Mr. Bounderby returns to his own home, where he lives with a previously well-connected and elderly widow named Mrs. Sparsit. As the two breakfast, Bounderby expresses his disapproval of Louisa associating with the likes of Sissy. Mrs. Sparsit, though she out loud agrees with Bounderby's assertions, often makes funny facial expressions (which Bounderby doesn't see), that communicate her real feelings, including her own dislike of Bounderby's interest in Louisa.
The interest that Bounderby again shows in Louisa hints at the marital intentions he will have towards her later on. Mrs. Sparsit's relationship to Bounderby is never fully described (do they just live together or is there something more?) but she clearly dislikes Bounderby's interest in Louisa, as it threatens her own comfortable position in Bounderby's rich house. Her secret facial expressions imply that her agreement with Bounderby is for show only.
Mr. Gradgrind, Louisa, and Sissy enter the room. Upon questioning, Sissy lets slip that she and her father read many fairy tales together, and is overcome with grief upon thinking about their separation. Louisa ignores Sissy entirely, but does comfort the girl when she starts crying. Mr. Gradgrind tells Sissy not to mention her past again, and he, his natural daughter, and his adopted daughter set off for Stone Lodge.
Sissy has clearly had the imagination of fancy that Mr. Gradgrind is so opposed to, and seems to be a nice girl for it. Louisa's initial coldness shows how her own education of facts is affecting her, though her kinder reaction when Sissy begins to weep shows that she may still have a little sympathy in her.