SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)

        X    Quarterly report pursuant to Section 13 or 15(d) of  the Securities
             Exchange Act of 1934
     -------

For the quarterly period ended September 26, 1998 or

             Transition report pursuant to Section 13 or 15(d) of the Securities
             Exchange  Act of 1934

For the transition period from            to           .

Commission file number 0-14938.


                         STANLEY FURNITURE COMPANY, INC.
             (Exact name of registrant as specified in its charter)


       Delaware                                                 54-1272589
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

            1641 Fairystone Park Highway, Stanleytown, Virginia 24168
               (Address of principal executive offices, Zip Code)


                                  (540)627-2000
              (Registrant's telephone number, including area code)



              (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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of October 7, 1998.


Class                                                            Number

Common Stock, par value $.02 per share                     7,175,579 Shares


<PAGE>
<TABLE>





 

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         STANLEY FURNITURE COMPANY, INC.
                                 BALANCE SHEETS
                        (In thousands, except share data)
<CAPTION>
                                                                                    (Unaudited)
                                                                                      September      December
                                                                                       26,1998       31, 1997
ASSETS
<S>                                                                                  <C>          <C>

Current assets:
    Cash.....................................................................        $    1,576    $       756
    Accounts receivable, less allowances of $2,384 and $1,895................            36,678         27,427
    Inventories:
       Finished goods........................................................            20,943         21,220
       Work-in-process.......................................................             7,401          6,997
       Raw materials.........................................................            16,852         17,513
                                                                                     ----------    -----------
                                                                                         45,196         45,730
    Prepaid expenses and other current assets................................             1,908          1,571
    Deferred income taxes....................................................             1,072            770
                                                                                     ----------    -----------
             Total current assets...........................................             86,430         76,254
Property, plant and equipment, net...........................................            51,579         51,714
Goodwill, less accumulated amortization of $3,276 and $3,024.................            10,164         10,416
Other assets.................................................................             4,497          4,841
                                                                                     ----------    -----------
                                                                                       $152,670       $143,225
                                                                                     ==========    ===========
LIABILITIES
Current liabilities:
     Current maturities of long-term debt....................................        $    5,136     $    5,086
     Accounts payable........................................................            18,801         18,164
     Accrued salaries, wages and benefits....................................            10,733          9,687
     Other accrued expenses..................................................             2,231          1,877
                                                                                     ----------    -----------
         Total current liabilities...........................................            36,901         34,814
Long-term debt, exclusive of current maturities..............................            41,405         47,491
Deferred income taxes........................................................            10,201         10,448
Other long-term liabilities..................................................             2,225          2,225
                                                                                     ----------    -----------
    Total liabilities........................................................            90,732         94,978
                                                                                     ----------    -----------

STOCKHOLDERS' EQUITY
Common stock, $.02 par value, 10,000,000  shares authorized,
    7,175,579 and 6,865,518 shares issued and outstanding....................               142            137
Capital in excess of par value...............................................            40,568         37,439
Retained earnings ...........................................................            21,228         10,671
                                                                                    -----------     ----------
  Total stockholders' equity...............................................              61,938         48,247
                                                                                    -----------     ----------
                                                                                       $152,670       $143,225
                                                                                    ===========     ========== 
</TABLE>


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

<PAGE>
<TABLE>


                         STANLEY FURNITURE COMPANY, INC.
                              STATEMENTS OF INCOME
                                   (Unaudited)
                      (In thousands, except per share data)

<CAPTION>


                                                                     Three Months                  Nine Months
                                                                         Ended                        Ended
                                                                 September      September     September   September
                                                                26 ,  1998      28, 1997      26, 1998    28, 1997
<S>                                                            <C>              <C>           <C>         <C>       

Net sales...................................................       $63,832       $54,270       $183,386    $153,370

Cost of sales...............................................        48,449        40,982        138,585     115,133
                                                                 ---------      --------       --------    --------

        Gross profit........................................        15,383        13,288         44,801      38,237

Selling, general and administrative expenses................         8,209         7,501         24,310      21,828
                                                                 ---------      --------       --------    --------
       Operating income.....................................         7,174         5,787         20,491      16,409

Other expense, net..........................................           159            94            242         227
Interest expense............................................         1,035           992          3,221       2,493
                                                                 ---------      --------       --------    --------
    Income before income taxes..............................         5,980         4,701         17,028      13,689

Income taxes................................................         2,274         1,766          6,472       5,227
                                                                 ---------      --------       --------    --------
Net income..................................................      $  3,706       $ 2,935       $ 10,556    $  8,462
                                                                 =========      ========       ========    ========

