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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended August 29, 2004

Commission File Number 1-10226

THE ROWE COMPANIES

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 703-847-8670

N/A

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filed (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the close of the period covered by this report.

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THE ROWE COMPANIES

INDEX

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PART1 - FINANCIAL INFORMATION

THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED AUGUST 29, 2004 AND AUGUST 31, 2003

UNAUDITED

See notes to consolidated financial statements

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS

ENDED AUGUST 29, 2004 AND AUGUST 31, 2003

UNAUDITED

See notes to consolidated financial statements

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS

ENDED AUGUST 29, 2004 AND AUGUST 31, 2003

UNAUDITED

Reconciliation of Net Earnings (Loss) to Net Cash

Provided By Operating Activities:

See notes to consolidated financial statements

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

These interim financial statements and the related notes should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2003.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

During the nine months ended August 29, 2004, payments, net of sublease income received, totaling $60,000 were applied against the reserve, as shown below:

As of August 29, 2004 and August 31, 2003, there were 888,731 and 1,706,990 outstanding options, respectively whose exercise price was equal to or greater than the average market price of the Company’s common stock for the three and nine months ended August 29, 2004 and August 31, 2003 respectively. These options are excluded from the computation of the effect of dilutive stock options shown in the table above. In addition, 59,000 options have been excluded from the three and nine month periods ended August 31, 2003 due to their anti-dilutive effect in conjunction with the net losses incurred for those periods.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

As of August 29, 2004, net investment property of $810,000 and mortgage loans totaling $3,198,000 were classified as held for sale in the Company’s Consolidated Balance Sheets. Income and expense items associated with the Property have been classified as discontinued operations, and all prior periods have been restated to conform to the current presentation. Discontinued operations includes pre-tax earnings (losses) of $29,000 and $(115,000) for the three months ended August 29, 2004 and August 31, 2003, respectively, and $(56,000) and $(23,000) for the respective nine month periods then ended, relating to the Property.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

In October, 2004, the Company’s Board of Directors approved management’s plan to sell an additional real estate investment property. Investment property totaling $6.4 million, net of accumulated depreciation (and included in other noncurrent assets), and mortgage debt totaling $5.8 million, are expected to be disposed of as part of the transaction.

During February, 2004, the Company recorded certain adjustments relating to workers compensation insurance reserves for policy years 1999 and 2000. These adjustments included amounts associated with its discontinued Wexford and Mitchell Gold operations, totaling $170,000 on a pre-tax basis. These charges have also been included in discontinued operations.

During the second quarter of 2003, the Company sold its Mitchell Gold subsidiary. Discontinued operations for the nine months ended August 31, 2003, included net shipments of $20,226,000, and pre-tax earnings of $1,748,000, associated with the operations of Mitchell Gold prior to the date of the sale.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Results of Operations:

Overview

The Rowe Companies operates through two subsidiaries in the home furnishings industry. Rowe manufactures quality, upholstered furniture serving the middle and upper middle market primarily throughout the United States. Storehouse is a multi-channel lifestyle home furnishings retailer with 60 stores from Texas through the Southeast and Mid-Atlantic markets.

During the third quarter of fiscal 2004, the Company continued the trend of improved retail operations that was evident in the second half of 2003, resulting in improved operating results.

The retail segment contributed significant sales growth and margin improvement, resulting in strong gross profit growth, offset by higher expenses associated with increased shipments (primarily commissions and sales bonuses, delivery costs and credit card fees), but resulting in positive earnings from operations in the retail segment, a substantial improvement from the prior year’s third quarter.

Offsetting the retail segment’s positive developments were reduced operating earnings in the manufacturing segment. While net shipments in the wholesale segment increased, labor inefficiencies and increased charges for insurance reserves resulted in a reduction in gross margin and gross profit. Labor inefficiencies resulted from the disruptions in normal operations from the Enterprise Resource Planning (“ERP”) and lean manufacturing process implementations, and turnover resulting, in part, from the demands of these implementations.

