What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-03-09 compared with 2020-12-08 · 215 added, 175 removed, 499 unchanged (44% of the section changed)

18 unchanged sentences

Business in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.

In August 2020, we expanded our existing strategic partnership with VitalSource® to provide students with increased access to additional learning opportunities through a unique bundle of its bartleby homework help services, bartleby learn ™ and bartleby write ™.

The VitalSource direct-to-student channel will now offer students unique access to the bartleby study bundle™ with the purchase of a qualifying VitalSource eBook.

In Fiscal 2020, we retained Morgan Stanley & Co.

LLC to serve as a financial advisor in connection with our review of strategic opportunities.

The review was designed to accelerate the execution of customer-focused strategic initiatives and enhance value for our shareholders, including, but not limited to, continued execution of our current business plan, new partnerships, joint ventures and other potential opportunities.

On August 24, 2020, we announced that we had concluded our review of strategic opportunities.

After extensive evaluation and deliberation, and in consultation with its financial and legal advisors, the Board unanimously determined that the continued execution of the Company’s current business plan is the best path forward for the Company and its shareholders.

Partnership with Fanatics and FLC

In December 2020, we entered into a new merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

('Fanatics") and Fanatics Lids College, Inc.

Through this partnership, we will receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our high margin general merchandise business.

Fanatics’ cutting-edge e-commerce and technology expertise will offer our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform.

Coupled with FLC, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores will have improved access to trend and sales performance data on licensees, product styles, and design treatments.

FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter.

We will maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores.

We will also work closely with our campus partners to ensure that each campus store will maintain unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand.

We will leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites.

FLC will manage in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores.

We expect to go live with this partnership beginning in the second calendar quarter of 2021.

Additionally, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a $15,000 strategic equity investment in BNED and received 2,307,692 common shares of BNED in exchange.

We expect to use these proceeds for general corporate purposes.

For additional information, see Item 1.

Financial Statements - Note 7.

Equity and Earnings Per Share .

Wolfram|Alpha Agreement

In December 2020, we entered into an agreement with Wolfram|Alpha to develop a math solver as a new feature in our bartleby suite of homework help and learning solutions.

math solver will allow students to access an interactive digital calculator that provides real-time, step-by-step explanations for even the most advanced math problems.

COVID-19 Business Impact

5 unchanged sentences

Colleges and universities in the United States continue to adjust their plans for each academic term, with some implementing shortened semesters or choosing to remain fully virtual in order to best protect students and faculty.

As many schools adjusted their learning model and curtailed on-campus activities in response to the pandemic, our flexible offerings ensured that students were

equipped with their course materials regardless of whether schools resumed classes on campus, remotely or via a hybrid learning model.

Our fiscal 2021 second quarter results were significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic.

Fewer students returned to campus this fall, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

As many schools adjusted their learning model and curtailed on-campus activities in response to the pandemic, our flexible offerings ensured that students were equipped with their course materials regardless of whether schools resumed classes on campus, remotely or via a hybrid learning model.

Our fiscal 2021 results have been significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and on-campus activities in response to the pandemic.

Fewer students have returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

While many big athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

Additionally, sales were impacted by overall enrollment declines in higher education.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.

The COVID-19 impact on higher education remains a fluid situation, and we are committed to supporting our campus partners through our flexible offerings and our ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses.

There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact to our results of operations, financial condition and cash flows from operations.

If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.

We have three reportable segments:

23 unchanged sentences

For our retail operations, sales are generally highest in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials, and lowest in the first and fourth fiscal quarters.

Sales attributable to

our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course materials for retail distribution.

Sales attributable to our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course materials for retail distribution.

For our DSS segment, or direct-to-student business, sales and operating profit are realized relatively consistently throughout the year.

7 unchanged sentences

The COVID-19 pandemic has materially and adversely impacted certain segments of the U.S.

economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery, including the ability to gain adequate herd-immunity levels through vaccine programs and their resilience to future virus variants.

Many colleges and K-12 schools have been required to cease in-person classes in an attempt to limit the spread of the COVID-19 pandemic and ensure the safety of their students.

Although many institutions have reopened, academic institutions are considering alternatives to traditional in-person instruction, including on-line learning and significantly reduced classroom size.

Additionally, many big athletic conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

• Economic Environment :

8 unchanged sentences

economic activity and increased unemployment could lead to decreased enrollment and consumer spending.

Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age.

Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional

18-24 year-old college age.

Online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment.

9 unchanged sentences

Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season.

Recently, the impact of fewer students on campus due to COVID-19 has significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods.

Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future.

25 unchanged sentences

13 weeks ended 39 weeks ended

Dollars in thousands October 31,

2020 October 26,

2019 October 31,

2020 October 26,

Dollars in thousands January 30,

2021 January 25,

2020 January 30,

2021 January 25,

Product sales and other $ 373,502 $ 453,678 $ 1,118,544 $ 1,474,448

1 unchanged sentence

Total sales $ 411,613 $ 502,292 $ 1,211,112 $ 1,594,177

Net income (loss) $ 7,515 $ 35,931 $ (39,137) $ 3,776

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

Adjusted Earnings (non-GAAP) (a)

11 unchanged sentences

13 weeks ended 39 weeks ended

2020 October 26,

2019 October 31,

2020 October 26,

2021 January 25,

2020 January 30,

2021 January 25,

Product sales and other 90.7 % 90.3 % 92.4 % 92.5 %

12 unchanged sentences

Restructuring and other charges 0.4 — 0.9 0.2

Operating income (loss) 1.2 % 7.3 % (6.5) % 1.2 %

Operating (loss) income (15.6) % (0.5) % (9.6) % 0.7 %

(a) Represents the percentage these costs bear to the related sales, instead of total sales.