Earnings per share:

  Basic.....................................................    $      .52      $    .38    $      1.51  $      .97
                                                                ==========      =========   ===========  ==========
  Diluted...................................................    $      .46      $    .34    $      1.32  $      .88
                                                                ==========      =========   ===========  ==========

Weighted average shares outstanding:

  Basic.....................................................         7,144         7,692          7,005       8,728
                                                                 =========      ========    ===========   =========
  Diluted...................................................         8,063         8,630          8,003       9,588
                                                                 =========      ========    ===========   =========


</TABLE>


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

<PAGE>
<TABLE>

                         STANLEY FURNITURE COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)
<CAPTION>

                                                                                         Nine Months Ended
                                                                                  September          September
                                                                                  26, 1998           28, 1997
<S>                                                                              <C>                <C>

Cash flows from operating activities:
Cash received from customers..................................................    $173,838           $146,302
Cash paid to suppliers and employees..........................................    (155,948)          (137,431)
Interest paid.................................................................      (3,545)            (2,880)
Income taxes paid, net........................................................      (5,530)            (6,461)
                                                                                ----------         ----------
  Net cash provided (used) by operating activities............................       8,815               (470)
                                                                                ----------         ----------

Cash flows from investing activities:
Capital expenditures..........................................................     (4,000)             (1,369)
Other, net...................................................................         (13)               (100)
                                                                                ----------         ----------
  Net cash used by investing activities.......................................     (4,013)             (1,469)
                                                                                ----------         ----------
Cash flows from financing activities:
Purchase and retirement of common stock.......................................                        (15,000)
(Repayment of) proceeds from revolving credit facility........................       (950)             10,197
Repayment of Senior Notes.....................................................     (5,086)               (725)
Proceeds from insurance policy loans..........................................        536                 480
Proceeds from exercised stock options.........................................      1,518                 160
                                                                                ----------         ----------
  Net cash used by financing activities.......................................     (3,982)             (4,888)
                                                                                ----------         ----------
Net increase (decrease) in cash...............................................         820             (6,827)
Cash at beginning of year.....................................................         756              8,126
                                                                                ----------         ----------
  Cash at end of period.......................................................  $    1,576         $    1,299
                                                                                ==========         ==========

Reconciliation  of  net  income  to  net  cash  provided
   (used)  by  operating activities:
   Net income.................................................................    $ 10,556         $    8,462
   Adjustments to reconcile net income to net
       cash provided by operating activities:
       Depreciation and amortization..........................................       4,315              4,070
       Other, net.............................................................         132                 76
       Changes in assets and liabilities:
         Accounts receivable..................................................      (9,251)            (7,212)
         Inventories..........................................................         534             (5,629)
         Prepaid expenses and other current assets............................        (483)              (873)
         Accounts payable.....................................................         637              1,685
         Accrued salaries, wages and benefits.................................       1,046                272
         Other accrued expenses...............................................       1,970               (605)
         Deferred income taxes................................................        (549)              (635)
         Other assets.........................................................         (92)               (81)
                                                                                ----------         ----------
   Net cash provided (used) by operating activities...........................  $    8,815         $     (470)
                                                                                ==========         ==========

</TABLE>

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

<PAGE>

                         STANLEY FURNITURE COMPANY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)


 1.      Preparation of Interim Financial Statements

The financial  statements of Stanley  Furniture  Company,  Inc.  (referred to as
"Stanley" 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
presentation 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 generally accepted accounting principles
have been either  condensed  or omitted  pursuant to SEC rules and  regulations.
However,  management  believes that the disclosures made are adequate for a fair
presentation of results of operations and financial position.  Operating results
for the interim  periods  reported  herein may not be  indicative of the results
expected for the year. It is suggested that these  financial  statements be read
in conjunction with the financial  statements and accompanying notes included in
Stanley's latest annual report on Form 10-K.

 2.      Property, Plant and Equipment
<TABLE>
                                                                                                               
                                                    (Unaudited)
                                                   September         December
                                                   26, 1998          31, 1997
<S>                                               <C>               <C>
          
         Land and buildings........................ $34,427           $33,941
         Machinery and equipment...................  50,497            48,180
         Office fixtures and equipment.............   1,803             1,836
         Construction in progress..................   1,643               588
                                                    -------           -------
             Property, plant and equipment, at cost. 88,370            84,545
         Less accumulated depreciation.............. 36,791            32,831
                                                    -------           -------
                                                    $51,579           $51,714
                                                    =======           =======
</TABLE>

 3.      Long-Term Debt
<TABLE>
                                                  (Unaudited)
                                                   September          December
                                                   26 , 1998           31,1997
<S>                                               <C>               <C>

         7.28% senior notes due March 15, 2004..    $25,714           $30,000
         7.57% senior note due June 30, 2005....      7,825             8,625
         7.43% senior notes due November 18, 2007.   10,000            10,000
         Revolving credit facility................    3,002             3,952
                                                    -------           -------
           Total...................................  46,541            52,577
         Less current maturities....................  5,136             5,086
                                                    -------           -------
                                                    $41,405           $47,491
                                                    =======           =======
</TABLE>

 4.       Earnings Per Common Share and Stock Split

Basic  earnings  per common  share are based upon the  weighted  average  shares
outstanding.  Outstanding  stock options are treated as common stock equivalents
for  purposes  of  computing  diluted  earnings  per  share  and  represent  the
difference between basic and diluted weighted average shares outstanding.

On April 7, 1998,  the Board of  Directors  approved a  two-for-one  stock split
which  was  distributed  in the  form of a  stock  dividend  on May 15,  1998 to
stockholders  of record  on May 1,  1998.  Accordingly,  3,478,462  shares  were
issued,  and approximately  $70,000 was transferred to common stock from capital
in excess of par value, representing the aggregate par value ($.02 per share) of
the shares  issued.  All related  amounts  have been  retroactively  adjusted to
reflect the stock split.


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

Results of Operations

Net sales  increased  $9.6 million,  or 17.6%,  for the three month period ended
September 26, 1998 from the comparable  1997 period.  For the nine month period,
net sales  increased $30.0 million,  or 19.6%,  from the comparable 1997 period.
The increase was due primarily to higher unit volume.

Gross profit margin for the third quarter of 1998  decreased to 24.1% from 24.5%
in the year ago quarter.  This  decrease  was due  primarily to the phase out of
upholstered  products.  In August 1998, the Company announced plans to phase out
its upholstered product line and began implementing these plans during the third
quarter of 1998. The Company expects to complete the phase out of these products
in the fourth quarter of 1998.

Gross profit  margin for the nine month  period of 1998  decreased to 24.4% from
24.9% for the  comparable  1997 periods.  The decrease  resulted  primarily from
higher raw material  costs,  principally  lumber,  partially  offset by improved
operating efficiencies.

Selling,  general  and  administrative  expenses  for the three  and nine  month
periods  of 1998 as a  percentage  of net sales  decreased  to 12.9% and  13.3%,
respectively,  from 13.8% and 14.2% for the comparable  1997 periods.  The lower
percentages in 1998 were due  principally  to higher net sales.  The majority of
the increased  expenditures in 1998 were selling expenses directly  attributable
to the sales increase.

As a result of the above,  operating income for the three and nine month periods
of 1998 increased to $7.2 million and $20.5  million,  or 11.2% of net sales for
both periods,  from $5.8 million and $16.4 million,  or 10.7% of net sales,  for
both the comparable 1997 periods.

Interest expense for the 1998 three and nine month periods  increased  primarily
due to higher average debt levels resulting from the Company's June and November
1997 repurchases of its common stock.

The  Company's  effective  income  tax rate was 38% for both the 1998 nine month
period and total year 1997.


Financial Condition, Liquidity and Capital Resources

At September 26, 1998,  long-term  debt including  current  maturities was $46.5
million.  Debt service  requirements  are $8.1 million in 1999,  $5.2 million in
2000,  $6.7 million in 2001, and $6.8 million in 2002. As of September 26, 1998,
approximately  $21.0 million of additional  borrowings  were available under the
Company's  revolving  credit  facility.  In October 1998, the Board of Directors
authorized the use of $10.0 million to repurchase the Company's common stock.The
Company  believes  that its  financial  resources  are  adequate  to support its
capital needs and debt service requirements.

Cash  generated  from  operations  increased  to $8.8 million in the 1998 period
compared to cash used by  operations  of $470,000  during the 1997  period,  due
primarily to increased  sales.  The cash used in the 1997 period funded payments
to suppliers and employees.

Net cash  used by  investing  activities  was $4.0  million  in the 1998  period
compared  to $1.5  million in the 1997  period.  Expenditures  in each year were
primarily  for plant and  equipment  and other  assets in the  normal  course of
business.

Net cash used by financing  activities  was $4.0 million in the 1998 compared to
$4.9  million  in the 1997  period.  In the 1998  period,  cash  generated  from
operations  and proceeds  from the exercise of stock options were used to reduce
borrowings and fund capital expenditures. In the 1997 period cash and borrowings
under the  revolving  credit  facility  were used to finance the June 1997 stock
repurchase.

Year 2000

In early 1998,  the Company  initiated a  cross-functional  team to identify and
address internal  hardware and software  compliance issues arising from the many
challenges  posed  by the  year  2000  on  information  systems.  Key  financial
information  and  operational   systems,   including   equipment  with  embedded
microprocessors, have been inventoried and assessed. Detailed plans are in place
for system  modifications or  replacements,  and a compliance plan for equipment
with embedded  technology  is  currently  being  developed and is expected to be
completed by the end of 1998.

Since 1996, the Company has been upgrading information systems technology,  with
year  2000  compliant  software,   to  support  its  sales,   manufacturing  and
administrative functions. As a result,  substantially all cost and upgrades have
been  incurred  and  completed  to-date  with  the  final  compliance  for  both
information and operational systems planned for implementation by mid-1999.  The
cost of system  upgrades is  estimated at less than $1.0  million,  of which the
majority has been incurred.  The estimated cost to complete year 2000 compliance
is less than  $100,000.  Testing of  critical  systems  is  ongoing  and will be
completed by the end of 1999.

In  addition,  the  Company  is  communicating  with key  customers,  suppliers,
financial  institutions  and others with whom it does business to determine year
2000 compliance and is currently assessing the potential impact on operations if
third parties are not successful in converting their systems in a timely manner.
However,  there can be no assurance that the systems of other  companies will be
timely converted and will not have an adverse effect on the Company.

The  Company   believes  it  is  taking   reasonable   steps  to  prevent  major
interruptions  in its business,  resulting from the year 2000 compliance  issue.
However,  contingency plans are currently being developed to minimize the impact
of any such  interruptions,  such as, backup  procedures and  identification  of
alternate suppliers.

Forward-Looking Statements

Certain  statements made in this report are not based on historical  facts,  but
are forward-looking statements. These statements can be identified by the use of
forward-looking  terminology  such  as  "believes,"  "expects,"  "may,"  "will,"
"should," or "anticipates"  or the negative thereof or other variations  thereon
or comparable  terminology,  or by  discussions  of strategy.  These  statements
reflect the Company's  reasonable judgment with respect to future events and are
subject to risks and  uncertainties  that could cause  actual  results to differ
materially  from  those  in  the  forward-looking  statements.  Such  risks  and
uncertainties   include  the  cyclical   nature  of  the   furniture   industry,
fluctuations in the price for lumber which is the most  significant raw material
used by the Company,  competition in the furniture  industry,  capital costs and
general economic conditions.


PART II.  OTHER INFORMATION

Item 5.  Other Information

On October 13,  1998,  the Company  announced  that its Board of  Directors  had
authorized  the use of up to $10 million to  repurchase  shares of the Company's
common stock, par value $.02 per share (the "Common Stock").  These  repurchases
may be made from  time to time in the open  market  or in  privately  negotiated
transactions,  at prevailing  market prices that the Company deems  appropriate.
Based on the current market value of the Common Stock, the  authorization  would
allow the Company to repurchase  approximately  12% of the 7.2 million shares of
Common Stock outstanding.

The SEC has adopted Rule 14a-4(c), effective June 29, 1998, which determines how
proxies designated by public corporations may use discretionary voting authority
on  stockholder  proposals  made at  annual  meetings.  The  Company  will  have
unrestricted use of discretionary  voting authority if it does not receive prior
written  notice  of an  intent  to submit a  proposal  at the  meeting.  For the
Company's 1999 annual meeting of  stockholders,  this notice must be received by
February 2, 1999.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit  11.      Schedule of Computation of Earnings Per Share.*

         Exhibit  27. 1    Financial Data Schedule for the quarter ended
                           September 26, 1998.*

(b)      Reports on Form 8-K
         A report  on Form 8-K was  filed on  August  7,  1998 to  announce  the
         Company's plans to phase out its upholstered product line.

* Filed herewith.


<PAGE>


                                    SIGNATURE



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

                         STANLEY FURNITURE COMPANY, INC.


Date: October 13, 1998                   By: /s/Douglas I. Payne
                                         Douglas I. Payne
                                         Sr. V.P. - Finance and Administration,
                                         Secretary and Treasurer
                                         (Principal Financial and Accounting
                                         Officer)