoming orders have increased year-over-year for three consecutive quarters, adjusted for the extra week in last year’s fourth quarter.

Housing activity and consumer confidence remain weak and the Department of Commerce’s February advance monthly estimates reflect that reality, showing that retail sales for furniture and home furnishings decreased by 5.6% as compared to the prior year and lower than January 2026.We don’t anticipate near-term meaningful improvement in conditions; however, with a more efficient cost structure and a streamlined portfolio, we believe we are positioned to report much improved results if current market conditions persist.

Our advantage is a clear focus on our core businesses, with the organization fully aligned to drive organic growth and deliver more consistent, sustainable earnings over time. Margaritaville product and gallery commitments continue to scale, with shipments expected to begin in the second half of fiscal 2027.

Critical Accounting Policies and Estimates

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. Specific areas requiring the application of management’s estimates and judgments include, among others, revenue recognition, inventory valuation, assumptions pertaining to valuation of goodwill and intangible assets and useful lives of long-lived assets. Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used. However, we do not believe that actual results will deviate materially from our estimates related to our accounting policies described below but because application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties, actual results could differ materially from these estimates. Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.

Revenue Recognition

We recognize revenue pursuant to Accounting Standards Codification 606, which requires revenue to be recognized at an amount that reflects the consideration we expect to be entitled to receive in exchange for transferring goods or services to our customers. Our policy is to record revenue when control of the goods transfers to the customer. We have a present right to payment at the time of shipment as customers are invoiced at that time. We believe the customer obtains control of goods at the time of shipment, which is typically when title passes. While the customer may not enjoy immediate physical possession of the products, the customer’s right to re-direct shipment indicates control. In the very limited instances when products are sold under consignment arrangements, we do not recognize revenue until control over such products has transferred to the end consumer. Orders are generally non-cancellable once loaded into a shipping trailer or container.

The transaction price for each contract is the stated price of the product, reduced by any stated discounts or allowances at that point in time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit contract with the customer, as reflected in the order acknowledgement and invoice, states the final terms of the sale, including the description, quantity, and price of each product purchased. The transaction price reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period.

Net sales are comprised of gross revenues from sales of home furnishings and hospitality furniture products and are recorded net of allowances for trade promotions, estimated product returns, rebate advertising programs and other discounts. Physical product returns are very rare due to the high probability of damages to our products in return transit. Other revenues, primarily royalties, are immaterial to our overall results. Payment is typically due within 30-60 days of shipment for customers qualifying for payment terms. Collectability is reasonably assured since we extend credit to customers for whom we have performed credit evaluations and/or from whom we have received a down payment or deposit. Due to the highly-customized nature of our hospitality products, we typically require substantial prepayments on these orders, with the balance due within 30 days of delivery.

Impairment of Long-Lived Assets

Tangible and Definite Lived Intangible Assets

We regularly review our property, plant and equipment and definite-lived intangible assets for indicators of impairment, as specified in the Accounting Standards Codification.

When an indicator of impairment is present, the impairment test for our property, plant and equipment requires us to assess the recoverability of the value of the assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and arising from use and eventual disposition of the assets. We principally use our internal forecasts to estimate the undiscounted future cash flows used in our impairment analyses. These forecasts are subjective and are largely based on management’s judgment, primarily due to the changing industry in which we compete, changing consumer tastes, trends and demographics and the current economic environment. We monitor changes in these factors as part of the quarter-end review of these assets. While our forecasts have been reasonably accurate in the past, during periods of economic instability, uncertainty, or rapid change within our industry, we may not be able to accurately forecast future cash flows from our long-lived assets and our future cash flows may be diminished. Therefore, our estimates and assumptions related to the viability of our long-lived assets may change and are reasonably likely to change in future periods. These changes could adversely affect our consolidated statements of operations and consolidated balance sheets.

When we conclude that any of these assets are impaired, the asset is written down to its fair value. Any impaired assets that we expect to dispose of by sale are measured at the lower of their carrying amount or fair value, less estimated cost to sell; are no longer depreciated; and are reported separately as “assets held for sale” in the consolidated balance sheets, if we expect to dispose of the assets in one year or less.

Intangible Assets and Goodwill

Our goodwill, trademarks and trade names are tested for impairment annually as of the first day of our fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The fair value of our trademarks and trade names is determined based on the estimated earnings and cash flow capacity of those assets. The impairment test consists of a comparison of the fair value of the indefinite-lived intangible assets with their carrying amount. If the carrying amount of the indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess.

Upon the adoption of ASU 2017-04, we perform our annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions, the most critical of which are potential future cash flows and the appropriate discount rate.

During the third quarter of fiscal 2026, adverse economic conditions, including declines in our market value, as well as other changes in market dynamics, triggered an interim impairment assessment of goodwill and intangible assets. We engaged an independent third-party valuation firm to assist in performing this assessment. The valuation procedures were performed with consideration of applicable accounting guidance, including Accounting Standards Codification (“ASC”) Topic 350, Goodwill and Other Intangible Assets and ASC Topic 820, Fair Value Measurement. The fair value of the Home Meridian and Domestic Upholstery reporting units was determined using a combination of the discounted cash flow method, guideline public company method, and guideline transaction method. Based on this analysis, we recorded aggregate non-cash impairment charges of $15.6 million, including $14.5 million related to Sunset West goodwill within the Domestic Upholstery segment, $0.6 million related to the HMI trade name within All Other, and $0.6 million related to the Bradington-Young trade name within the Domestic Upholstery segment. See Note 9, Intangible Assets and Goodwill, to the Consolidated Financial Statements for additional information regarding impairment charges and amortizable intangible assets.

