What changed in this filing

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Item 1A. Risk Factors

2023-04-14 compared with 2022-04-15 · 88 added, 106 removed, 150 unchanged (56% of the section changed)

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There may be additional risks that are presently unknown to us or that we currently believe to be immaterial that could affect us.

Risks related to COVID-19 and future pandemics

The impact of COVID-19 and future pandemics could adversely affect our business, results of operations, financial condition and liquidity, and stock price.

The COVID-19 pandemic is a serious threat to health and economic well-being affecting our customers, our associates and our suppliers.

Home furnishings purchases are largely postponable and heavily influenced by consumer confidence and most of our customers’ businesses are classified as non-essential.

Consequently, traffic to our customers’ stores and demand for our products significantly decreased at the initial height of the pandemic, our sales deteriorated and our earnings were negatively impacted.

COVID-19 also impacted our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are manufactured, and we experienced out-of-stocks and lost sales as a result.

Additionally, the demand surge that occurred after the initial height of the pandemic continues to cause supplier capacity restraints, shipping container and steamship space shortages.

These logistics issues have increased costs, led to out-of-stocks and adversely affected our sales and earnings.

Our sales order backlog is at historic levels due to these factors, and we cannot assure that we will be able to convert this backlog into sales at a normal pace or at all.

We face the risk that current consumer demand could soften, or our customers could go elsewhere for products if our competitors are able to solve the current issues and we cannot.

Alternatively, solving these issues may significantly diminish our profit margins if we are unable to offset these additional costs.

The extent of the continued impact of COVID-19 on our business and financial results depends on future developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public health measures.

Other pandemics are also possible with similar or worse public health outcomes.

The sweeping nature of pandemics makes it extremely difficult to predict how our business and operations could be affected in the longer run.

Any of the foregoing factors, or other cascading effects of this or other pandemics, could materially increase our costs, negatively impact our sales and damage the company’s results of operations and its liquidity, possibly to a significant degree.

The duration of any such impacts cannot be predicted.

Risks related to our business and industry

We rely on offshore sourcing from Vietnam, China and Malaysia for most of our sales.

We rely on offshore sourcing from Vietnam and China for most of our sales.

Consequently:

A disruption in supply from Vietnam, China or Malaysia 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.

A disruption in supply from Vietnam or China 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 2023, imported products sourced from Vietnam and China accounted for 91% of our import purchases and our top five suppliers in Vietnam and China accounted for 50% of our fiscal 2023 import purchases.

Our supply chain could be adversely impacted by the uncertainties of health concerns and governmental restrictions.

A disruption in our supply chain, or from Vietnam, China or Malaysia in general, could significantly impact our ability to fill customer orders for products manufactured in those countries.

For example, in the summer of calendar 2021, our suppliers in Vietnam and Malaysia were temporarily closed or operated at substantially reduced levels due to a COVID-related lockdown.

We faced supply chain constraints including but not limited to slower-than-expected re-openings, capacity limitations and production delays at some of our suppliers, along with the reduced shipping container and ocean vessel space availability.

Home Meridian segment shipping and sales were immediately impacted as the majority of its business is container direct customers.

In the fourth quarter of fiscal 2022, Hooker Branded segment sales were also impacted due to low inventory receipts in the second half of fiscal 2022 which consequently resulted in out-of-stocks.

A disruption in our supply chain, or from Vietnam or China 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 were 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, China or Malaysia in general, could adversely affect our sales, earnings, financial condition and liquidity.

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 or China in general, could adversely affect our sales, earnings, financial condition and liquidity.

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.

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.

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

Transportation costs, including ocean freight costs and domestic trucking costs, on imported products currently represent a significant portion of the cost of those products.

Transportation costs on our imported products are affected by a myriad of factors including the global economy, petroleum prices and ocean freight carrier capacity.

We have seen a significant spike in these costs over the past year and our profitability has been materially impacted.

We have implemented price increases and surcharges;

In the recent past, especially during fiscal 2022, 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.

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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-US suppliers.

We rely heavily on suppliers we do not own or control, including a large number of non-U.S.

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.

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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.

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.

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

Effective September 24, 2018, the prior U.S.

administration imposed a 10% tariff on certain goods imported into the United States from China, including all furniture and furniture components manufactured in China, which increased to 25% in May 2019 and such tariffs have not been repealed.

