What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-09-12 compared with 2025-06-13 · 597 added, 483 removed, 48 unchanged (96% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

references to the “Company,” “we,” “us” and “our” in this document 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 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.

All references to the “Company,”

“we,” “us” and “our” in this document 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 Home Meridian segment.

The Hooker Branded segment includes Hooker Casegoods and Hooker Upholstery.

Domestic Upholstery segment includes Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West.

includes intercompany eliminations and operating segments that are not individually reportable.

Forward-Looking Statements

Certain statements made in this report, including

statements under Item 2.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and

in the notes to the consolidated financial statements included in this report, are not based on historical facts, but are forward-looking

These statements reflect our reasonable judgment with respect to future events and typically can be identified by the

use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,”

“plans,” “may,” “will,” “should,” “would,” “could,” or “anticipates,”

or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of strategy.

Forward-looking

statements made in this report, including statements under Item 2.

“Management’s Discussion and Analysis of Financial Condition

and Results of Operations” and in the notes to the consolidated financial statements included in this report, are not based on

historical facts, but are forward-looking statements.

These statements reflect our reasonable judgment with respect to future events

and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,”

“intends,” “plans,” “may,” “will,” “should,” “would,” “could,”

or “anticipates,” or the negatives thereof, or other variations thereof, or comparable terminology, or by discussions of

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially

from those in the forward-looking statements.

statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking

Those risks and uncertainties include but are not limited to:

general economic or business conditions, both domestically and internationally, including the current macro-economic uncertainties and

challenges to the retail environment for home furnishings along with instability in the financial and credit markets, in part due to

fluctuating interest rates and housing market volatility, which can affect consumer spending patterns, existing home sales, and demand

for home furnishings, including their potential impact on (i) our sales and operating costs and access to financing, (ii) customers,

and (iii) suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses;

adverse political acts or developments in, or affecting, the international markets from which we import products and some components

used in our Domestic Upholstery segment, including duties or tariffs imposed on those products by foreign governments or the U.S.

such as the current ten percent tariff and potential additional higher reciprocal tariffs on imports from key sourcing countries , affecting

the countries from which we source imported home furnishings and components, including the possible adverse effects on our sales, earnings,

and liquidity;

the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers’

income available for discretionary purchases, and the availability and terms of consumer credit;

risks associated with the ultimate outcome of our cost reduction plans, including the amounts and timing of savings realized and the

ability to scale the business appropriately as customer demand increases or decreases based on the macroeconomic environment;

risks associated with the ongoing restructuring and review of the Home Meridian (HMI) segment, including uncertainties related to the

successful execution of cost reduction plans, the impact of exiting unprofitable product lines and facilities, and the potential to achieve

consistent profitability in the future, including the buying hesitancy of its customer base due to tariff and other economic uncertainties;

risk associated with the planned exit of our Savannah, Georgia warehouse, including executing a timely exit, the costs and availability

of temporary warehousing, moving and start-up costs, ERP and technology-related risks, the timing and amounts of related restructuring

charges and expected cost savings, as well as possible related disruptions to sales, earnings, revenue;

risks associated with our new warehouse facility in Vietnam, including our ability to execute the planned shift of inventories from domestic

facilities to Vietnam without increasing overall inventories and adversely affecting working capital levels and start-up risks including

technology-related risks or disruption in our offshore suppliers or the transportation and handling industries, including labor stoppages,

strikes, or slowdowns, and the ability to timely fulfill customer orders;

the risks specifically related to the concentrations of a material part of our sales and accounts receivable in only a few customers,

including the loss of several large customers through business consolidations, failures or other reasons, or the loss of significant

sales programs with major customers;

risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased

finished goods, customs issues, freight costs, including the price and availability of shipping containers, ocean vessels, domestic trucking,

and warehousing costs and the risk that a disruption in our supply chain or the transportation and handling industries, including labor

stoppages, strikes, or slowdowns, could adversely affect our ability to timely fulfill customer orders;

the impairment of our long-lived assets, which can result in reduced earnings and net worth;

difficulties in forecasting demand for our imported products and raw materials used in our domestic operations;

our inability to collect amounts owed to us or significant delays in collecting such amounts;

the risks associated with our Amended and Restated Loan Agreement, including the fact that our asset-based lending facility is secured

by substantially all of our assets and contains provisions which limit the amount of our future borrowings under the facility, as well

as financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness;

interruption, inadequacy, security breaches or integration failure of our information systems or information technology infrastructure,

related service providers or the internet or other related issues including unauthorized disclosures of confidential information, hacking

or other cybersecurity threats or inadequate levels of cyber insurance or risks not covered by cyber insurance;

risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability

of key raw materials, as well as changes in transportation, warehousing and domestic labor costs, availability of skilled labor, and

environmental compliance and remediation costs;

risks associated with our self-insured healthcare and workers compensation plans, which utilize stop-loss insurance for aggregate claims

above specified thresholds and can be impacted by higher healthcare inflation and expenditures, all of which may cause our healthcare

and workers compensation costs to rise unexpectedly, adversely affecting our earnings, financial condition, and liquidity;

disruptions and damage (including those due to weather) affecting our Virginia, North Carolina or Georgia warehouses, our Virginia, North

Carolina or California administrative and manufacturing facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative

offices or warehouses in Vietnam and China;

(1) adverse political acts or developments in,

or affecting, the international markets from which we import products and some components used in our Domestic Upholstery segment, including

duties or tariffs imposed on those products or product components by foreign governments or the U.S.

government, such as the current twenty

percent tariff, potential additional higher reciprocal tariffs on imports from key sourcing countries, U.S.

Department of Commerce’s

Section 232 investigation into timber, lumber, and their derivative products, including furniture, affecting the countries from which

we source imported home furnishings and components, including the possible adverse effects on our sales, earnings, and liquidity;

(2) general economic or business conditions, both

domestically and internationally, including the current macro-economic uncertainties and challenges to the retail environment for home

furnishings along with instability in the financial and credit markets, in part due to fluctuating interest rates and housing market volatility,

which can affect consumer spending patterns, existing home sales, and demand for home furnishings, including their potential impact on

(i) our sales and operating costs and access to financing, (ii) customers, and (iii) suppliers and their ability to obtain financing or

generate the cash necessary to conduct their respective businesses;

(3) the impairment of our long-lived assets, which

can result in reduced earnings and net worth;

(4) the cyclical nature of the furniture industry,

which is particularly sensitive to changes in consumer confidence, the amount of consumers’ income available for discretionary purchases,

and the availability and terms of consumer credit;

(5) risks associated with the ultimate outcome

of our cost reduction plans, including the amounts and timing of savings realized and the ability to scale the business appropriately

as customer demand increases or decreases based on the macroeconomic environment;

(6) risks associated with the ongoing restructuring

and review of the Home Meridian (HMI) segment, including uncertainties related to the successful execution of cost reduction plans, the

impact of exiting unprofitable product lines and facilities, and the potential to achieve consistent profitability in the future, including

the buying hesitancy of its customer base due to tariff and other economic uncertainties;