As previously reported, the Company initiated a plan to dispose of an investment property during the third quarter of 2004, anticipating a completed sale by approximately the end of the quarter. The buyer, however, exercised its rights to withdraw from the contract before completing the sale. The Company continues to pursue other potential buyers, and anticipates completing a sale in the next six to nine months. The results of operations associated with this investment property have been reflected as discontinued operations for all periods presented in this report. Operating income has not been impacted by this reclassification.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

The following table recaps operating earnings by segment for the third quarter and nine month periods:

Nine Months Ended August 29, 2004 Versus Nine Months Ended August 31, 2003

Net shipments increased $21,324,000, or 10.6%, to $223,254,000 in 2004 from $201,930,000 in 2003. The increase primarily resulted from increased shipments in our retail segment, with a smaller increase in manufacturing segment shipments.

Retail segment net shipments increased $15.0 million, or 16.8%, from $89.2 million in 2003 to $104.2 million in 2004. Every product category showed growth over 2003, particularly the categories of accessories (up 36% over last year), office and library walls (16%), and upholstery (9%). In addition, textiles, primarily comprised of window treatments, were a new category in 2004. Accessory sales grew as a result of an improved merchandise replenishment process, speeding the flow of product into consumer’s hands. The expanded direct marketing effort through catalogs and the Internet also increased accessory sales. Overall, same store sales increased 12.6% over the first nine months of 2003.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Manufacturing segment net shipments increased $6.3 million, or 5.6%, from $112.7 million in 2003 to $119.0 million in 2004. The manufacturing segment also shipped $14.8 million to the retail segment, 2.4% more than the amount shipped in 2003. These shipments have been eliminated in consolidation.

Gross profit increased $7,752,000, or 10.8%, from $71,757,000 in 2003 to $79,509,000 in 2004. Gross margin, or gross profit as a percent of net shipments, improved from 35.5% in 2003 to 35.6% in 2004. These increases were due to increased retail margins and an increase in retail shipments as a percent of total shipments.

Retail segment gross profit improved by $9.4 million, from $43.2 million in 2003 to $52.6 million in 2004, primarily as a result of increased shipments. Retail gross margin also improved, from 48.5% to 50.5%, due to a combination of higher margin categories accounting for a larger percentage of total volume (accessories and textiles in particular); a price increase, averaging 2-3%, taken during the latter half of 2003; and slower growth (10.9% clearance growth versus 16.8% total growth) in shipments through clearance stores, and a decline in the level of discounts recognized on those shipments, in 2004 compared to 2003.

Manufacturing segment gross profit declined $1.6 million, or 5.7%, from $28.5 million in 2003 to $26.9 million in 2004. Gross margin declined from 25.3% in 2003 to 22.6% in 2004. Approximately $990,000 of the decline in gross profit (or 0.8 percentage points of gross margin) resulted from accelerated depreciation of certain legacy information technology systems being replaced later this year. Other factors in the decline in gross profit (as well as gross margin) were a decline in manufacturing productivity as production management personnel were involved in the ERP implementation effort and the lean manufacturing implementation; and shortages of certain fabrics during recent months, resulting in disruptions in the orderly scheduling of production and shipments. Although the Company expects that the need for production management personnel to be involved in the ERP and lean manufacturing implementation will diminish in the near future, until these processes are complete manufacturing productivity will likely continue to be hindered and could decline further. Increases in reserves for workers compensation and healthcare insurance costs also contributed to the decline in gross profit and gross margin.

Selling and administrative expenses increased by $4,331,000, or 6.1%, from $71,510,000 in 2003 to $75,841,000 in 2004. Selling and administrative expenses improved from 35.4% of net shipments in 2003 to 34.0% in 2004. Essentially all of the increase in selling and administrative costs occurred in the retail segment.

Retail segment selling and administrative expenses increased $4.2 million, or 8.8%, from $47.8 million in 2003 (including restructuring and related charges of $125,000) to $52.0 million in 2004. These increases are primarily a result of higher shipments, including commissions, delivery expense, credit card and related fees, and other variable costs. In addition, while the overall store count has not increased from last year, two stores did open late in 2003 and another in May 2004, adding incremental costs to the 2004 expenses. Two stores closed during 2004, one in each of the second and third quarters. Costs of the accessories warehouse (to support catalogue and recently started internet sales efforts) and catalogue call center, along with rent and other costs for relocating from the old to the new Atlanta distribution center, also contributed to the increase as compared to 2003.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Manufacturing segment selling and administrative expenses increased $118,000, or 0.6%, from $18.5 million in 2003 to $18.6 million in 2004. Advertising costs increased over 2003, largely offset by reduced international expenses.

Operating earnings were $3,668,000 in 2004, compared to $247,000 in 2003, as a result of increased retail shipments and gross profit, offset by lower manufacturing segment gross profit and increased retail segment selling and administrative expenses, as discussed above.

Interest expense decreased from $3,250,000 in 2003 to $2,537,000 in 2004, as proceeds from the Mitchell Gold sale were applied to reduce outstanding debt. Declining short-term interest rates and slightly reduced margins over base rates on certain components of our outstanding debt (based upon improved financial condition and operating ratios), also contributed to the decline in interest expense.

Other income, net, increased $415,000, from $673,000 in 2003 to $1,088,000 in 2004, due to higher net rental income associated with investment properties, combined with some operating expense reductions. In addition, certain reserves were established for uncollectible rental income during the 2003 period.

Earnings from continuing operations before taxes improved to earnings of $2,219,000 in 2004 from a loss of $(2,330,000) in 2003, reflecting the factors discussed above.

Three Months Ended August 29, 2004 Versus Three Months Ended August 31, 2003

Net shipments increased $6,433,000, or 9.2%, to $76,585,000 in 2004 from $70,152,000 in 2003. The increase resulted from increased shipments in both our retail and manufacturing segments.

Retail segment net shipments increased $4.2 million, or 13.6%, from $31.2 million in 2003 to $35.5 million in 2004. While virtually every product category showed growth over 2003, particularly strong increases were in the categories of accessories (up 32.1% over last year), office and library walls (11.7%), and upholstery (8.1%). Textiles is a new category in 2004. Accessory sales grew as a result of an improved merchandise replenishment process, speeding the flow of product into consumer’s hands. The expanded direct marketing effort through catalogs and the Internet also increased accessory sales. Overall, same store sales increased 8.8% over the comparable three months of 2003.

Manufacturing segment net shipments increased $2.2 million, or 5.6%, from $38.9 million in 2003 to $41.1 million in 2004. The manufacturing segment also shipped $4.6 million to the retail segment, 0.9% more than the amount shipped in 2003. These shipments have been eliminated in consolidation.

Gross profit increased $1,540,000, or 6.1%, from $25,451,000 in 2003 to $26,991,000 in 2004. Gross margin declined from 36.3% in 2003 to 35.2% in 2004. Higher overall shipments and retail margins generated an increase in gross profit, but reduced manufacturing margins brought overall margins down.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Retail segment gross profit improved by $2.5 million, from $15.4 million in 2003 to $17.9 million in 2004, primarily as a result of increased shipments. Retail gross margin also improved, from 49.5% to 50.6%; due to a combination of higher margin categories accounting for a larger percentage of total volume (accessories and textiles in particular) and a price increase, averaging 2-3%, taken during the latter half of 2003.

Manufacturing segment gross profit decreased $0.9 million, or 9.4%, from $10.0 million in 2003 to $9.1 million in 2004. Gross margin declined from 25.7% in 2003 to 22.0% in 2004. The decline in gross margin resulted from a decline in manufacturing productivity as the ERP and lean manufacturing implementations impacted operations. Fabric shortages, while improved from the second quarter levels, continued to impact production efficiencies as well. Increases in health care and workers compensation insurance reserves also impacted the third quarter margins.

Selling and administrative expenses increased by $1,358,000, or 5.6%, from $24,431,000 in 2003 to $25,789,000 in 2004. Selling and administrative expenses improved from 34.8% of net shipments in 2003 to 33.7% in 2004. Increases in retail segment expenses were partially offset by decreases in other administrative expenses.

Retail segment selling and administrative expenses increased $1.2 million, or 7.5%, from $16.4 million in 2003 to $17.6 million in 2004. These increases were primarily a result of costs that vary closely with changes in shipments, including commissions, delivery costs, credit card and related fees, and other variable costs. In addition, while the overall store count has not increased from last year, two stores opened late in 2003 and another late in the second quarter of 2004, adding incremental costs to the 2004 expenses. Costs of the accessories warehouse (to support catalogue and recently started internet sales efforts) and catalogue call center also contributed to the increase from 2003’s third quarter.

Manufacturing segment selling and administrative expenses increased $0.2 million, or 3.7%, from $6.3 million in 2003 to $6.5 million in 2004. Increased advertising costs accounted for the increase.

Other administrative costs decreased $100,000, from $1.8 million in 2003 to $1.7 million in 2004. The decrease resulted from non-recurring charges recorded in 2003.

Operating earnings were $1,202,000 in 2004, compared to $1,020,000 in 2003, as a result of increased shipments and gross profit, offset by increased retail segment selling and administrative expenses, as discussed above.

Interest expense decreased from $1,010,000 in 2003 to $876,000 in 2004. Reductions in outstanding balances achieved during 2003 largely accounted for the reduction. Declining short-term interest rates and slightly reduced margins over base rates on certain components of the Company’s outstanding debt (based upon improved financial condition and operating ratios), also contributed to the decline in interest expense.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Other income, net, increased $325,000, from $91,000 in 2003 to $416,000 in 2004, due to one time adjustments, including the aforementioned reserve for uncollectible rental income, recorded in the 2003 period and higher net rental income in 2004 associated with investment properties.

Earnings from continuing operations before taxes improved to $742,000 in 2004 from $101,000 in 2003, reflecting the factors discussed above.

During the three months ended August 31, 2003, the Company established reserves for certain state tax carryforwards recorded in prior periods, impacting the effective tax rate during the period.

Critical Accounting Policies:

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain estimates and assumptions have been made that affect the amounts and disclosures reported in the consolidated financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. Management uses its best judgment in valuing these estimates and may solicit external advice. Estimates are based on current facts and circumstances, prior experience and other assumptions believed to be reasonable. Critical accounting policies that may affect the consolidated financial statements include self-insurance, long-lived asset valuations and impairments, inventory reserves and goodwill.

Self-Insurance Reserves

The Company is self-insured for substantial portions of its health care and workers compensation insurance programs. Reserves are established for such costs based on, among other factors, reported claims to date, prior history, and actuarial projections of claims incurred but not reported and future medical cost increases likely to affect the total cost to settle claims. If actual results in any of these areas change from prior periods, adjustments to recorded reserves may be required.

Long-lived Asset Valuations and Impairments

The Company monitors the economic health of its facilities and operations and makes determinations, using cash flow analyses, of the fair value of its assets, both tangible and intangible. When cash flow analysis indicates that the fair value of an asset is less than its book value, and such shortfall is not believed to be temporary in nature, then an adjustment to reduce the asset to its fair value is made. As conditions change, additional adjustments of fair value may be required.

Inventory Reserves

The Company maintains its inventories at the lower of cost or market value. Cost is determined on a last-in, first-out (LIFO) basis for inventory held at retail facilities, and on a first-in, first-out (FIFO) basis for inventory held at its manufacturing facilities. When conditions warrant, reserves are established to reduce the value of inventory to net realizable values. As conditions warrant, additional adjustments may be required.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Goodwill

In accordance with SFAS 142, “Goodwill and Other Intangible Assets,” which was adopted by the Company in 2003, goodwill and other intangible assets are to be evaluated for impairment at the reporting unit level on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit may exceed its fair value. The Company conducts its required annual impairment test during the second quarter of each fiscal year. The impairment test uses a discounted cash flow and projected profitability model to estimate the fair value of the reporting unit. This model requires the use of long-term planning forecasts and assumptions regarding specific economic conditions that are outside the control of the Company.

Liquidity and Source of Capital:

Cash from Operations

Net cash provided by operating activities was $4,825,000 and $6,654,000 in 2004 and 2003, respectively. Fluctuations in net cash provided by operating activities are primarily the result of changes in operating income and changes in working capital accounts. Substantial changes from 2003 to 2004 included a larger increase in inventories in 2004 versus 2003, due to increases in retail inventories to support higher volumes of shipments; increases in accrued expenses and accounts payable during 2004, compared to decreases during 2003, largely related to increased 2004 shipments; increases in prepaid expenses and other assets in 2004, versus decreases in 2003, related to changes in timing of insurance premium payments; and a decrease in retail customer deposits in 2004, compared to an increase in 2003, largely due to the change in timing of the Labor Day holiday weekend from the end of August in 2003 to later in September 2004. Taxes also changed from net refunds received in 2003 to payments in 2004 on improved operating results.

Cash from Investing Activities

Net cash provided by (used in) investing activities was $(2,605,000) and $22,199,000 in 2004 and 2003, respectively, primarily reflecting proceeds from the sale of, and payments for obligations related to, the sale of Mitchell Gold in 2003. Capital expenditures increased in 2004 relating to expenditures at Rowe for the lean implementation in process and at Storehouse for costs for a new distribution center in Atlanta, GA, to replace the existing distribution center, completed during the second quarter of 2004.

Cash from Financing Activities

Net cash used in financing activities was $(3,689,000) and $(22,887,000) for 2004 and 2003, respectively. In 2003, the Company paid down significant portions of its outstanding debt largely from proceeds from the sale of Mitchell Gold, in addition to required principal payments under its debt agreements. In December of fiscal 2004, the Company reduced the outstanding balance of the Elliston capital lease in conjunction with a modification and extension of its terms, in addition to other required principal payments on its existing debt.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

As of August 29, 2004, the Company had $14.1 million available under its revolving bank loan. The Company believes it has the financial resources (including available cash, expected cash flow from operations, and bank loans) needed to meet business requirements for the foreseeable future including capital expenditures and working capital. Cash flow from operations is highly dependent on order rates and the Company’s operating performance.

Forward-Looking Statements:

When used in this Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, in press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions, as well as the use of future dates, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements. Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: changes from anticipated levels of sales, whether due to future national or regional economic and competitive conditions, customer acceptance of existing and new products, or otherwise; pending or future litigation; pricing pressures due to excess capacity; raw material cost increases; transportation cost increases; the inability of a major customer to meet its obligations; loss of significant customers in connection with a merger, acquisition, redisposition, bankruptcy or otherwise; actions of current or new competitors; increased advertising costs associated with promotional efforts; change of tax rates; change of interest rates; future business decisions and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company.

Additional risks include:

Our manufacturing and our retailing subsidiaries face significant competition from numerous competitors, many of which are larger and better capitalized. Our subsidiaries may be at a competitive disadvantage as a result. If our subsidiaries lose market share to competitors, our financial performance could be materially adversely affected.

Our retail operations are currently unprofitable, and there can be no assurance that profitability will be achieved.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

During fiscal 2003, approximately 32% of the Company’s purchases of retail inventory originated overseas, and the Company also purchased some raw materials, particularly wood components, fabric, and leather chairs for re-sale, from overseas sources. Most of these purchases were denominated in US dollars. As exchange rates with certain currencies have become unfavorable, the likelihood of price increases from our foreign vendors has increased. Such price increases, if they occur, could have one or more of the following impacts:

Similar impacts could be experienced in our manufacturing segment. To date, no significant exchange rate price increases have been incurred.

The Company has substantial debt obligations that mature in 2007 and 2008 in particular. At those times, the Company would be required to pay off or refinance these obligations. If economic conditions, as well as the Company’s own operating results, do not improve in the intervening years, then the Company would be more likely to need to refinance, rather than pay off, such obligations. There can be no assurance that the Company would be successful in obtaining this financing, or that, if obtained, the financing would be on favorable terms and conditions.

Substantially all of the Company’s trade accounts receivable are from retail furniture businesses. Management monitors payment status and periodically performs credit evaluations of these customers. However, changes in creditworthiness can occur rapidly and unanticipated losses from trade accounts receivable could occur in excess of the outstanding allowance for losses. Therefore, there can be no assurance that total losses from uncollectible accounts will not exceed the allowance.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Our retail operation anticipates opening 8-10 new stores during the next twelve months. There are numerous risks inherent in new store development which could result in unprofitable locations. Risk exposure areas include site selection, contractual commitment to rent expense, and successful execution of store selling and operations activities. There can be no assurance that these new stores will achieve adequate levels of shipments or profitability.

Our manufacturing operations are implementing a new ERP system that includes accounting, order processing, materials purchasing and inventory management, human resources and payroll management and certain other functions. This is a complex, multi-step implementation. Various parts of the system may not perform as planned, which could create problems in entering or processing customer orders, processing payroll, procuring and managing inventory or record keeping. We could also experience costs to implement in excess of our budgeted amount.

Our production management personnel have been intensely focused on the implementation of the new ERP system and conversion to lean manufacturing, significantly reducing the time for day-to-day management activities. Consequently, our manufacturing productivity has declined and could continue to decline until our production management personnel can return to focusing on their normal responsibilities.

In certain merchandise categories, there has been a rapid expansion of imported home furnishings at lower manufacturing costs, resulting in lower retail selling prices. This trend could reach the upholstery segment of the home furnishings market, resulting in our manufacturing operations facing low-cost foreign competition. This in turn could require us to reduce our selling prices or could diminish demand for our products.

We are an importer of finished goods for our retail operations and components for our manufacturing operations. Disruptions to our supply chain could result in late arrival or unavailability of components or finished goods for resale, causing manufacturing delays or negatively affecting retail sales due to increased out-of-stock merchandise.

We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

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THE ROWE COMPANIES AND WHOLLY-OWNED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UNAUDITED

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Foreign Currency Exchange Rate Risk

Because the Company’s obligations under its term loan, revolving loan and capital lease obligation bear interest at variable rates, the Company is sensitive to changes in prevailing interest rates. A 10% fluctuation in market interest rates would not result in a material change in interest expense during the 2004 fiscal year. The Company is exposed to market risk from changes in the value of foreign currencies because it imports a substantial portion of its retail inventory and some of its raw materials, from foreign sources. See “Forward-Looking Statements” above.

Item 4. Controls and Procedures.

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(a)) under the Securities Exchange Act of 1934 (the “Act”) was carried out as of August 29, 2004 under the supervision of and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management. Our Chief Executive Officer and Chief Financial Officer concluded that as of August 29, 2004, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

During the quarter ended August 29, 2004, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information with respect to shares of common stock of the Company purchased by the Company during the three months ended August 29, 2004.

The shares shown above have been purchased by the Company in accordance with the terms of the Company’s ESOP/PAYSOP, which grants participants the right to sell their shares back to the company under certain conditions. Except for such purchases of its shares, the Company is prohibited by the terms of its bank lending agreements from purchasing its shares. As of August 29, 2004, there were 141,689 shares in the Company’s ESOP/PAYSOP.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits.

The following exhibits are furnished as part of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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EXHIBIT INDEX

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