Results of Operations - 13 and 26 weeks ended October 31, 2020 compared with the 13 and 26 weeks ended October 26, 2019

13 weeks ended, October 31, 2020

Results of Operations - 13 and 39 weeks ended January 30, 2021 compared with the 13 and 39 weeks ended January 25, 2020

13 weeks ended, January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

10 unchanged sentences

$ (32,204) $ 4,708 $ (1,996) $ (6,515) $ 604 (35,403)

Impairment loss (non-cash) 27,630

Restructuring and other charges 1,669

Operating income $ 6,733

13 weeks ended, October 26, 2019

Operating loss $ (64,702)

13 weeks ended, January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

11 unchanged sentences

Restructuring and other charges 205

Operating income $ 56,431

26 weeks ended, October 31, 2020

Operating loss $ (2,971)

39 weeks ended, January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

10 unchanged sentences

$ (75,477) $ 21,625 $ (5,647) $ (17,324) $ (1,704) (78,527)

Impairment loss (non-cash) 27,630

Restructuring and other charges 10,727

Operating loss $ (116,884)

26 weeks ended, October 26, 2019

39 weeks ended, January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

13 unchanged sentences

Operating income $ 9,648

The following table summarizes our sales for the 13 and 26 weeks ended October 31, 2020 and October 26, 2019:

The following table summarizes our sales for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019 % October 31, 2020 October 26, 2019 %

Dollars in thousands January 30, 2021 January 25, 2020 % January 30, 2021 January 25, 2020 %

Product sales and other $ 373,502 $ 453,678 (17.7)% $ 1,118,544 $ 1,474,448 (24.1)%

1 unchanged sentence

Total Sales $ 411,613 $ 502,292 (18.1)% $ 1,211,112 $ 1,594,177 (24.0)%

Sales decreased by $176.7 million, or 22.9%, to $595.5 million during the 13 weeks ended October 31, 2020 from $772.2 million during the 13 weeks ended October 26, 2019.

Sales decreased by $292.4 million, or 26.8%, to $799.5 million during the 26 weeks ended October 31, 2020 from $1,091.9 million during the 26 weeks ended October 26, 2019.

Sales decreased by $90.7 million, or 18.1%, to $411.6 million during the 13 weeks ended January 30, 2021 from $502.3 million during the 13 weeks ended January 25, 2020.

Sales decreased by $383.1 million, or 24.0%, to $1,211.1 million during the 39 weeks ended January 30, 2021 from $1,594.2 million during the 39 weeks ended January 25, 2020.

The sales decrease is primarily related to the impact from temporary store closings related to COVID-19, as well as lower in store foot traffic, lower enrollments and fewer on-campus events due to COVID-19.

1 unchanged sentence

Sales variances 13 weeks ended 39 weeks ended

Dollars in millions October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Dollars in millions January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

New stores $ 17.3 $ 16.3 $ 52.7 $ 61.9

19 unchanged sentences

See discussion of intercompany activities and eliminations below.

Retail sales decreased by $165.2 million, or 22.3%, to $576.5 million during the 13 weeks ended October 31, 2020 from $741.8 million during the 13 weeks ended October 26, 2019.

Retail sales decreased by $281.1 million, or 27.7%, to $735.3 million during the 26 weeks ended October 31, 2020 from $1,016.4 million during the 26 weeks ended October 26, 2019.

Retail added 80 new stores and closed 60 stores (not including temporary store closings due to COVID-19) during the 26 weeks ended October 31, 2020, ending the period with a total of 1,439 stores.

Retail sales decreased by $70.3 million, or 15.4%, to $387.7 million during the 13 weeks ended January 30, 2021 from $458.0 million during the 13 weeks ended January 25, 2020.

Retail sales decreased by $351.5 million, or 23.8%, to $1,123.0 million during the 39 weeks ended January 30, 2021 from $1,474.4 million during the 39 weeks ended January 25, 2020.

Retail added 88 new stores and closed 66 stores (not including temporary store closings due to COVID-19) during the 39 weeks ended January 30, 2021, ending the period with a total of 1,441 stores.

13 weeks ended 39 weeks ended

October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Number of Stores:

4 unchanged sentences

Number of stores at end of period 765 676 772 664 765 676 772 664

Product and other sales for Retail for the 13 weeks ended October 31, 2020 decreased by $155.2 million, or 22.6% to $532.9 million from $688.1 million during the 13 weeks ended October 26, 2019.

Product and other sales for Retail for the 26 weeks ended October 31, 2020 decreased by $264.5 million, or 28.0% to $680.8 million from $945.3 million during the 26 weeks ended October 26, 2019.

Product and other sales for Retail for the 13 weeks ended January 30, 2021 decreased by $59.8 million, or 14.6% to $349.6 million from $409.4 million during the 13 weeks ended January 25, 2020.

Product and other sales for Retail for the 39 weeks ended January 30, 2021 decreased by $324.3 million, or 23.9% to $1,030.4 million from $1,354.7 million during the 39 weeks ended January 25, 2020.

Product and other sales are impacted by comparable store sales (as noted in the chart below), new store openings and store closings, as well as the impact from the COVID-19 pandemic.

Sales were impacted by the temporary store closings due to COVID-19 earlier in the fiscal year, as well as the impact of fewer students returning to campus this fall, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

Sales were impacted by the temporary store closings due to COVID-19 earlier in the fiscal year, as well as the impact of fewer students returning to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

While many big-conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the company’s high-margin general merchandise business.

3 unchanged sentences

We have made continued progress in the development of our next generation e-commerce platform, which launched in Fiscal 2021 to deliver increased high-margin general merchandise sales.

Rental income for Retail for the 13 weeks ended October 31, 2020 decreased by $10.0 million, or 18.7% to $43.7 million from $53.7 million during the 13 weeks ended October 26, 2019.

Rental income for Retail for the 26 weeks ended October 31, 2020 decreased by $16.7 million, or 23.4% to $54.5 million from $71.1 million during the 26 weeks ended October 26, 2019.

Rental income for Retail for the 13 weeks ended January 30, 2021 decreased by $10.5 million, or 21.6% to $38.1 million from $48.6 million during the 13 weeks ended January 25, 2020.

Rental income for Retail for the 39 weeks ended January 30, 2021 decreased by $27.2 million, or 22.7% to $92.6 million from $119.7 million during the 39 weeks ended January 25, 2020.

Rental income is impacted by comparable store sales, new store openings and store closings.

3 unchanged sentences

These decreases were partially offset by increased First Day, digital and eTextbook revenue.

Consistent with prior years, the Spring Rush period extended beyond the quarter due to later school openings and the continued pattern of students buying course materials later in the semester.

Factoring in the fiscal month of February, comparable store sales decreased 26.7% on a year to date basis.

Comparable store sales variances for Retail by category for the 13 and 39 week periods are as follows:

Comparable Store Sales variances - Retail 13 weeks ended 39 weeks ended

Dollars in millions October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Dollars in millions January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Textbooks (Course Materials) $ (25.0) (8.1) % $ (31.2) (9.3) % $ (136.1) (14.3) % $ (85.2) (8.3) %

2 unchanged sentences

Total Comparable Store Sales $ (88.5) (19.9) % $ (34.4) (7.3) % $ (397.7) (28.0) % $ (85.4) (5.7) %

Wholesale sales decreased by $3.8 million, or 9.5% to $36.4 million during the 13 weeks ended October 31, 2020 from $40.2 million during the 13 weeks ended October 26, 2019.

The decrease is primarily due to decreased gross sales, partially offset by a lower returns and allowances, both impacted by the COVID-19 pandemic.

Wholesale sales increased by $4.2 million, or 3.7% to $116.7 million during the 26 weeks ended October 31, 2020 from $112.5 million during the 26 weeks ended October 26, 2019.

The increase is primarily due to lower returns and allowances as a result of customer sales mix.

During the 26 months ended October 31, 2020, the Wholesale operations assumed direct-to-student fulfillment of course material orders for the Retail Segment campus bookstores that were not fully operational due to COVID-19 campus store closures.

DSS total sales increased by $0.7 million, or 14.0% to $5.9 million during the 13 weeks ended October 31, 2020 from $5.2 million during the 13 weeks ended October 26, 2019.

DSS total sales increased by $1.2 million, or 11.6% to $11.8 million during the 26 weeks ended October 31, 2020 from $10.6 million during the 26 weeks ended October 26, 2019.

Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period, does not include sales from closed stores for all periods presented, and digital agency sales are included on a gross basis.

Wholesale sales decreased by $27.5 million, or 41.1% to $39.5 million during the 13 weeks ended January 30, 2021 from $67.0 million during the 13 weeks ended January 25, 2020.

Wholesale sales decreased by $23.4 million, or 13.0% to $156.1 million during the 39 weeks ended January 30, 2021 from $179.5 million during the 39 weeks ended January 25, 2020.

The decrease is primarily due to decreased gross sales impacted by the COVID-19 pandemic, partially offset by a lower returns and allowances.

DSS total sales increased by $0.8 million, or 12.0% to $7.2 million during the 13 weeks ended January 30, 2021 from $6.4 million during the 13 weeks ended January 25, 2020.

DSS total sales increased by $2.0 million, or 11.8% to $19.0 million during the 39 weeks ended January 30, 2021 from $17.0 million during the 39 weeks ended January 25, 2020.

Sales increased primarily due to an increase in bartleby subscription sales.

Cost of Sales and Gross Margin

Our cost of sales increased as a percentage of sales to 80.6% during the 13 weeks ended October 31, 2020 compared to 75.8% during the 13 weeks ended October 26, 2019.

Our gross margin decreased by $71.7 million, or 38.3%, to $115.3 million, or 19.4% of sales, during the 13 weeks ended October 31, 2020 from $187.0 million, or 24.2% of sales during the 13 weeks ended October 26, 2019.

Our cost of sales increased as a percentage of sales to 81.7% during the 26 weeks ended October 31, 2020 compared to 76.3% during the 26 weeks ended October 26, 2019.

Our gross margin decreased by $112.5 million, or 43.5%, to $146.1 million, or 18.3% of sales, during the 26 weeks ended October 31, 2020 from $258.6 million, or 23.7% of sales during the 26 weeks ended October 26, 2019.

The following table summarizes the Retail cost of sales for the 13 and 26 weeks ended October 31, 2020 and October 26, 2019:

Our cost of sales increased as a percentage of sales to 82.8% during the 13 weeks ended January 30, 2021 compared to 76.4% during the 13 weeks ended January 25, 2020.

Our gross margin decreased by $47.9 million, or 40.4%, to $70.6 million, or 17.2% of sales, during the 13 weeks ended January 30, 2021 from $118.5 million, or 23.6% of sales during the 13 weeks ended January 25, 2020.

Our cost of sales increased as a percentage of sales to 82.1% during the 39 weeks ended January 30, 2021 compared to 76.3% during the 39 weeks ended January 25, 2020.

Our gross margin decreased by $160.4 million, or 42.5%, to $216.7 million, or 17.9% of sales, during the 39 weeks ended January 30, 2021 from $377.1 million, or 23.7% of sales during the 39 weeks ended January 25, 2020.

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 % of

Related Sales October 26, 2019 % of

Related Sales October 31, 2020 % of

Related Sales October 26, 2019 % of

Dollars in thousands January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales

5 unchanged sentences

$ 334,146 86.2% $ 358,198 78.2% $ 957,789 85.3% $ 1,151,544 78.1%

The following table summarizes the Retail gross margin for the 13 and 26 weeks ended October 31, 2020 and October 26, 2019:

The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020:

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 % of

Related Sales October 26, 2019 % of

Related Sales October 31, 2020 % of

Related Sales October 26, 2019 % of

Dollars in thousands January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales January 30, 2021 % of

Related Sales January 25, 2020 % of

Related Sales

4 unchanged sentences

$ 53,523 13.8% $ 99,790 21.8% $ 165,170 14.7% $ 322,869 21.9%

For the 13 weeks ended October 31, 2020, the Retail gross margin as a percentage of sales decreased as discussed below:

For the 13 weeks ended January 30, 2021, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin decreased (785 basis points), driven primarily by an unfavorable sales mix (445 basis points) due to lower high-margin general merchandise sales of approximately $59.1 million and the shift to lower margin digital courseware, and lower margin rates (380 basis points) due to higher markdowns, partially offset by lower contract costs as a percentage of sales related to our college and university contracts (40 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (355 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (450 basis points), partially offset by higher rental margin rates (95 basis points).

For the 26 weeks ended October 31, 2020, the Retail gross margin as a percentage of sales decreased as discussed below:

• Rental gross margin decreased (745 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (795 basis points), partially offset by higher rental margin rates (40 basis points) and favorable rental mix (10 basis points).

For the 39 weeks ended January 30, 2021, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin decreased (730 basis points), driven primarily by an unfavorable sales mix (475 basis points) due to lower high-margin general merchandise sales of approximately $247.0 million and the shift to lower margin digital courseware, and lower margin rates (325 basis points) due to higher markdowns, partially offset by lower contract costs as a percentage of sales related to our college and university contracts (70 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (640 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (670 basis points) and unfavorable rental mix (40 basis points), partially offset by higher rental margin rates (70 basis points).

