What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-31 compared with 2022-03-08 · 219 added, 399 removed, 405 unchanged (60% of the section changed)

8 unchanged sentences

We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions.

We operate 1,441 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content and tools within a dynamic omnichannel retail environment.

We operate 1,406 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

3 unchanged sentences

(“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership.

We expect gross general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership.

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

We believe the Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States.

The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States.

Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

For additional information related to our business, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

First Day Inclusive Access Programs

3 unchanged sentences

• First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials.

The First Day Complete model drives substantially greater unit sell-through for the bookstore.

The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

Offering courseware sales through our inclusive access First Day and First Day Complete models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

9 unchanged sentences

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

In December 2020, Fanatics, Inc.

and Lids Holdings, Inc.

jointly made a strategic equity investment in BNED.

On April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC, which was finalized during the first quarter of Fiscal 2022.

As contemplated by the FLC Partnership's e-commerce agreement, we began to transition certain of our e-commerce sites to Fanatics e-commerce sites for logo and emblematic products during the first quarter of Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic general merchandise sales on a gross basis in the prior year.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories .

COVID-19 Business Impact

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

Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders.

By mid-March, during our Fiscal 2020 fourth quarter, we closed the majority of our physical campus stores to protect the health and safety of our customers and employees.

While our campus stores were closed, we continued to serve institutions and students through our campus websites, providing free shipping on all orders and an expanded digital content offering to provide immediate access to course materials to students at our campuses that closed due to COVID-19.

We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

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

Although most four year schools returned to a traditional on-campus environment for learning in the Fall semester, as well as hosted traditional on campus sporting activities , there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

As we entered the Spring rush period in early January 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities.

In early January, while the majority of schools brought students back to campus, some schools chose to conduct classes virtually for the beginning of the semester, while other schools chose to delay their start dates (and some schools both delayed the start of the semester and started classes virtually), thus reducing and/or delaying sales later into the quarter or shifting some sales to our fourth quarter.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers.

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.

For additional information, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

We have three reportable segments:

1 unchanged sentence

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information

distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance.

The following summarizes the three segments.

For additional information about each segment's operations, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 .

Retail Segment

1 unchanged sentence

Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products.

The majority of the physical campus bookstores have school-branded e-commerce sites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The Retail Segment also offers inclusive access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class.

4 unchanged sentences

Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 350 college bookstores.

The Digital Student Solutions (“DSS”) Segment includes direct-to-student products and services to assist students to study more effectively and improve academic performance.

The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby ® , a direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

The Digital Student Solutions (“DSS”) Segment includes products and services to assist students to study more effectively and improve academic performance.

The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby ® , an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

14 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 were required to cease in-person classes in an attempt to limit the spread of the COVID-19 virus and ensure the safety of their students.

Although many academic institutions have reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and

significantly reduced classroom sizes.

economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors.

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

Although many academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

While many athletic conferences resumed their sport activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed.

Additionally, our business, like many others has been affected by the challenging labor market and the ability to recruit employees.

1 unchanged sentence

Retail general merchandise sales are subject to short-term fluctuations driven by the broader retail environment and other economic factors, such as interest rate fluctuations and inflationary considerations.

The broader macro-economic global supply chain issues has impacted our ability to source school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

The broader macro-economic global supply chain issues have impacted our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

A significant reduction in U.S.

economic activity could lead to decreased consumer spending.

• Enrollment Trends:

1 unchanged sentence

We continue to see downward enrollment trends.

Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g.

low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce.

Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce.

Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses.

A significant reduction in U.S.

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.

5 unchanged sentences

Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.

We continue to invest in data protection and information technology to prevent or minimize these risks and, to date, we have not experienced any material service interruptions and are not aware of any material breaches.

We continue to invest in data protection, including insurance, and information technology to prevent or minimize these risks and, to date, we have not experienced any material service interruptions and are not aware of any material breaches.

• Distribution Network Evolving.

18 unchanged sentences

We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business.

We also expect that certain less

profitable or essential bookstores we operate may close.

We also expect that certain less profitable or essential bookstores we operate may close.

Such stores could be included in contracts for stores we operate that may be deemed non-essential;

2 unchanged sentences

For additional discussion of our trends and other factors affecting our business, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the year ended May 1, 2021.

Business in our Annual Report on Form 10-K for the year ended April 30, 2022.

Elements of Results of Operations

7 unchanged sentences

Our selling and administrative expenses consist primarily of store payroll and store operating expenses.

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based services business.

subscription-based services business.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

Results of Operations - Summary

13 weeks ended 39 weeks ended

Dollars in thousands January 29,

2022 January 30,

2021 January 29,

2022 January 30,

Product sales and other $ 377,713 $ 373,502 $ 1,182,812 $ 1,118,544

13 weeks ended

Dollars in thousands July 30,

2022 July 31,

Product sales and other (a)

$ 252,946 $ 227,770

Rental income 10,912 13,024

1 unchanged sentence

Net loss $ (52,707) $ (43,628)

Adjusted Earnings (non-GAAP) (a)

Adjusted Earnings (non-GAAP) (b)

$ (50,755) $ (40,014)

Adjusted EBITDA by Segment (non-GAAP) (a)

Adjusted EBITDA by Segment (non-GAAP) (b)

Retail $ (24,985) $ (19,622)

4 unchanged sentences

Total Adjusted EBITDA (non-GAAP) $ (33,421) $ (24,497)

(a) Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures.

(a) Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

For Retail Gross Comparable Store Sales details, see below.

(b) Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures.

See Use of Non-GAAP Measures discussion below.

The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:

13 weeks ended 39 weeks ended

2022 January 30,

2021 January 29,

2022 January 30,

13 weeks ended

2022 July 31,

Product sales and other 95.9 % 94.6 %

3 unchanged sentences

Product and other cost of sales (a)

78.8 84.5 78.2 83.5

Rental cost of sales (a)

72.3 66.6 60.5 65.4

Total cost of sales 75.9 75.1

2 unchanged sentences

Depreciation and amortization expense 4.7 5.2

Impairment loss (non-cash) 1.6 6.7 0.5 2.3

Restructuring and other charges 0.1 0.8

1 unchanged sentence

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

Results of Operations - 13 and 39 weeks ended January 29, 2022 compared with the 13 and 39 weeks ended January 30, 2021

13 weeks ended January 29, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 349,655 $ 37,039 $ 9,430 $ — $ (18,411) $ 377,713

Rental income 25,085 — — — — 25,085

Total sales 374,740 37,039 9,430 — (18,411) 402,798

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales 287,435 28,935 1,498 — (20,175) 297,693

Rental cost of sales 18,144 — — — — 18,144

Total cost of sales 305,579 28,935 1,498 — (20,175) 315,837

Gross profit 69,161 8,104 7,932 — 1,764 86,961

Selling and administrative expenses 84,626 3,941 7,775 5,154 (36) 101,460

Depreciation and amortization expense 8,939 1,396 1,826 18 — 12,179

(24,404) 2,767 (1,669) (5,172) 1,800 (26,678)

Impairment loss (non-cash) 6,411 — — — — 6,411

Restructuring and other charges 30 — — 16 — 46

Operating (loss) income $ (30,845) $ 2,767 $ (1,669) $ (5,188) $ 1,800 $ (33,135)

13 weeks ended January 30, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 349,558 $ 39,465 $ 7,206 $ — $ (22,727) $ 373,502

Rental income 38,111 — — — — 38,111

Total sales 387,669 39,465 7,206 — (22,727) 411,613

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales 308,752 28,807 1,324 — (23,276) 315,607

Rental cost of sales 25,394 — — — — 25,394

Total cost of sales 334,146 28,807 1,324 — (23,276) 341,001

Gross profit 53,523 10,658 5,882 — 549 70,612

Selling and administrative expenses 75,921 4,336 6,015 6,491 (55) 92,708

Depreciation and amortization expense 9,806 1,614 1,863 24 — 13,307

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

Impairment loss (non-cash) 27,630 — — — — 27,630

Restructuring and other charges 162 — 571 936 — 1,669

Operating (loss) income $ (59,996) $ 4,708 $ (2,567) $ (7,451) $ 604 $ (64,702)

39 weeks ended January 29, 2022

Results of Operations - 13 weeks ended July 30, 2022 compared with the 13 weeks ended July 31, 2021

13 weeks ended July 30, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

10 unchanged sentences

(34,540) 1,419 (2,299) (7,232) (4,879) (47,531)

Impairment loss (non-cash) 6,411 — — — — 6,411

Restructuring and other charges — — — 375 — 375

Operating (loss) income $ (34,540) $ 1,419 $ (2,299) $ (7,607) $ (4,879) $ (47,906)

39 weeks ended January 30, 2021

13 weeks ended July 31, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

10 unchanged sentences

(29,629) 5,114 (1,316) (7,462) (5,537) (38,830)

Impairment loss (non-cash) 27,630 — — — — 27,630

Restructuring and other charges 1,008 — — 897 — 1,905

Operating (loss) income $ (30,637) $ 5,114 $ (1,316) $ (8,359) $ (5,537) $ (40,735)

The following table summarizes our sales for the 13 and 39 weeks ended January 29, 2022 and January 30, 2021:

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 % January 29, 2022 January 30, 2021 %

The following table summarizes our sales for the 13 weeks ended July 30, 2022 and July 31, 2021:

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021 %

Product sales and other $ 252,946 $ 227,770 11.1%

1 unchanged sentence

Total Sales $ 263,858 $ 240,794 9.6%

Sales decreased by $8.8 million, or 2.1%, to $402.8 million during the 13 weeks ended January 29, 2022 from $411.6 million during the 13 weeks ended January 30, 2021.

The decrease is related to lower course material sales primarily due to lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings in response to the latest COVID variant.

The decrease in sales is also due to lower logo and emblematic sales as they are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

For additional information, see Retail Sales discussion below.

Sales increased by $59.5 million, or 4.9%, to $1,270.6 million during the 39 weeks ended January 29, 2022 from $1,211.1 million during the 39 weeks ended January 30, 2021.

The sales increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

The increase is offset by lower sales primarily due to lower enrollments, primarily at community colleges and by international students, the continuation of remote and hybrid class offerings and lower logo and emblematic sales as they are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

For additional information, see Retail Sales discussion below.

The components of the variances for the 13 and 39 week periods are reflected in the table below.

Sales variances 13 weeks ended 39 weeks ended

Dollars in millions January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Sales increased by $23.1 million, or 9.6%, to $263.9 million during the 13 weeks ended July 30, 2022 from $240.8 million during the 13 weeks ended July 31, 2021.

The sales increase is primarily related to higher general merchandise sales as many schools approach a more traditional on campus learning experience.

The components of the variances for the 13 week periods are reflected in the table below.

Sales variances 13 weeks ended

Dollars in millions July 30, 2022 July 31, 2021

New stores $ 11.8 $ 10.3

1 unchanged sentence

Comparable stores (a)

(10.2) (83.3) 57.2 (384.0)

Textbook rental deferral (1.2) 0.2

Service revenue (b)

(2.1) 1.8 (2.0) (1.9)

1.0 0.6 (1.1) 2.2

Retail sales subtotal:

3 unchanged sentences

Eliminations (d)

$ 4.3 $ 6.3 $ 34.3 $ (10.2)

Total sales variance:

3 unchanged sentences

(“FLC”) (collectively referred to herein as the “FLC Partnership”).

Effective April 4, 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 202 1.

Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics.

The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

For Retail Gross Comparable Store Sales details, see below.

3 unchanged sentences

See discussion of intercompany activities and eliminations below.

Retail sales decreased by $12.9 million, or 3.3%, to $374.7 million during the 13 weeks ended January 29, 2022 from $387.7 million during the 13 weeks ended January 30, 2021.

Retail sales increased by $71.2 million, or 6.3%, to $1,194.2 million during the 39 weeks ended January 29, 2022 from $1,123.0 million during the 39 weeks ended January 30, 2021.

Retail added 82 new stores and closed 58 stores during the 39 weeks ended January 29, 2022, ending the period with a total of 1,441 stores.

13 weeks ended 39 weeks ended

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Retail sales increased by $26.0 million, or 12.4%, to $236.5 million during the 13 weeks ended July 30, 2022 from $210.5 million during the 13 weeks ended July 31, 2021.

The comparability of Products and other sales, specifically logo and emblematic sales, is impacted by the recognition of logo and emblematic sales on a net basis in our condensed consolidated financial statements during the 13 weeks ended July 30, 2022, as compared to on a gross basis for the majority of our e-commerce websites during the 13 weeks ended July 31, 2021.

See the Retail Gross Comparable Store Sales discussion below.

Retail added 40 new stores and closed 61 stores during the 13 weeks ended July 30, 2022, ending the period with a total of 1,406 stores.

Many of the store closings relate to closing less profitable stores, including satellite store locations.

13 weeks ended

July 30, 2022 July 31, 2021

Number of Stores:

Physical Virtual Physical Virtual Physical Virtual Physical Virtual

Physical Virtual Physical Virtual

Number of stores at beginning of period 805 622 769 648

2 unchanged sentences

Number of stores at end of period 793 613 784 645

Product and other sales and Rental income are impacted by comparable store sales, the growth of First Day Complete, new store openings and store closings, as well as the impact from the COVID-19 pandemic.

Sales were impacted by overall enrollment declines in higher education.

Although most four year schools returned to a traditional on-campus environment for learning in the Fall semester, as well as hosted traditional on campus sporting activities, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, and the continuation of remote and hybrid class offerings.