(7) risk associated with the planned exit of our

Savannah, Georgia warehouse, including executing a timely exit, the costs and availability of temporary warehousing, moving and start-up

costs, ERP and technology-related risks, the timing and amounts of related restructuring charges and expected cost savings, as well as

possible related disruptions to sales, earnings, revenue;

(8) risks associated with our new warehouse facility

in Vietnam, including our ability to execute the planned shift of inventories from domestic facilities to Vietnam without increasing overall

inventories and adversely affecting working capital levels and start-up risks including technology-related risks or disruption in our

offshore suppliers or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, and the ability to

timely fulfill customer orders;

(9) the risks specifically related to the concentrations

of a material part of our sales and accounts receivable in only a few customers, including the loss of several large customers through

business consolidations, failures or other reasons, or the loss of significant sales programs with major customers;

(10) risks associated with our reliance on offshore

sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods, customs issues, freight costs,

including the price and availability of shipping containers, ocean vessels, domestic trucking, and warehousing costs and the risk that

a disruption in our supply chain or the transportation and handling industries, including labor stoppages, strikes, or slowdowns, could

adversely affect our ability to timely fulfill customer orders;

(11) interruption, inadequacy, security breaches

or integration failure of our information systems or information technology infrastructure, related service providers or the internet

or other related issues including unauthorized disclosures of confidential information, hacking or other cybersecurity threats or inadequate

levels of cyber insurance or risks not covered by cyber insurance;

(12) difficulties in forecasting demand for our

imported products and raw materials used in our domestic operations;

(13) our inability to collect amounts owed to

us or significant delays in collecting such amounts;

(14) the risks associated with our Amended and

Restated Loan Agreement, including the fact that our asset-based lending facility is secured by substantially all of our assets and contains

provisions which limit the amount of our future borrowings under the facility, as well as financial and negative covenants that, among

other things, may limit our ability to incur additional indebtedness;

(15) risks associated with domestic manufacturing

operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in

transportation, warehousing and domestic labor costs, availability of skilled labor, and environmental compliance and remediation costs;

(16) risks associated with our self-insured healthcare

and workers compensation plans, which utilize stop-loss insurance for aggregate claims above specified thresholds and can be impacted

by higher healthcare inflation and expenditures, all of which may cause our healthcare and workers compensation costs to rise unexpectedly,

adversely affecting our earnings, financial condition, and liquidity;

(17) disruptions and damage (including those due

to weather) affecting our Virginia, North Carolina or Georgia warehouses, our Virginia, North Carolina or California administrative and

manufacturing facilities, our High Point, Las Vegas, and Atlanta showrooms or our representative offices or warehouses in Vietnam and

(18) 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;

risks associated with product defects, including higher than expected costs associated with product quality and safety, regulatory compliance

costs related to the sale of consumer products and costs related to defective or non-compliant products, product liability claims and

costs to recall defective products and the adverse effects of negative media coverage;

the direct and indirect costs and time spent by our associates related to the implementation of our Enterprise Resource Planning system

(“ERP”), including costs resulting from unanticipated disruptions to our business;

achieving and managing growth and change, and the risks associated with new business lines, acquisitions, including the selection of

suitable acquisition targets, restructurings, strategic alliances and international operations;

risks associated with distribution through third-party retailers, such as non-binding dealership arrangements;

changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our

imported products and raw materials;

and foreign government regulations

and in the political, social and economic climates of the countries from which we source our products;

(19) risks associated with product defects, including

higher than expected costs associated with product quality and safety, regulatory compliance costs related to the sale of consumer products

and costs related to defective or non-compliant products, product liability claims and costs to recall defective products and the adverse

effects of negative media coverage;

(20) the direct and indirect costs and time spent

by our associates related to the implementation of our Enterprise Resource Planning system (“ERP”), including costs resulting

from unanticipated disruptions to our business;

(21) achieving and managing growth and change,

and the risks associated with new business lines, acquisitions, including the selection of suitable acquisition targets, restructurings,

strategic alliances and international operations;

(22) risks associated with distribution through

third-party retailers, such as non-binding dealership arrangements;

(23) changes in domestic and international monetary

policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials;

(24) price competition in the furniture industry;

changes in consumer preferences, including increased demand for lower-priced furniture.

forward-looking statements could be wrong considering these and other risks, uncertainties and assumptions.

The future events, developments

or results described in this report could turn out to be materially different.

Any forward-looking statement we make speaks only as of

the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether

as a result of new information, future events or otherwise and you should not expect us to do so.

our business is subject to significant risks and uncertainties, any of which can adversely affect our business, results of operations,

financial condition or future prospects.

For a discussion of risks and uncertainties that we face, see the Forward-Looking Statements

detailed above and Item 1A, “Risk Factors” in our 2025 Annual Report.

should also be aware that while we occasionally communicate with securities analysts and others, it is against our policy to selectively

disclose to them any material nonpublic information or other confidential commercial information.

Accordingly, investors should not assume

that we agree with any projection, forecast or report issued by any analyst regardless of the content of the statement or report, as

we have a policy against confirming information issued by others.

quarterly report on Form 10-Q includes our unaudited condensed consolidated financial statements for the 2026 fiscal year thirteen-week

period (also referred to as “three months,” “three-month period,” “quarter,” “first quarter”

or “quarterly period”) that began February 3, 2025 and ended May 4, 2025.

(25) changes in consumer preferences, including

increased demand for lower-priced furniture, especially in light of recently imposed tariffs on imported furniture.

Our forward-looking statements could be wrong

considering these and other risks, uncertainties and assumptions.

The future events, developments or results described in this report

could turn out to be materially different.

Any forward-looking statement we make speaks only as of the date of that statement, and we

undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future

events or otherwise and you should not expect us to do so.

Also, our business is subject to significant risks

and uncertainties, any of which can adversely affect our business, results of operations, financial condition or future prospects.

a discussion of risks and uncertainties that we face, see the Forward-Looking Statements detailed above and Item 1A, “Risk Factors”

in our 2025 Annual Report.

Investors should also be aware that while we occasionally

communicate with securities analysts and others, it is against our policy to selectively disclose to them any material nonpublic information

or other confidential commercial information.

Accordingly, investors should not assume that we agree with any projection, forecast or

report issued by any analyst regardless of the content of the statement or report, as we have a policy against confirming information

issued by others.

Quarterly Reporting

This quarterly report on Form 10-Q includes our

unaudited condensed consolidated financial statements for the 2026 fiscal year thirteen-week period (also referred to as “three

months,” “three-month period,” “quarter,” “second quarter” or “quarterly period”)

that began May 5, 2025 and the twenty-six-week period (also referred to as “six months”, “six-month period” or

“first half”) that began February 3, 2025, which both ended August 3, 2025.

This report discusses our results of operations

for this period compared to the 2025 fiscal year thirteen-week period that began January 29, 2024 and ended April 28, 2024;

and our financial

condition as of May 4, 2025 compared to February 2, 2025.

in this report to:

for these periods compared to the 2025 fiscal year thirteen-week period that began April 29, 2024, and the twenty-six-week period that

began January 29, 2024, which both ended July 28, 2024;

and our financial condition as of August 3, 2025 compared to February 2, 2025.

