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Item 1A. Risk Factors

2026-04-17 compared with 2025-04-18 · 135 added, 141 removed, 308 unchanged (47% of the section changed)

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The furniture industry is particularly sensitive

to cyclical variations in the general economy and the current macro-economic uncertainties, including the current sustained economic downturn

caused by persistent inflation and higher interest rates, the slow housing market, and after-effects of COVID-19.

Home furnishings are

generally considered a discretionary and 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 and persistent macroeconomic headwinds of the last

A recovery in our sales could lag significantly behind a general recovery in the economy after an economic downturn, due to,

among other things, the nature and relatively significant cost of home furnishings purchases resulting in a temporary shift in consumer

discretionary spending away from home furnishings, or scarcity of transportation and Asian manufacturing capacity during times of increased

Additionally, most of our sales are of wooden or metal Casegoods products, which have a slower replacement cycle than our upholstered

home furnishings products.

These factors also impact retailers, who are our primary customers, possibly adversely affecting our sales,

earnings, financial condition and liquidity.

to cyclical variations in the general economy and the current macro-economic conditions that affect consumer spending.

Economic uncertainty,

including persistent inflationary pressures, elevated interest rates, and the slow housing market, may negatively impact consumer confidence

and discretionary spending.

Home furnishings purchases are generally considered discretionary and may be postponed by consumers during

periods of economic downturns or reduced household purchasing power.

Demand for our products is influenced by a number

of macroeconomic factors, including changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability

of consumer credit and broader national or geopolitical factors.

In recent years, the housing market has experienced periods of slowdown

due in part to higher mortgage rates and affordability challenges, which have adversely affected demand of home furnishings.

higher interest rates and tighter credit conditions reduce discretionary consumer spending, which in turn may reduce demand for home furnishings.

A recovery in our sales could lag significantly

behind a general recovery in the economy after an economic downturn, due to, among other things, the nature and relatively significant

cost of home furnishings purchases resulting in a temporary shift in consumer discretionary spending away from home furnishings, or scarcity

of transportation and Asian manufacturing capacity during times of increased demand.

Additionally, most of our sales are of wooden or

metal Casegoods products, which have a slower replacement cycle than our upholstered home furnishings products.

These factors also impact retailers, who are our

primary customers.

If our retail customers experience reduced consumer demand, increased financial pressure, or inventory adjustments

in response to economic conditions, our sales, earnings, financial condition and liquidity could be adversely affected.

We rely on offshore sourcing from Vietnam for

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tariffs imposed on other countries from which we source, including Vietnam, China, or Mexico, could adversely affect our business.

There is a potential that the current

administration will impose additional reciprocal tariffs on nearly all the countries from which we source our product, including

Vietnam and China, which accounted for 76% and 13% of our total imports in fiscal 2025, respectively.

Inability to reduce product costs,

pass through price increases or find other suitable manufacturing sources may have a material adverse impact on sales volume, earnings

Changes in U.S.

trade policies, including

the imposition of new tariffs, increases in existing tariffs, or other trade restrictions, could adversely affect our business.

A significant

portion of our products is sourced from foreign manufacturers, including Vietnam and China, which accounted for 87% and 5% of our total

imports in fiscal 2026, respectively.

As a result, our cost of goods sold and supply chain could be significantly affected by changes

in tariffs or other trade measures imposed by the U.S.

or other countries.

Inability to mitigate the tariff impact and reduce product

costs, pass through price increases or find other suitable manufacturing sources may have a material adverse impact on sales volume, earnings

and liquidity.

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increases or less profitable due to lower margins.

Our inability to effectively manage the negative impacts of changing U.S.

trade policies could adversely affect our business and financial results.

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.

Changes in trade policies could also

disrupt established sourcing strategies, require us to shift production to alternative countries or suppliers, and increase supply chain

In response to evolving trade policies, we have taken steps in recent years to diversify our sourcing base and reduce reliance

on certain countries, including shifting a portion of our sourcing from China to other countries such as Vietnam and Mexico.

these efforts may not fully mitigate the impact of tariffs or other trade restrictions.