While many conferences resumed their sport activities, other on campus events, such as Parent's Weekends or Alumni events, continue to be either eliminated or severely

restricted, which further impacted the company’s general merchandise business.

Product and other sales for Retail for the 13 weeks ended January 29, 2022 remained flat at $349.6 million during the 13 weeks ended January 30, 2021.

Rental income for Retail for the 13 weeks ended January 29, 2022 decreased by $13.0 million, or 34.2% to $25.1 million from $38.1 million during the 13 weeks ended January 30, 2021.

During the 13 weeks ended January 29, 2022, course material sales and rentals were impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings, which was somewhat mitigated by the growth of First Day Complete.

Product and other sales for Retail for the 39 weeks ended January 29, 2022 increased by $76.0 million, or 7.4% to $1,106.4 million from $1,030.4 million during the 39 weeks ended January 30, 2021.

Rental income for Retail for the 39 weeks ended January 29, 2022 decreased by $4.8 million, or 5.2% to $87.8 million from $92.6 million during the 39 weeks ended January 30, 2021.

The overall Retail sales increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Course material sales were also impacted by to lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

During the 13 weeks ended January 29, 2022, Retail Gross Comparable Store textbook sales decreased by 4.0%, as compared to an 8.1% decline a year ago.

During the 39 weeks ended January 29, 2022, Retail Gross Comparable Store textbook sales increased by 2.0%, as compared to a 14.3% decline a year ago, when the majority of our stores had temporarily closed due to the COVID-19 pandemic.

Product and other sales for Retail increased by $28.1 million, or 14.3%, to $225.6 million during the 13 weeks ended July 30, 2022 from $197.5 million during the 13 weeks ended July 31, 2021.

During the 13 weeks ended July 30, 2022, total general merchandise product sales increased by $23.4 million, or 35.8%, to $88.8 million, total course material product sales increased by $5.3 million, or 4.3%, to $127.5 million, offset by a decrease in service and other revenue of $0.5 million, or 5.4%, to $9.3 million.

Total course material rental income for Retail decreased by $2.1 million, or 16.2%, to $10.9 million during the 13 weeks ended July 30, 2022 from $13.0 million during the 13 weeks ended July 31, 2021 primarily due to the shift to more digital course materials.

The overall Retail sales increase is primarily related to revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, alumni events and prospective student campus tours, as schools approach a more traditional campus experience.

We continued to experience higher general merchandise sales, especially for graduation products, logo and emblematic products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

Sales were also negatively impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

During the 13 weeks ended July 30, 2022, logo and emblematic sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis for the majority of our e-commerce websites during the 13 weeks ended July 31, 2021.

See Retail Gross Comparable Store Sales discussion below.

Course material declines were mitigated by the growth of First Day (our inclusive access program), digital and eTextbook revenue increases, due to a shift to lower cost options and more affordable solutions, including digital offerings.

For the 2022 Spring term, First Day Complete was offered through 76 campus bookstores compared to 14 campus bookstores in the prior year, at schools with over 380,000 in total undergraduate enrollment, up from approximately 62,000 in total undergraduate enrollment in the 2021 Spring term.

Revenue for both of our First Day models increased to $76.1 million during the third quarter of Fiscal 2022, as compared to $46.4 million in the prior year period.

Revenue for both of our First Day models increased to $199.2 million during Fiscal 2022, as compared to $108.9 million in the prior year period.

During the 13 and 39 weeks ended January 29, 2022, logo and emblematic sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the prior year period.

During the 13 weeks ended July 30, 2022, Retail Gross Comparable Store general merchandise sales increased by 34.0%.

During the 13 weeks ended July 30, 2022, Retail Gross Comparable Store course material sales increased by 1.5%.

See Retail Gross Comparable Store Sales discussion below.

During the 13 weeks ended January 29, 2022, Retail Gross Comparable Store general merchandise sales increased by 59.1%, as compared to a 45.8% decline a year ago.

During the 39 weeks ended January 29, 2022, Retail Gross Comparable Store general merchandise sales increased by 82.0%, as compared to a 54.9% decline a year ago.

Both results during both periods benefited greatly from the return to an on campus learning experience and the resumption of many activities and events.

Sales for general merchandise, including on-campus cafe and convenience products, and trade merchandise have increased compared to the prior year, when sales were impacted by the temporary store closings due to the COVID-19 pandemic.

However, general merchandise sales are still impacted by fewer students returning to campus, as many schools implemented a remote or hybrid learning model and curtailed on-campus classes and activities.

The increase in course material sales was reflective of the growth of First Day inclusive access programs, digital and eTextbook revenue increases, due to a shift to lower cost options and more affordable solutions, including digital offerings.

During the 13 weeks ended July 30, 2022, revenue for both of our First Day models increased to $45.0 million, or 67%, as compared to $27.0 million in the prior year period.

Retail Gross Comparable Store Sales

2 unchanged sentences

For Retail Gross Comparable Store Sales, sales for logo and emblematic general merchandise fulfilled by FLC, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to April 4, 2021.

The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time.

We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-

Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry.

As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Retail Gross Comparable Store Sales variances for Retail by category for the 13 and 39 week periods are as follows:

13 weeks ended 39 weeks ended

Dollars in millions January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Retail Gross Comparable Store Sales variances for Retail by category for the 13 week periods are as follows:

13 weeks ended

Dollars in millions July 30, 2022 July 31, 2021

Textbooks (Course Materials) $ 1.9 1.5 % $ 23.1 21.9 %

General Merchandise 31.6 34.0 % 50.5 119.4 %

Trade Books 1.6 48.5 % (5.5) (61.1) % 5.0 61.6 % (19.4) (69.3) %

Total Retail Gross Comparable Store Sales $ 33.5 15.0 % $ 73.6 49.8 %

Consistent with prior years and further exacerbated by some delayed start dates, the Spring Rush period extended beyond the quarter into the fourth quarter.

Factoring in the fiscal month of February into the third quarter, which includes rental deferred revenue for our First Day programs, Retail gross comparable store sales increased by approximately 18.8%.

Wholesale sales decreased by $2.4 million, or 6.1% to $37.0 million during the 13 weeks ended January 29, 2022 from $39.5 million during the 13 weeks ended January 30, 2021.

Wholesale sales decreased by $53.0 million, or 33.9% to $103.2 million during the 39 weeks ended January 29, 2022 from $156.1 million during the 39 weeks ended January 30, 2021.

The decrease is primarily due to lower gross sales impacted by the COVID-19 pandemic, including supply constraints resulting from the lack of on campus textbook buyback opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by lower returns and allowances.

During the prior year period, 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, whereas the sales shifted back to the physical bookstores in the current period.

DSS total sales increased by $2.2 million, or 30.9% to $9.4 million during the 13 weeks ended January 29, 2022 from $7.2 million during the 13 weeks ended January 30, 2021.

DSS total sales increased by $7.0 million, or 36.7% to $26.0 million during the 39 weeks ended January 29, 2022 from $19.0 million during the 39 weeks ended January 30, 2021.

Wholesale sales decreased by $7.4 million, or 16.6% to $37.1 million during the 13 weeks ended July 30, 2022 from $44.5 million during the 13 weeks ended July 31, 2021.

The decrease is primarily due to lower gross sales impacted by supply constraints resulting from the lack of textbook purchasing opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by lower returns and allowances.

DSS total sales increased by $0.9 million, or 10.6% to $9.2 million during the 13 weeks ended July 30, 2022 from $8.3 million during the 13 weeks ended July 31, 2021.

Sales increased primarily due to an increase in subscription sales.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 78.4% during the 13 weeks ended January 29, 2022 compared to 82.8% during the 13 weeks ended January 30, 2021.

Our gross margin increased by $16.4 million, or 23.2%, to $87.0 million, or 21.6% of sales, during the 13 weeks ended January 29, 2022 from $70.6 million, or 17.2% of sales during the 13 weeks ended January 30, 2021.

Our cost of sales decreased as a percentage of sales to 77.0% during the 39 weeks ended January 29, 2022 compared to 82.1% during the 39 weeks ended January 30, 2021.

Our gross margin increased by $75.8 million, or 35.0%, to $292.5 million, or 23.0% of sales, during the 39 weeks ended January 29, 2022 from $216.7 million, or 17.9% of sales during the 39 weeks ended January 30, 2021.

During the 39 weeks ended January 29, 2022, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below.

Our cost of sales increased as a percentage of sales to 75.9% during the 13 weeks ended July 30, 2022 compared to 75.1% during the 13 weeks ended July 31, 2021.

Our gross margin increased by $3.5 million, or 5.8%, to $63.5 million, or 24.1% of sales, during the 13 weeks ended July 30, 2022 from $60.0 million, or 24.9% of sales during the 13 weeks ended July 31, 2021.

During the 13 weeks ended July 31, 2021, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below.

For additional information, see Item 1.

1 unchanged sentence

Summary of Significant Accounting Policies - Merchandise Inventories.

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January 29, 2022 and January 30, 2021:

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 % of

Related Sales January 30, 2021 % of

Related Sales January 29, 2022 % of

Related Sales January 30, 2021 % of

The following table summarizes the Retail cost of sales for the 13 weeks ended July 30, 2022 and July 31, 2021:

13 weeks ended

Dollars in thousands July 30, 2022 % of

Related Sales July 31, 2021 % of

Related Sales

5 unchanged sentences

$ 182,514 77.2% $ 162,326 77.1%

The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January 29, 2022 and January 30, 2021:

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 % of

Related Sales January 30, 2021 % of

Related Sales January 29, 2022 % of

Related Sales January 30, 2021 % of

The following table summarizes the Retail gross margin for the 13 weeks ended July 30, 2022 and July 31, 2021:

13 weeks ended

Dollars in thousands July 30, 2022 % of

Related Sales July 31, 2021 % of

Related Sales

4 unchanged sentences

$ 53,993 22.8% $ 48,143 22.9%

For the 13 weeks ended January 29, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

• Product and other gross margin increased (610 basis points), driven primarily by a favorable sales mix (450 basis points) due to higher general merchandise sales, higher margin rates (295 basis points) due to lower inventory reserves and lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (135 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (570 basis points), driven primarily by lower rental margin rates (1,380 basis points) and unfavorable rental mix (275 basis points), partially offset by lower contract costs as a percentage of sales related to our college and university contracts (1,080 basis points).

For the 39 weeks ended January 29, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

• Product and other gross margin increased (620 basis points), driven primarily by a favorable sales mix (465 basis points) due to higher general merchandise sales, higher margin rates (200 basis points) due to lower inventory reserves and lower markdowns, partially offset by higher 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 and an inventory merchandise loss of $0.4 million (5 basis points) related to the final sale of our logo and emblematic general merchandise inventory below cost to FLC.

• Rental gross margin increased (490 basis points), driven primarily by lower contract costs as a percentage of sales related to our college and university contracts (685 basis points) and a favorable rental mix (45 basis points), partially offset by lower rental margin rates (240 basis points).

The cost of sales and gross margin for Wholesale were $28.9 million, or 78.1% of sales, and $8.1 million, or 21.9% of sales, respectively, during the 13 weeks ended January 29, 2022.

The cost of sales and gross margin for Wholesale was $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 were $79.1 million, or 76.6% of sales, and $24.1 million, or 23.4% of sales, respectively, during the 39 weeks ended January 29, 2022.

The cost of sales and gross margin for Wholesale was $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 gross margin rate decreased during the 13 and 39 weeks ended January 29, 2022 primarily due to the unfavorable impact of returns and allowances and higher markdowns, partially offset by a favorable sales mix.

The gross margin for the DSS segment was $7.9 million, or 84.1% of sales, during the 13 weeks ended January 29, 2022 and $5.9 million, or 81.6% of sales, during the 13 weeks ended January 30, 2021.

The gross margin for the DSS segment was $21.9 million, or 84.1% of sales, during the 39 weeks ended January 29, 2022 and $15.3 million, or 80.4% of sales, during the 39 weeks ended January 30, 2021.

For the 13 weeks ended July 30, 2022, the Retail gross margin as a percentage of sales decreased as discussed below:

• Product and other gross margin increased (80 basis points), driven primarily by a favorable sales mix (340 basis points) due to higher general merchandise sales and higher margin rates (250 basis points) due to lower inventory reserves and lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (510 basis points) resulting from contract renewals and new store contracts.

• Rental gross margin decreased (670 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (555 basis points) resulting from contract renewals and new store contracts, an unfavorable rental mix (95 basis points) and lower rental margin rates (20 basis points).

The cost of sales and gross margin for Wholesale were $30.2 million, or 81.4% of sales, and $6.9 million, or 18.6% of sales, respectively, during the 13 weeks ended July 30, 2022.

The cost of sales and gross margin for Wholesale was $34.1 million or 76.6% of sales and $10.4 million or 23.4% of sales, respectively, during the 13 weeks ended July 31, 2021.

The gross margin rate decreased during the 13 weeks ended July 30, 2022 primarily due to higher markdowns.

The gross margin for the DSS segment was $7.5 million, or 81.5% of sales, during the 13 weeks ended July 30, 2022 and $7.0 million, or 84.7% of sales, during the 13 weeks ended July 31, 2021.

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

Intercompany Eliminations

During the 13 weeks ended January 29, 2022 and January 30, 2021, our sales eliminations were $(18.4) million and $(22.7) million, respectively.

During the 39 weeks ended January 29, 2022 and January 30, 2021, our sales eliminations were $(52.8) million and $(87.0) million, respectively.