New tariffs could be imposed on manufactured goods from other countries from which we source, including Vietnam.

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A disruption affecting our domestic facilities could disrupt our business.

The warehouses in which we store our inventory in Virginia, North Carolina, Georgia and California are critical to our success.

The facilities in which we store our inventory in Virginia, North Carolina, Georgia 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.

Our domestic upholstery manufacturing facilities are located in Virginia and 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 utilizes other highly flammable materials such as 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 have been negatively affected by COVID-19 and we experienced some COVID-related employee absences.

During the initial height of the COVID-19 crisis in early calendar 2020, we activated business continuity plans and many administrative employees telecommuted given recommendations for social distancing and most of our domestic manufacturing facilities temporarily closed or operated at reduced levels.

We also instituted increased cleaning regimens and social distancing and masking protocols for office, manufacturing and warehousing associates.

As COVID-infection rates have decreased, more administrative employees have returned to our offices and social distancing and masking protocols have adjusted to current public health guidelines.

Additionally, our domestic operations could be negatively affected by public health events, such as the COVID-19 pandemic.

Any disruption affecting our domestic facilities, for even 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.

Labor shortages could disrupt operations at our domestic warehousing and manufacturing facilities

Demand for home furnishings rose after the COVID-19 pandemic and lead to higher-than-normal order rates and historic levels of order backlogs.

We hired an increased number of employees in all three segments during fiscal 2022 in response to business growth.

It has become increasingly difficult to recruit skilled labor into our domestic upholstery plants and training and turnover costs have increased.

In fiscal 2022, lack of qualified workers and high turnover in a variety of positions caused increased training costs, adversely affected our production schedules and the ability to ship our furniture products, which adversely affected our sales, earnings and liquidity.

Should these issues persist or increase due to the COVID-19 pandemic or similar pandemics in the future, our sales, earnings, financial condition and liquidity could again be adversely affected.

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

We observed a strong labor market after the COVID-19 pandemic.

We continue to experience 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 the ability to ship our furniture products.

Furthermore, we experienced higher labor costs and ongoing inflationary pressure.

Should these issues persist or increase due to the COVID-19 pandemic, similar future pandemics or for other reasons, our sales, earnings, financial condition and liquidity could again be adversely affected.

Fluctuations in the price, 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.

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Unfavorable fluctuations in the price, quality or availability of required raw materials could negatively affect our ability to meet the demands of our customers.

For example, our domestic upholstery segment experienced foam allocations of between 60-75% of requested amounts in early fiscal 2022 which negatively impacted production efficiencies for several months.

Later we experienced raw material cost inflation for nearly all of our raw materials and higher freight surcharges to bring in these materials.

We may not always be able to pass price increases on raw materials through to our customers due to competition and other market pressures.

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The inability to meet customers’ demands or recover higher costs could adversely affect our sales, earnings, financial condition and liquidity.

In 2021, Russia was the third largest source of US hardwood plywood imports.

Due to the current Ukraine-Russia conflict, the U.S.

House of Representatives voted to raise tariffs on some Russian imports, which could impose tariffs of 40% to 50% on Russian Birch.

Currently, 50% - 60% of the plywood used at our Shenandoah (SFI) division is Russian birch.

Based on current rates of sale, we believe we have an adequate supply to support SFI manufacturing operations through mid-to-late summer 2022.

SFI has begun the process of switching from the Russian Birch to another plywood species and are currently working with suppliers and testing those products.

If we are unable to find a suitable replacement for Russian Birch before we exhaust our supply, our sales, earnings and liquidity could be adversely affected.

If demand for our domestically manufactured upholstered furniture declines, we may respond by realigning manufacturing.

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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 material part of our sales and accounts receivable are concentrated in a few customers.

The loss of several large customers through business consolidations, the loss of a major customer or significant sales programs with major customers, failures or other reasons, including the adverse economic effects of the COVID-19 pandemic or similar events, could adversely affect our business.

One customer accounted for approximately 8% of our consolidated sales in fiscal 2022, our top five customers accounted for about 26% of our fiscal 2022 consolidated sales.

Approximately 25% 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.

Sales and earnings in the Clubs channel of our Home Meridian segment are subject to higher volatility than other distribution channels subject to our success or failure in developing suitable products at acceptable prices for this channel.

The Clubs channel has proven to be a particularly difficult channel in which to do business.

We have taken steps to minimize our exposure in this channel however, given the relatively liberal return policies in this channel, we are subject to higher-than-normal customer chargebacks.

While we accrue estimated amounts for chargebacks based on sales and chargeback history, those accruals may not be adequate and given the relative size of customers in this channel, we may not be successful in negotiating resolutions to these extra costs.

Consequently, our sales and earnings could be adversely affected.

Should the negative economic effects of COVID-19 persist, or another similar event or events occur, the negative developments described in this paragraph would be more likely to occur.

Amounts owed to us by a customer whose business fails, or is failing, may become uncollectible, 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 the negative economic effects of COVID-19 to persist or a similar pandemic or another major, unexpected event with negative economic effects 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.

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

At January 29, 2023, we had $73.7 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill.

Our goodwill, some trademarks and tradenames 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.

As an example, COVID-19 had a material impact on our financial performance in the fiscal 2021 first quarter and on the market valuations, discount rates and other inputs used in our intangibles valuation analysis.

We determined that an immediate intangible asset valuation was necessary given our performance and changing market dynamics.

As a result of the intangible asset valuation analysis, in the fiscal 2021 first quarter, we recorded $44.3 million in non-cash impairment charges to write down goodwill and certain tradenames in the Home Meridian segment and goodwill in the Shenandoah division of its Domestic Upholstery segment.

In fiscal 2023, we wrote off $12,500 representing the remaining value of the Right2Home trade name in the Home Meridian segment due to the decision to exit the ACH business unit in the fourth quarter of fiscal 2023.

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.

See Note 10 to our Consolidated Financial Statements for additional information.

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

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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.

The implementation of our Enterprise Resource Planning system could disrupt our business.

We are in the process of implementing a common Enterprise Resource Planning (ERP) system across all divisions and expect to go-live with this system in our Hooker Branded segment in the second half of our 2023 fiscal year, with other segments and divisions following thereafter.

The implementation of our Enterprise Resource Planning ( “ ERP ” ) system could disrupt our business.

We are in the process of implementing a common ERP system across all divisions.

The ERP system went live at Sunset West in the fourth quarter of fiscal 2023, and is expected to go-live in our legacy Hooker divisions in fiscal 2024, with Home Meridian segment following thereafter.

Although we currently expect the ERP implementation to increase efficiencies by leveraging a common, cloud-based system throughout all divisions and standardizing processes and reporting, our ERP system implementation may not result in improvements that outweigh its costs and may disrupt our operations.

Our inability to mitigate existing and future disruptions could adversely affect our sales, earnings, financial condition and liquidity.

For example, when the ERP system went live at Sunset West in December 2022, the conversion process significantly impacted its shipping activities and negatively impacted its sales and profitability in the fiscal 2023 fourth quarter due to longer than expected post-implementation stabilization.

We expect these issues to be resolved in the first quarter of fiscal 2024.

The ERP system implementation subjects us to substantial costs and inherent risks associated with migrating from our legacy systems.

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Increased demands on management and staff time to the detriment of other corporate initiatives.

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 the COVID-19 pandemic or similar events, could adversely affect our business.

One customer accounted for approximately 6% of our consolidated sales in fiscal 2023, our top five customers accounted for about 22% of our fiscal 2023 consolidated sales.

Approximately 20% 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.

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 the COVID-19 or a similar pandemic or another major, unexpected event with negative economic effects 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.

We may engage in acquisitions and investments in companies, form strategic alliances and pursue new business lines.

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New business initiatives may fail outright or fail to produce an adequate return, which could adversely affect our earnings, financial condition and liquidity.

We may fail to realize all of the anticipated benefits of the Sunset West acquisition.

We incurred significant acquisition and acquisition-related costs in fiscal 2022 in connection with the Sunset West acquisition and expect to incur additional integration-related costs in fiscal 2023, but we may fail to realize all the anticipated benefits of the acquisition or they may take longer to realize than expected.

While we believe the Sunset West acquisition will be accretive to our earnings per share beginning in fiscal 2023, this expectation is based on preliminary estimates which may materially change.

We may fail to realize all of the anticipated benefits of the Sunset Acquisition.

We incurred significant debt, acquisition and acquisition-related costs in connection with the Sunset Acquisition, but we may fail to realize all the anticipated benefits of the Sunset Acquisition or they may take longer to realize than expected.

While we believe the Sunset Acquisition will be accretive to our earnings per share, this expectation is based on preliminary estimates which may materially change.

