Annual Report for Fiscal Year Ending February 1, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

◾

All of our recent public filings made with the SEC which are available, without charge, at www.sec.gov and at http://investors.hookerfurnishings.com;

◾

The forward-looking statements disclaimer contained prior to Item 1 of this report, which describe the significant risks and uncertainties that could cause actual results to differ materially from those forward-looking statements made in this report, including those contained in this section of our annual report on Form 10-K;

◾

The company-specific risks found in Item 1A. "Risk Factors" of this report. This section contains critical information regarding significant risks and uncertainties that we face. If any of these risks materialize, our business, financial condition and future prospects could be adversely impacted; and

◾

Our commitments and contractual obligations and off-balance sheet arrangements described on page 28 and in Note 18 to our Consolidated Financial Statements on page F-30 of this report. This note describes commitments, contractual obligations and off-balance sheet arrangements, some of which are not reflected in our consolidated financial statements.

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

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

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

Executive Summary - Fiscal 2026 Results of Operations

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

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

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

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

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

Results of Operations - Continuing Operations

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

		52 weeks ended				53 weeks ended
		February 1,				February 2,
		2026				2025
Net sales			100	%			100	%
Cost of sales			73.6				75.4
Gross profit			26.4				24.6
Selling and administrative expenses			25.9				26.4
Goodwill and trade name impairment charges			5.6				0.3
Intangible asset amortization			0.9				0.9
Operating (loss) / income			(6.0	)			(3.0	)
Other income, net			0.1				0.9
Interest expense, net			0.3				0.4
(Loss) / income from continuing operations before income taxes			(6.1	)			(2.5	)
Income tax (benefit) / expense			(1.5	)			(0.6	)
Net (loss) / income from continuing operations			(4.6	)			(1.9	)

Fiscal 2026 Compared to Fiscal 2025

Net Sales

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Net Sales								% Net Sales
Hooker Branded		$	146,978				52.8	%		$	151,298				47.7	%		$	(4,320	)			-2.9	%
Domestic Upholstery			111,177				40.0	%			114,216				36.0	%			(3,039	)			-2.7	%
All Other			19,984				7.2	%			51,843				16.3	%			(31,859	)			-61.5	%
Consolidated		$	278,139				100	%		$	317,357				100	%		$	(39,218	)			-12.4	%

Unit Volume and Average Selling Price ("ASP")

Unit Volume		FY26 % Increase / (Decrease) vs. FY25				Average Selling Price		FY26 % Increase / (Decrease) vs. FY25
Hooker Branded			-8.8	%		Hooker Branded			5.7	%
Domestic Upholstery			-2.9	%		Domestic Upholstery			0.0	%
All Other			-48.4	%		All Other			-11.8	%
Consolidated			-14.3	%		Consolidated			6.5	%

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

		Average Net Sales Per Shipping Day
		52 weeks ended				53 weeks ended
		February 1, 2026				February 2, 2025				$ Change				% Change
Hooker Branded		$	583			$	589			$	(5	)			-0.9	%
Domestic Upholstery			441				444				(3	)			-0.7	%
All Other			79				202				(122	)			-60.7	%
Consolidated		$	1,104			$	1,235			$	(131	)			-10.6	%
Shipping Days			252				257

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

◾

Hooker Branded segment's net sales decreased by $4.3 million, or 2.9%, compared to the prior fiscal year. The entire decrease occurred in the fourth quarter, with net sales down $5.5 million, offsetting modest increases recorded during the first three quarters of the fiscal year. The decrease was primarily attributable to the fourth quarter of the current fiscal year being one week shorter than the prior year period, which reduced net sales by approximately $2.9 million based on average daily sales, and, to a lesser extent, supplier production delays that limited product availability for shipment, as well as temporary weather-related shipping disruptions. Unit volume decreased by 8.8%, primarily due to a 27% decrease in fourth quarter volume versus the prior year, marking the lowest quarterly level in two years. This decrease was partially offset by a 5.7% increase in average selling price, implemented in August 2025 to mitigate higher product costs and tariffs.

◾

Domestic Upholstery segment's net sales decreased by $3.0 million, or 2.7%, compared to the prior year. Results varied across divisions, with sales decreases in divisions focused on upscale leather and custom fabric furniture due in part to a shorter fiscal period and lower incoming orders, while divisions serving private label, contract and senior living, and outdoor furniture channels reported sales growth. Average selling prices remained relatively stable across all divisions. The overall decrease in net sales was primarily driven by lower unit volume in the underperforming divisions, partially offset by higher unit volume in the divisions with sales growth.

◾

All Other's net sales decreased by $31.9 million, or 61.5%, compared to the prior year. The decrease was entirely attributable to lower sales in the hospitality business, reflecting the project-based nature of this business, in which certain large projects shipped in the prior year did not recur in the current year.

Gross Profit and Margin

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	48,212				32.8	%		$	46,627				30.8	%		$	1,585				3.4	%
Domestic Upholstery			20,361				18.3	%			18,289				16.0	%			2,072				11.3	%
All Other			4,922				24.6	%			13,220				25.5	%			(8,298	)			-62.8	%
Consolidated		$	73,495				26.4	%		$	78,136				24.6	%		$	(4,641	)			-5.9	%

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

◾

The Hooker Branded segment's gross profit increased by $1.6 million, and gross margin increased by 200 basis points compared to the prior fiscal year, despite a slight decrease in net sales. The margin improvement was primarily driven by a 210 basis point reduction in cost of goods sold as a percentage of net sales, largely due to favorable freight costs, and to a lesser extent, pricing actions. Tariffs are expected to have a greater impact on margins in future periods.

◾

Domestic Upholstery segment's gross profit increased by $2.1 million, and gross margin increased by 230 basis points compared to the prior fiscal year. The margin improvement was primarily driven by lower direct material costs, which decreased by 150 basis points. Direct labor, indirect, and warehousing and distribution costs each decreased by approximately 20 to 40 basis points, reflecting reduced headcount and the exit of the Savannah warehouse, partially offset by costs associated with Sunset West inventory relocation to Virginia.

◾

All Other's gross profit and gross margin both decreased compared to the prior year, primarily due to a 61.5% decrease in net sales in the hospitality business, as discussed above.

Selling and Administrative Expenses ("S&A")

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	46,284				31.5	%		$	47,060				31.1	%		$	(776	)			-1.6	%
Domestic Upholstery			20,021				18.0	%			21,287				18.6	%			(1,266	)			-5.9	%
All Other			5,616				28.1	%			15,476				29.9	%			(9,860	)			-63.7	%
Consolidated		$	71,921				25.9	%		$	83,823				26.4	%		$	(11,902	)			-14.2	%

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

◾

Hooker Branded segment's S&A expenses decreased by $776,000 compared to the prior year. The decrease was primarily driven by cost reduction initiatives, which resulted in approximately $3.3 million in savings, including lower compensation costs due to reduced headcount, as well as reductions in showroom and rent expenses, bad debt, banking fees, and other operating costs. These reductions were largely offset by higher professional services and maintenance expenses, including a $2.1 million increase in IT-related maintenance driven by higher software licensing fees and post-implementation support and maintenance costs associated with the Company's ERP system, as well as additional consulting fees related to compliance, corporate strategy, and investor relations activities.

◾

Domestic Upholstery segment's S&A expenses decreased by $1.3 million, or 60 basis points, compared to the prior year. The decrease was primarily driven by approximately $665,000 lower operating expenses, including reductions in advertising and supplies, compensation costs, and compliance expenses related to a non-recurring item in the prior year, as well as other cost savings. The decrease also reflects lower restructuring and selling costs.

◾

All Other's S&A expenses decreased by $9.9 million compared to the prior year, primarily due to the absence of $7.2 million of operating expenses associated with a previously exited HMI business classified in All Other, including $3.1 million of bad debt expense related to the bankruptcy of its major customer. The decrease also reflects, to a lesser extent, absence of $1.7 million in restructuring costs incurred in the prior year related to another previously exited lighting and home décor business.

Intangible Asset Impairment and Amortization

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
							% Net Sales								% Net Sales
Goodwill impairment		$	14,462				5.2	%		$	-				0.0	%		$	14,462				0.0	%
Tradenames impairment			1,114				0.4	%			1,055				0.3	%			59				5.6	%
Intangible asset amortization			2,462				0.9	%			2,763				0.9	%			(301	)			-10.9	%

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

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

Operating (Loss) / Income and Margin

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
							% Segment Net Sales								% Segment Net Sales
Hooker Branded		$	1,928				1.3	%		$	(433	)			-0.3	%		$	2,361				545.3	%
Domestic Upholstery			(16,897	)			-15.2	%			(5,374	)			-4.7	%			(11,523	)			-214.4	%
All Other			(1,495	)			-7.5	%			(3,698	)			-7.1	%			2,203				59.6	%
Consolidated		$	(16,464	)			-5.9	%		$	(9,505	)			-3.0	%		$	(6,959	)			-73.2	%

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

Interest Expense, net

		52 weeks ended								53 weeks ended
		February 2, 2026								February 2, 2025								$ Change				% Change
							% Net Sales								% Net Sales
Consolidated interest expense		$	765				0.3	%		$	1,274				0.3	%		$	(509	)			-40.0	%

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

Income Taxes

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Net Sales								% Net Sales
Consolidated income tax (benefit) / expense		$	(4,254	)			-1.5	%		$	(1,902	)			-0.6	%		$	(2,352	)			-123.7	%
Effective Tax Rate			25.0	%							23.6	%

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

Net (Loss) from Continuing Operations and Earnings Per Share

		52 weeks ended								53 weeks ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Net Sales								% Net Sales
Net (loss) / income from continuing operations
Consolidated		$	(12,779	)			-4.6	%		$	(6,166	)			-1.9	%		$	(6,613	)			-107.2	%
Diluted (loss) / earnings from continuing operations per share		$	(1.20	)						$	(0.59	)

Results of Operations - Discontinued Operations

		For the
		52 Weeks Ended								53 Weeks Ended
		February 1, 2026								February 2, 2025								$ Change				% Change
						% Net Sales								% Net Sales
Net sales		$	42,795				100.0	%		$	80,107				100.0	%		$	(37,312	)			-87.2	%
Cost of sales			41,550				97.1	%			69,295				86.5	%			(27,745	)			-66.8	%
Gross profit			1,245				2.9	%			10,812				13.5	%			(9,567	)			-768.4	%
S&A expenses			13,404				31.3	%			16,694				20.8	%			(3,290	)			-24.5	%
Tradename impairment			-				0.0	%			1,776				2.2	%			(1,776	)
Intangible asset amortization			742				1.7	%			922				1.2	%			(180	)			-24.3	%
Other income items that are not major			(1,099	)			-2.6	%			(222	)			-0.3	%			(877	)			79.8	%
Pretax loss of discontinued operations related to major classes			(11,802	)			-27.6	%			(8,358	)			-10.4	%			(3,444	)			-29.2	%
Loss on sale of the discontinued operations			6,888				16.1	%			-				0.0	%			6,888				100.0	%
(Loss) / income from discontinued operations before income taxes			(18,690	)			-43.7	%			(8,358	)			-10.4	%			(10,332	)			-55.3	%
Income tax benefits			(4,502	)			-10.5	%			(2,017	)			-2.5	%			(2,485	)			-55.2	%
Net loss from discontinued operations			(14,188	)			-33.2	%			(6,341	)			-7.9	%			(7,847	)			-55.3	%

Unit Volume		FY26 % Increase / (Decrease) vs. FY25				Average Selling Price ("ASP")				FY26 % Increase / (Decrease) vs. FY25
Discontinued Operations			-52.6	%			Discontinued Operations				-3.1	%

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

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

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

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

Financial Condition, Liquidity and Capital Resources

Summary Cash Flow Information - Operating, Investing and Financing Activities

		52 Weeks Ended				53 Weeks Ended				52 Weeks Ended
		February 1,				February 2,				January 28,
		2026				2025				2024
Net cash provided by / (used in) operating activities		$	18,302			$	(22,036	)		$	66,402
Net cash provided by / (used in) investing activities			1,972				(2,530	)			(6,981	)
Net cash used in financing activities			(27,394	)			(11,149	)			(22,756	)
Net cash provided by / (used in) discontinued operations			1,937				(1,149	)			(12,508	)
Net (decrease) / increase in cash and cash equivalents		$	(5,183	)		$	(36,864	)		$	24,157

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

●

Cash provided by operating activities totaled $18.3 million in fiscal 2026, compared to $22.0 million used in the prior fiscal year. The improvement was driven primarily by favorable changes in working capital and non-cash adjustments. Key drivers of operating cash flow increase:

o

Despite a higher net loss from continuing operations of $12.8 million, compared to $6.2 million in the prior year, operating cash flow benefited from significant non-cash adjustments, including $15.6 million of trade name impairment charges, which were added back in the reconciliation to operating cash flow.

o

Trade receivables: Collections of trade accounts receivable generated $8.1 million of cash inflows, compared to $11.3 million outflows in the prior fiscal year, primarily due to improved collections, including large, project-based receipts.

o

Inventories: Generated $17.5 million of cash inflows, compared to a use of $13.2 million outflows in the prior year, reflecting deliberate inventory reduction efforts. The decrease was concentrated in the Hooker Branded segment as inventory levels normalized following prior elevated build-ups.

●

Offsetting factors

o

A $5.8 million decrease in accounts payable, representing a use of cash compared to a $4.8 million source in the prior year, as we reduced purchasing activity and did not continue building inventory levels during the current fiscal year.

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

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

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

Liquidity, Financial Resources and Capital Expenditures

Our sources of liquidity are:

◾

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

◾

expected cash flow from operations;

◾

available lines of credit; and

◾

cash surrender value of Company-owned life-insurance.

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

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

Loan Agreements and Revolving Credit Facility

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

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

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

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

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

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

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

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

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

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

Share Repurchase Authorization

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

Capital Expenditures

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

Material Capital Commitments

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

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

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

Dividends

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

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

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

Recently Issued Accounting Pronouncements

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

Outlook

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

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

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

Critical Accounting Policies and Estimates

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

Revenue Recognition

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

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

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

Impairment of Long-Lived Assets

Tangible and Definite Lived Intangible Assets

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

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

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

Intangible Assets and Goodwill

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

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

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

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

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

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

Inventory

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

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

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

Recently Issued Accounting Standards Not Yet Adopted

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

Concentrations of Sourcing Risk

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