References in this report to:

2026 fiscal year and comparable terminology mean the fiscal year that began February 3, 2025,

2 unchanged sentences

and ended February 2, 2025.

amounts presented in the tables below are in thousands except for per share data.

following discussion should be read in conjunction with the condensed consolidated financial statements, including the related notes,

contained elsewhere in this quarterly report.

We also encourage users of this report to familiarize themselves with all our recent public

filings made with the SEC, especially our 2025 Annual Report.

Our 2025 Annual Report contains critical information regarding known risks

and uncertainties that we face, critical accounting policies and information on commitments and contractual obligations that are not

reflected in our condensed consolidated financial statements, as well as a more thorough and detailed discussion of our corporate strategy

and new business initiatives.

2025 Annual Report and other public filings made with the SEC are available, without charge, at www.sec.gov and at http://investors.hookerfurnishings.com.

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 décor for the residential, hospitality and contract

We also domestically manufacture premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.

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

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.

the Hooker Branded and Domestic Upholstery segments, 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.

We generally consider the Home Meridian segment’s backlog to be one helpful indicator

of that segment’s sales for the upcoming 90-day period.

Due to (i) the average sales order sizes of its mass and mega account channels

of distribution, (ii) the proprietary nature of many of its products and (iii) the project nature of its hospitality business, for which

average order sizes tend to be larger and consequently, the Home Meridian segment’s order backlog tends to be larger.

have been exceptions to the general predictive nature of our orders and backlogs noted in this paragraph, such as during times of extremely

high demand and supply chain challenges as experienced during the immediate aftermath of the initial COVID-19 crisis and subsequent recovery.

Orders were not being converted to shipments as quickly as would be expected compared to the pre-pandemic environment due to the lack

and cost of shipping containers and vessel space as well as limited overseas vendor capacity.

As a result, backlogs were significantly

elevated and reached historical levels at the end of fiscal 2021 and 2022.

May 4, 2025, our backlog of unshipped orders was as follows:

Dollar amounts presented in the tables below are

in thousands except for per share data.

The following discussion should be read in conjunction

with the condensed consolidated financial statements, including the related notes, contained elsewhere in this quarterly report.

encourage users of this report to familiarize themselves with all our recent public filings made with the SEC, especially our 2025 Annual

Our 2025 Annual Report contains critical information regarding known risks and uncertainties that we face, critical accounting

policies and information on commitments and contractual obligations that are not reflected in our condensed consolidated financial statements,

as well as a more thorough and detailed discussion of our corporate strategy and new business initiatives.

Our 2025 Annual Report and other public filings

made with the SEC are available, without charge, at www.sec.gov and at http://investors.hookerfurnishings.com.

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 décor for the residential, hospitality and contract markets.

We also domestically manufacture

premium residential custom leather, custom fabric-upholstered furniture and outdoor furniture.

Orders and Backlog

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;

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

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.

For the Hooker Branded and Domestic Upholstery

segments, 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.

We generally consider the Home Meridian segment’s backlog to be one helpful indicator of that segment’s sales for the upcoming

90-day period.

Due to (i) the average sales order sizes of its mass and mega account channels of distribution, (ii) the proprietary nature

of many of its products and (iii) the project nature of its hospitality business, for which average order sizes tend to be larger, the

Home Meridian segment’s order backlog tends to be larger.

At August 3, 2025, our backlog of unshipped orders

was as follows:

Order Backlog

4 unchanged sentences

Domestic Upholstery

consolidated order backlog at the end of the first quarter of fiscal 2026 decreased by 2.7% compared to the year-end on February 2, 2025,

and by 40.3% compared to the end of the previous year’s first quarter.

This decrease was primarily driven by the Home Meridian

segment, where incoming orders and backlog fell due to reduced demand and the loss of orders from a major customer that filed for bankruptcy

These trends reflect broader macroeconomic pressures and tariff-related buying hesitancy among our customers, particularly affecting

value-focused segments.

Macroeconomic

factors affecting our results

home furnishings industry continues to face significant challenges due to macroeconomic factors dampening consumer demand.

this category is historically linked to existing home sales, as consumers often buy furnishings after moving.

However, the housing market

remains sluggish due to housing affordability, high mortgage rates and low consumer confidence.

According to the National Association

of Realtors, existing home sales have hovered around 75% of pre-pandemic levels for the past three years, despite the addition of over

seven million jobs.

This indicates that employment growth hasn’t translated into greater housing mobility or home-related spending.

despite the U.S.

population growing by over 50% since 1978, fewer existing homes were sold in 2024 than in 1978, underscoring deep housing

market stagnation.

calendar 2025, the average 30-year fixed mortgage rate has hovered around 6.8%.

This marks a significant increase

compared to the pandemic-era lows of approximately 3% in 2020 and 2021.

The doubling of borrowing costs has effectively cooled the housing

market, discouraging both first-time buyers and existing homeowners from moving.

This stagnation has, in turn, suppressed demand for

new furnishings typically associated with home moves.

sentiment has deteriorated sharply, as reflected in the University of Michigan’s Consumer Sentiment Index, which fell to 52.2 in

This marks a nearly 30% drop since

January 2025, underscoring a steep erosion in public confidence.

During the home furnishings sales boom in 2021, this index consistently

hovered around 80, highlighting just how far optimism has fallen.

The recent decline is fueled by concerns over inflation, trade

uncertainty, and rising unemployment expectations—factors that are prompting consumers to delay discretionary purchases like furniture.

of Operations

reported consolidated net sales of $85.3 million for the first quarter, a decrease of $8.3 million, or 8.8%, compared to the same period

Home Meridian accounted for over 90% of the sales decrease, primarily due to ongoing challenges in the home furnishings industry

driven by macroeconomic pressures and tariff-related buying hesitancy among Home Meridian’s customers, who tend to be more cost

In addition, the absence of sales due to the bankruptcy of a former major customer in the prior year accounted for approximately

30% of the segment’s net sales decrease.

maintained gross profit levels, with gross margin increasing by 180 bps, driven by higher margins at Home Meridian and Domestic Upholstery.

Despite the decrease in net sales, we reduced our consolidated operating loss by $1.6 million, or 31%, to $3.6 million, reflecting the

impact of cost reduction initiatives implemented in the second half of the prior year.

In the first quarter of fiscal 2026, we saw clear

results from those reductions as we reduced operating expenses by $2.2 million versus the prior year quarter.

This reduction occurred

despite our first quarter fiscal 2026 results including $523,000 in restructuring costs, primarily severance.

Hooker Branded achieved

breakeven in operating results for the quarter, while Domestic Upholstery and Home Meridian significantly reduced their operating losses

by $713,000 (55%) and $584,000 (17%), respectively.

We recorded a net loss of $3.1 million, or ($0.29) per diluted share, an improvement

from the prior year first quarter’s net loss of $4.1 million, or ($0.39) per diluted share.

Cost Reduction Initiatives

are executing a multi-phase cost reduction strategy aimed at achieving approximately $25 million in annualized savings by next year (fiscal

Initial Cost Reductions (last year - fiscal year 2025)

fixed costs by over $10 million through facility downsizing, workforce reductions and fixed

cost reductions.

