What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-09-10 compared with 2026-06-11 · 111 added, 65 removed, 266 unchanged (40% of the section changed)

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any uncertainty or decline in general global economic conditions, caused by inflation, rising interest rates, geo-political conflicts, or other external factors, could lead to disproportionately reduced discretionary consumer spending and a corresponding reduction in demand for our products and have an adverse effect on our liquidity and profitability;

the uncertainty of the impact of tariffs on countries from which we import is expected to have an impact on our business, mainly our cost of goods and profit margin, including uncertainty regarding the ultimate availability, timing, and amount of any remaining refunds of IEEPA tariffs we previously paid which have been subject to recent judicial developments;

the uncertainty of the impact of tariffs on countries from which we import is expected to have an impact on our business, mainly our cost of goods and profit margin;

consumer interests can change rapidly, and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand and drive consumer demand for our products and services;

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Build-A-Bear's pop-culture appeal plays a key role in expanding our total addressable market beyond children to teens and adults with sports licensing, collectible and gifting offerings, as well as to categories beyond plush.

As of May 2, 2026, the Company had 669 global locations through a combination of its corporately-managed, partner-operated, and franchise models.

As of August 1, 2026, the Company had 674 global locations through a combination of its corporately-managed, partner-operated, and franchise models.

This reflects 379 corporately-managed locations, including 337 stores in the United States (“U.S.”) and Canada and 42 stores in the United Kingdom ("U.K.") and the Republic of Ireland, 177 partner-operated locations in which we sell our products on a wholesale basis to other companies that then, in turn, execute our retail experience, and 118 international franchise locations, all under the Build-A-Bear Workshop brand.

In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

For the 2026 fiscal year to date, the Company had net new unit growth of 7 experience locations, comprised of one corporately managed location, 3 partner-operated locations, and 3 international franchise locations.

In addition to these locations, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

For fiscal year 2026 year-to-date, the Company achieved net new unit growth of 12 experience locations, comprising four corporately managed locations and nine international franchise locations, partially offset by one fewer partner-operated location compared with the prior fiscal year.

We operate in three segments that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:

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International franchising – Royalties as well as product and fixture sales from other international operations under franchise agreements.

Selected financial data attributable to each segment for the thirteen weeks ended May 2, 2026 and May 3, 2025 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Selected financial data attributable to each segment for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Recent Events and Trends Regarding Tariffs and International Trade

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tariffs is unclear.

On February 20, 2026, the U.S.

Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA").

On March 4, 2026, the Court of International Trade ordered U.S.

Customs and Border Protection ("CBP") to begin the refund process for all importers who were subject to the IEEPA duties.

In April 2026, the CBP opened a portal for the refund process to begin for certain importers.

Based on these court rulings affirming the Company's legal right to recover IEEPA tariffs, the Company determined that it is entitled to a tariff refund of approximately $13.2 million, which was recorded in receivables, net on the condensed consolidated balance sheet.

For the thirteen weeks ended May 2, 2026, the Company recorded a $10.4 million benefit for these tariffs in cost of merchandise sold-retail on the condensed consolidated statements of operations and comprehensive income, $7.0 million of which related to prior fiscal year costs, and reduced the carrying value of inventory by $2.8 million on the condensed consolidated balance sheet as of May 2, 2026.

The related inventory with tariffs is expected to be substantially sold in the second fiscal quarter of 2026.

The ultimate availability, timing, and amount of any remaining refunds of such tariffs remain uncertain and are subject to further legal, regulatory, and administrative developments.

Following the Supreme Court’s decision, the U.S.

presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.

There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on the Company's business.

The Company continues to monitor and evaluate these developments and assess their potential impact on its business, financial condition, and results of operations.

During the first quarter of fiscal 2026, following Supreme Court rulings regarding tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"), the Company determined that it was entitled to recover approximately $13.2 million of previously paid tariffs.

The Company recorded the related receivable, recognized a $10.4 million benefit in cost of merchandise sold-retail, including approximately $7.0 million related to prior fiscal year costs, and reduced the carrying value of inventory by approximately $2.8 million for tariffs attributable to inventory remaining on hand.

During the second quarter of fiscal 2026, the Company collected the refund including interest and recognized the remaining inventory-related benefit as the underlying inventory was sold.

As a result, the Company has substantially completed recognition of the financial statement impacts associated with the IEEPA tariff refund.

The Company continues to be subject to tariffs imposed under other legal authorities.

Based on current information, the Company's fiscal 2026 outlook reflects the impact of ongoing tariffs and related costs associated with an estimated effective tariff rate of approximately 12.5%.

There remains uncertainty regarding future tariff policies, tariff rates, trade negotiations, potential retaliatory actions, and the duration of existing tariffs.

The Company continues to monitor these developments and evaluate their potential impact on its business, financial condition, results of operations, and cash flows.

Since we import the vast majority of our products from vendors outside the U.S., we face uncertainty and risks related to tariffs and other trade policies that could negatively impact our Company.

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Specifically, the latest tariffs implemented by the U.S.

continues to have an impact on our cost structure and product margins.

continue to have an impact on our cost structure and product margins.

Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, makes it difficult for us to operate optimally.

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We seek to provide outstanding guest experiences across all channels and touch points including our retail locations, our e-commerce sites, our mobile sites and apps as well as traditional, digital, and social media.

We believe the hands-on and interactive nature of our experience locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.

We believe the hands-on and interactive nature of our experiencial locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.

Operating Strategies

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We plan to do this by optimizing our omnichannel model via deeper integration, greater visibility, and more meaningful engagement with guests to improve lifetime value.

Our physical experience locations remain critical in building the strength of the Build-A-Bear brand with our core kid consumer.

Our physical experiencial locations remain critical in building the strength of the Build-A-Bear brand with our core kid consumer.

At the same time, our e-commerce business remains our single largest store, serving as a key information destination and a highly complementary channel that extends our reach beyond the core by over-indexing with teen and adult gifting and collectible consumers.

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We expect to continue growing our experiential location footprint across all three retail business models, including corporately operated, partner-operated, and franchise, with a particular focus on international growth through our asset-light partner-operated approach.

We expect to continue opening across global locations, in a broad range of formats, from smaller shop-in-shops to larger, tourist-destination locations.

We expect to continue opening across global locations, in a broad range of formats, from smaller standalone locations, shop-in-shops to larger, tourist-destination locations.

Pillar Three - Wholesale and Outbound Brand Licensing .

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This pillar is designed to gain more share of the growing multi-billion-dollar gifting and personalization markets.

Build-A-Bear offers beloved gifts that creates memories for both the gift-giver and recipient across multiple age groups and occasions.

Build-A-Bear offers beloved gifts that create memories for both the gift-giver and recipient across multiple age groups and occasions.

With over one-third of our revenue currently driven by birthdays, we have already proven that the brand is associated with gifting occasions but believe there is a robust opportunity to expand into gifts for more of life’s special moments, with our powerful brand and personalization options serving as an important competitive point of difference.

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and Ireland (collectively, Europe) for the periods presented:

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August 1, 2026

August 2, 2025

North America

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End of period

As of May 2, 2026, 53% of our corporately-managed stores were in an updated Discovery format.

As of August 1, 2026, 55% of our corporately-managed stores were in an updated Discovery format.

We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans.

The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops, and expansion in other locations outside of traditional malls.

Partner-Operated Locations:

The number of partner-operated locations opened and closed for the periods presented below is summarized as follows:

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Through our partner-operated model, there were 181 stores in operation at the end of the first quarter of 2026 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA.

Through our partner-operated model, there were 177 stores in operation at the end of the second quarter of 2026 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA.

The partner-operated model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis.

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All franchise stores have similar signage, store layout, merchandise characteristics and guest experience as our corporately-managed stores.

As of May 2, 2026, we had seven master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering a total of twelve countries.

The number of international franchise locations opened and closed for the periods presented below are summarized as follows:

Thirteen weeks ended

As of August 1, 2026, we had seven master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering a total of twelve countries.

The number of international franchise locations opened and closed for the periods presented below is summarized as follows:

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August 1, 2026

August 2, 2025

Beginning of period (1)

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Net retail sales

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retail gross margin percentage represents retail gross margin divided by net retail sales.

Thirteen weeks ended May 2, 2026 compared to thirteen weeks ended May 3, 2025

Thirteen weeks ended August 1, 2026 compared to thirteen weeks ended August 2, 2025

Total revenues.

Consolidated revenues decreased $3.1 million or 2.4%, primarily driven by a $6.1 million or 5.1% decrease in Net Retail sales partially offset by a $3.3 million or 44% increase in Commercial revenue when compared to the first fiscal quarter of 2025.

The decrease in net retail sales was driven by lower sales at existing stores, decreased e-commerce demand offset by sales at new stores.

The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from a net increase of 54 partner-operated locations s ince the first quarter of 2025.

Net retail sales for the thirteen weeks ended May 2, 2026 were $113.5 million, compare d to $119.6 mi llion for the thirteen weeks ended May 3, 2025.

Consolidated revenues decreased $9.0 million or 7.2%, primarily driven by a $8.1 million or 7.1% decrease in net retail sales and a $0.9 million or 9.0% decrease in combined commercial and international franchising revenue when compared to the second fiscal quarter of 2025.

The decrease in net retail sales was driven by lower sales at existing stores and decreased e-commerce demand offset by sales at new stores.

The decrease in commercial revenue was due to lower sales volume from our wholesale customers through our partner-operated retail model.

The decrease in international franchising revenue was due to timing of product shipments.

Net retail sales for the thirteen weeks ended August 1, 2026 were $106.5 million, compare d to $114.6 mi llion for the thirteen weeks ended August 2, 2025.

The components of the performance are as follows (dollars in thousands):

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August 1, 2026

Existing stores

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Digital sales

The lower retail revenue performance was primarily due to lower sales at existing stores, decreased e-commerce demand offset by sales at new stores.

Commercial revenue was $10.9 million for the thirteen weeks ended May 2, 2026 compared to $7.6 million for the thirteen weeks ended May 3, 2025.

The $3.3 million increase i s prima rily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

International franchising revenue was $0.9 million for the thirteen weeks ended May 2, 2026 compared to $1.2 million for the thirteen weeks ended May 3, 2025.

The $0.3 million decrea se is primarily due to timing of product shipments.

The lower retail revenue performance was primarily due to lower sales at existing stores and decreased e-commerce demand offset by sales at new stores.

Commercial revenue was $8.1 million for the thirteen weeks ended August 1, 2026 compared to $8.6 million for the thirteen weeks ended August 2, 2025.

The $0.5 million decrease was primarily due to lower sales volume from our wholesale accounts.

International franchising revenue was $0.7 million for the thirteen weeks ended August 1, 2026 compared to $1.0 million for the thirteen weeks ended August 2, 2025.

The $0.3 million decrease was primarily due to lower royalties and other sales to franchisees.

Retail gross margin.

Retail gross margin dollars increased $5.1 million to $73.1 million from $68.0 million for the thirteen weeks ended May 3, 2025 .

The retail gross margin rate increased 750 basis points compared to the prior year, including a 560 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, with the remaining 190 basis-points primarily driven by selective price increases.

Retail gross margin dollars decreased $8.5 million to $57.6 million from $66.1 million for the thirteen weeks ended August 2, 2025 .

The retail gross margin rate decreased 360 basis points compared to the prior year primarily due to occupancy cost deleverage and increased promotional activity.

Selling, general and administrative.

SG&A expenses were $56.1 million, or 44.8% of consolidated revenue, for the thirteen weeks ended May 2, 2026, compared to $53.6 million, or 41.7% of consolidated revenue, for the thirteen weeks ended May 3, 2025.

The increase was driven by higher total compensation costs, general inflationary pressures, and longer-range investments.

SG&A expenses were $51.4 million, or 44.6% of consolidated revenue, for the thirteen weeks ended August 1, 2026, compared to $56.4 million, or 45.4% of consolidated revenue, for the thirteen weeks ended August 2, 2025.

The decrease was primarily driven by lower incentive compensation.

Interest income, net.

Interest income was $0.1 million for the thirteen weeks ended May 2, 2026, compared to interest income of $0.2 million for the thirteen weeks ended May 3, 2025.

Interest income was $0.6 million for the thirteen weeks ended August 1, 2026, compared to interest income of $0.2 million for the thirteen weeks ended August 2, 2025.

The increase was driven by higher interest income from IEEPA tariff refunds.

Provision for income taxes .

Income tax expense was $5.6 million with a tax rate of 23.4% for the thirteen weeks ended May 2, 2026, as compared to $4.3 million with a tax rate of 22.0% for the thirteen weeks ended May 3, 2025 .

In the first quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income).

In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and foreign derived intangible income.

In addition, in the first quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Income tax expense was $2.9 million with a tax rate of 24.7% for the thirteen weeks ended August 1, 2026, as compared to $3.0 million with a tax rate of 19.3% for the thirteen weeks ended August 2, 2025 .

In the second quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived eligible income deduction (formerly foreign derived intangible income).

In the second quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position.

In addition, in the second quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Twenty-six weeks ended August 1, 2026 compared to twenty-six weeks ended August 2, 2025

Total revenues.

Consolidated revenues decreased $12.1 million or 4.8%, primarily driven by a $14.2 million or 6.1% decrease in net retail sales partially offset by a $2.1 million or 11.6% increase in combined commercial and international franchising revenue when compared to the same period of 2025.

The decrease i n net retail sales was driven by lower sales at existing stores and decreased e-commerce demand.

The increase in commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from a net increase of 16 partner-operated locations since the second quarter of 2025.

Net retail sales for the twenty-six weeks ended August 1, 2026 were $220.0 million compare d to $234.2 mi llion for the twenty-six weeks ended August 2, 2025.

The components of the performance are as follows (dollars in thousands):

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August 1, 2026

Existing stores

Store closures

Foreign currency translation

Gift card breakage

Gift card discounts

Digital sales

The lower retail revenue performance was primarily due to lower sales at existing stores and decreased e-commerce demand.

Commercial revenue was $19.0 million for the twenty-six weeks ended August 1, 2026 compared to $16.3 million for the twenty-six weeks ended August 2, 2025.

The $2.8 million increase i s primarily due to increased sales volume from our wholesale accounts.

International franchising revenue was $1.5 million for the twenty-six weeks ended August 1, 2026 compared to $2.2 million for the twenty-six weeks ended August 2, 2025.

The $0.7 million decrease is primarily due to lower royalties and other sales to franchisees.

Retail gross margin.

Retail gross margin dollars decreased $3.4 million to $130.7 million from $134.1 million for the twenty-six weeks ended August 2, 2025 .

The retail gross margin rate increased 210 basis points compared to the prior year.

Ex cluding a 535 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, retail gross margin increased primarily driven by selective price increases partially offset by occupancy cost deleverage and higher promotional activity.

Selling, general and administrative.

SG&A expenses were $107.5 million, or 44.7% of consolidated revenue, for the twenty-six weeks ended August 1, 2026, compared to $110.0 million, or 43.5% of consolidated revenue, for the twenty-six weeks ended August 2, 2025.

The 120 -basis-point increase in SG&A expense was driven mainly by higher store-level compensation expense, general inflationary pressures, and longer-term investments, partially offset by lower incentive compensation expense.

Interest income, net.

Interest income was $0.7 million for the twenty-six weeks ended August 1, 2026, compared to interest income of $0.4 million for the twenty-six weeks ended August 2, 2025.

The increase was driven by higher interest income from IEEPA tariff refunds.

Provision for income taxes .

Income tax expense was $8.5 million with a tax rate of 23.8% for the twenty-six weeks ended August 1, 2026, as compared to $7.3 million with a tax rate of 20.8% for the twenty-six weeks ended August 1, 2026 .

The fiscal 2026 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived eligible income deduction (formerly foreign derived intangible income).

The fiscal 2025 effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position.

Earnings before Interest, Taxes, Depreciation, and Amortization

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Income before income taxes (pre-tax)

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Earnings before interest, taxes, depreciation, and amortization

EBITDA for the thirteen weeks ended May 2, 2026 increased $4.6 million, or 20.0% to $27.7 million from $23.1 million for the thirteen weeks ended May 3, 2025.

EBITDA for the thirteen weeks ended August 1, 2026 decreased $3.6 million, or 19.1% to $15.2 million from $18.8 million for the thirteen weeks ended August 2, 2025.

The decrease was driven by lower gross profit resulting from occupancy cost deleverage and increased promotional activity, partially offset by lower SG&A expenses, primarily due to reduced incentive compensation.

EBITDA for the twenty-six weeks ended August 1, 2026 increased $1.0 million, or 2.5% to $42.9 million from $41.9 million for the twenty-six weeks ended August 2, 2025.

The increase was driven by higher gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses.

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A summary of cash provided by or used in our operating, investing and financing activities is shown in the following table (dollars in thousands).

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Net cash provided by operating activities

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Operating Activities.

Cash provided by operating activities decreased $6.6 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025.

This decrease in cash from operatin g activities was primarily driven by increases in prepaid and other assets and receivables from commercial accounts, as well as changes in deferred revenue, accounts payable and accrued expenses, partially offset by higher net income.

Cash provided by operating activities decreased $5.9 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025.

The decrease i n cash from operating activities was driven by changes in working capital balances.

Investing Activities.

Cash used in investing activities increased $4.0 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025.

Cash used in investing activities increased $9.1 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025.

The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Financing Activities.

Cash used in financing activitie s increased $6.3 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025.

Thi s increase in cash used in financing activities during the thirteen weeks of fiscal 2026 was driven by an increase in the amount utilized to repurchase shares compared to the prior year.

Cash used in financing activitie s increased $8.9 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025.

This increase in cash used in financing activities was driven by higher share repurchases compared to the prior year.

Capital Resources:

As of May 2, 2026, we had a consolidated cash balance of $26.2 million, 73% of which w as domiciled within the U.S, after investing $6.9 million in capital projects in the first quarter.

As of August 1, 2026, we had a consolidated cash balance of $14.0 million, 66% of which w as domiciled within the U.S., after investing $15.4 million in capital projects in fiscal 2026.

We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in an aggregate principal amount of up to $40.0 million, subject to a borrowing base formula.

As of May 2, 2026, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) at a rate based on SOFR reference rate, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement.

As of May 2, 2026, our borrowing base was $40.0 million and the Company had no outstanding borrowings as of the end of the quarter.

As of August 1, 2026, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) at a rate based on SOFR reference rate, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement.

As of August 1, 2026, the Company had approximately $39.5 million of available borrowing base, net of a $0.5 million outstanding letter of credit, and no amounts were outstanding under the agreement as of the end of the quarter.

Most of our corporately-managed retail stores are located within shopping malls and all are operated under leases classified as operating leases.

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If we cannot do so, our results of operations and financial condition could be harmed, and we may be required to record significant additional impairment charges.

Capital spending for the thirteen weeks ended May 2, 2026 totaled $6.9 million for information technology projects and new store openings, and we expect to spend approximately $22 to $25 million on capital expenditures in fiscal 2026 .

Total inventory at quarter end was $77.8 million, an increase of $5.5 million or 8% from the end of the fiscal 2025 first quarter.

Capital spending for the twenty-six weeks ended August 1, 2026 totaled $15.4 million for information technology projects and new store openings, and we expect to spend approximately $25 million on capital expenditures in fiscal 2026 .

Total inventory at quarter end was $81.1 million, a decrease of $0.6 million or 1% from the end of the fiscal 2025 second quarter.

We are comfortable with the level and composition of our inventory to support customer demand and critical seasonal products.

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans.

As of May 2, 2026, we had purchase obligations totaling approximately $127.0 million, of whi ch $28.6 million are due in the next 12 months.

As of August 1, 2026, we had purchase obligations totaling approximately $126.8 million, of whi ch $28.4 million are due in the next 12 months.

We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

We utili zed $11.4 million in cash to repurchase 248,118 shares during the thirteen weeks ended May 2, 2026 under our current September 2024 Stock Repurchase Program, compared to using $4.2 million in cash to repurchase 108,502 shares during the thirteen weeks ended May 3, 2025 under our September 2024 Stock Repurchase Program and completed August 2022 program .

We utili zed $17.0 million in cash to repurchase 403,236 shares during the twenty-six weeks ended August 1, 2026 under our current September 2024 Stock Repurchase Program, compared to using $7.3 million in cash to repurchase 167,585 shares during the twenty-six weeks ended August 2, 2025 under our September 2024 Stock Repurchase Program and completed August 2022 program .

Off-Balance Sheet Arrangements

The Company continued to experience inflationary pressures during the first quarter of fiscal 2026, primarily through higher store labor, product, freight, transportation and other supply chain costs.

The Company continued to experience inflationary pressures during the first half of fiscal 2026, primarily through higher store labor, product, freight, transportation and other supply chain costs.

In addition, evolving tariffs and trade policies have increased cost and pricing pressure and created additional uncertainty across our sourcing and supply chain activities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis