NASDAQ: HOFT

The analysis presented herein excludes discontinued
operations, except where otherwise indicated.

Reportable Segments

Furnishings sales account for all of our net sales.
For financial reporting purposes and as described further below, 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”.
See Note 17 -Segment Information to our Consolidated Financial Statements for additional financial information regarding our operating
segments.

Products

Our product lines cover the design spectrum of
residential furnishings: traditional, contemporary and transitional. Further, our product lines are in the “good”, “better”
and “best” product categories, which carry medium and upper price points. Hooker Furnishings Corporation consists of the following
two operating segments and “All Other”:

◾The Hooker Branded segment which includes two
businesses:

□Hooker Casegoods, which covers a wide range of design categories and includes home entertainment, home
office, accent, dining and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand; and

□Hooker Upholstery, imported upholstered furniture targeted at the upper-medium price-range.

◾The Domestic Upholstery segment which includes
the following operations:

□Bradington-Young, a seating specialist in upscale motion and stationary leather furniture;

□HF Custom (formerly Sam Moore Furniture), a specialist in fashion forward custom fabric upholstery offering
a selection of chairs, sofas, sectionals, recliners and a variety of accent upholstery pieces;

□Shenandoah Furniture, an upscale upholstered furniture business specializing in private label sectionals,
modulars, sofas, chairs, ottomans, benches, beds and dining chairs in the upper-medium price points for lifestyle specialty retailers;
and

□Sunset West, a designer and manufacturer of comfortable, stylish and high-quality outdoor furniture.

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◾All Other consisting of:

□Samuel Lawrence Hospitality, a designer and supplier of hotel furnishings targeted toward four and five-star
hotels; and

□Operating segments that are not individually reportable and intercompany eliminations.

Sourcing

Imported Products

We have sourced products from foreign manufacturers
for over thirty years, predominantly from Asia. Imported casegoods and upholstered furniture together accounted for approximately 60%,
64%, and 63% of our net sales in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.

Our imported furniture business is subject to
inherent risks in importing products manufactured abroad, including, but not limited to: policies and regulations affecting trade or the
application of tariffs, such as the imposition of duties or tariffs by the U.S. administration or foreign governments, supply disruptions
and delays due to a variety of reasons, including our foreign suppliers’ factory capacities, factory shutdowns and delays, fluctuations
in ocean freight costs, container and vessel space availability, currency exchange rate fluctuations, as well as economic and political
developments and instability, affecting the countries from which we source imported home furnishings and components.

Because of the large number and diverse nature
of the foreign suppliers in Vietnam, China, Mexico, India, and Malaysia from which we source our imported products, we have flexibility
in the sourcing of products among any particular supplier or country. However, a disruption in our supply chain from a major supplier
or from Vietnam in general, could significantly compromise our ability to fill customer orders for products manufactured at that factory
or in that country. Supply disruptions and delays on selected items could occur for six months or longer. If we were unable to obtain
those products from alternative sources or at a comparable cost, our sales, earnings and liquidity could be adversely affected.

Given the sourcing capacity available in Vietnam
and other low-cost producing countries such as China, Mexico, Malaysia, and India, as well as our supply chain diversification efforts,
we believe the risks from these potential supply disruptions are manageable in the long-term. However, our insight into the probability
of a wide scale global or regional disruptions, such as changes in trade policies and tariffs, pandemics, geopolitical conflicts, significant
disruptions in global transportation networks, remains limited. Ongoing geopolitical conflicts have disrupted global energy markets, resulting
in increased energy costs and reduced fuel availability that have raised manufacturing, transportation, and raw material costs, which
could adversely affect our supply chain and operating expenses. See Item 1A, “Risk Factors” for additional information on
our risks related to imported products.

For imported products, we generally negotiate
firm pricing with foreign suppliers in U.S. Dollars, typically for a term of at least one year. However, under certain circumstances,
we may re-negotiate pricing during the year. We accept the exposure to exchange rate movements during these negotiated periods. We do
not use derivative financial instruments to manage this risk but could choose to do so in the future. Since we transact our imported product
purchases in U.S. Dollars, a relative decline in the value of the U.S. Dollar compared to the currencies from which we obtain our imported
products could increase the price we pay for imported products beyond the negotiated periods. We generally expect to reflect substantially
all of the effects of any price increases from suppliers in the prices we charge for imported products. However, these price changes could
adversely impact sales volume and profit margin during the affected periods, and potential competitive pricing pressures could limit the
Company’s ability to pass cost increases to vendors or customers. Additionally, we generally do not apply price increases on order
backlog, which could adversely affect our earnings. Conversely, a relative increase in the value of the U.S. Dollar compared to the currencies
from which we obtain our imported products could decrease the cost of imported products and favorably impact net sales and profit margins
during the affected period. However, due to other factors, such as inflationary pressure, we may not fully realize savings when exchange
rates fall. Therefore, lower exchange rates may only have a tempering effect on future price increases by merely delaying cost increases
on imported products. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”

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Raw Materials

Significant
materials used in manufacturing our domestic upholstered furniture products include leather, fabric, foam, wooden and metal frames and
electronic mechanisms. Most of the leather is imported from Italy and South America and is purchased as full hides and cut and sewn in
our facilities or is purchased as pre-cut and sewn kits processed by our vendors to our pattern specifications. We believe our sources
for raw materials are adequate and that we are not overly dependent on any one supplier. Our five largest domestic upholstery suppliers
accounted for 30% of our raw materials purchases for domestic upholstered furniture manufacturing operations in fiscal 2026. Should disruptions
with these suppliers occur, other than macro disruptions affecting all such suppliers, we believe we could successfully source these products
from other suppliers without significant disruption to our operations. After the implementation of the initial reciprocal tariffs in April
2025 and subsequent tariffs imposed under Section 232, we have experienced price increases in certain imported raw materials, including
fabrics, steel, and hides. Generally, we seek to mitigate the impact of these tariffs through negotiations with our suppliers and other
cost management initiatives. However, if we are unable to offset the tariff costs on these imported materials, it may lead to increased
product costs, potentially adversely affecting net sales and profit margins.

Customers

Our home furnishings products are sold through
a variety of retailers including independent furniture stores, department stores, mass merchants, national chains, catalog merchants,
interior designers, and e-commerce retailers. No single customer accounted for more than 10% of our consolidated sales in fiscal 2026.
Our top five customers accounted for approximately 26% of our fiscal 2026 consolidated sales. The loss of any one or more of these customers
would have a material adverse impact on our business. Less than 1% of our sales in fiscal 2026 were to international customers. We define
sales to international customers as sales to customers outside of the United States and Canada since our independent domestic sales force
services both countries.

Competition

The furniture industry is highly competitive and
includes a large number of foreign and domestic manufacturers and importers, none of which dominates the market in our price points. While
the markets in which we compete include a large number of relatively small and medium-sized manufacturers, certain competitors have substantially
greater sales volumes and financial resources than we do. U.S. imports of furniture produced overseas, such as from Vietnam and China,
have stabilized in recent years. The primary competitive factors for home furnishings in our price points include price, style, availability,
service, quality and durability. Competitive factors in the hospitality and contract furniture markets include product value and utility,
lead times, on-time delivery and the ability to respond to requests for special and non-standard products. We believe our design capabilities,
ability to import and/or manufacture upholstered furniture, product value, longstanding customer and supplier relationships, significant
sales, distribution and inventory capabilities, ease of ordering, financial strength, experienced management and customer support are
significant competitive advantages.

Warehousing and Distribution

We distribute furniture to retailers directly
from factories and warehouses in Asia via our container direct programs and from our facilities in Virginia, North Carolina and California,
and in limited cases, from customer operated warehouses in strategic locations. During fiscal 2026, we completed the planned exit of the
Georgia warehouse, which primarily supported the discontinued PFC and SLF businesses. In addition, we launched a new Vietnam warehouse
in May 2025 to support our container direct program and enhance our international logistics capabilities. This transition has reduced
direct container lead times from approximately 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. When implementing these changes,
we considered the timing and magnitude of restructuring charges, anticipated cost savings, and the potential impact on net sales and earnings.

Working Capital Practices

Inventory

We generally import casegoods inventory and certain
upholstery items in amounts that enable us to meet the delivery requirements of our customers, our internal in-stock goals and minimum
purchase requirements from our sourcing partners. The majority of products in the Hooker Branded segment are shipped from our U.S. warehouses.
Our Domestic Upholstery segment products are made to order and shipped shortly after they are produced; however, this segment carries
significant amounts of raw materials for production. We do not carry significant amounts of hospitality products, as most of these products
are built to order and are shipped shortly after their manufacture directly to the customer.

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Accounts receivable

Substantially all of our trade accounts receivable
are due from retailers and dealers that sell residential home furnishings or commercial purchasers of our hospitality and senior living
products, which consist of a large number of entities with a broad geographic dispersion. We perform credit evaluations of our customers
and generally do not require collateral. For qualified customers, we offer payment terms, generally requiring payment 30 days from shipment.
However, we may offer extended payment terms in certain circumstances, including promoting sales of our product. We purchase accounts
receivable insurance on certain customers if their risk profile warrants it and the insurance is available. Due to the highly customized
nature of our hospitality products, we typically require a 50% deposit upon order, a 40% deposit before goods reach a U.S. port and the
remaining 10% balance due within 30 days of the receipt of goods by the customer. For our outdoor furnishings, smaller orders require
full prepayment and most larger orders require a 50% deposit upon order and the balance when production is started. Additionally, some
customers request and qualify for payment terms.

Accounts payable

Payment for our imported products warehoused first
in Asia is due 10 to 14 days after our quality audit inspections are complete and the vendor invoice is presented. Payment for goods which
are shipped to our U.S. warehouses or container direct to our customers FOB Origin (free on board origin, which means the buyer is responsible
for the costs and liability of the freight during transport) is generally due upon proof of lading onto a U.S.-bound vessel and invoice
presentation; however, payment terms, depending on the supplier, can stretch up to 45 days from invoice date. Payment terms for domestic
raw materials and non-inventory related charges vary but are generally 30 days from invoice date.

Order Backlog

At February 1, 2026, our backlog of unshipped
orders was as follows:

Order Backlog

(Dollars in 000s)

February 1, 2026
February 2, 2025

Reporting Segment
Dollars
Weeks
Dollars
Weeks

Hooker Branded
$16,490
5.8
$13,108
4.6

Domestic Upholstery
19,557
9.1
18,123
8.4

All Other
7,807
20.3
5,390
5.5

Consolidated
$43,854
8.2
$36,621
6.1

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.

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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.

At the end of fiscal 2026, our consolidated order
backlog increased $7.2 million, or 20%, as compared to the prior year-end. Backlog increased across Hooker Branded, Domestic Upholstery,
and All Other. The increases in Domestic Upholstery and All Other were driven by higher incoming orders at Shenandoah and SLH. The increase
in the Hooker Branded segment was also attributed to shipment timing, including vendor delays and weather-related disruptions affecting
U.S. shipments.

Seasonality

Generally, sales in our fiscal first quarter are
lower than our other fiscal quarters due to the post-Lunar New Year shipping lag and sales in our fiscal fourth quarter are generally
stronger due to the pre-Lunar New Year surge in shipments from Asia.

Environmental Matters

As a part of our business operations, our manufacturing
sites generate both non-hazardous and hazardous waste; the treatment, storage, transportation and disposal of which are subject to various
local, state and federal laws relating to environmental protection. Our policy is to record monitoring commitments and environmental liabilities
when expenses are probable and can be reasonably estimated. The costs associated with our environmental responsibilities, compliance with
federal, state and local laws regulating the discharge of materials into the environment, or costs otherwise relating to the protection
of the environment, have not had and are not expected to have a material effect on our financial position, results of operations, capital
expenditures or competitive position.

We are actively working to refine and align our
environmental stewardship based on current best practices, shareholder expectations and regulatory developments through our Environmental,
Social and Governance (ESG) focused employee committee called CARE (Community Action & Responsibility for our Environment). It regularly
updates management and updates the Board at least quarterly on these initiatives. We note the following recent and ongoing activities
and new developments:

◾We have put in place several initiatives focused
on promoting sustainability and preserving natural resources. We maintain an annual Greenhouse Gas (GHG) emissions inventory and verification.

◾Since 2021, we have started projects to reduce
our carbon footprint by investment in renewable energy and in projects to reduce energy consumption. We have purchased renewable energy
from solar farms for several domestic manufacturing facilities since 2022. Sunset West and HF Custom (formerly Sam Moore) are operating
on 100% renewable energy. All remaining facilities will be added as renewable energy programs are available in those locations. We are
recognized as an Appalachian Power 2024 Top Performer for energy efficiency in the Martinsville area.

◾We continue to partner with the Arbor Day Foundation,
the Sustainable Furnishings Council, and the Eco Ambassador Council for their commitment to environmental responsibility and sustainability,
including financial assistance, educating employees on the necessity of preserving and replenishing resources, and supporting various
projects within the Dan River Basin area. We also support the Virginia Museum of Natural History’s Cultural Heritage Monitoring
lab, which provides global monitoring capability for cultural heritage sites threatened by armed conflict and natural disaster.

Human Capital Resources

As of February 1, 2026, we had 840 full-time employees,
of which 298 were employed in our Hooker Branded segment and 542 were employed in our Domestic Upholstery segment. By geographical area,
756 employees were located in the United States and 84 were located in Asia. None of our employees are represented by a labor union. We
consider our relations with our employees to be good.

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Our employees are critical to our success, and
we are committed to attracting, developing, and retaining top talent to drive our business forward. The core values of our Company include
integrity, caring and inclusivity that affirms every individual. Our leadership team is committed to fostering an environment where everyone
is welcomed, respected, listened to and valued for their unique contributions to the organization, and to providing a work environment
that is free from all forms of harassment, discrimination and inequality. We recruit, employ, train, promote and compensate our employees
without regard to race, ethnicity, age, gender, gender identity, religion, national origin, citizenship, marital status, veteran’s
status, disability or any other characteristic protected by applicable federal, state, or local law. All facilities have established human
resource departments with formal hiring processes and controls in place to ensure ethical and fair hiring practices. Some of the action
steps we have taken recently or are working on currently include:

◾We carefully evaluate the overall compensation and benefits packages regularly
to ensure the economic security, health, and safety of our employees, including;

ocompensating employees competitively relative to the industry and local labor markets, and in accordance
with all applicable federal, state, and local wage, work hour, overtime, and benefits laws; and

oproviding affordable and comprehensive health benefits to employees focused on financial, emotional, and
physical health and well-being, including a standardized process of reporting worker’s compensation claims which we believe promotes
the health and safety of our employees.

◾We maintain standardized safety procedures and
training at all locations including established safety committees, under the leadership of our Director of Facilities & Safety, which
consist of management and employee representatives, with tasks of identifying and reporting hazards and unsafe work practices, removing
obstacles to accident prevention, and minimizing the risks of accidents, injury and impacts on health. We are committed to implementing
and improving safety measures to achieve a safe, healthy, secure, and productive workplace;

◾We are committed to employees’ professional
success and growth by providing extensive safety training, on-the-job coaching, formal training sessions, and online learning resources.
The Company also provides continuing education opportunities, including an independently operated educational foundation originally funded
by the Company, comprehensive leadership development programs, and a renewable tuition reimbursement program to children and spouses of
all employees, excluding family members of current and former executive officers and board directors;

◾We are committed to fostering a culture of opportunity
and respect for all members of our team. We have done this by:

oExpanding Talent Pipelines

●We expanded our Furniture Market Internship, providing aspiring professionals with hands-on experience
and exposure to the furniture industry in areas such as customer service, hospitality, marketing, and sales.

●We established a formal summer internship program aligned with roles of interest for recent graduates.
The program is designed to rotate among departments over time, based on organizational needs and business priorities.

●We continued our focus on building diverse talent pipelines through sustained engagement with local colleges
and universities and participation in career-related events. In addition, our staff participated in career readiness focused events.

oEnhancing Employee Training

●We completed the implementation of feedback and conflict management training for people leaders and continue
to provide ongoing training to reinforce effective workplace communication and a collaborative environment.

●We continue to plan future training initiatives aimed at enhancing workforce effectiveness and supporting
a high-performing, results-oriented organization.

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oStrengthening Community Partnerships

●We continue to maintain and grow community partnerships in the communities where our employees live and
work. Our employees dedicate their time to community engagement activities, and the Company supports fundraising initiatives benefiting
a range of causes.

●In calendar 2025, we participated in job fairs, workshops, and university events, providing resume reviews,
mock interviews, and insights into careers at Hooker Furnishings to strengthen community ties and support workforce development. Additionally,
our staff participated in speaker panels focused on career readiness.

◾We maintain a Code of Business Conduct and Ethics.
All employees are required to sign off on the Code at hiring and reaffirm their understanding and compliance with the Code, as well as
anti-corruption, cybersecurity and anti-bribery training. In addition, the Company has both import and domestic suppliers to sign a Vendor
Code of Conduct. The Company also has audits in place for both Environmental Social and Governance (ESG) and the US Customs Trade Partnership
Against Terrorism certification (CTPAT) and conducts them every 6 months and produces a scorecard that can be used in future purchasing
decisions based upon the vendor’s performance. The CTPAT audit process involves a comprehensive self-assessment of our supply chain
covering facilities, logistics, and personnel, IT, etc., and the implementation of security best practices, to ensure our entire supply
chain is secure. This self-assessment is ultimately audited by US Customs and Border Protection. Adherence to this program allows for
quicker processing of shipments through US Customs. Our ESG audit involves a systematic evaluation of our performance across the ESG spectrum
aiming to identify strengths, weaknesses, opportunities, and risks, and to provide stakeholders with a comprehensive view of our sustainability
efforts and adherence to ESG principles.

Patents and Trademarks

The Hooker Furnishings, Hooker Furniture, Bradington-Young,
Sam Moore, Samuel Lawrence Hospitality, Shenandoah, H Contract, Sunset West, HF Custom and BOBO trade names represent many years of continued
business. We believe these trade names are well-recognized and associated with quality and service in the furnishings industry. We also
own a number of patents and trademarks, both domestically and internationally, none of which is considered to be material.

Governmental Regulations

Our company is subject to U.S. federal, state
and local laws and regulations in the areas of safety, health, employment and environmental pollution controls, as well as U.S. and international
trade laws and regulations, including tariffs. We are also subject to foreign laws and regulations. In the past, compliance with these
laws and regulations has not had any material effect on our earnings, capital expenditures or competitive position in excess of those
affecting others in our industry; however, the effect of compliance in the future cannot be predicted. We believe we are in material compliance
with applicable U.S. and international laws and regulations.

Additional Information

You may visit us online at hookerfurnishings.com,
shenandoahfurniture.com, slh-co.com, and hcontractfurniture.com. We make available, free of charge through our Hooker Furnishings website
hookerfurnishings.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those
reports, and other documents as soon as practical after they are filed with or furnished to the Securities and Exchange Commission (“SEC”).
A free copy of our annual report on Form 10-K may also be obtained by contacting Earl Armstrong, Chief Financial Officer and Senior Vice-President
Finance at CorpSec@hookerfurnishings.com or by calling 276-632-2133.