Although we do not expect to merge operations or change customer-facing services, the success of this acquisition will depend, in part, on our ability to improve each business by sharing best practices in order to lower costs, improve efficiencies and grow sales.

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Thus, the integration of Sunset West’s business may be unpredictable, subject to delays or changed circumstances, and we can give no assurance that the acquired business will perform in accordance with our expectations, or that our expectations with respect to integration or benefits as a result of the contemplated acquisition will materialize.

The integration process could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies.

The integration process in on-going and could result in the diversion of management attention to the detriment of other areas, the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies.

If the integration is not completed as planned, our ongoing business and financial results may be adversely affected, 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 January 30, 2022, we had $52.4 million in net long-lived assets, consisting primarily of property, plant and equipment, trademarks, trade names and goodwill.

We determined that an immediate intangible asset valuation was necessary given our performance and changing market dynamics.

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.

See Notes 7 and 8 to our Consolidated Financial Statements for additional information.

We may fail to realize the benefits of HMI segment restructuring and cost-savings efforts.

During the fourth quarter of fiscal 2023, management approved a plan to exit the Accentrics Home (ACH) e-commerce brand of the HMI segment along with repositioning the Prime Resources International (PRI) brand as a direct-container only business model.

We recorded a $24.4 million charge in the fiscal 2023 fourth quarter to write-down certain segment inventories to market and also recorded severance expenses.

We expect to reduce the physical footprints at our Savannah, GA warehouse and High Point, NC administrative office over the course of the current 2024 fiscal year with a concurrent reduction in lease, warehouse, and related expenses.

We expect these actions will return the HMI segment to profitability sometime in fiscal 2024.

However, we may be unable to realize these cost savings in a timely manner or at all.

If these efforts are unsuccessful, in whole or in part, our ongoing business and financial results may be adversely affected, which could adversely affect our sales, earnings, financial condition and liquidity.

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

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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.

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.

Other general risk factors applicable to us and our business

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 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, which could adversely affect our sales, earnings, financial condition and liquidity.

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

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

The furniture industry is particularly sensitive to cyclical variations in the general economy and to uncertainty regarding future economic prospects, including those caused by pandemics such as COVID-19.

Home furnishings are generally considered a postponable purchase by most consumers.

Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings.

Changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors have particularly significant effects on our business.

We have seen negative effects on all of these measures due to the COVID-19 pandemic.

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 postponable nature and relatively significant cost of home furnishings purchases or scarcity of transportation and Asian manufacturing capacity during times of increased demand.

These events could also impact retailers, who are our primary customers, possibly adversely affecting our sales, earnings, financial condition and liquidity.

The impact of future pandemics could adversely affect our business, results of operations, financial condition, liquidity and stock price.

At the initial height of the COVID-19 pandemic, home furnishings purchases are largely postponable and heavily influenced by consumer confidence and most of our customers’ businesses are classified as non-essential.

Consequently, traffic to our customers’ stores and demand for our products significantly decreased, our sales deteriorated and our earnings were negatively impacted.

COVID-19 also impacted our Asian supply chain, particularly as a result of mandatory shutdowns in locations where our products are manufactured in the Summer of calendar 2021, and we experienced out-of-stocks and lost sales as a result.

Additionally, the demand surge that occurred after the initial height of the pandemic caused supplier capacity constraints, shipping container and steamship space shortages.

These logistics issues increased costs, led to out-of-stocks and adversely affected our sales and earnings.

The extent of the continued impact of a pandemic or other global health crisis on our business and financial results depends on future developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public health measures and could result in similar or worse public health outcomes compared to the Covid-19 pandemic.

The sweeping nature of pandemics makes it extremely difficult to predict how our business and operations could be affected in the longer run.

Any of the foregoing factors, or other cascading effects of this or other pandemics, could materially increase our costs, negatively impact our sales and damage the Company’s results of operations and its liquidity, possibly to a significant degree.

The duration of any such impacts also cannot be predicted.

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.

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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 cyber-attacks of our information systems or networks;

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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.

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

Home furnishings are generally considered a postponable purchase by most consumers.

Economic downturns could affect consumer spending habits by decreasing the overall demand for home furnishings.

We have seen negative effects on all of these measures due to the COVID-19 pandemic.

These events could also impact retailers, who are our primary customers, possibly adversely affecting 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors