Hooker Furnishings Corporation HOFT Form 10-Q filing Q2 FY2026

Item 1. Financial Statements

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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HOOKER FURNISHINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in tables, except per share amounts, in thousands unless otherwise indicated)

(Unaudited)

For the Twenty-Six Weeks Ended August 3, 2025

1. Preparation of Interim Financial Statements

The condensed consolidated financial statements of Hooker Furnishings Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended February 2, 2025 (“2025 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.

The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering 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 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 these notes to the condensed consolidated financial statements of the Company to:

• the 2026 fiscal year and comparable terminology mean the fifty-two-week fiscal year that began February 3, 2025 and will end February 1, 2026; and
• the 2025 fiscal year and comparable terminology mean the fifty-three-week fiscal year that began January 29, 2024 and ended February 2, 2025.

2. Recently Adopted Accounting Policies

In December 2023, the FASB issued Accounting Standards Updates “ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The new guidance requires enhanced effective tax rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (our fiscal 2026). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of income statement expenses”. The new guidance requires new tabular disclosures to disaggregate prescribed natural expenses underlying any income statement caption. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 (our fiscal 2028). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.

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3. Accounts Receivable

4. Inventories

5. Property, Plant and Equipment

6. Cloud Computing Hosting Arrangement

We are implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” of our consolidated balance sheets. We amortize on a straight-line basis over 10-years term. The amortization expenses are recorded as a component of selling and administrative expenses in our consolidated statements of operations.

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During the second quarter of fiscal 2026, we capitalized $287,000 of implementation costs and interest, related to the ERP system and a new supply chain planning software, compared with $1.2 million in the second quarter of fiscal 2025. For the six-month periods, capitalized implementation costs and interest totaled $551,000 in fiscal 2026 and $2.6 million in fiscal 2025. Amortization expense was $368,000 in the second quarter of fiscal 2026 and $292,000 in the second quarter of fiscal 2025, and $735,000 and $582,000 for the respective six-month periods.

The capitalized implementation costs at August 3, 2025 and February 2, 2025 were as follows:

7. Fair Value Measurements

Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability (an exit price) in an orderly transaction between market participants on the applicable measurement date. We use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

• Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities;
• Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
• Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of August 3, 2025 and February 2, 2025, Company-owned life insurance was measured at fair value on a recurring basis based on Level 2 inputs. The fair value of the Company-owned life insurance is determined by inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Additionally, the fair value of the Company-owned life insurance is marked to market each reporting period and any change in fair value is reflected in income for that period.

Our assets measured at fair value on a recurring basis at August 3, 2025 and February 2, 2025, were as follows:

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8. Intangible Assets

Our intangible assets with indefinite lives consist of: goodwill related to the Shenandoah, Sunset West and BOBO Intriguing Objects acquisitions; and trademarks and tradenames related to the acquisitions of Bradington-Young, Home Meridian and BOBO Intriguing Objects. Our intangible assets with definite lives are recorded in our Home Meridian and Domestic Upholstery segments. Details of our intangible assets are as follows:

*: The amounts are net of impairment charges of $16.4 million related to Shenandoah goodwill and $7.6 million related to certain Home Meridian segment trade names, of which $4.8 million were recorded in fiscal 2021 and $2.8 million were recorded in fiscal 2025.

Amortization expenses for intangible assets with definite lives were $872,000 and $924,000 for the second quarters of fiscal 2026 and 2025, respectively, and $1.8 million for the first half of both fiscal 2026 and 2025. For the remainder of fiscal 2026, amortization expense is expected to be approximately $1.7 million.

9. Leases

We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. Sub-lease income totaled $119,000 in the second quarter and $200,000 for the first half of fiscal 2026, compared with $18,000 and $71,000, respectively, in fiscal 2025 periods.

The components of lease cost and supplemental cash flow information for leases for the second quarters and six-months of fiscal 2026 and 2025 were:

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The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of August 3, 2025 and February 2, 2025 were as follows:

The weighted-average discount rate is 5.53%. The weighted-average remaining lease term is 5.8 years.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on August 3, 2025:

During the fiscal 2026 second quarter, we entered into an agreement to terminate and surrender the Georgia warehouse by October 31, 2025. This amendment is expected to reduce right-of-use assets by approximately $10.1 million, lease liabilities by $10.7 million, and lease payments by $13.4 million over the remaining lease term. Since the agreement has not yet commenced, the modification is not reflected in the table above.

10. Long-Term Debt

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 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.

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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 $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.

11. Earnings Per Share

We refer you to the discussion of Earnings Per Share in Note 1. Summary of Significant Accounting Policies, in the financial statements included in our 2025 Annual Report, for additional information concerning the calculation of earnings per share (EPS).

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All stock awards are designed to encourage retention and to provide an incentive for increasing shareholder value. We have issued restricted stock awards to non-employee members of the board of directors since 2006 and to certain non-executive employees since 2014. We have issued RSUs to certain senior executives since fiscal 2012 under the Company’s Stock Incentive Plan. Each RSU entitles an executive to receive one share of the Company’s common stock if the executive remains continuously employed with the Company through the applicable vesting date. The RSUs may be paid in shares of our common stock, cash or both at the discretion of the Compensation Committee of our board of directors. We have issued PSUs to certain senior executives since fiscal 2019 under the Company’s Stock Incentive Plan. Each PSU entitles the executive officer to receive one share of our common stock based on the achievement of two specified performance conditions if the executive officer remains continuously employed through the end of the three-year performance period. Historically, one target is based on our annual average growth in our EPS over the performance period and the other target is based on EPS growth over the performance period compared to our peers. For the PSUs issued under the Company’s 2024 Plan in fiscal 2025 and afterwards, one target is the Company’s annual EPS growth over the performance period and the other target is the Company’s total shareholder return during the performance period compared to the Company’s peer group. The payout or settlement of the PSUs will be made in shares of our common stock.

We expect to continue to grant these types of awards annually in the future. The following table sets forth the number of outstanding restricted stock awards and RSUs and PSUs, net of forfeitures and vested shares, as of the fiscal period-end dates indicated:

All restricted shares, RSUs and PSUs awarded that have not yet vested are considered when computing diluted earnings per share.

The following table sets forth the computation of basic and diluted earnings per share:

Due to net losses, approximately 106,000 shares and 115,000 shares for the second quarter and first half of fiscal 2026, and 169,000 shares and 176,000 shares for the second quarter and first half of fiscal 2025, respectively, would have been antidilutive and are therefore excluded from the calculation of earnings per share, respectively.

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12. Income Taxes

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. The 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.

No material and non-routine positions have been identified as uncertain tax positions.

Tax years ending January 29, 2023 through February 2, 2025 remain subject to examination by federal and state taxing authorities.

13. Segment Information

As a public entity, we are required to present disaggregated information by segment using the management approach. The objective of this approach is to allow users of our financial statements to see our business through the eyes of management based upon the way management reviews performance and makes decisions. The management approach requires segment information to be reported based on how management internally evaluates the operating performance of the Company’s business units or segments. The objective of this approach is to meet the basic principles of segment reporting as outlined in ASC 280 Segments (“ASC 280”), which are to allow the users of our financial statements to:

• better understand our performance;
• better assess our prospects for future net cash flows; and
• make more informed judgments about us as a whole.

We define our segments as those operations our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources. The Company’s CODM is the Chief Executive Officer. The CODM regularly reviews net sales, gross profit, and operating income by segment as the primary measures of segment performance. The CODM reviews net sales as a primary indicator of operational performance, assessing how much revenue is brought in from core business activities, after returns, allowances, and discounts, which reflects demand and execution of each segment’s strategy. Gross profit, which is derived from net sales and cost of sales, is reviewed by the CODM as a diagnostic metric, particularly useful in evaluating margin trends. Operating income is the key profitability metric used to assess performance across segments and make decisions related to resource allocation, including capital expenditures, headcount, and other investment initiatives. Each of these metrics are considered in budgeting, forecasting, and operational planning decisions.

For financial reporting purposes, we are organized into three reportable segments and “All Other”, which includes the remainder of our businesses:

• Hooker Branded, consisting of the operations of our imported Hooker Casegoods and Hooker Upholstery businesses;
• Home Meridian, is a stand-alone, mostly autonomous business that serves a different type or class of customer than do our other operating segments and at much lower margins;
• Domestic Upholstery, which includes the domestic upholstery manufacturing operations of Bradington-Young, HF Custom (formerly Sam Moore), Shenandoah Furniture and Sunset West; and
• All Other, consisting of intercompany eliminations and operating segments that are not individually reportable. Due to a change in the way management internally evaluates operating performance, beginning with the fiscal 2026 first quarter, Hooker Branded and Domestic Upholstery segments’ results now include all the sales of products formerly included in H Contract’s results. Fiscal 2025 results discussed below have been recast to reflect this change.

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The following tables present segment information for the periods, and as of the dates, indicated.

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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. The restructuring costs were recorded under cost of sales and selling and administrative expenses in the statements of operations.

Sales by product type are as follows:

14. Subsequent Events

Dividends

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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. 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.

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Overview

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.

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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; 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.

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:

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.

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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 sales. 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 demand.

In response to these persistent macroeconomic challenges, we remain focused on factors within our control:

• On 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.
• On 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 quarter. 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.

Net 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 period.

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.

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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.

Phase 1: Initial Cost Reductions (Fiscal 2025)

• Actions: 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.

Phase 2: Logistics & Operations Consolidation (Fiscal 2026)

• Actions:

○ 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 line.

○ 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 warehousing.

○ Operational Streamlining: Pursuing additional cost-saving opportunities through supply chain optimization, organizational simplification in the Domestic Upholstery segment, and expansion of outsourced services.

• 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.

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

Results of Operations

The following table sets forth the percentage relationship to net sales of certain items included in the condensed consolidated statements of income included in this report.

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

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Consolidated 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 the quarter. 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.

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

• The 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.
• The 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 year. 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.
• The 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. In contrast, 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.

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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 All Other. 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.
• The 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.
• The 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 capacity. Additionally, warehousing and distribution expenses decreased across nearly all categories.

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.

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

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• The 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.
• The 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.

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.

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.

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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. The 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.

Outlook

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 fiscal year.

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.

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Financial Condition, Liquidity and Capital Resources

Cash Flows – Operating, Investing and Financing Activities

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.

• Net 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.
• Key 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 receipts.

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: Accrued 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.

• Offsetting factors

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 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 Expenditures

Our financial resources include:

• 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.

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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. 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 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.

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%. 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).

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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.

Dividends

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.

Item 3. Quantitative and Qualitative Disclosures

About Market Risk**

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

Interest Rate Risk

Borrowings under the Amended and Restated Loan Agreement will bear interest at a rate per annum equal to the then-current Term SOFR Rate for a period of one month plus 0.10% plus a margin of 1.75%. The Term SOFR Rate will be adjusted on a monthly basis. As such, these debt instruments expose us to market risk for changes in interest rates. As of August 3, 2025, we had $5.6 million in principal amount of outstanding loans. At current borrowing levels, a 1% increase in the SOFR rate would result in an annual increase in interest expenses of approximately $56,000. There were no additional borrowings outstanding under the Amended and Restated Loan Agreement as of August 3, 2025.

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Raw Materials Price Risk

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

Currency Risk

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

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended August 3, 2025. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of August 3, 2025 to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended August 3, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 5. Other Information

During the three months ended August 3, 2025, no director or officer of the Company adopted, terminated or modified a ‘Rule 10b5-1 trading arrangement’ or ‘non-Rule 10b5-1 trading arrangement,’ as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

3.1 Articles of Incorporation of the Company, as amended as of September 16, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (SEC File No. 000-25349) for the quarter ended October 31, 2021)

3.2 Amended and Restated Bylaws of the Company, as amended September 5, 2023 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q (SEC File No. 000-25349) for the quarter ended July 30, 2023) 4.1 Articles of Incorporation of the Company, as amended (See Exhibit 3.1) 4.2 Amended and Restated Bylaws of the Company, as amended (See Exhibit 3.2) 31.1* Rule 13a-14(a) Certification of the Company’s principal executive officer 31.2* Rule 13a-14(a) Certification of the Company’s principal financial officer 32.1** Rule 13a-14(b) Certification of the Company’s principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101* Interactive Data Files (formatted as Inline XBRL) 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished herewith

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