During the 13 weeks ended July 30, 2022 and July 31, 2021, our sales eliminations were $(18.9) million and $(22.5) 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 January 29, 2022 and January 30, 2021, the cost of sales eliminations were $(20.2) million and $(23.3) million, respectively.

During the 39 weeks ended January 29, 2022 and January 30, 2021, the cost of sales eliminations were $(53.2) million and $(85.2) 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 January 29, 2022 and January 30, 2021, the gross margin eliminations were $1.8 million and $0.5 million, respectively.

During the 39 weeks ended January 29, 2022 and January 30, 2021, the gross margin eliminations were $0.4 million and $(1.8) million, respectively.

During the 13 weeks ended July 30, 2022 and July 31, 2021, the cost of sales eliminations were $(14.0) million and $(16.9) 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 July 30, 2022 and July 31, 2021, the gross margin eliminations were $(4.9) million and $(5.5) 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.

Selling and Administrative Expenses

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 % of

Sales January 30, 2021 % of

Sales January 29, 2022 % of

Sales January 30, 2021 % of

13 weeks ended

Dollars in thousands July 30, 2022 % of

Sales July 31, 2021 % of

Total Selling and Administrative Expenses

$ 98,486 37.3% $ 86,235 35.8%

During the 13 weeks ended January 29, 2022, selling and administrative expenses increased by $8.8 million, or 9.4%, to $101.5 million from $92.7 million during the 13 weeks ended January 30, 2021.

During the 39 weeks ended January 29, 2022, selling and administrative expenses increased by $40.9 million, or 16.0%, to $295.6 million from $254.7 million during the 39 weeks ended January 30, 2021.

During the 13 weeks ended July 30, 2022, selling and administrative expenses increased by $12.3 million, or 14.2%, to $98.5 million from $86.2 million during the 13 weeks ended July 31, 2021.

The variances by segment are discussed by segment below.

The increase in selling and administrative expenses is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Additionally, during the 13 and 39 weeks ended January 29, 2022, long-term incentive compensation expense decreased by $0.6 million and increased by $4.0 million, respectively, primarily related to cash-settled phantom share unit awards which are remeasured at the end of each reporting period to reflect current assumptions, including changes in the our common stock price.

During the 13 weeks ended January 29, 2022, Retail selling and administrative expenses increased by $8.7 million, or 11.5%, to $84.6 million from $75.9 million during the 13 weeks ended January 30, 2021.

During the 13 weeks ended July 30, 2022, Retail selling and administrative expenses increased by $10.6 million, or 15.6%, to $79.0 million from $68.4 million during the 13 weeks ended July 31, 2021.

This increase was primarily due to a $4.3 million increase in stores payroll and operating expenses including comparable stores, virtual stores and new/closed stores payroll and operating expenses, and a $6.3 million increase in corporate payroll, infrastructure and product development costs.

The payroll increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

During the 39 weeks ended January 29, 2022, Retail selling and administrative expenses increased by $32.2 million, or 15.3%, to $242.5 million from $210.3 million during the 39 weeks ended January 30, 2021.

This increase was primarily due to a $29.8 million increase in stores payroll and operating expenses including comparable stores, virtual stores and new/closed stores payroll and operating expenses, a $0.9 million increase in incentive plan compensation expense related to phantom share awards as discussed above, and a $1.5 million increase in corporate payroll, infrastructure and product development costs.

The payroll increase is primarily related to the impact from re-opening stores that had temporarily closed due to the COVID-19 pandemic in the prior year.

Wholesale selling and administrative expenses decreased by $0.4 million, or 9.1%, to $3.9 million from $4.3 million during the 13 weeks ended January 30, 2021, primarily driven by lower payroll and operating costs.

Wholesale selling and administrative expenses remained flat at $12.3 million for both the 39 weeks ended January 29, 2022 and January 30, 2021, as lower payroll and operating costs were offset by higher incentive plan compensation expense related to phantom share awards, as discussed above.

During the 13 weeks ended January 29, 2022, DSS selling and administrative expenses increased by $1.8 million, or 29.3%, to $7.8 million from $6.0 million during the 13 weeks ended January 30, 2021.

During the 39 weeks ended January 29, 2022, DSS selling and administrative expenses increased by $6.5 million, or 43.0%, to $21.5 million from $15.0 million during the 39 weeks ended January 30, 2021.

The increase in costs was primarily driven by higher compensation-related expense, higher operating costs invested in the business associated with higher product development and sales costs aimed at increasing revenue, and higher incentive plan compensation expense related to phantom share awards, as discussed above.

The payroll increase is primarily related to increased staffing at stores that had temporarily or partially closed due to limited on campus activities related to the COVID-19 pandemic in the prior year.

The increase is also due to greater on campus activity and related sales during the 13 weeks ended July 30, 2022 and costs incurred in preparation for the anticipated increased activity, including support for the growth in First Day programs, in the upcoming peak fall term in the second quarter of Fiscal 2023.

Wholesale selling and administrative expenses increased by $0.1 million, or 3.5%, to $4.1 million from $4.0 million during the 13 weeks ended July 31, 2021, primarily driven by higher operating costs.

During the 13 weeks ended July 30, 2022, DSS selling and administrative expenses increased by $1.7 million, or 26.3%, to $8.1 million from $6.4 million during the 13 weeks ended July 31, 2021.

The increase in costs was primarily driven by higher compensation expense, higher operating costs invested in the business associated with higher product development and sales costs infrastructure costs aimed at increasing revenue.

Corporate Services

During the 13 weeks ended January 29, 2022, Corporate Services' selling and administrative expenses decreased by $1.3 million, or 20.6%, to $5.2 million during the 13 weeks ended January 29, 2022 from $6.5 million during the 13 weeks ended January 30, 2021.

The decrease was primarily due to lower compensation-related expense of $1.5 million and lower incentive plan compensation expense related to phantom share awards of $0.4 million, as discussed above, partially offset by higher operating costs of $0.6 million.

During the 39 weeks ended January 29, 2022, Corporate Services' selling and administrative expenses increased by $2.2 million, or 12.6%, to $19.4 million from $17.2 million during the 39 weeks ended January 30, 2021.

The increase was primarily due to higher incentive plan compensation expense related to phantom share awards of $2.6 million, as discussed above, and higher operating costs of $1.1 million, partially offset by lower compensation-related expense of $1.5 million.

During the 13 weeks ended July 30, 2022, Corporate Services' selling and administrative expenses decreased by $0.2 million, or 3.1%, to $7.2 million during the 13 weeks ended July 29, 2022 from $7.4 million during the 13 weeks ended July 31, 2021.

The decrease was primarily due to lower compensation costs, partially offset by higher professional service costs.

Depreciation and Amortization Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 % of

Sales January 30, 2021 % of

Sales January 29, 2022 % of

Sales January 30, 2021 % of

13 weeks ended

Dollars in thousands July 30, 2022 % of

Sales July 31, 2021 % of

Total Depreciation and Amortization Expense

$ 12,533 4.7% $ 12,624 5.2%

Depreciation and amortization expense decreased by $1.1 million, or 8.5%, to $12.2 million during the 13 weeks ended January 29, 2022 from $13.3 million during the 13 weeks ended January 30, 2021.