Alternative sourcing locations may have higher

production costs, limited manufacturing capacity, or logistical challenges that could increase costs or disrupt supply.

The scope, timing,

and duration of tariffs and other trade restrictions remain uncertain.

Further increases in tariffs or expansion of countries and products

subject to tariffs could materially increase the cost of goods sold and adversely affect our operating results, financial condition, and

◾ 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

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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

These risks may be even more pronounced with new product launches, like our current Margaritaville product launch.

If we purchase too little or the wrong mix of inventory, we may not be able to fill customer orders and may lose market share and weaken

or damage customer relationships, which also could adversely affect our sales, earnings, financial condition and liquidity.

◾ A disruption in supply from Vietnam or from

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

recent past, especially after the COVID-19 pandemic, transportation costs, including ocean freight costs and domestic trucking costs,

on imported products represented a significant portion of the cost of those products.

We saw a significant spike in these costs during

that time and our profitability was materially impacted.

geopolitical conflicts and instability, including disruptions to key shipping routes, have increased volatility in global shipping markets

and have resulted in higher ocean freight rates, longer transit times, and reduced carrier capacity.

In the recent past, especially after

the COVID-19 pandemic, transportation costs, including ocean freight costs and domestic trucking costs, on imported products represented

a significant portion of the cost of those products.

We saw a significant spike in these costs during that time and our profitability

was materially impacted.

To mitigate the increased costs, we implemented price increases and surcharges;

however, there can be no assurance that we will be successful in increasing prices or receiving freight surcharges in the future or that

we can do it quickly enough to offset increased costs.

Increased transportation costs, both domestically and internationally, in the future

would likely adversely affect our earnings, financial condition and liquidity.

however, there can be no assurance

that we will be successful in increasing prices or receiving freight surcharges in the future or that we can do it quickly enough to offset

increased costs.

Increased transportation costs, both domestically and internationally, in the future would likely adversely affect our

earnings, financial condition and liquidity.

◾ Our dependence on suppliers could, over time,

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Changes in political, economic and social

conditions, as well as in the laws and regulations in the foreign countries from which we source our products could adversely affect our

sales, earnings, financial condition and liquidity.

These changes could make it more difficult to provide products and service to our

customers or could increase the cost of those products.

International trade regulations and policies of the United States and the countries

from which we source finished products could adversely affect us.

Imposition of trade sanctions relating to imports, taxes, import duties

and other charges on imports affecting our products could increase our costs and decrease our earnings.

conditions, including geopolitical conflicts or instability affecting key global shipping routes and our suppliers, as well as in the

laws and regulations in the foreign countries from which we source our products could adversely affect our sales, earnings, financial

condition and liquidity.

These changes could make it more difficult to provide products and service to our customers or could increase

the cost of those products.

International trade regulations and policies of the United States and the countries from which we source finished

products could adversely affect us.

Imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports

affecting our products could increase our costs and decrease our earnings.

◾ Changes in the value of the U.S.

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

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 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 also reduced the physical footprints at our Savannah, GA warehouse and High Point, NC

administrative office over the course of the 2024 fiscal year with a concurrent reduction in lease, warehouse, and related expenses.

March 2025, we announced the planned exit of our Savannah, GA warehouse and the consolidation of warehouse operations at existing and

temporary facilities.

We recorded $1.3 million in inventory reserves on end-of-life and near-end of life cycle products that we don’t

plan to move to these existing or temporary facilities due to the moving costs involved.

We expect to record between $3 million to $4

million in exit charges in the fiscal 2026 first half consisting of a combination of severance and fixed asset impairment.

We expect these

actions will return the HMI segment to future profitability assuming demand improves to more normalized levels.

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 engage in acquisitions and investments

in companies, form strategic alliances and pursue new business lines.

These activities could disrupt our business, divert management attention

from our current business, pose integration concerns or difficulties, dilute our earnings per share, decrease the value of our common

stock and decrease our earnings and liquidity.