The cost of sales and gross margin for Wholesale were $25.7 million, or 70.6% of sales, and $10.7 million, or 29.4% of sales, respectively, during the 13 weeks ended October 31, 2020.

The cost of sales and gross margin for Wholesale was $27.7 million or 68.8% of sales and $12.5 million or 31.2% of sales, respectively, during the 13 weeks ended October 26, 2019.

The cost of sales and gross margin for Wholesale were $89.2 million, or 76.5% of sales, and $27.5 million, or 23.5% of sales, respectively, during the 26 weeks ended October 31, 2020.

The cost of sales and gross margin for Wholesale was $85.1 million or 75.6% of sales and $27.5 million or 24.4% of sales, respectively, during the 26 weeks ended October 26, 2019.

The gross margin rate decreased during the 13 weeks ended October 31, 2020 primarily due to an unfavorable sales mix, partially offset by the favorable impact of returns and allowances and lower markdowns.

The gross margin rate decreased during the 26 weeks ended October 31, 2020 primarily due an unfavorable sales mix and inventory markdowns, partially offset by the favorable impact of returns and allowances.

The gross margin for the DSS segment was $4.7 million, or 78.4% of sales, during the 13 weeks ended October 31, 2020 and $4.1 million, or 79.4% of sales, during the 13 weeks ended October 26, 2019.

The gross margin for the DSS segment was $9.4 million, or 79.6% of sales, during the 26 weeks ended October 31, 2020 and $8.6 million, or 80.8% of sales, during the 26 weeks ended October 26, 2019.

The cost of sales and gross margin for Wholesale were $28.8 million, or 73.0% of sales, and $10.7 million, or 27.0% of sales, respectively, during the 13 weeks ended January 30, 2021.

The cost of sales and gross margin for Wholesale was $52.8 million or 78.8% of sales and $14.2 million or 21.2% of sales, respectively, during the 13 weeks ended January 25, 2020.

The cost of sales and gross margin for Wholesale were $118.0 million, or 75.6% of sales, and $38.1 million, or 24.4% of sales, respectively, during the 39 weeks ended January 30, 2021.

The cost of sales and gross margin for Wholesale was $137.8 million or 76.8% of sales and $41.7 million or 23.2% of sales, respectively, during the 39 weeks ended January 25, 2020.

The gross margin rate increased during the 13 and 39 weeks ended January 30, 2021 primarily due to the favorable impact of returns and allowances and lower markdowns, partially offset by an unfavorable sales mix.

The gross margin for the DSS segment was $5.9 million, or 81.6% of sales, during the 13 weeks ended January 30, 2021 and $5.3 million, or 82.1% of sales, during the 13 weeks ended January 25, 2020.

The gross margin for the DSS segment was $15.3 million, or 80.4% of sales, during the 39 weeks ended January 30, 2021 and $13.8 million, or 81.3% of sales, during the 39 weeks ended January 25, 2020.

The high gross margins are driven primarily by high margin subscription service revenue earned.

The decrease in gross margin for the 13 and 26 weeks ended October 31, 2020 is primarily due to increased amortization of content development costs for bartleby textbook solutions of $0.2 million and $0.5 million, respectively.

The decrease in gross margin for the 13 and 39 weeks ended January 30, 2021 is primarily due to increased amortization of content development costs for bartleby textbook solutions of $0.3 million and $0.8 million, respectively.

Intercompany Eliminations

During the 13 weeks ended October 31, 2020 and October 26, 2019, our sales eliminations were $(23.4) million and $(15.0) million, respectively.

During the 26 weeks ended October 31, 2020 and October 26, 2019, our sales eliminations were $(64.3) million and $(47.6) million, respectively.

During the 13 weeks ended January 30, 2021 and January 25, 2020, our sales eliminations were $(22.7) million and $(29.1) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, our sales eliminations were $(87.0) million and $(76.8) million, respectively.

These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

During the 13 weeks ended October 31, 2020 and October 26, 2019, the cost of sales eliminations were $(27.8) million and $(24.3) million, respectively.

During the 26 weeks ended October 31, 2020 and October 26, 2019, the cost of sales eliminations were $(61.9) million and $(47.2) million, respectively.

During the 13 weeks ended January 30, 2021 and January 25, 2020, the cost of sales eliminations were $(23.3) million and $(28.4) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, the cost of sales eliminations were $(85.2) million and $(75.5) million, respectively.

These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

During the 13 weeks ended October 31, 2020 and October 26, 2019, the gross margin eliminations were $4.4 million and $9.3 million, respectively.

During the 26 weeks ended October 31, 2020 and October 26, 2019, the gross margin eliminations were $(2.4) million and $(0.5) million, respectively.

During the 13 weeks ended January 30, 2021 and January 25, 2020, the gross margin eliminations were $0.5 million and $(0.8) million, respectively.

During the 39 weeks ended January 30, 2021 and January 25, 2020, the gross margin eliminations were $(1.8) million and $(1.3) million, respectively.

The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

1 unchanged sentence

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 % of

Sales October 26, 2019 % of

Sales October 31, 2020 % of

Sales October 26, 2019 % of

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

Total Selling and Administrative Expenses

$ 92,708 22.5% $ 106,184 21.1% $ 254,723 21.0% $ 317,279 19.9%

During the 13 weeks ended October 31, 2020, selling and administrative expenses decreased by $21.4 million, or 18.9%, to $92.0 million from $113.4 million during the 13 weeks ended October 26, 2019.

During the 26 weeks ended October 31, 2020, selling and administrative expenses decreased by $49.1 million, or 23.3%, to $162.0 million from $211.1 million during the 26 weeks ended October 26, 2019.

During the 13 weeks ended January 30, 2021, selling and administrative expenses decreased by $13.5 million, or 12.7%, to $92.7 million from $106.2 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, selling and administrative expenses decreased by $62.6 million, or 19.7%, to $254.7 million from $317.3 million during the 39 weeks ended January 25, 2020.

The variances by segment are as follows:

During the 13 weeks ended October 31, 2020, Retail selling and administrative expenses decreased by $21.2 million, or 21.5%, to $77.4 million from $98.6 million during the 13 weeks ended October 26, 2019.

This decrease was primarily due to a $17.5 million decrease in stores payroll and operating expenses, including comparable stores, primarily due to furloughed store employees, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $3.7 million in corporate payroll, infrastructure costs, product development costs and digital operations costs.

During the 26 weeks ended October 31, 2020, Retail selling and administrative expenses decreased by $48.0 million, or 26.3%, to $134.4 million from $182.4 million during the 26 weeks ended October 26, 2019.

During the 13 weeks ended January 30, 2021, Retail selling and administrative expenses decreased by $15.9 million, or 17.4%, to $75.9 million from $91.9 million during the 13 weeks ended January 25, 2020.

This decrease was primarily due to a $13.1 million decrease in stores payroll and operating expenses, including comparable stores, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $2.8 million in corporate payroll, infrastructure costs, product development costs and digital operations costs.

During the 39 weeks ended January 30, 2021, Retail selling and administrative expenses decreased by $64.0 million, or 23.3%, to $210.3 million from $274.2 million during the 39 weeks ended January 25, 2020.

This decrease was primarily due to a $53.6 million decrease in stores payroll and operating expenses, including comparable stores, primarily due to furloughed store employees, lower virtual stores and new/closed stores payroll and operating expenses, and a decrease of $10.4 million in corporate payroll, infrastructure costs, product development costs and digital operations costs.

During the 13 weeks ended October 31, 2020, Wholesale selling and administrative expenses decreased by $0.5 million or 9.7% to $4.1 million from $4.6 million during the 13 weeks ended October 26, 2019.

During the 26 weeks ended October 31, 2020, Wholesale selling and administrative expenses decreased by $1.4 million or 15.1% to $7.9 million from $9.4 million during the 26 weeks ended October 26, 2019.The decrease in selling and administrative expenses was primarily driven by lower payroll and operating costs.

During the 13 weeks ended October 31, 2020, DSS selling and administrative expenses increased by $0.4 million or 8.4% to $5.0 million from $4.6 million during the 13 weeks ended October 26, 2019.

During the 26 weeks ended October 31, 2020, DSS selling and administrative expenses increased by $0.3 million or 3.6% to $9.0 million from $8.7 million during the 26 weeks ended October 26, 2019.

Wholesale selling and administrative expenses remained flat at $4.3 million for both the 13 weeks ended January 30, 2021 and January 25, 2020.

During the 39 weeks ended January 30, 2021, Wholesale selling and administrative expenses decreased by $1.4 million or 10.2% to $12.3 million from $13.7 million during the 39 weeks ended January 25, 2020.

The decrease in selling and administrative expenses was primarily driven by lower payroll and operating costs.

During the 13 weeks ended January 30, 2021, DSS selling and administrative expenses increased by $1.0 million or 20.6% to $6.0 million from $5.0 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, DSS selling and administrative expenses increased by $1.3 million or 9.8% to $15.0 million from $13.7 million during the 39 weeks ended January 25, 2020.

The increase in costs was primarily driven by higher professional services and advertising costs.

Corporate Services

During the 13 weeks ended October 31, 2020, Corporate Services' selling and administrative expenses decreased by $0.2 million or 2.9% to $5.5 million from $5.7 million during the 13 weeks ended October 26, 2019.

During the 26 weeks ended October 31, 2020, Corporate Services' selling and administrative expenses increased by $0.1 million or 0.7% to $10.8 million from $10.7 million during the 26 weeks ended October 26, 2019.

The increase was primarily due to higher compensation-related expense, partially offset by lower operating expenses.

During the 13 weeks ended January 30, 2021, Corporate Services' selling and administrative expenses increased by $1.3 million or 25.9% to $6.5 million from $5.2 million during the 13 weeks ended January 25, 2020.

During the 39 weeks ended January 30, 2021, Corporate Services' selling and administrative expenses increased by $1.4 million or 8.9% to $17.2 million from $15.8 million during the 39 weeks ended January 25, 2020.

The increase was primarily due to higher compensation-related expense and higher operating expenses.

Depreciation and Amortization Expense

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 % of

Sales October 26, 2019 % of

Sales October 31, 2020 % of

Sales October 26, 2019 % of

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

Total Depreciation and Amortization Expense

$ 13,307 3.2% $ 15,117 3.0% $ 40,563 3.3% $ 46,542 2.9%

Depreciation and amortization expense decreased by $2.4 million, or 15.1%, to $13.2 million during the 13 weeks ended October 31, 2020 from $15.5 million during the 13 weeks ended October 26, 2019.

Depreciation and amortization expense decreased by $4.2 million, or 13.3%, to $27.3 million during the 26 weeks ended October 31, 2020 from $31.4 million during the 26 weeks ended October 26, 2019.The decrease was primarily attributable to lower depreciation related to closed stores and lower capital expenditures.

Depreciation and amortization expense decreased by $1.8 million, or 12.0%, to $13.3 million during the 13 weeks ended January 30, 2021 from $15.1 million during the 13 weeks ended January 25, 2020.

Depreciation and amortization expense decreased by $6.0 million, or 12.8%, to $40.6 million during the 39 weeks ended January 30, 2021 from $46.5 million during the 39 weeks ended January 25, 2020.The decrease was primarily attributable to lower depreciation related to closed stores and lower capital expenditures.

Impairment loss (non-cash)

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

During the 26 weeks ended October 26, 2019, we recognized an impairment loss (non-cash) of $0.4 million in the Retail segment related to net capitalized development costs for a project which are not recoverable.

During the 13 weeks ended January 30, 2021, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $27.6 million, $20.5 million after-tax, comprised of $5.1 million, $13.3 million, $6.3 million and $2.9 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies and Note 8.

Fair Value Measurements .

During the 39 weeks ended January 25, 2020, we recognized an impairment loss (non-cash) of $0.4 million in the Retail segment related to net capitalized development costs for a project which were not recoverable.

Restructuring and other charges

During the 13 and 26 weeks ended October 31, 2020, we recognized restructuring and other charges totaling $3.4 million and $9.1 million, respectively, comprised primarily of $1.1 million and $4.5 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $2.3 million and $4.6 million, respectively, for professional service costs related to restructuring, process improvements, shareholder activist activities, and costs related to liabilities for a facility closure.

During the 13 and 26 weeks ended October 26, 2019, we recognized restructuring and other charges totaling $1.6 million and $3.0 million, respectively, comprised primarily of $0.1 million and $0.8 million, respectively, for severance and other employee termination and benefit costs associated with several management changes and the elimination of various positions as part of cost reduction objectives, and $1.5 million and $2.2 million, respectively, related to professional service costs related to restructuring, process improvements, shareholder activist activities, and costs related to liabilities for a facility closure.

Operating Income (Loss)

During the 13 and 39 weeks ended January 30, 2021, we recognized restructuring and other charges totaling $1.7 million and $10.7 million, respectively, comprised primarily of $1.3 million and $5.8 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, $0.2 million and $4.6 million, respectively, for professional service costs related to restructuring, process improvements, the financial advisor strategic review process, costs related to development and integration associated with Fanatics and FLC

partnership agreements and shareholder activist activities, and $0.2 million and $0.3 million, respectively, related to liabilities for a facility closure.

During the 13 and 39 weeks ended January 25, 2020, we recognized restructuring and other charges totaling $0.2 million and $3.2 million, respectively, comprised primarily of $0 and $0.8 million, respectively, for severance and other employee termination and benefit costs associated with several management changes and the elimination of various positions as part of cost reduction objectives, and $0.2 million and $2.4 million, respectively, related to professional service costs related to restructuring, process improvements, shareholder activist activities, and costs related to liabilities for a facility closure.

Operating (Loss) Income

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 % of

Sales October 26, 2019 % of

Sales October 31, 2020 % of

Sales October 26, 2019 % of

Total Operating Income (Loss) $ 6,733 1.2% $ 56,431 7.3% $ (52,182) (6.5)% $ 12,619 1.2%

Our operating income was $6.7 million during the 13 weeks ended October 31, 2020, compared to an operating income of $56.4 million during the 13 weeks ended October 26, 2019.

The decrease in operating income is due to the matters discussed above.

For the 13 weeks ended October 31, 2020, excluding the $3.4 million of restructuring and other charges, discussed above, operating income was $10.1 million (or 1.7%).

For the 13 weeks ended October 26, 2019, excluding the $1.6 million of restructuring and other charges, discussed above, operating income was $58.0 million (or 7.5% of sales).

Our operating loss was $(52.2) million during the 26 weeks ended October 31, 2020, compared to an operating income of $12.6 million during the 26 weeks ended October 26, 2019.

Dollars in thousands January 30, 2021 % of

Sales January 25, 2020 % of

Sales January 30, 2021 % of

Sales January 25, 2020 % of

Total Operating (Loss) Income $ (64,702) (15.6)% $ (2,971) (0.5)% $ (116,884) (9.6)% $ 9,648 0.7%

Our operating loss was $(64.7) million during the 13 weeks ended January 30, 2021, compared to an operating loss of $(3.0) million during the 13 weeks ended January 25, 2020.

The increase in operating loss is due to the matters discussed above.

For the 13 weeks ended January 30, 2021, excluding the $27.6 million of impairment loss (non-cash) and the $1.7 million of restructuring and other charges, discussed above, operating loss was $(35.4) million (or 8.6% of sales).

For the 13 weeks ended January 25, 2020, excluding the $0.2 million of restructuring and other charges, discussed above, operating loss was $(2.8) million (or 0.6% of sales).

Our operating loss was $(116.9) million during the 39 weeks ended January 30, 2021, compared to an operating income of $9.6 million during the 39 weeks ended January 25, 2020.

The decrease in operating income is due to the matters discussed above.

For the 26 weeks ended October 31, 2020, excluding the $9.1 million of restructuring and other charges, discussed above, operating loss was $(43.1) million (or 5.4%).

For the 26 weeks ended October 26, 2019, excluding the $3.0 million of restructuring and other charges and impairment loss (non-cash) of $0.4 million, discussed above, operating income was $16.1 million (or 1.5% of sales).

For the 39 weeks ended January 30, 2021, excluding the impairment loss (non-cash) of $27.6 million and the $10.7 million of restructuring and other charges, discussed above, operating loss was $(78.5) million (or 6.5%).

For the 39 weeks ended January 25, 2020, excluding the $3.2 million of restructuring and other charges and impairment loss (non-cash) of $0.4 million, discussed above, operating income was $13.3 million (or 0.8% of sales).

Interest Expense, Net

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Interest Expense, Net $ 2,311 $ 1,904 $ 5,876 $ 5,882

Net interest expense decreased by $0.5 million, or 36.9%, to $0.9 million during the 13 weeks ended October 31, 2020 from $1.4 million during the 13 weeks ended October 26, 2019.

Net interest expense decreased by $0.4 million, or 10.4%, to $3.6 million during the 26 weeks ended October 31, 2020 from $4.0 million during the 26 weeks ended October 26, 2019.

The decrease was primarily due to lower interest rates and lower net borrowings compared to the prior year.

Net interest expense increased by $0.4 million, or 21.4%, to $2.3 million during the 13 weeks ended January 30, 2021 from $1.9 million during the 13 weeks ended January 25, 2020.

Net interest expense remained flat at $5.9 million during both the 39 weeks ended January 30, 2021 and January 25, 2020.

Income Tax (Benefit) Expense

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 Effective Rate October 26, 2019 Effective Rate October 31, 2020 Effective Rate October 26, 2019 Effective Rate

Dollars in thousands January 30, 2021 Effective Rate January 25, 2020 Effective Rate January 30, 2021 Effective Rate January 25, 2020 Effective Rate

Income Tax (Benefit) Expense $ (18,724) 27.9% $ (3,182) 65.3% $ (35,334) 28.8% $ 1,683 44.7%

We recorded an income tax benefit of $(1.7) million on pre-tax income of $5.8 million of during the 13 weeks ended October 31, 2020, which represented an effective income tax rate of (29.1)% and we recorded income tax expense of $19.1 million on a pre-tax income of $55.0 million during the 13 weeks ended October 26, 2019, which represented an effective income tax rate of 34.7%.

We recorded an income tax benefit of $(16.6) million on a pre-tax loss of $(55.7) million of during the 26 weeks ended October 31, 2020, which represented an effective income tax rate of 29.8% and we recorded income tax expense of $4.9 million on pre-tax income of $8.6 million during the 26 weeks ended October 26, 2019, which represented an effective income tax rate of 56.3%.

The effective tax rate for the 13 and 26 weeks ended October 31, 2020 is lower as compared to the comparable prior year due to permanent differences and the impact of benefits available to the Company as a result of the CARES Act in the current year.

Net Income (Loss)

We recorded an income tax benefit of $(18.7) million on a pre-tax loss of $(67.0) million of during the 13 weeks ended January 30, 2021, which represented an effective income tax rate of 27.9% and we recorded an income tax benefit of $(3.2) million on a pre-tax loss of $(4.9) million during the 13 weeks ended January 25, 2020, which represented an effective income tax rate of 65.3%.

We recorded an income tax benefit of $(35.3) million on a pre-tax loss of $(122.8) million of during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8% and we recorded income tax expense of $1.7 million on pre-tax income of $3.8 million during the 39 weeks ended January 25, 2020, which represented an effective income tax rate of 44.7%.

The effective tax rate for the 13 and 39 weeks ended January 30, 2021 is lower as compared to the comparable prior year due to permanent differences.

Net (Loss) Income

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Net income (loss) $ 7,515 $ 35,931 $ (39,137) $ 3,776

As a result of the factors discussed above, net income was $7.5 million during the 13 weeks ended October 31, 2020, compared with net income of $35.9 million during the 13 weeks ended October 26, 2019 and net loss was $(39.1) million

during the 26 weeks ended October 31, 2020, compared with net income of $3.8 million during the 26 weeks ended October 26, 2019.

Adjusted Earnings (non-GAAP) is $11.1 million during the 13 weeks ended October 31, 2020, compared with $37.8 million during the 13 weeks ended October 26, 2019 and Adjusted Earnings (non-GAAP) is $(30.6) million during the 26 weeks ended October 31, 2020, compared with $7.8 million during the 26 weeks ended October 26, 2019.

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

As a result of the factors discussed above, net loss was $(48.3) million during the 13 weeks ended January 30, 2021, compared with net loss of $(1.7) million during the 13 weeks ended January 25, 2020 and net loss was $(87.4) million during the 39 weeks ended January 30, 2021, compared with net income of $2.1 million during the 39 weeks ended January 25, 2020.

Adjusted Earnings (non-GAAP) is $(25.6) million during the 13 weeks ended January 30, 2021, compared with $(0.7) million during the 13 weeks ended January 25, 2020 and Adjusted Earnings (non-GAAP) is $(56.2) million during the 39 weeks ended January 30, 2021, compared with $7.0 million during the 39 weeks ended January 25, 2020.

See Adjusted Earnings (non-GAAP) discussion below.

15 unchanged sentences

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Net income (loss) $ 7,515 $ 35,931 $ (39,137) $ 3,776

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

Reconciling items, after-tax (below)

16 unchanged sentences

13 weeks ended 39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019 October 31, 2020 October 26, 2019

Net income (loss) $ 7,515 $ 35,931 $ (39,137) $ 3,776

Dollars in thousands January 30, 2021 January 25, 2020 January 30, 2021 January 25, 2020

Net (loss) income $ (48,289) $ (1,693) $ (87,426) $ 2,083

Depreciation and amortization expense 13,307 15,117 40,563 46,542

4 unchanged sentences

Impairment loss (non-cash) (a)

27,630 — 27,630 433

Restructuring and other charges (a)

3 unchanged sentences

(a) See Management Discussion and Analysis and Results of Operations discussion above.

The following is Adjusted EBITDA by segment for the 13 and 26 weeks ended October 31, 2020 and October 26, 2019.

Adjusted EBITDA - by Segment 13 weeks ended October 31, 2020

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January 30, 2021 and January 25, 2020.

Adjusted EBITDA - by Segment 13 weeks ended January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

6 unchanged sentences

Adjusted EBITDA (non-GAAP) $ (22,222) $ 6,322 $ 1,005 $ (6,491) $ 604 $ (20,782)

Adjusted EBITDA - by Segment 13 weeks ended October 26, 2019

Adjusted EBITDA - by Segment 13 weeks ended January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

6 unchanged sentences

Adjusted EBITDA (non-GAAP) $ 8,140 $ 9,923 $ 1,150 $ (5,154) $ (644) $ 13,415

Adjusted EBITDA - by Segment 26 weeks ended October 31, 2020

Adjusted EBITDA - by Segment 39 weeks ended January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

6 unchanged sentences

Adjusted EBITDA (non-GAAP) $ (44,538) $ 25,856 $ 3,358 $ (17,236) $ (1,704) $ (34,264)

Adjusted EBITDA - by Segment 26 weeks ended October 26, 2019

Adjusted EBITDA - by Segment 39 weeks ended January 25, 2020

Dollars in thousands Retail Wholesale DSS Corporate Services Elimination (b)

6 unchanged sentences

Adjusted EBITDA (non-GAAP) $ 49,220 $ 28,024 $ 2,492 $ (15,829) $ (1,071) $ 62,836

(a) For the 13 weeks ended October 31, 2020, gross margin excludes $0.2 million and $1.0 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 26 weeks ended October 31, 2020, gross margin excludes $0.4 million and $2.0 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 13 weeks ended October 26, 2019, gross margin excludes $0.2 million and $0.8 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 26 weeks ended October 26, 2019, gross margin excludes $0.4 million and $1.5 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

(a) For the 13 weeks ended January 30, 2021, gross margin excludes $0.2 million and $1.1 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 39 weeks ended January 30, 2021, gross margin excludes $0.6 million and $3.1 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 13 weeks ended January 25, 2020, gross margin excludes $0.2 million and $0.9 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

For the 39 weeks ended January 25, 2020, gross margin excludes $0.6 million and $2.4 million of amortization expense (non-cash) related to content development costs in the Retail Segment and DSS Segment, respectively.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

1 unchanged sentence

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing.

As of October 31, 2020, we had $99.5 million outstanding borrowings under the Credit Agreement.

As of January 30, 2021, we had $150.8 million outstanding borrowings under the Credit Agreement.

See Financing Arrangements discussion below.

COVID-19 Impact

Our business experienced an unprecedented and significant impact as a result of COVID-19 related campus store closures.

5 unchanged sentences

Fewer students returned to campus this fall, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

Fewer students have returned to campus, as many schools implemented a remote learning model and curtailed on-campus classes and activities.

Additionally, sales were impacted by overall enrollment declines in higher education.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Evaluation of Goodwill and Other Long-Lived Assets related to the impairment loss (non-cash) recognized during the 13 weeks ended January 30, 3021.

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

Certain elements of this plan were implemented in late Fiscal 2020, while other actions are planned for Fiscal 2021.

Certain elements of this plan were implemented in late Fiscal 2020, while other actions are planned for

We anticipate meaningful annualized cost savings from this program, the majority of which is expected to be realized beginning in Fiscal 2021.

The first half of Fiscal 2021 was significantly impacted by COVID-19 related campus store closures, as well as lower enrollments due to COVID-19 and fewer on campus events.

We cannot accurately predict the

duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business operations.

We cannot accurately predict the duration or extent of the impact of COVID-19 on enrollments, university budgets, athletics and other areas that directly affect our business operations.

There is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic.

We believe that our future cash from operations, access to borrowings under the Credit Facility, FILO Facility and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the foreseeable future.

3 unchanged sentences

There can be no assurances that we will have access to capital markets on acceptable terms.

Sale of Treasury Shares

In December 2020, we entered into a new merchandising partnership with Fanatics and FLC which included a strategic equity investment in the Company.

Fanatics, Inc.

and Lids Holdings, Inc.

jointly purchased an aggregate 2,307,692 of our common shares (issued from treasury shares) for $15 million, representing a share price of $6.50 per share.

The premium price paid above the fair market value of our common stock at closing was approximately $4.1 million and was recognized as a contract liability ($0.2 million in accrued liabilities and $3.9 million in other long-term liabilities on our condensed consolidated balance sheet) which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC.

We expect to use these proceeds for general corporate purposes.

Additionally, FLC has agreed to purchase our logo and emblematic general merchandise inventory, which we expect to be finalized during our fiscal 2021 fourth quarter.

For additional information regarding the merchandising partnership, see Item 1.

Financial Statements - Note 1.

Organization - Partnership with Fanatics and FLC and Note 7.

EPS and Earnings Per Share - Sale of Treasury Shares.

Sources and Uses of Cash Flow

39 weeks ended

Dollars in thousands October 31, 2020 October 26, 2019

Dollars in thousands January 30, 2021 January 25, 2020

Cash, cash equivalents, and restricted cash at beginning of period $ 9,008 $ 14,768

11 unchanged sentences

These shifts in timing may affect the comparability of our results across periods.

Cash flows provided by operating activities during the 26 weeks ended October 31, 2020 were $88.1 million compared to $161.4 million during the 26 weeks ended October 26, 2019.

This decrease in cash provided by operating activities of $73.3 million was primarily due to lower net income compared to the prior year and changes in inventory and working capital.

Cash flows provided by operating activities during the 39 weeks ended January 30, 2021 were $41.6 million compared to $92.0 million during the 39 weeks ended January 25, 2020.

This decrease in cash provided by operating activities of $50.4 million was primarily due to a net loss in current year period compared to net income in the prior year period, an increase in other long-term liabilities due to sale of treasury shares at a premium (discussed above), and changes in inventory and working capital.

As discussed above, our operations were highly impacted by COVID-19 related campus store closures.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 26 weeks ended October 31, 2020 were $(13.0) million compared to $(16.1) million during the 26 weeks ended October 26, 2019.

Cash flows used in investing activities during the 39 weeks ended January 30, 2021 were $(26.0) million compared to $(27.3) million during the 39 weeks ended January 25, 2020.

The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems, renewing existing contracts and new store construction and lower payments to acquire businesses and the change in other noncurrent assets for contractual obligations.

Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website.

Capital expenditures totaled $16.2 million and $19.3 million during the 26 weeks ended October 31, 2020 and October 26, 2019, respectively.

Capital expenditures totaled $25.9 million and $26.8 million during the 39 weeks ended January 30, 2021 and January 25, 2020, respectively.

Cash Flow from Financing Activities

Cash flows used in financing activities during the 26 weeks ended October 31, 2020 were $(76.1) million compared to $(134.8) million during the 26 weeks ended October 26, 2019.

This net change of $58.7 million is primarily due to lower net borrowings under the credit agreement.

Cash flows used in financing activities during the 39 weeks ended January 30, 2021 were $(13.9) million compared to $(68.9) million during the 39 weeks ended January 25, 2020.

This net change of $55.0 million is primarily due to lower net borrowings under the credit agreement and the sale of treasury shares of $10.9 million (discussed above).

Financing Arrangements

3 unchanged sentences

The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100 million incremental facility maintaining the maximum availability under the Credit Agreement at $500 million.

On March 2, 2020, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2020, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $90 million.

During the 26 weeks ended October 31, 2020, we borrowed $330.8 million and repaid $406.0 million under the Credit Agreement, with $99.5 million of outstanding borrowings as of October 31, 2020, comprised entirely of outstanding borrowings under the Credit Facility.

During the 26 weeks ended October 26, 2019, we borrowed $150.0 million and repaid $283.5 million under the Credit Agreement.

There were no outstanding borrowings as of October 26, 2019 under the Credit Facility and FILO Facility.

As of both October 31, 2020 and October 26, 2019, we have issued $4.8 million in letters of credit under the Credit Facility.

During the 39 weeks ended January 30, 2021, we borrowed $547.6 million and repaid $571.5 million under the Credit Agreement, with $150.8 million of outstanding borrowings as of January 30, 2021, comprised entirely of outstanding borrowings under the Credit Facility.

During the 39 weeks ended January 25, 2020, we borrowed $383.4 million and repaid $451.0 million under the Credit Agreement, with $65.9 million of outstanding borrowings as of January 25, 2020, comprised entirely of outstanding borrowings under the Credit Facility.

As of both January 30, 2021 and January 25, 2020, we have issued $4.8 million in letters of credit under the Credit Facility.

For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7.

1 unchanged sentence

Income Tax Implications on Liquidity

As of October 31, 2020, other long-term liabilities includes $25.7 million related to the long-term tax payable associated with the LIFO reserve.

As of January 30, 2021, other long-term liabilities includes $25.7 million related to the long-term tax payable associated with the LIFO reserve.

The LIFO reserve is impacted by changes in the consumer price index ("CPI") and is dependent on the inventory levels at the end of our tax year (on or about January 31st) which is in the middle of our second largest selling cycle.

7 unchanged sentences

Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

During the 26 weeks ended October 31, 2020, we did not repurchase any of our Common Stock under the stock repurchase program.

As of October 31, 2020, approximately $26.7 million remains available under the stock repurchase program.

During the 26 weeks ended October 31, 2020, we repurchased 410,560 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 39 weeks ended January 30, 2021, we did not repurchase any of our Common Stock under the stock repurchase program.

As of January 30, 2021, approximately $26.7 million remains available under the stock repurchase program.

During the 39 weeks ended January 30, 2021, we repurchased 414,174 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

2 unchanged sentences

Off-Balance Sheet Arrangements

As of October 31, 2020, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

As of January 30, 2021, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

55 unchanged sentences

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