Depreciation and amortization expense decreased by $3.8 million, or 9.4%, to $36.8 million during the 39 weeks ended January 29, 2022 from $40.6 million during the 39 weeks ended January 30, 2021.The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during the third quarter of Fiscal 2021.

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 13 and 39 weeks ended January 29, 2022, 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 $6.4 million (both pre-tax and after-tax), comprised of $0.7 million, $1.8 million, $3.7 million and $0.2 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.

During the 13 and 39 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 6.

Fair Value Measurements .

Depreciation and amortization expense decreased by $0.1 million, or 0.7%, to $12.5 million during the 13 weeks ended July 30, 2022 from $12.6 million during the 13 weeks ended July 31, 2021.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2022.

Restructuring and other charges

During the 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $3.8 million, comprised primarily of $2.0 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives and $1.8 million for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

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, and $0.4 million and $4.9 million, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

During the 13 weeks ended July 30, 2022, we recognized restructuring and other charges totaling $0.4 million comprised primarily of professional service costs for restructuring and process improvements.

During the 13 weeks ended July 31, 2021, we recognized restructuring and other charges totaling $1.9 million comprised primarily of $0.8 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.1 million for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

Operating Loss

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 % of

Sales January 30, 2021 % of

Sales January 29, 2022 % of

Sales January 30, 2021 % of

13 weeks ended

Dollars in thousands July 30, 2022 % of

Sales July 31, 2021 % of

Total Operating Loss $ (47,906) (18.0)% $ (40,735) (16.9)%

Our operating loss was $(33.1) million during the 13 weeks ended January 29, 2022, compared to operating loss of $(64.7) million during the 13 weeks ended January 30, 2021.

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

For the 13 weeks ended January 29, 2022, excluding the $6.4 million of impairment loss (non-cash) discussed above, operating loss was $(26.7) million (or (6.6)% of sales).

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).

Our operating loss was $(50.0) million during the 39 weeks ended January 29, 2022, compared to an operating loss of $(116.9) million during the 39 weeks ended January 30, 2021.

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

For the 39 weeks ended January 29, 2022, excluding the $0.4 million of merchandise inventory loss, $6.4 million of impairment loss (non-cash), and the $3.8 million of restructuring and other charges discussed above, operating loss was $(39.4) million (or (3.1)% of sales).

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

Our operating loss was $(47.9) million during the 13 weeks ended July 30, 2022, compared to operating loss of $(40.7) million during the 13 weeks ended July 31, 2021.

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

For the 13 weeks ended July 30, 2022, excluding the $0.4 million of restructuring and other charges, discussed above, operating loss was $(47.5) million (or (18.0)% of sales).

For the 13 weeks ended July 31, 2021, excluding the $1.9 million of restructuring and other charges, discussed above, operating loss was $(38.8) million (or (16.1)% of sales).

Interest Expense, Net

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Interest Expense, Net $ 3,868 $ 2,494

Net interest expense increased by $0.7 million, or 32.0%, to $3.1 million during the 13 weeks ended January 29, 2022 from $2.3 million during the 13 weeks ended January 30, 2021.

Net interest expense increased by $1.9 million, or 32.9%, to $7.8 million during the 39 weeks ended January 29, 2022 from $5.9 million during the 39 weeks ended January 30, 2021.

The increase was primarily due to higher borrowings compared to the prior year.

Income Tax Expense (Benefit)

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 Effective Rate January 30, 2021 Effective Rate January 29, 2022 Effective Rate January 30, 2021 Effective Rate

Income Tax Expense (Benefit) $ 615 (1.7)% $ (18,724) 27.9% $ 811 (1.4)% $ (35,334) 28.8%

We recorded an income tax expense of $0.6 million on pre-tax loss of $(36.2) million during the 13 weeks ended January 29, 2022, which represented an effective income tax rate of (1.7)% and we recorded an income tax benefit of $(18.7) million on a pre-tax loss of $(67.0) million during the 13 weeks ended January 30, 2021, which represented an effective income tax rate of 27.9%.

We recorded income tax expense of $0.8 million on a pre-tax loss of $(57.8) million during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of (1.4)% and we recorded an income tax benefit of $(35.3) million on a pre-tax loss of $(122.8) million during the 39 weeks ended January 30, 2021, which represented an effective income tax rate of 28.8%.

The effective tax rate for the 13 and 39 weeks ended January 29, 2022 is lower as compared to the comparable prior year due to the assessment of the realization of deferred tax assets and loss carrybacks recorded in the prior year.

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Net interest expense increased by $1.4 million, or 55.1%, to $3.9 million during the 13 weeks ended July 30, 2022 from $2.5 million during the 13 weeks ended July 31, 2021.

The increase was primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax Expense

13 weeks ended

Dollars in thousands July 30, 2022 Effective Rate July 31, 2021 Effective Rate

Income Tax Expense $ 933 (1.8)% $ 399 (0.9)%

We recorded an income tax expense of $0.9 million on pre-tax loss of $(51.8) million during the 13 weeks ended July 30, 2022, which represented an effective income tax rate of (1.8)% and we recorded an income tax expense of $0.4 million on a pre-tax loss of $(43.2) million during the 13 weeks ended July 31, 2021, which represented an effective income tax rate of (0.9)%.

The effective tax rate for the 13 weeks ended July 30, 2022 is higher as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Net loss $ (52,707) $ (43,628)

As a result of the factors discussed above, net loss was $(36.8) million during the 13 weeks ended January 29, 2022, compared with net loss of $(48.3) million during the 13 weeks ended January 30, 2021.

As a result of the factors discussed above, net loss was $(58.6) million during the 39 weeks ended January 29, 2022, compared with net loss of $(87.4) million during the 39 weeks ended January 30, 2021.

Adjusted Earnings (non-GAAP) is $(28.9) million during the 13 weeks ended January 29, 2022, compared with $(25.6) million during the 13 weeks ended January 30, 2021.

Adjusted Earnings (non-GAAP) is $(44.0) million during the 39 weeks ended January 29, 2022, compared with $(56.2) million during the 39 weeks ended January 30, 2021.

As a result of the factors discussed above, net loss was $(52.7) million during the 13 weeks ended July 30, 2022, compared with net loss of $(43.6) million during the 13 weeks ended July 31, 2021.

Adjusted Earnings (non-GAAP) is $(50.8) million during the 13 weeks ended July 30, 2022, compared with $(40.0) million during the 13 weeks ended July 31, 2021.

See Adjusted Earnings (non-GAAP) discussion below.