Incurred $4.9 million in restructuring charges, including $3.6 million in severance.

Achieved over $3 million in fiscal 2025 and expect to

realize over $10 million annually this year (fiscal year 2026).

Logistics & Operations Consolidation (current year – fiscal year 2026)

o Savannah Warehouse:

We initiated and expect full closure and formal

release from the Savannah warehouse lease by October 31, 2025, previously used for the discontinued Accentrics Home product line.

Opened new facility in May 2025 to enhance supply chain efficiency, reducing

lead times from about 6 months to 4–6 weeks.

cost-saving opportunities through operational streamlining and potential outsourcing.

Expecting $2-$3 million in net charges in fiscal 2026, including the $523,000

in restructuring costs, primarily severance, reported in the first quarter of fiscal 2026.

Anticipate net savings of $3.4 million in fiscal 2026,

net of expected charges and other offsets;

projecting net savings of over $14 million annually from fiscal 2027.

In total, we expect to eliminate approximately $25 million or 25% of

our fixed costs due to these cost reduction initiatives, consisting of $11 million in warehousing and distribution expenses under cost

of goods sold and $14 million in selling and administrative expenses.

In fiscal 2026, we expect to realize about $14 million in cost savings

net of offsets and special charges.

By fiscal 2027, we expect to realize approximately $25 million in net annualized savings through these

phased initiatives, enhancing profitability, operational efficiency, and long-term shareholder value.

Our cost reductions should not impact

our strategic growth priorities, including our collected living merchandising platform, the Vietnam warehouse advantage, and our upcoming

Margaritaville licensed collection.

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

At the end of the second quarter of fiscal

2026, consolidated order backlog experienced a modest decrease of 2.8% compared to the fiscal year-end on February 2, 2025, These

decreases were driven by the Home Meridian segment, where incoming orders and backlog decreased significantly due to softer demand

from macroeconomic pressures, tariff-related buying hesitancy among value-focused customers, and the loss of orders from a major

customer that filed for bankruptcy in calendar 2024.

In contrast, Domestic Upholstery backlog rose

nearly 7% compared to both year-end and the prior year’s quarter-end, with three of its four divisions showing increases across

both periods.

Hooker Branded’s backlog was flat compared to last year’s second quarter, but increased nearly 20% from year-end,

supported by a 10.6% rise in incoming orders during the second quarter.

Executive Summary

During the second quarter of fiscal 2026, the

home furnishings industry continued to face a challenging macroeconomic environment, as reflected in several key economic indicators.

Existing home sales also remained at historically low levels, particularly for single-family homes, which are a key driver of home furnishings

Elevated mortgage rates continued to pressure housing affordability and dampen turnover in the housing market, limiting consumer

willingness to invest in home-related products.

The Consumer Price Index (CPI) remains elevated, reflecting persistent inflationary pressures,

while the Index of Consumer Sentiment indicated continued weakness in consumer confidence.

Additionally, since the early 1980s, the average

age of first time homebuyers has increased by nearly ten years over four decades.

Collectively, these factors contributed to reduced demand

across the industry.

The Home Meridian segment was most heavily impacted

by these conditions, given its value-focused customer base.

Inflationary pressures and weak consumer sentiment disproportionately affected

demand for lower-priced products, while tariff-related buying hesitancy further pressured its revenue.

As a result of these factors, and

the absence of sales from a major customer’s bankruptcy in the prior year and lower hospitality shipments due to the project-based

nature and timing of these sales, Home Meridian’s net sales declined by 44.5% in the second quarter, and gross margin decreased

by 1,330 bps.

In contrast, the Hooker Branded and Domestic Upholstery

segments demonstrated modest recovery in net sales during the quarter, reflecting some stabilization in higher-priced product categories.

However, sales volumes in these segments remain at historically low levels due to ongoing weakness in the housing market and subdued housing

In response to these persistent macroeconomic

challenges, we remain focused on factors within our control:

the revenue side, we are preparing for the October debut of our new collection with Margaritaville

and continuing to emphasize growth opportunities in the hospitality and contract channels.

The newly leased Vietnam fulfillment warehouse is already operating as planned, reaching

two-thirds capacity and reducing direct container lead times from six months to just four

to six weeks.

This not only enhances our ability to serve large customers and optimize U.S.

inventory but also improves container customization options while reducing dependence on

domestic warehousing.

the cost side, we are executing an ongoing cost reduction plan.

Operating expenses, which

also included $1.3 million in restructuring costs, decreased by $1.6 million in the second

For the first half of fiscal 2026, which included $1.7 million in restructuring

costs, operating expenses decreased by $3.7 million.

These actions reflect our commitment

to aligning costs with current demand levels while positioning the Company for long-term

recovery and growth.

sales of $82.1 million were down 13.6% from the prior year second quarter.

We recorded $2.0 million in consolidated restructuring costs

in the second quarter of fiscal 2026.

These costs included $1.3 million in severance and warehouse consolidation expenses and approximately

$700,000 in inventory liquidation losses at the Georgia warehouse.

For the first half of fiscal 2026, total restructuring costs were

$2.5 million, consisting of $1.7 million in severance and warehouse consolidation expenses and $821,000 in inventory liquidation losses

at the same facility.

Operating loss was $4.4 million versus $3.1 million last year, reflecting lower Home Meridian volumes and an unfavorable

product-customer mix.

Hooker Branded achieved breakeven in operating results for the quarter despite including $655,000 restructuring

costs, while Domestic Upholstery reduced its operating loss by $877,000 or 68% compared to the same quarter last year, despite including

$152,000 restructuring costs.

The consolidated net loss for the quarter was $3.3 million, or ($0.31) per diluted share, compared to a

net loss of $2.0 million, or ($0.19) per diluted share, in the same quarter last year.

The consolidated net loss for the six-month period

was $6.3 million, or ($0.60) per diluted share, compared to a net loss of $6.0 million, or ($0.57) per diluted share, in the prior year

Multi-Phased Cost Reduction Initiatives

We are executing a multi-phase cost reduction

strategy aimed at achieving approximately $25 million in annualized savings by next year (fiscal year 2027).

In fiscal 2025, we identified

$10 million of expense reduction opportunities and realized approximately $3 million of savings within that year.

In fiscal 2026, we identified

an additional $15 million of expense reductions.

During the first half of fiscal 2026, we achieved approximately $3.7 million in savings,

notwithstanding the recognition of $1.7 million in restructuring charges.

We expect to realize further benefits during the second half

of fiscal 2026 and believe we remain on track to achieve approximately $25 million in annualized savings beginning in fiscal 2027.

These phased initiatives are designed to enhance

profitability, improve operational efficiency, and support long-term shareholder value creation.

We do not expect these cost reduction

measures to materially impact our strategic growth priorities, which include advancing the Collected Living merchandising platform, leveraging

the Vietnam warehouse advantage, and launching the Margaritaville licensed collection.

In total, we expect these initiatives to reduce

fixed costs by approximately $25 million, or nearly 25%.

This includes approximately $11 million in warehousing and distribution expenses,

which are reported within cost of goods sold, and approximately $14 million in selling and administrative expenses.

Initial Cost Reductions (Fiscal 2025)

Reduced fixed costs by over $10 million through

facility downsizing, workforce reductions, and other fixed cost reductions.

● Financial Impact:

Incurred $4.9 million in restructuring

charges, including $3.6 million in severance.

Logistics & Operations Consolidation

(Fiscal 2026)

○ Savannah Warehouse:

Entered into an agreement for full

closure and lease termination effective October 31, 2025.

This facility was primarily utilized for the discontinued Accentrics Home product

○ Vietnam Warehouse:

Opened in May 2025 and has reached

approximately two-thirds capacity.

This transition has reduced direct container lead times from 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

○ Operational Streamlining:

Pursuing additional cost-saving

opportunities through supply chain optimization, organizational simplification in the Domestic Upholstery segment, and expansion of outsourced

Financial Impact:

We recorded $2.0 million in consolidated restructuring costs in the second quarter of fiscal 2026.

These costs included $1.3 million in severance and warehouse consolidation expenses and approximately $700,000 in inventory liquidation losses at the Georgia warehouse.

For the first half of fiscal 2026, total restructuring costs were $2.5 million, consisting of $1.7 million in severance and warehouse consolidation expenses and $821,000 in inventory liquidation losses at the same facility.

As of August 3, 2025 and February 2, 2025, we had accrued restructuring charges of approximately $300,000 and $174,000, respectively.

The balance as of August 3, 2025 is expected to be paid during the next five months.

We expect approximately $2 million in additional charges in the second half of fiscal 2026, primarily related to fixed asset write-offs and severance costs associated with the Savannah warehouse exit in October.

fiscal 2026 second quarter and first-half performance is discussed in greater detail below under “Results of Operations.”

of Operations

2 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Cost of sales

7 unchanged sentences

Net (loss)/income

2026 First Quarter Compared to Fiscal 2025 First Quarter

Thirteen Weeks Ended

Hooker Branded

Home Meridian

Domestic Upholstery

2026 Second Quarter and First Half Compared to Fiscal 2025 Second Quarter and First Half

Average Selling Price (“ASP”)

5 unchanged sentences

Domestic Upholstery

net sales decreased by $8.3 million, or 8.8%, in the first quarter of fiscal 2026 driven by the decrease at Home Meridian, and to a lesser

extent, at Domestic Upholstery.

Despite the lower overall unit volume down 21.2% on a consolidated basis, the consolidated Average Selling

Price (ASP) rose by 15.4% compared to the prior year.

This significant increase in ASP reflects a favorable shift in product mix:

of lower-priced Home Meridian products fell sharply, while sales of higher-priced Hooker Branded and Domestic Upholstery products made

up a larger share of the total.

Hooker Branded segment’s net sales increased slightly by $300,000, or 0.8%, in the

first quarter of fiscal 2026, due to higher unit volume, while partially offset by lower

Gross revenue in this segment increased by 1.8%;

however, increased discounts reduced

Home Meridian segment’s net sales decreased by $7.6 million, or 28.8%, in the first

quarter of fiscal 2026, primarily due to a significant reduction in unit volume.

Approximately

30% of the net sales decrease resulted from the loss of a major customer due to its bankruptcy

in the prior year, with the remainder attributed to reduced sales due to macroeconomic pressures

and tariff-related buying hesitancy among our customers.

The ASP increase was driven by the

growth in the hospitality business and a decreased proportion of lower-priced sales through

traditional channels.

Domestic Upholstery segment’s net sales decreased by $1.1 million, or 3.7%, in the

first quarter of fiscal 2026, primarily due to decreased sales of indoor residential home

furnishings, driven by ongoing challenges in demand.

In contrast, outdoor furnishings business,

benefiting from recent expansion of bicoastal operations, outperformed the prior year’s first

quarter with a 12.7% sales increase.

Gross Profit / (Loss) and Margin

Thirteen Weeks Ended

Hooker Branded

Home Meridian

Domestic Upholstery

gross profit remained nearly unchanged despite lower net sales, with consolidated gross margin increasing due to improvements at Home

Meridian and Domestic Upholstery, partially offset by a slight decrease at Hooker Branded.

The Hooker Branded segment’s gross profit and margin decreased by $392,000 and 130 bps, respectively, in the first quarter of fiscal 2026, primarily driven by reduced margins on heavily discounted products.

This margin loss was partially offset by decreased warehousing and distribution expenses, resulting from lower overall spending including labor costs and Asian operations expenses, partially offset by higher medical costs.

Home Meridian segment’s gross profit decreased by only $568,000, while its gross margin

increased by 200 bps in the first quarter of fiscal 2026, despite a significant decrease

in net sales.

This performance was driven by improved product margins, reduced allowances,

and lower warehousing and distribution expenses in both Asian and domestic operations, all

resulting from the restructuring efforts focused on restoring the segment’s profitability.

The Domestic Upholstery segment’s gross profit increased by $575,000, and its gross margin increased by 260 bps in the first quarter of fiscal 2026, despite a decrease in net sales.

Direct material costs decreased slightly by 80 bps, while direct labor costs fell by 100 bps, driven by the cost reduction plan, as well as reduced work hours.

Indirect costs remained stable as a percentage of net sales, as savings from the cost reduction plan—including lower indirect labor costs and overall spending—were largely offset by increased benefits expenses.

Additionally, warehousing and distribution expenses decreased by 60 bps due to reduced labor costs and freight-out expenses.

Selling and Administrative Expenses (S&A)

Thirteen Weeks Ended

Hooker Branded

Home Meridian

Domestic Upholstery

selling and administrative (“S&A”) expenses decreased by $1.8 million in the first quarter of fiscal 2026, driven by

cost reduction measures implemented across all three segments.

S&A expenses increased slightly as a percentage of net sales due to

the overall decrease in net sales.

net sales decreased by $12.9 million, or 13.6%, in the second quarter of fiscal 2026, primarily attributable to a significant decline

in the Home Meridian segment.

The Hooker Branded and Domestic Upholstery segments each experienced modest recoveries in net sales during

For the six-month period, consolidated net sales decreased by $21.2 million, or 11.2%, also driven by the decline in the

Home Meridian segment and, to a lesser extent, a slight decrease in the Domestic Upholstery segment.

ASP in the Home Meridian segment decreased significantly, consolidated ASP increased compared to both prior-year periods.

in consolidated average selling price was due to a favorable shift in product mix.

Unit volume of lower-priced Home Meridian products

declined by 37.7% in the second quarter and 36.7% for the six-month period, while higher-priced Hooker Branded and Domestic Upholstery

products represented a larger proportion of total unit volume.

Hooker Branded segment’s net sales increased modestly by $465,000, or 1.3%, in the

second quarter of fiscal 2026.

This increase was driven by a slight increase in ASP, partially

offset by higher discounts.

For the six-month period, net sales increased by $766,000, or

1.1%, reflecting higher unit volume, partially offset by a decrease in ASP resulting from

increased discounting to balance inventory mix and levels.

Home Meridian segment’s net sales decreased by $13.6 million, or 44.5%, in the second

quarter of fiscal 2026.

Approximately 40% of the decline occurred in its hospitality business,

due to the timing associated with the project-based nature of this channel, where two large

projects entered the shipping phase in the second quarter of last year.

About 35% of the

decrease was in traditional furniture channels, primarily due to macroeconomic pressures

and tariff-related buying hesitancy among value-focused customers.

The remaining 25% of the

decrease was attributable to the loss of a major customer due to its bankruptcy in the prior

The ASP decreased significantly this quarter due to unfavorable product and customer

mix, and the liquidation of certain inventory at below-cost prices in the Georgia warehouse,

prompted by its planned closure.

For the six-month period, net sales decreased by $21.2 million,

or 37.2%, with more than half of the decline in traditional furniture channels, approximately

30% related to the loss of the same major customer, and the remainder attributable to the

hospitality business.

Domestic Upholstery segment’s net sales were essentially flat compared to the second

quarter of the prior year.

Notably, our indoor residential home furnishings divisions reported

net sales increases, reflecting early signs of recovery in these divisions.

net sales in the outdoor furnishings business decreased by 9.7% during the quarter, primarily

due to supply chain disruptions in Vietnam and China.

These conditions stabilized following

the end of the quarter.

For the six-month period, segment net sales decreased by approximately

$1.0 million, or 1.7%, driven by lower sales in indoor residential home furnishings attributable

to soft demand, while outdoor furnishings net sales were flat year over year.

Profit / (Loss) and Margin

Consolidated gross profit decreased by $4.1 million

in the second quarter, and gross margin declined by 150 bps, primarily due to significantly lower profitability in the Home Meridian segment.

These declines were partially offset by higher gross profit in the Domestic Upholstery segment.

For the six-month period, gross profit

also decreased, driven by the Home Meridian segment, partially offset by improved results in Domestic Upholstery and a reduced loss in

Gross margin for the six-month period was essentially flat compared to the prior-year period.

The Hooker Branded segment’s gross profit decreased by $167,000 and gross margin decreased slightly by 80 bps in the second quarter of fiscal 2026.

The decrease was primarily attributable to reduced margins on discounted products and higher product costs related to tariff-related accruals.

Warehousing and distribution expenses also increased, both in absolute dollars and as a percentage of sales, reflecting $211,000 in restructuring costs consisting of `severance and warehouse consolidation expenses, as well as higher medical costs.

These increases were partially offset by lower labor costs and reduced overall spending.

For the six-month period, gross profit decreased by $560,000 and gross margin declined by 100 bps, driven by the same factors.

Home Meridian segment’s gross profit decreased by $4.9 million in the second quarter

of fiscal 2026, driven by a significant reduction in net sales.

Gross margin decreased by

1,330 bps, attributed to unfavorable product and customer mix, increased warehousing and

distribution expenses, including $448,000 severance costs and warehouse consolidation expenses.

Additionally, gross margin was adversely affected by losses from the liquidation of inventories

at the Georgia warehouse.

For the six-month period, gross profit decreased by $5.6 million,

and gross margin decreased by 590 bps, also due to unfavorable product mix and the increase

in warehousing and distribution expenses.

Domestic Upholstery segment’s gross profit increased by $659,000 in the second quarter

and by $1.2 million in the first half of fiscal 2026, with gross margin increasing by 220

bps and 240 bps, respectively, compared to the corresponding prior periods.

Direct material

costs remained consistent with both prior periods, while direct labor costs and indirect

costs declined, the latter due to improved absorption from higher sales and full production

Additionally, warehousing and distribution expenses decreased across nearly all

and Administrative Expenses (S&A)

Consolidated selling and administrative (“S&A”)

expenses decreased by $2.8 million in the second quarter and $4.6 million in the first half of fiscal 2026, reflecting reductions across

all three segments driven by the ongoing cost-reduction and restructuring plan.

As a percentage of net sales, S&A expenses increased

in both periods due to the overall decline in net sales.

Hooker Branded segment’s S&A expenses decreased by $505,000, or 170 bps, in the

first quarter of fiscal 2026 compared to the same period in the prior year.

This reduction

resulted from lower overall spending nearly across the board, including headcount and showroom

However, the decrease was partially offset by increased IT-related expenses, which

were approximately $443,000 higher than the prior year’s first quarter, due to the

continued refinement of the ERP system—an effort expected to persist into the foreseeable

Benefits costs also increased by approximately $325,000 compared to the same quarter

last year, which included a sizable gain from life insurance proceeds.

Additional impacts

included $127,000 in severance costs related to the Company’s cost reduction plan and

a slight increase in selling expenses resulting from higher net sales.

Home Meridian segment’s S&A expenses decreased by $1.1 million in the first quarter

of fiscal 2026, primarily driven by the Company’s cost reduction plan, which included

headcount reductions and reduced overall spending, as well as lower bad debt expense and

selling costs associated with decreased net sales.

Home Meridian recorded $144,000 in severance

costs in the quarter associated with the Company’s cost reduction plan.

increased by 370 bps due to decreased net sales.

Domestic Upholstery segment’s S&A expenses decreased by $129,000 in the first quarter

of fiscal 2026, due to reduced selling costs, lower bonus accruals, decreased advertising

supplies, and other spending reductions.

This decrease was partially offset by severance

costs of approximately $113,000 and higher sample and product development costs for the High

Point Market.

Intangible Asset Impairment and Amortization

Thirteen Weeks Ended

Intangible asset amortization

asset amortization decreased slightly compared to the first quarter of the previous year, due to the full amortization of Sam Moore trade

See Note 8 to our Condensed Consolidated Financial Statements for additional information.

Operating (Loss) / Profit and Margin

Thirteen Weeks Ended

Hooker Branded

Home Meridian

Domestic Upholstery

the first quarter of fiscal 2026, we recorded an operating loss of $3.6 million, primarily due to lower sales volume.

However, our cost

reduction initiatives and other factors outlined earlier reduced the operating loss by $1.6 million versus the prior year.

Thirteen Weeks Ended

Consolidated income tax (benefit) / expense

Effective Tax Rate

recorded income tax benefit of $764,000 and $816,000 for the fiscal 2026 and 2025 first quarters.

The effective tax rates for the fiscal

2026 and 2025 first quarters were 20.0% and 16.6%, respectively.

The increase in the fiscal 2026 first quarter effective tax rate was

primarily attributable to a non-taxable life insurance gain recognized in the prior-year period, which reduced the comparative effective

second quarter of fiscal 2026 compared to the prior-year period, despite $443,000 in restructuring

costs, primarily severance related to the cost-reduction plan.

The decline was driven by

lower compensation expenses and reduced overall spending under the ongoing cost-reduction

plan, partially offset by higher IT-related license fees and continued ERP system refinement,

which were approximately $520,000 above last year’s second quarter.

For the first half

of fiscal 2026, S&A expenses decreased by $747,000, or 130 bps, reflecting the same factors

along with lower showroom market expenses.

These reductions were partially offset by nearly

$1 million in higher technology-related spending compared to the prior year’s six-month

period, $571,000 in severance costs, and increased benefits expenses, driven by the absence

of life insurance proceeds recorded in the prior year and by higher medical costs.

Home Meridian segment’s S&A expenses decreased by $1.9 million in the second quarter

and $3.0 million in the first half compared to the prior-year periods.

These reductions were

driven by headcount reductions and lower overall spending under the ongoing cost-reduction

plan, as well as lower selling expenses resulting from decreased net sales.

As a percentage

of net sales, however, S&A expenses increased by 610 bps in the quarter and 500 bps for

the first half, reflecting under-absorption of operating expenses due to significantly lower

sales volumes.

Domestic Upholstery segment’s S&A expenses decreased by $169,000 in the second

quarter and $298,000 in the first half of fiscal 2026, due primarily to lower professional

service fees, which were unusually high in the prior year.

Additionally, advertising supplies

and other spending were lower than the prior year period.

These savings were partially offset

by severance costs of approximately $115,000 in the second quarter and $228,000 for the first

half, along with higher compensation, rent, and banking expenses associated with expanded

outdoor furniture business.

Asset Impairment and Amortization

asset amortization

Intangible asset amortization for the second quarter

and first half decreased compared to the prior-year periods due to the full amortization of the Sam Moore trade name.

See Note 8 to our

Condensed Consolidated Financial Statements for additional information.

(Loss) / Profit and Margin

We recorded $2 million in consolidated restructuring

costs in the fiscal 2026 second quarter and $2.5 million in the first half of fiscal 2026.

We recorded an operating loss of $4.4 million

in the second quarter of fiscal 2026, compared to a $3.1 million loss in the same period last year.

The higher loss was driven by the

restructuring costs and continued weakness in Home Meridian, partially offset by improved performance and reduced losses in the other

segments, as noted above.

For the first half of fiscal 2026, operating loss and operating margin also decreased compared to the prior-year

period, reflecting the same factors.

income tax (benefit) / expense

We recorded an income tax benefit of $1.2

million for the fiscal 2026 second quarter, compared to an income tax expense of $85,000 in the fiscal 2025 second quarter.

effective tax rates for these periods were 26.9% and (4.5%), respectively.

The fiscal 2025 second quarter reflected an income tax

expense despite a pretax loss due to the effective tax rate annualization method.

For the first half of fiscal 2026, we recorded

income tax benefits of $2.0 million compared to $731,000 in the prior-year period, with effective tax rates of 23.7% and 10.8%,

respectively.

The differences in the rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value

gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal

2026 under the annualization method.

(Loss) / Income

net (loss) / income

Thirteen Weeks Ended

Consolidated net (loss) / income

Diluted (loss) / earnings per share

According to U.S.

Census Bureau monthly retail trade

survey, furniture retail sales have shown modest improvement in recent months.

April sales were slightly higher compared to the January–March

period and increased 5.6% year-over-year.

However, existing home sales remain subdued, currently operating at approximately 75% of typical

pre-pandemic levels for the third consecutive year.

Despite these headwinds, inflation and employment indicators appear to be relatively

navigate the ongoing economic challenges, we continue to prioritize product innovation, cost optimization, and operational excellence.

These strategic imperatives position the business to capitalize on emerging opportunities as macroeconomic conditions improve, ultimately

driving long-term shareholder value.

initiatives include the launch of the new Margaritaville licensing program, the development of a best-in-class international warehouse

that reduces the need for domestic safety stock, preserves working capital, and shortens lead times, and the Collected Living whole-home

merchandising approach, which received strong validation at the April High Point Market.

addition, a redesigned corporate website is scheduled to launch in October.

The updated site is expected to:

digital customer experience, improve lead generation, and support omni-channel growth;

consumer engagement, streamline e-commerce navigation, and support retail partners;

as a hub for product education and lifestyle inspiration, increasing time-on-site and conversion

Within the Hooker Branded segment, the newly introduced Live Your Way

strategy is designed to:

customizable, lifestyle-oriented solutions tailored to evolving consumer preferences;

tailored upholstery options that align with today’s diverse lifestyles and consumer

expectations;

on modularity, flexibility, and personalized comfort, meeting the needs of design-savvy customers;

customization and quality craftsmanship, reinforcing leadership in the premium upholstery

We are simultaneously driving operational efficiencies

across the segments and are beginning to observe measurable improvements in performance.

Condition, Liquidity and Capital Resources

Flows – Operating, Investing and Financing Activities

Thirteen Weeks Ended

(loss) / earnings per share

Hooker Furnishings is taking decisive steps that

return the business to profitability.

Our cost-reduction initiatives and focus on growth initiatives have positioned the Company to maintain

resilience in today’s challenging environment, and to strategically capture growth when demand returns

At the beginning and end of the quarter, we saw

an encouraging momentum in Hooker Legacy orders, with July orders up 24% year-over-year at both Hooker Branded and Domestic Upholstery.

For the quarter, Hooker Branded orders were up nearly 11% and Domestic Upholstery were up 1.6%.

That said, the home furnishings industry

continues to face headwinds from low existing home sales, elevated mortgage rates and persistent inflation, all of which are weighing

on consumer confidence and demand.

At HMI, we have de-risked it significantly over

the last several years and continue to further that effort.

These actions have been obscured by required restructuring charges, weak demand

in the home furnishings industry due to an extremely weak housing environment, and tariff buying hesitancy in the market segment in which

HMI competes.

By the end of our fiscal 2025 third quarter, HMI’s fixed cost structure will be aligned to support what we believe

to be a sustainable business and one in which its sales can be significantly scaled from current levels when demand returns.

Barring additional

tariffs or other significant, disruptive events, we expect HMI’s performance to be significantly enhanced by the end of the current

We remain focused on factors within our control

– scaling our cost structure for profitability, preparing for the October debut of Margaritaville collection and pursuing growth

in hospitality, contract and outdoor channels, supported by the new Vietnam warehouse.

These initiatives position us well to navigate

near-term challenges and capitalize on opportunities when the market recovers, creating long-term value for our shareholders.

Financial Condition, Liquidity and Capital

Cash Flows – Operating, Investing and

Financing Activities

Twenty-Six Weeks Ended

Net cash provided by operating activities

1 unchanged sentence

Net cash used in financing activities

Net increase / (decrease) in cash and cash equivalents

During fiscal 2026 first quarter, cash provided by operating activities

totaled $14.7 million for the first quarter of fiscal 2026, compared to $1.5 million for the comparable prior-year period.

This increase

was primarily driven by favorable changes in working capital and a reduction in net loss.

we reported a net loss of $3.1 million in the first quarter of fiscal 2026, an improvement

from a $4.1 million net loss in the first quarter of fiscal 2025.

Key drivers of operating cash flow increase

o Improved collections of trade receivables resulted in a $18.8 million

cash increase, compared to $2.1 million in the prior year first quarter, primarily related to large, project-based receipts.

o Inventory optimization efforts resulted in a $6.4 million cash increase,

compared to $5.2 million in the prior year first quarter, where we transitioned from previously elevated seasonal inventory build-up to

active sell-through, especially at Hooker Branded, resulting in a net inventory reduction and significant positive cash impact.

o Changes in prepaid expenses and other assets resulted in a $928,000

cash decrease, compared to a $2.2 million cash decrease in the prior year first quarter, reflecting approximately $1.3 million in less

spending due primarily to the pause in ERP system implementation.

o Lower compensation-related payments resulted in a $155,000 cash increase,

compared to $1.8 million cash decrease in the prior year first quarter, attributed to absence of bonus payouts in the current period and

decreased headcount and reduced salary and wage expenses.

o These cash inflows were partially offset by a decline in accounts payable,

which resulted in a $8.5 million cash decrease, compared to a $2.1 million cash increase in the prior year first quarter, as we reduced

purchasing activity and did not continue building inventory levels during the quarter.

Net decrease in cash and cash equivalents

During the first six months of fiscal 2026, cash

decreased by approximately $5.5 million from the prior fiscal year-end.

Cash used in financing activities, primarily related to repayments

on the term loan and revolving credit facility, together with cash used in investing activities, was largely offset by cash provided by

operating activities, which was driven by favorable changes in working capital.

loss for the fiscal 2026 first six months was $6.3 million, slightly higher than a net loss

of $6.0 million in the prior year same period.

drivers of operating cash flow increase

o Trade receivables:

Collections of trade accounts

receivable generated $17.1 million of cash inflows, compared to $7.6 million in the prior-year period, primarily due to large, project-based

o Inventories:

Reductions in inventory levels provided

$12.2 million cash inflows, compared to $4.7 million in the prior-year period.

The decrease was concentrated in the Hooker Branded segment,

where inventory transitioned from previously elevated seasonal build-up to active sell-through.

Home Meridian also reduced inventories

significantly following the planned closure of the Georgia warehouse.

o Prepaid expenses and other assets:

Cash outflows

totaled $2.4 million, compared to $6.2 million in the prior-year period, primarily reflecting reduced spending on the ERP system implementation.

o Accrued salaries, wages, and benefits:

compensation increased by $0.6 million, compared to a $1.3 million cash outflow in the prior-year period, due to the timing of related

cash disbursement.

o These cash inflows were partially offset by a

$6 million decline in accounts payable, as we paid down outstanding payables, compared to a $3.4 million cash inflow in the prior year

same period, as we reduced purchasing activity and did not continue building inventory levels during the current period.

o Customer deposits increased cash inflow by $1.1

million, compared to $2.8 million in the prior year period, as large projects, which require sizable deposits, were shipped last year,

reducing deposits this year.

Cash used in investing activities totaled $2.0

compared to $959,000 in the first quarter of the prior year.

Cash used in financing activities totaled $2.0 million compared to $2.8 million

in the prior year first quarter, due to $534,000 proceeds from revolving credit facility and the absence of term loan payments during

the current quarter.

Financial Resources and Capital Expenditures

financial resources include:

million, compared to $808,000 in the prior-year period.

The increase was primarily due to $936,000 life insurance proceeds received in

the prior year that did not recur in the current period.

Cash used in financing activities was $21.6 million,

compared to $5.6 million in the prior-year period, primarily due to $16.5 million of repayments on the revolving credit facility during

the current period.

Liquidity, Financial Resources and Capital

Our financial resources include:

cash and cash equivalents, which are highly dependent on incoming order rates and our operating

2 unchanged sentences

surrender value of Company-owned life insurance.

most significant components of our working capital are inventory, accounts receivable and cash and cash equivalents reduced by accounts

payable and accrued expenses.

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 ERP project, 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 mid-summer because of inventory build-up for

the traditional fall selling season.

Long term cash requirements relate primarily to funding lease payments and repayment of long-term

Agreements and Revolving Credit Facility

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.

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 ERP project, showroom renovations and upgrading systems, buildings and equipment.

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 mid-summer because of inventory build-up for the traditional fall selling season.

Long term cash requirements

relate primarily to funding lease payments and repayment of long-term debt.

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.

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 will be available

(a) on entry into the Amended and Restated Loan Agreement to replace the outstanding loans and letters of credit outstanding under

the Existing Loan Agreement and to pay fees and expenses related to entry into the Amended and Restated Loan Agreement and (b) from

and after entry into the Amended and Restated Loan Agreement, for general working capital and other corporate purposes of the

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

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.

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 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 will be available (a) on entry into the Amended and Restated Loan Agreement to replace the outstanding

loans and letters of credit outstanding under the Existing Loan Agreement and to pay fees and expenses related to entry into the

Amended and Restated Loan Agreement and (b) from

and after entry into the Amended and Restated Loan Agreement, 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%.

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.

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.

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.

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).

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.

incurred $480,000 in fiscal 2025 and an additional $17,000 in fiscal 2026 first quarter in debt issuance costs in connection with our

As of May 4, 2025, unamortized loan costs of $456,000 were netted against the carrying value of our term loans on our consolidated

balance sheets.

of May 4, 2025, we had $22.6 million principal amount of outstanding loans and $6.7 million face amount of letters of credit.

$40.7 million of Availability based on the current Borrowing Base.

There were no additional borrowings outstanding under the Amended

and Restated Loan Agreement as of May 4, 2025.

We expect to spend approximately $2 to $3 million in capital expenditures

over the remainder of fiscal 2026 to maintain and enhance our operating systems and facilities, excluding any possible spending decreases

resulting from the cost reduction plan discussed above.

Resource Planning Project

calendar 2021, our Board of Directors approved an upgrade to our current ERP system and implementation efforts began shortly thereafter.

The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023.

Due to our cost

reduction initiatives, we have temporarily paused the ERP project in the Home Meridian segment.

June 3, 2025, our board of directors declared a quarterly cash dividend of $0.23 per share which will be paid on June 30, 2025, to shareholders

of record at June 16, 2025.

Accounting Policies

have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Annual Report.

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

$33,000 in fiscal 2026 first half in debt issuance costs in connection with our term loans.

As of August 3, 2025, unamortized loan costs

of $447,000 were netted against the carrying value of our term loans on our consolidated balance sheets.

As of August 3, 2025, we had $5.6 million principal

amount of outstanding loans and $6.7 million face amount of letters of credit.

We had $57.7 million of Availability based on the current

Borrowing Base.

There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of August 3, 2025.

Capital Expenditures

We expect to spend approximately $1 to $2 million

in capital expenditures over the remainder of fiscal 2026 to maintain and enhance our operating systems and facilities, excluding any

possible spending decreases resulting from the cost reduction plan discussed above.

Enterprise Resource Planning Project

During calendar 2021, our Board of Directors approved

an upgrade to our current ERP system and implementation efforts began shortly thereafter.

The ERP system went live at Sunset West in December

2022 and in the legacy Hooker divisions in early September 2023.

On September 9, 2025, our board of directors declared

a quarterly cash dividend of $0.23 per share which will be paid on September 30, 2025, to shareholders of record at September 19, 2025.

Critical Accounting Policies

There have been no material changes to our critical

accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations,” included in our 2025 Annual Report.

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-Q

Item 2. Management’s Discussion and Analysis