Based on our internal valuation and goodwill impairment analysis as described above, we have concluded that Shenandoah goodwill in the Domestic Upholstery segment is not impaired, and the fair values of remaining Bradington Young, Home Meridian and BOBO non-amortizable trade names exceeded their carrying values as of February 1, 2026.

The assumptions used to determine the fair value of our intangible assets are highly subjective and judgmental and include long-term growth rates, sales volumes, projected revenues, assumed royalty rates and factors used to develop an applied discount rate. If the assumptions that we use in these calculations differ from actual results, we may realize impairment on our intangible assets that may have a material-adverse effect on our results of operations and financial condition.

Inventory

Inventories, consisting of finished furniture for sale, raw materials, manufacturing supplies and furniture in process, are stated at the lower of cost, or market value, with cost determined using the last-in, first-out (LIFO) method. Under this method, inventory is valued at cost, which is determined by applying a cumulative index to current year inventory dollars.

We review inventories on hand and record an allowance for slow-moving and obsolete inventory based on historic experience, current sales trends and market conditions, expected sales and other factors. When we identify inventory that is unlikely to be sold or that has a cost basis in excess of its net realizable value, we record a write-down to reduce the carrying amount of inventory to its estimated net realizable value.

Our other significant accounting policies are described in Note 1 – Summary of Significant Accounting Policies to our Consolidated Financial Statements beginning at page F-10 in this report.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires public entities to provide additional disclosures disaggregating certain expense captions presented on the consolidated statements of operations. The guidance requires disclosure, in tabular format, of specified expense categories, including employee compensation, depreciation and amortization, and inventory-related costs, within relevant income statement captions. The standard is effective for annual reporting periods beginning after December 15, 2026, which will be our fiscal 2028, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Adoption is expected to result in expanded disclosures, but is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Concentrations of Sourcing Risk

In fiscal 2026, imported products sourced from Vietnam accounted for 87% of our import purchases and our top five suppliers in Vietnam accounted for 69% of our fiscal 2026 import purchases. A disruption in our supply chain, or from Vietnam in general, could significantly impact our ability to fill customer orders for products manufactured in those countries. Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions. In some cases, we may be able to provide substitutions using inventory on hand, in-transit and from our domestic warehouses, but not enough to entirely mitigate the lost sales. Supply disruptions and delays on selected items could occur for six months or longer before the impact of remedial measures would be reflected in our results. If we are unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain from our largest import furniture suppliers, or from Vietnam in general, could adversely affect our sales, earnings, financial condition and liquidity.

We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, raw materials price risk and changes in foreign currency exchange rates, which could impact our results of operations or financial condition. We manage our exposure to this risk through our normal operating activities.

Interest Rate Risk

Borrowings under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. As such, these debt instruments expose us to market risk for changes in interest rates. As of February 1, 2026, we had $3.6 million principal amount of outstanding loans. At current borrowing levels, a 1% increase in the SOFR rate would result in an annual increase in interest expenses of approximately $36,000. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of February 1, 2026.

Raw Materials Price Risk

We are exposed to market risk from changes in the cost of raw materials used in our domestic upholstery manufacturing processes; principally, wood, fabric and foam products. Increases in home construction activity could result in increases in wood and fabric costs. Additionally, the cost of petroleum-based foam products we utilize are sensitive to crude oil prices, which vary due to supply, demand and geo-political factors.

Currency Risk

For imported products, we generally negotiate firm pricing denominated in U.S. Dollars with our foreign suppliers, typically for periods of at least one year. We accept the exposure to exchange rate movements beyond these negotiated periods. We do not use derivative financial instruments to manage this risk but could choose to do so in the future. Most of our imports are purchased from suppliers located in Vietnam and China. The Chinese currency floats within a limited range in relation to the U.S. Dollar, resulting in exposure to foreign currency exchange rate fluctuations.

Since we transact our imported product purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially all of the effect of any price increases from suppliers in the prices we charge for imported products. However, these changes could adversely impact sales volume or profit margins during affected periods.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended February 1, 2026. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of February 1, 2026, the end of the period covered by this annual report, to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

In accordance with Section 404 of the Sarbanes-Oxley Act and SEC rules thereunder, management has conducted an assessment of our internal control over financial reporting as of February 1, 2026, based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s report regarding that assessment is included on page F-2 of this report, with our consolidated financial statements, and is incorporated herein by reference.

Report of Registered Public Accounting Firm

Our independent registered public accounting firm, KPMG LLP, audited the consolidated financial statements included in this annual report on Form 10-K and has issued an audit report on the effectiveness of our internal control over financial reporting. KPMG’s report is included on page F-3 and F-4 of this report, with our consolidated financial statements, and is incorporated herein by reference.

Changes in Internal Control over Financial Reporting

There were no other changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.