17 unchanged sentences

Consolidated Adjusted Earnings (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Net loss $ (52,707) $ (43,628)

Reconciling items, after-tax (below)

7,855 22,717 14,614 31,213

Adjusted Earnings (non-GAAP) $ (50,755) $ (40,014)

Reconciling items, pre-tax

Impairment loss (non-cash) (a)

$ 6,411 $ 27,630 $ 6,411 $ 27,630

Merchandise inventory loss (a)

Content amortization (non-cash)

1,398 1,314 3,984 3,700

Restructuring and other charges (a)

46 1,669 3,785 10,727

Reconciling items, pre-tax 1,952 3,614

Pro forma income tax impact (a)(b)

— 7,896 — 10,844

Reconciling items, after-tax $ 1,952 $ 3,614

2 unchanged sentences

Consolidated Adjusted EBITDA (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Net loss $ (52,707) $ (43,628)

1 unchanged sentence

Interest expense, net 3,868 2,494

Income tax expense (benefit) 615 (18,724) 811 (35,334)

Impairment loss (non-cash) (a)

6,411 27,630 6,411 27,630

Income tax expense 933 399

Merchandise inventory loss (a)

Content amortization (non-cash)

1,398 1,314 3,984 3,700

Restructuring and other charges (a)

46 1,669 3,785 10,727

Adjusted EBITDA (non-GAAP) $ (33,421) $ (24,497)

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

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January 29, 2022 and January 30, 2021.

Adjusted EBITDA - by Segment 13 weeks ended January 29, 2022

The following is Adjusted EBITDA by segment for the 13 weeks ended July 30, 2022 and July 31, 2021.

Adjusted EBITDA - by Segment 13 weeks ended July 30, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

4 unchanged sentences

Income tax expense — — — 933 — 933

Impairment loss (non-cash) (a)

6,411 — — — — 6,411

Merchandise inventory loss (a)

Content amortization (non-cash) 26 — 1,551 — — 1,577

Restructuring and other charges (a)

30 — — 16 — 46

Adjusted EBITDA (non-GAAP) $ (15,386) $ 4,163 $ 1,476 $ (5,154) $ 1,800 $ (13,101)

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

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (59,996) $ 4,708 $ (2,567) $ 8,962 $ 604 $ (48,289)

Depreciation and amortization expense 9,806 1,614 1,863 24 — 13,307

Interest expense, net — — — 2,311 — 2,311

Income tax benefit — — — (18,724) — (18,724)

Impairment loss (non-cash) (a)

27,630 — — — — 27,630

Merchandise inventory loss (a)

Content amortization (non-cash) 176 — 1,138 — — 1,314

Restructuring and other charges (a)

Restructuring and other charges (b)

— — — 375 — 375

Adjusted EBITDA (non-GAAP) $ (24,985) $ 2,768 $ 889 $ (7,214) $ (4,879) $ (33,421)

Adjusted EBITDA - by Segment 39 weeks ended January 29, 2022

Adjusted EBITDA - by Segment 13 weeks ended July 31, 2021

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

4 unchanged sentences

Income tax expense — — — 399 — 399

Impairment loss (non-cash) (a)

6,411 — — — — 6,411

Merchandise inventory loss (a)

434 — — — — 434

Content amortization (non-cash) 350 — 3,634 — — 3,984

Restructuring and other charges (a)

2,831 — — 954 — 3,785

Adjusted EBITDA (non-GAAP) $ 4,436 $ 11,810 $ 3,975 $ (19,407) $ 556 $ 1,370

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

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (107,740) $ 21,625 $ (6,218) $ 6,611 $ (1,704) $ (87,426)

Depreciation and amortization expense 30,361 4,231 5,883 88 — 40,563

Interest expense, net — — — 5,876 — 5,876

Income tax benefit — — — (35,334) — (35,334)

Impairment loss (non-cash) (a)

Merchandise inventory loss (b)

434 — — — — 434

Merchandise inventory loss (a)

Content amortization (non-cash) 166 — 1,109 — — 1,275

Restructuring and other charges (a)

Restructuring and other charges (b)

1,008 — — 897 — 1,905

Adjusted EBITDA (non-GAAP) $ (19,622) $ 6,414 $ 1,692 $ (7,444) $ (5,537) $ (24,497)

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement which funds our operating and financing needs across the organization.

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization.

Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

1 unchanged sentence

Free Cash Flow (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Net cash flows (used in) provided by operating activities $ (16,241) $ (50,213) $ 7,901 $ 41,173

13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Net cash flows used in operating activities $ (28,998) $ (17,304)

Capital expenditures (a)

12,129 9,713 33,393 25,910

Cash interest 2,933 1,682

4 unchanged sentences

The following table provides the components of total purchases of property and equipment:

Capital Expenditures 13 weeks ended 39 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

Capital Expenditures 13 weeks ended

Dollars in thousands July 30, 2022 July 31, 2021

Physical store capital expenditures $ 4,496 $ 3,893

5 unchanged sentences

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 January 29, 2022, we had $200.4 million outstanding borrowings under the Credit Agreement.

As of July 30, 2022, we had $260.3 million and $203.7 million outstanding borrowings under the Credit Agreement and Term Loan Agreement, respectively.

See Financing Arrangements discussion below.

We believe that our future cash from operations, access to borrowings under the Credit Agreement and Term Loan Agreement will provide adequate resources to fund our operating and financing needs for the foreseeable future.

Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties.

To the extent that available funds are

insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity.

Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy.

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

COVID-19 Business Impact

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

Beginning in March 2020, colleges and universities nationwide began to close their campuses in light of safety concerns and as a result of local and state issued stay-at-home orders.

By mid-March, during our Fiscal 2020 fourth quarter, we closed the majority of our physical campus stores to protect the health and safety of our customers and employees.

We developed and implemented plans to safely reopen our campus stores based on national, state and local guidelines, as well as the campus policies set by the school administration.

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve.

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

Although most four year schools returned to a traditional on-campus environment for learning, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

For additional information, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021 .

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.

To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity.

Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy.

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

Sources and Uses of Cash Flow

13 weeks ended

Dollars in thousands January 29, 2022 January 30, 2021

Dollars in thousands July 30, 2022 July 31, 2021

Cash, cash equivalents, and restricted cash at beginning of period $ 21,934 $ 16,814

Net cash flows provided by operating activities 7,901 41,173

Net cash flows used in operating activities (28,998) (17,304)

Net cash flows used in investing activities (9,726) (11,178)

Net cash flows provided by (used in) financing activities 20,686 (13,925)

Net cash flows provided by financing activities 33,429 24,885

Cash, cash equivalents, and restricted cash at end of period $ 16,639 $ 13,217

As of January 29, 2022 and January 30, 2021, we had restricted cash of $2.8 million and $0.8 million, respectively, comprised of $1.9 million and $0, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement

and $0.9 million and $0.8 million, respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

As of July 30, 2022 and July 31, 2021, we had restricted cash of $7.5 million and $5.6 million, respectively, comprised of $6.6 million and $4.7 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

2 unchanged sentences

When a school adopts our First Day inclusive access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

As a higher percentage of our sales shift to First Day inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they sell textbooks and other course materials for retail distribution.

3 unchanged sentences

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

Cash flows provided by operating activities during the 39 weeks ended January 29, 2022 were $7.9 million compared to $41.2 million during the 39 weeks ended January 30, 2021.

This decrease in cash used in operating activities of $33.3 million was primarily due to changes in working capital, including higher accounts receivables and higher inventory purchases, partially offset by higher earnings of $28.8 million in the current year period compared to the prior year period and lower tax payments of $13.8 million compared to the prior year period as discussed below.

Our operations were highly impacted by COVID-19 related campus store closures in the prior year period, resulting in lower operating costs and lower inventory purchases.

Cash flows used in operating activities during the 13 weeks ended July 30, 2022 were $(29.0) million compared to $(17.3) million during the 13 weeks ended July 31, 2021.

This increase in cash used in operating activities of $11.7 million was primarily due to changes in working capital, including higher inventory purchases as we prepare for the upcoming Fall term, partially offset by lower receivables and lower earnings in the current year period compared to the prior year period.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 39 weeks ended January 29, 2022 were $(32.7) million compared to $(25.6) million during the 39 weeks ended January 30, 2021.

The increase in cash used in investing activities is primarily due to higher capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems and websites, renewing existing contracts and new store construction.

Capital expenditures totaled $33.4 million and $25.9 million during the 39 weeks ended January 29, 2022 and January 30, 2021, respectively.

Cash flows used in investing activities during the 13 weeks ended July 30, 2022 were $(9.7) million compared to $(11.2) million during the 13 weeks ended July 31, 2021.

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 and websites, and new store construction.

Capital expenditures totaled $9.7 million and $11.4 million during the 13 weeks ended July 30, 2022 and July 31, 2021, respectively.

Cash Flow from Financing Activities

Cash flows provided by financing activities during the 39 weeks ended January 29, 2022 were $20.7 million compared to cash flows used in financing activities of $(13.9) million during the 39 weeks ended January 30, 2021.

This net change of $34.6 million is primarily due to higher net borrowings under the credit agreement, offset by the sale of treasury shares of $10.9 million during the 39 weeks ended January 30, 2021.

Cash flows provided by financing activities during the 13 weeks ended July 30, 2022 were $33.4 million compared to $24.9 million during the 13 weeks ended July 31, 2021.

This net change of $8.5 million is primarily due to higher net borrowings.

Financing Arrangements

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”).

2 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.

As of January 29, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the upcoming draw under the FILO Facility, scheduled for April 2022, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110.0 million.

As of July 30, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the draw scheduled for April 2022 under the FILO Facility, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110.0 million.

Under the waiver amendment, the commitment under the FILO Facility of $25.0 million was increased to $40.0 million, with all remaining terms unchanged.

During the 39 weeks ended January 29, 2022, we borrowed $463.2 million and repaid $440.4 million under the Credit Agreement, with $200.4 million of outstanding borrowings as of January 29, 2022, comprised entirely of borrowings 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.

As of both January 29, 2022 and January 30, 2021, we have issued $4.8 million in letters of credit under the Credit Facility.

During the 13 weeks ended July 30, 2022, we borrowed $117.2 million and repaid $112.6 million under the Credit Agreement, with $230.3 million of outstanding borrowings as of July 30, 2022, comprised of $190.3 million and $40.0 million of borrowings under the Credit Facility and FILO Facility, respectively.

During the 13 weeks ended July 31, 2021, we borrowed $71.7 million and repaid $45.6 million under the Credit Agreement, with $203.7 million of outstanding borrowings as of July 31, 2021, comprised of $153.7 million and $50.0 million of borrowings under the Credit Facility and FILO Facility, respectively.

As of both July 30, 2022 and July 31, 2021, 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement.

For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”).

The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility.

During the 13 weeks ended July 30, 2022, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of July 30, 2022.

During the 13 weeks ended July 30, 2022, we incurred debt issuance costs totaling $1.9 million related to the Term Loan Credit Agreement.

The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25% and mature on June 7, 2024.

We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind.

The Term Loans do not amortize prior to maturity.

Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1.0 million, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.

The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75.0 million.

Income Tax Implications on Liquidity

As of January 29, 2022, other long-term liabilities includes $25.3 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.

At the end of the most recent tax year, inventory levels declined as compared to the prior year resulting in approximately $0.7 million of the income taxes associated with the LIFO reserve becoming currently payable.

Given recent trends relating to the pricing and rental of textbooks, management believes that an additional portion of the remaining long-term tax payable associated with the LIFO reserve could become payable within the next twelve months.

We are unable to predict future trends for CPI and inventory levels, therefore it is difficult to project with reasonable certainty how much of this liability will become payable within the next twelve months.

For the fiscal year ended April 30, 2022, we filed an application to change our tax year from January to April under the automatic consent provisions.

As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

We have filed our federal income tax returns for the tax year ended January 2021, as well claims for refunds for cash taxes paid in prior years.

We received a $7.8 million refund in the second quarter of Fiscal 2022 and expect to receive additional refunds of approximately $22.6 million.

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 which is expected to be earned over the term of the merchandising contracts for Fanatics and FLC ($0.2 million and $0.2 million, respectively, in accrued liabilities, and $3.8 million and $4.0 million, respectively, as of January 29, 2022 and January 30, 2021, in other long-term liabilities our condensed consolidated balance sheet).

We received refunds of $7.8 million in Fiscal 2022 and $15.8 million on August 29, 2022 (Fiscal 2023).

We expect to receive additional refunds of approximately $6.9 million.

Share Repurchases

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding Common Stock.

The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934).

The stock repurchase program may be suspended, terminated, or modified at any time.

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

During the 13 weeks ended January 29, 2022, we did not repurchase any of our Common Stock under the stock repurchase program.

As of January 29, 2022, approximately $26.7 million remains available under the stock repurchase program.

During the 39 weeks ended January 29, 2022, we repurchased 239,751 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 weeks ended July 30, 2022, we did not repurchase any of our Common Stock under the stock repurchase program.

As of July 30, 2022, approximately $26.7 million remains available under the stock repurchase program.

During the 13 weeks ended July 30, 2022, we repurchased 238,210 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

Our projected contractual obligations are consistent with amounts disclosed in Part II - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Off-Balance Sheet Arrangements

As of January 29, 2022, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

As of July 30, 2022, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Disclosure Regarding Forward-Looking Statements

3 unchanged sentences

New risks emerge from time to time.

It is not possible for our management

to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

35 unchanged sentences

• changes in accounting standards;

• the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

• the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned.

3 unchanged sentences

There have been no material changes to the items discussed in Part II - Item 7A.

Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

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