Growth by acquisition is highly dependent upon

finding attractive targets and there can be no assurance those targets will be found.

We may acquire or invest in businesses such as those

that offer complementary products or that we believe offer competitive advantages.

However, we may fail to identify significant liabilities

or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth.

have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations.

or strategic alliances may disrupt or distract management from our ongoing business.

We may pay for future acquisitions using cash, stock,

the assumption of debt or a combination of these.

Future acquisitions could result in dilution to existing shareholders and to earnings

per share and decrease the value of our common stock.

Outside of the acquisition framework, there are risks involved with new business

lines and product line launches.

We may pursue new business lines in which we have limited or no prior experience or expertise.

new product line launches always have inherent risks regarding attracting customers without an established track record or defined market

expectations.

Like with our current launch of the new Margaritaville product line, these pursuits may require substantial investment of

capital, personnel and management attention.

New business initiatives may fail outright or fail to produce an adequate return, which could

adversely affect our earnings, financial condition and liquidity.

If demand for our domestically manufactured

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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.

in Virginia, North Carolina and California are critical to our success.

Our corporate and divisional headquarters, which house our administration,

sourcing, sales, finance, merchandising, customer service and logistics functions for our imported and domestic products are located in

Virginia, North Carolina and California.

Additionally, our primary showrooms are located in North Carolina.

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Additionally, our domestic operations could be negatively affected by natural

disasters such as hurricanes and floods, and public health events, such as the COVID-19 pandemic.

Any disruption affecting our domestic

facilities, even for a relatively short period of time, could adversely affect our ability to ship our furniture products and disrupt

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

disasters such as hurricanes and floods, and public health events.

Any disruption affecting our domestic facilities, even for a relatively

short period of time, could adversely affect our ability to ship our furniture products and disrupt our business, which could adversely

affect our sales, earnings, financial condition and liquidity.

Fluctuations in the price (including tariffs),

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financial condition and liquidity.

The implementation of our ERP system could

disrupt our business.

We implemented a common ERP system across all

Hooker Legacy divisions in 2022 and 2023.

Due to our cost reduction initiatives, we have temporarily paused the ERP project in the Home

Meridian segment beginning in the third quarter of fiscal 2025.

The risk in pausing this effort is that HMI’s current version of

SAP will no longer be supported after December 2025.

We expect to mitigate this risk by engaging a third party who supports end-of-life

SAP instances.

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.

When the ERP system went live at Sunset West and legacy Hooker divisions, the conversion

process significantly impacted shipping activities and negatively impacted sales and profitability in the respective periods, due to longer

than expected post-implementation stabilization.

The ERP system implementation subjects us to substantial costs and inherent risks associated

with migrating from our legacy systems.

These costs and risks could include, but are not limited to:

● Significant capital and operating expenditures;

● Disruptions to our domestic and international supply chains;

● Inability to fill customer orders accurately and on a timely basis, or at

● Inability to process payments to suppliers, vendors and associates accurately

and in a timely manner;

● Disruption to our system of internal controls;

● Inability to fulfill our SEC or other governmental reporting requirements

in a timely or accurate manner;

● Inability to fulfill international, federal, state or local tax filing requirements

in a timely or accurate manner;

● Increased demands on management and staff time to the detriment of other

corporate initiatives.

We may not be able to maintain, raise prices, or raise prices in

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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.

and trade names have indefinite useful lives and, consequently, are not subject to amortization for financial reporting purposes, but

are tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired.

Our definite-lived

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under ASU 2021-03, Intangibles – Goodwill and Other (Topic 350).

Due to the decline in revenue driven by the downturn in the furniture

industry, increased freight costs, changes in management’s strategy, and the bankruptcy of a key customer, we identified triggering

events that necessitated a valuation of the indefinite-lived trade names and trademarks in the Home Meridian segment.

Consequently, we

performed a valuation using the discounted cash flow method.

This methodology involved cash flow projections and growth rates for each

trade name over the next five years, provided by management, along with a royalty rate benchmark for companies engaged in similar activities.

Based on this analysis, we recorded non-cash impairment charges of $2.8 million for certain indefinite-lived trade names within the Home

Meridian segment.

Due to adverse economic conditions, including declines in our market

value, as well as other changes in market dynamics, we identified triggering events that necessitated a valuation of our goodwill and

intangible assets.

We engaged an independent third-party valuation firm to assist in performing the assessment.

Based on this analysis,

we recorded non-cash impairment charges of $14.5 million related to the impairment of Sunset West goodwill within the Domestic Upholstery

segment, $558,000 for the trade name in the remaining HMI business classified in All Other, and $556,000 for the Bradington-Young trade

name in the Domestic Upholstery segment.

See Note 9 to our Consolidated Financial Statements for additional information.

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affect our sales, earnings, financial condition and liquidity.

In fiscal 2025, we recorded $3.1 million in bad debt expense due to a large

customer’s bankruptcy.

We may not be able to collect amounts owed

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Were an economic downturn, 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.

economic effects to occur, we may not be able to collect amounts owed to us or such payment may only occur after significant delay.

we perform credit evaluations of our customers, those evaluations may not prevent uncollectible trade accounts receivable.

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to us by these customers, which could adversely affect our sales, earnings, financial condition and liquidity.

In fiscal 2026 and 2025,

we recorded approximately $1 million and $3.1 million in bad debt expense due to bankruptcies of two large customers.

Our existing and future debt obligations could impair our liquidity

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sales, earnings, financial condition and liquidity could again be adversely affected.

We may engage in acquisitions and investments

in companies, form strategic alliances and pursue new business lines.

These activities could disrupt our business, divert management attention

from our current business, pose integration concerns or difficulties, dilute our earnings per share, decrease the value of our common

stock and decrease our earnings and liquidity.

Growth by acquisition is highly dependent upon

finding attractive targets and there can be no assurance those targets will be found.

We may acquire or invest in businesses such as those

that offer complementary products or that we believe offer competitive advantages.

However, we may fail to identify significant liabilities

or risks that could negatively affect us or result in our paying more for the acquired company or assets than they are worth.

have difficulty assimilating and integrating the operations and personnel of an acquired business into our current operations.

or strategic alliances may disrupt or distract management from our ongoing business.

We may pay for future acquisitions using cash, stock,

the assumption of debt or a combination of these.

Future acquisitions could result in dilution to existing shareholders and to earnings

per share and decrease the value of our common stock.

We may pursue new business lines in which we have limited or no prior experience

or expertise.

These pursuits may require substantial investment of capital, personnel and management attention.

New business initiatives

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

We may lose market share due to furniture retailers

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financial condition and liquidity.

We may fail to realize the benefits of the

sale of Pulaski Furniture and Samuel Lawrence casegoods brands

We evaluate and may pursue the divestiture of

businesses or product lines that we determine are underperforming or no longer align with our strategic priorities.

During fiscal 2026,

we determined that the two largest businesses in the Home Meridian segment no longer aligned with our long-term strategy to streamline

our portfolio and enhance profitability by focusing on brands that generate consistent earnings, and we completed the sale of the Pulaski

Furniture (“PFC”) and Samuel Lawrence Furniture (“SLF”) casegoods brands within this segment.

Divesting involves a number of risks and uncertainties.

We may incur significant costs associated with such transactions, including transaction costs, employee-related costs, and costs associated

with exiting facilities or other contractual obligations.

Divestitures may also disrupt relationships with customers, suppliers, and employees,

particularly where the divested business had operational or customer relationships that overlap with our remaining operations.

we may retain certain liabilities associated with the divested business, including obligations related to the legacy PFC pension plan.

Furthermore, the anticipated benefits of a divestiture,

including improved profitability, reduced complexity, or greater strategic focus, may not be realized within the expected timeframe or

If we are unable to successfully execute divestitures or achieve the expected benefits from such transactions, our business, financial

condition, and results of operations could be adversely affected.

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