What changed in this filing

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Item 1. Business

2023-03-13 compared with 2022-03-16 · 118 added, 143 removed, 510 unchanged (34% of the section changed)

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This Annual Report covers the 52-week fiscal year ended January 28, 2023 (Fiscal 2022).

The fiscal years ended January 30, 2021 (Fiscal 2020) and February 1, 2020 (Fiscal 2019) also consisted of 52 weeks.

On March 11, 2020, the World Health Organization declared the novel coronavirus (known as COVID-19) outbreak to be a global pandemic.

As a result, we began the temporary closing of some of our stores, and effective March 22, 2020, we made the decision to temporarily close all of our stores, distribution centers (other than processing of received inventory) and corporate offices to combat the rapid spread of COVID-19.

We began re-opening stores on May 11, 2020, with the majority of stores, as well as all distribution centers, re-opened by mid-June 2020, and substantially all stores re-opened by the end of the second quarter of Fiscal 2020.

In response to the COVID-19 pandemic and the temporary closing of our stores, we provided two weeks of financial support to associates impacted by these store closures and by the shutdown of distribution centers.

We temporarily furloughed most store and distribution center associates, as well as some corporate associates, but continued to provide benefits to furloughed associates in accordance with our benefit plans.

In addition, we paid 100% of their medical benefit premiums during the period they were furloughed.

During the second quarter, we recalled all furloughed associates at our re-opened stores, as well as our corporate and distribution facilities.

In order to maintain financial flexibility during these uncertain times, we completed several debt transactions in the first quarter of Fiscal 2020.

Refer to Note 7, "Long Term Debt," for further discussion regarding these debt transactions.

Additionally, we took the following steps to further enhance its financial flexibility:

Carefully managed operating expenses, working capital and capital expenditures, including ceasing substantially all buying activities while stores were closed.

We subsequently resumed its buying activities, while continuing its conservative approach toward operating expenses and capital expenditures;

Negotiated rent deferral agreements with landlords, which were substantially complete as of the end of Fiscal 2021;

Temporarily suspended our share repurchase program, which resumed during the third quarter of Fiscal 2021;

Our CEO voluntarily agreed to not take a salary;

our Board of Directors voluntarily forfeited their cash compensation;

our executive leadership team voluntarily agreed to decrease their salary by 50%;

and smaller salary reductions were temporarily put in place for all associates through a certain level.

This compensation was reinstated once substantially all of our stores re-opened;

The annual incentive bonus payments related to Fiscal 2019 performance were delayed to the second quarter of Fiscal 2020, and merit pay increases for Fiscal 2020 were delayed to the third quarter of Fiscal 2020.

Due to the aging of inventory related to the temporary store closures discussed above, as well as the impact of seasonality on the our merchandise, we recognized inventory markdown reserves of $271.9 million during the three month period ended May 2, 2020.

These reserves covered markdowns taken during the second quarter of Fiscal 2020.

These charges were included in “Cost of sales”

on the Consolidated Statement of Income (Loss).

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, which provided emergency economic assistance for American workers, families and businesses affected by the COVID-19 pandemic.

As a result of amending prior returns to carry back the federal net operating loss generated on the Fiscal 2020 tax return, we expect to obtain a one-time tax refund of $245.5 million, which is included in the line item “Prepaid and other current assets”

on our Consolidated Balance Sheet.

The fiscal years ended January 29, 2022 (Fiscal 2021) and January 30, 2021 (Fiscal 2020) also consisted of 52 weeks.

Results for Fiscal 2020 were significantly impacted by the COVID-19 pandemic.

All our stores were temporarily closed for a portion of Fiscal 2020, resulting in a sales decline and higher inventory markdowns.

These store closures did not repeat in Fiscal 2021 or Fiscal 2022.

However, certain lingering economic effects of the pandemic did continue to impact results, including supply chain disruptions.

Over 99% of our net sales are derived from stores we operate as Burlington Stores.

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Burlington Stores offer customers a complete line of merchandise, including:

women’s ready-to-wear apparel, accessories, footwear, menswear, youth apparel, baby, home, coats, beauty, toys and gifts.

women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats.

Our broad selection provides a wide range of apparel, accessories and furnishings for all ages.

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nature of the off-price buying experience drives frequent visits to our stores.

We believe the breadth of our selection and our ability to successfully operate in stores of varying square footage represents a competitive advantage.

We believe that, as we continue to reduce our comparable store inventory, we will be able to reduce the square footage of our stores while continuing to maintain our broad assortment.

Our store base is geographically diversified with stores located in 46 states and Puerto Rico as set forth below:

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Our store base has grown from 13 stores in 1980 to 927 stores as of January 28, 2023.

Based on our smaller store prototype, as well as the opportunity presented by accelerating retail disruption and industry wide store closures, we have increased our long-term store target to 2,000 stores, up from our previous store target of 1,000 stores, which was established in connection with our IPO in 2013.

Based on our smaller store prototype, as well as the opportunity presented by accelerating retail disruption and industry wide store closures, our long-term store target remains at 2,000 stores.

If we identify appropriate locations, including locations that fit our smaller store prototype, we believe that we will be able to execute our growth strategy without significantly impacting our current stores.

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Of this total square footage, the area that represents the total selling square footage for all stores as of the end of Fiscal 2022, Fiscal 2021, and Fiscal 2020 were 31.0 million, 30.0 million, and 32.3 million respectively.

Total selling square footage decreased in Fiscal 2021 despite opening 79 net new stores, primarily due to optimizing the selling space at existing locations, as well as the smaller size of our new stores compared to prior years.

Distribution and Warehousing

We have five distribution centers that shipped approximately 99% of merchandise units to our stores in Fiscal 2021.

The remaining 1% of merchandise units are drop shipped by our vendors directly to our stores.

We have five distribution centers that shipped more than 99% of merchandise units to our stores in Fiscal 2022.

The remaining merchandise units are drop shipped by our vendors directly to our stores.

Our two east coast distribution centers are located in Edgewater Park, New Jersey and Burlington, New Jersey.

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These five distribution centers occupy an aggregate of 4,106,000 square feet, and each includes processing, shipping and storage capabilities.

In addition, we entered into a lease for an additional distribution center in Logan, New Jersey occupying approximately 1,029,000 square feet.

This building is expected to be operational for storage during Fiscal 2022, and for processing and shipping during Fiscal 2023.

In addition, we entered into a lease during Fiscal 2021 for an additional distribution center in Logan, New Jersey occupying approximately 1,029,000 square feet.

This building was used for storage and basic manual processing during Fiscal 2022, and is expected to be fully operational during Fiscal 2024.

We also operate warehousing facilities to support our distribution centers.

The east coast has three supporting warehouses located in Burlington, New Jersey.

The west coast has two supporting warehouses, located in Redlands, California and San Bernardino, California.

These five warehousing facilities occupy an aggregate of 2,058,000 square feet and primarily serve as storage facilities.

The west coast has three supporting warehouses, located in Redlands, California, Riverside, California, and San Bernardino, California.

We entered into a lease for the Riverside, California warehousing facility during Fiscal 2022, and the building is expected to become operational during Fiscal 2023.

These six warehousing facilities occupy an aggregate of 2,591,000 square feet and primarily serve as storage facilities.

Primary Distribution Centers:

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Burlington, New Jersey (Richards Run)

Burlington, New Jersey (Daniels Way)

Burlington, New Jersey (Daniels Way) (c)

Redlands, California (River Bluff Ave)

Riverside, California (Oleander Ave) (d)

San Bernardino, California (Waterman Ave)

(a) Inclusive of corporate offices.

(b) The lease for this distribution center was signed during Fiscal 2021 and is expected to become operational during Fiscal 2022 for storage and Fiscal 2023 for processing and shipping.

(b) This distribution center was used for storage and basic manual processing during Fiscal 2022.

The building is expected to be fully operational during Fiscal 2024.

(d) This warehousing facility is expected to become operational during Fiscal 2023.

In addition to the distribution centers that we operate, we have arrangements with third parties for the use of pool point facilities, which we believe streamline and optimize our distribution network.

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We have streamlined processes and will continue to strive to create opportunities for fast and friendly customer interactions.

Our goal for our stores is to reflect clean, organized merchandise presentations that highlight the brands, value and diversity of selection within our assortments.

Our goal is to facilitate a “treasure-hunt”

experience for our customers with clean, organized merchandise presentations that highlight the brands, value and diversity of selection within our frequently refreshed assortments.

Our Off-Price Sourcing and Merchandising Model

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Kids apparel and baby

Certain classifications have been updated in the above table compared to prior years in order to conform to the manner in which we manage our operations.

These updates include a shift in certain cold weather categories from apparel to accessories and footwear, as well as in certain gifts, electronics, automotive and other miscellaneous categories from menswear to home.

Prior year amounts have been reclassified to conform to the current period presentation.

The sales mix for Fiscal 2020 in the above table was significantly impacted by the COVID-19 pandemic, and may not be reflective of continuing trends.

Human Capital Resources

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For example, our Compensation Committee is responsible for, among other things, developing and reviewing executive management succession plans and reviewing our compensation policies for executives and associates generally to assess (i) whether the compensation structure establishes appropriate incentives and (ii) the risks associated with such policies and practices.

In addition, our Nominating and Corporate Governance Committee provides oversight of the social, political and environmental trends, issues and concerns, including legislative and regulatory developments, that could significantly affect our public affairs.

In addition, our Nominating and Corporate Governance Committee reviews environmental, social and governance (“ESG”) trends, issues and concerns, including legislative and regulatory developments, that could significantly affect our public affairs.

Our Board of Directors provides oversight of ESG matters.

As of January 28, 2023, we employed 61,166 associates, including 46,297 part-time and seasonal associates.

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The survey results help us understand the associate experience, evaluate our performance, identify our strengths and pinpoint opportunities for improvement.

Our 2021 survey, which included feedback from more than 43,000 associates, revealed:

92% believe Burlington makes it easy for people from diverse backgrounds to fit in and be accepted;

90% reported that their manager treats them with dignity and respect;

and 86% believe in our Core Values.

Diversity, Equity and Inclusion

As Burlington continues to grow, innovate, and thrive, we are integrating diversity, equity, and inclusion ("DEI") best practices across the entire spectrum of business functions.

In 2021, Burlington developed a new DEI strategy and governance framework to support this effort.

Our DEI strategy consists of five pillars that support all areas of the business:

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Product, Vendor & Supplier Diversity.

Community Advocacy

Further evidencing our commitment to advancing DEI, Burlington welcomed three new DEI leaders since the beginning of Fiscal 2021, who will oversee our ongoing efforts.

The DEI team will be further supported by an enhanced governance structure consisting of additional DEI counsels to support corporate, merchandising, distribution centers, and field/store operations, along with expanded Associate Resource Groups, which will give associates more ways to participate in DEI efforts as members of an associate-led community.

C ommunity Advocacy

Burlington has a DEI team that is further supported by an enhanced governance structure consisting of additional DEI counsels to support corporate, merchandising, distribution centers, and field/store operations, along with expanded Associate Resource Groups, which gives associates more ways to participate in DEI efforts as members of an associate-led community.

Learning and Development

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Email reaches our best customers, while social marketing, including relationships with influencers, allows for authentic consumer engagement.

During Fiscal 2020, we made a strategic business decision to transition from an e-commerce website to a marketing content-based website designed to inspire consumers to shop in stores.

Today, Burlington.com highlights our great merchandise values, while encouraging customers to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home.

Merchandise sold directly from our website represented approximately 0.5% of our total sales in Fiscal 2019.

During Fiscal 2019, we launched a private label credit card program in all our stores.

We believe this program has the potential to deepen customer loyalty, inform customer contact strategies, and drive increases in trip frequency and transaction size.

Burlington.com highlights our great merchandise values, while encouraging customers to visit our stores to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home.

retail apparel and home furnishings markets are highly fragmented and competitive.

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“Cohoes,”

“MJM Designer Shoes,”

“B”

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Information that we post on our website or on social media channels could be deemed material;

therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well

as the following social media channels:

therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well as the following social media channels:

Facebook ( www.facebook.com/BurlingtonStores ) and Twitter ( www.twitter.com/burlington ).

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Macroeconomic, Industry and Business Risks

The COVID-19 pandemic has significantly adversely impacted and is expected to continue to adversely impact our business.

Governmental authorities nationally and locally have taken numerous actions and mandated various restrictions in an effort to slow the spread of COVID-19, including travel restrictions, restrictions on public gatherings, “shelter at home”

orders and advisories, temporary closure of non-essential businesses and quarantining of people who may have been exposed to the virus.

While several of these measures have since eased, other restrictions such as vaccine and mask mandates and testing requirements have been newly imposed or proposed, and the recovery process is uncertain.

The COVID-19 pandemic has had a sustained adverse impact on global economic activity and caused significant volatility and negative pressure in financial markets, labor markets and the global supply chain.

The pandemic has disrupted our business and has had a significant adverse impact on our financial performance and condition, operating results, liquidity and cash flows.

A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.

Consumer spending habits are affected by, among other things, prevailing global economic conditions, inflation (including the costs of basic necessities and other goods), levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.

In addition, consumer purchasing patterns may be influenced by consumers’

disposable income, credit availability and debt levels.

Slowdown in the U.S.

economy, an uncertain global economic outlook, interest rate volatility, or a credit crisis could adversely affect consumer spending habits, resulting in lower net sales and profits than expected on a quarterly or annual basis.

Consumer confidence is also affected by the domestic and international political situation and periods of social unrest.

The occurrence of terrorist acts or other hostilities in or affecting the U.S.

could lead to a decrease in spending by consumers.

In addition, natural disasters, industrial accidents, acts of war, and public health issues such as pandemics or epidemics could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S.

economies and lead to a downturn in consumer confidence and spending.

We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods to a greater extent than we have in recent years due to current economic conditions.

There can be no assurance that we will be able to offset inflationary pressure and other fluctuations in costs in the future, or that consumer behavior or our business, operations, liquidity, and/or financial results, will not be negatively affected by continued inflation in the future.

We may not be able to adequately increase our prices over time to offset increased costs, whether due to inflation or otherwise.

Any decreases in consumer discretionary spending could result in a decrease in store traffic and same store sales, all of which could negatively affect the Company’s business, operations, liquidity, financial results and/or stock price, particularly if consumer spending levels are depressed for a prolonged period of time.

The COVID-19 pandemic has significantly adversely impacted, and future outbreaks of COVID-19, new COVID-19 variants or other public health-related concerns could adversely impact, our business.

The COVID-19 pandemic disrupted our business and had a significant adverse impact on our financial performance and condition, operating results, liquidity and cash flows.

In particular, in Fiscal 2020, the Company temporarily closed all of its stores, distribution centers (other than processing of received inventory) and corporate offices for a period of months to combat the rapid spread of COVID-19.

In addition, as a result of the uncertainty regarding the COVID-19 pandemic, the Company took a number of measures in Fiscal 2020 to manage its liquidity, including careful management of operating expenses, working capital and capital expenditures, as well as temporarily suspending the Company’s share repurchase program.

Future outbreaks of COVID-19 may continue to adversely impact and cause disruption to our business, financial performance and condition, operating results, liquidity and cash flows.

Factors that could negatively impact our ability to successfully operate during the current or future outbreaks of the COVID-19 pandemic, either more broadly or within our stores, include:

The COVID-19 pandemic had a sustained adverse impact on global economic activity and caused significant volatility and negative pressure in financial markets, labor markets and the global supply chain.

During the COVID-19 pandemic, governmental authorities nationally and locally took, and may in the future take, numerous actions in an effort to slow the spread of COVID-19, including travel restrictions, restrictions on public gatherings, “shelter at home”

orders and advisories, temporary closure of non-essential businesses and quarantining of people who may have been exposed to the virus.

While the impact of the COVID-19 pandemic on our business has largely abated at this time, and the U.S.

has announced that the COVID-19 health emergency will expire in May 2023, the impact of COVID-19, including the impact of restrictions imposed to combat its spread, could adversely impact our business, in particular in the event that infection rates in the U.S.

rise or new COVID-19 variants emerge.

Future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns could adversely impact and cause disruption to our business, financial performance and condition, operating results, liquidity and cash flows.

that could negatively impact our ability to successfully operate during future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns, either more broadly or within our stores, include:

our ability to continue to operate and preserve liquidity;

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difficulty accessing debt and equity capital on attractive terms, or at all, to fund business operations or address maturing liabilities.

The extent of the continuing impact of the COVID-19 pandemic on our business, financial performance and condition, operating results, liquidity and cash flows will depend largely on future developments, including the production and administration of effective medical treatments and vaccines, the timing and extent of the recovery in traffic and consumer spending at our stores, additional costs and delays related to our supply chain, reduced workforces or labor shortages and scarcity of raw materials, and any future required store closures because of COVID-19 resurgences, all of which are highly uncertain and cannot be predicted.

COVID-19 presents material uncertainty and risk with respect to our business, financial performance and condition, operating results, liquidity and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described throughout this Annual Report.

A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.

Consumer spending habits are affected by, among other things, prevailing global economic conditions, inflation, including the costs of basic necessities and other goods, levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.

In addition, consumer purchasing patterns may be influenced by consumers’

disposable income, credit availability and debt levels.

Slowdown in the U.S.

economy, an uncertain global economic outlook (such as that caused by the COVID-19 pandemic) or a credit crisis could adversely affect consumer spending habits, resulting in lower net sales and profits than expected on a quarterly or annual basis.

Consumer confidence is also affected by the domestic and international political situation and periods of social unrest.

The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the U.S.

could lead to a decrease in spending by consumers.

In addition, natural disasters, industrial accidents, acts of war, and public health issues such as pandemics or epidemics could have the effect of disrupting supplies and raising prices globally (such as that caused by the COVID-19 pandemic) which, in turn, may have adverse effects on the world and U.S.

economies and lead to a downturn in consumer confidence and spending.

We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods.

There can be no assurance that we will be able to offset inflationary pressure in the future, or that our business will not be negatively affected by continued inflation in the future.

We may not be able to adequately increase our prices over time to offset increased costs, whether due to inflation or otherwise.

The extent of future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns on our business, financial performance and condition, operating results, liquidity and cash flows will depend largely on future developments, including the production and administration of effective medical treatments and vaccines, the timing and extent of the recovery in traffic and consumer spending at our stores, additional costs and delays related to our supply chain, reduced workforces or labor shortages and scarcity of raw materials, and any future required store closures, all of which are highly uncertain and cannot be predicted.

To the extent that future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other viruses adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described throughout this Annual Report.

We face increased competition from other retailers that could adversely affect our business.

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Seasonal fluctuations also affect our inventory levels.

We must carry a significant amount of inventory, especially before the holiday season selling period.

We must carry a significant amount of

inventory, especially before the holiday season selling period.

If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations.

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Failure to effectively meet these changing expectations and demands may adversely impact our reputation and our financial results.

Many stakeholders, including investors, customers, consumers and others, have increasingly focused on environmental sustainability and corporate social responsibility matters, including climate change, packaging and waste reduction, energy consumption, and diversity and inclusion.

Our disclosure on these matters and our failure, or perceived failure, to meet our commitments and otherwise effectively address these matters, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations.

We may be unable to meet our environmental, social or governance (“ESG”) goals or otherwise meet the expectations of our stakeholders with respect to ESG matters.

Many stakeholders, including investors, customers, employees, consumers and others, have increasingly focused on ESG topics, including environmental sustainability and corporate social responsibility matters such as climate change, packaging and waste reduction, energy consumption, and diversity, equity and inclusion.

We face pressures from these constituencies to meet our goals related to, and to make significant advancements toward achievements in, these areas.

Achievement of our goals is subject to risks and uncertainties, many of which are outside of our control, and it is possible that we may fail to achieve these goals or that these constituencies may not be satisfied with the goals we set or our efforts to achieve them.

Our disclosure on these matters and our failure, or perceived failure, to meet our goals and otherwise effectively address these matters, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations.

In addition, developing and acting on ESG initiatives, including collecting, measuring and reporting related data, can be costly, difficult and time consuming.

Significant expenditures and commitment of time by management, employees and outside advisors may be involved in developing, implementing and overseeing policies, practices and internal controls related to ESG risk and performance, and we may undertake additional costs to control, assess and report on ESG metrics as the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand.

Such costs may have an adverse impact our business and results of operations.

We also may face potential governmental enforcement actions or private litigation challenging our ESG and sustainability goals, or our disclosure of those goals and our metrics for measuring achievement of them, which may increase our costs of compliance.

Extreme and/or unseasonable weather conditions caused by climate change or otherwise, or natural disasters, could have a significant adverse effect on our business.

Our business is susceptible to risks associated with climate change, which may cause more frequent and extreme weather events.

Extreme weather conditions in the areas in which our stores or distribution centers are located - especially in areas with a high concentration of our stores - could have a material adverse effect on our business, financial condition and results of operations.

Extreme weather conditions in the areas in which our stores or distribution centers are located - especially in areas with a high

concentration of our stores - could have a material adverse effect on our business, financial condition and results of operations.

For example, heavy snowfall or other extreme weather conditions over a prolonged period, caused by climate change or otherwise, might make it difficult for our customers or employees to travel to our stores.

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Our growth largely depends on our ability to successfully open and operate new stores, as well as to expand our distribution capabilities in order to support that growth.

While have identified numerous market opportunities that we believe will allow us to operate 2,000 stores over the long term, the success of these strategies is dependent upon, among other things, the current retail environment, the identification of suitable markets and the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics and other factors, the negotiation of acceptable lease terms, construction costs, the availability of financing, the hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis.

Notably, as we continue to evolve our off-price model, we plan on more effectively chasing the sales trend, making greater investments in our merchandising capabilities, operating with leaner inventories, improving operational flexibility, and challenging expenses, among other things.

While we have identified numerous market opportunities that we believe will allow us to operate 2,000 stores over the long term, the success of these strategies is dependent upon, among other things, the current retail environment, the identification of suitable markets and the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics and other factors, the negotiation of acceptable lease terms, construction costs, the availability of financing, the hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis.

Executing these initiatives while also maintaining the current pace of our expansion may place increased demands on our operational, managerial and administrative resources.

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We base our purchases of inventory, in part, on our sales forecasts.

If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to markdown excess or slow-moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer demand, leading to lost sales, either of which could adversely affect our financial performance.

If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to mark down excess or slow-moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer demand, leading to lost sales, either of which could adversely affect our financial performance.

We need to purchase inventory sufficiently below conventional retail to maintain our pricing differential to regular department and specialty store prices, and to attract customers and sustain our margins, which we may not achieve at various times and which could adversely affect our results.

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Any inability to acquire high quality merchandise would have a negative effect on our business and operating results because we would be missing products from our merchandise mix unless and until alternative supply arrangements were made, resulting in deferred or lost sales.

In addition, events that adversely affect our vendors could impair our

ability to obtain desired merchandise in sufficient quantities.

In addition, events that adversely affect our vendors could impair our ability to obtain desired merchandise in sufficient quantities.

Such events include difficulties or problems associated with our vendors’

businesses, finances, labor, importation of products, costs, production, insurance and reputation.

Our failure to attract, train and retain quality employees and temporary personnel in appropriate numbers could adversely affect our business.

Our performance depends on recruiting, developing, training and retaining quality sales, systems, distribution center and other employees in large numbers as well as experienced buying and management personnel, and we invest significant resources in training and motivating them to maintain a high level of job satisfaction.

Many of our store and distribution center employees are in entry level or part-time positions with historically high rates of turnover, which can lead to increased training and retention costs, particularly if employment opportunities increase including in light of the ongoing “great resignation”

occurring throughout the U.S.

Our failure to attract, train and retain quality employees and temporary personnel in sufficient numbers could adversely affect our business.

Our performance depends on recruiting, developing, training and retaining quality store, distribution center and other employees in large numbers as well as experienced buying and management personnel, and we invest significant resources in training and motivating them to maintain a high level of job satisfaction.

Availability and skill of employees may differ across markets in which we do business and in new markets we enter, and we need to manage our labor needs effectively.

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If we do not continue to attract qualified individuals, train them in our business model, support their development and retain them, our performance could be adversely affected or our growth could be limited.

We are also dependent upon temporary personnel to adequately staff our stores and distribution facilities, with heightened dependence during busy periods such as the holiday season and when multiple new stores are opening.

We are also dependent upon temporary personnel to adequately staff our distribution facilities, with heightened dependence during busy periods such as the holiday season.

Although we strive to secure long-term contracts on favorable terms with our service providers and other vendors, we may not be able to avoid unexpected operating cost increases in the future, such as those associated with minimum wage increases or enhanced health care requirements.

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If any of the third parties with which we do business become subject to bankruptcy, receivership or similar insolvency proceedings, our rights and benefits in relation to our contracts, transactions and business relationships with such third parties could be terminated, modified in a manner adverse to us, or otherwise impaired.

We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts,

transactions or business relationships, if at all.

We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, transactions or business relationships, if at all.

Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.

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Such factors include:

political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis;

disruptions in the operations of domestic ports through which we import our merchandise, including labor disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship merchandise to alternative ports in the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs;

political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, particularly if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis;

the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs;

disruptions at ports through which we import our goods could also result in unanticipated inventory shortages;

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Although we source the majority of our merchandise from third party vendors located in the U.S., the production of that merchandise occurs primarily overseas.

As a result, we continue to evaluate the impact of

currently effective tariffs, as well as any additional proposed tariffs, on our supply chain, costs, sales and profitability.

As a result, we continue to evaluate the impact of currently effective tariffs, as well as any additional proposed tariffs, on our supply chain, costs, sales and profitability.

We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.

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any interruption in service by these carriers for any reason could cause disruptions in our business, a loss of sales and profits, and other material adverse effects.

Finally, as the COVID-19 pandemic continues, we could continue to experience supply disruptions, reduced workforces or labor shortages, transportation delays, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, each of which could have a material adverse effect on our business and results of operations.

Finally, outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public-health related concerns could lead us to experience supply disruptions, reduced workforces or labor shortages, transportation delays, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, each of which could have a material adverse effect on our business and results of operations.

If we are unable to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.

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remediation costs, such as liability for stolen assets or information, repairs of system damage or replacement of systems, and incentives to customers or business partners in an effort to maintain relationships after an attack;

increased cybersecurity protection costs, which may include the costs to continuing to make organizational changes, deploy additional personnel and protection technologies, train employees, and engage third party consultants;

increased cybersecurity protection costs, which may include the cost of continuing to make organizational changes, deploy additional personnel and protection technologies, train employees, and engage third party consultants;

lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack;

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damage to our competitiveness, stock price, and long-term stockholder value.

Despite advances in security hardware, software, and encryption technologies, the methods and tools used to obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time, and there is no guarantee that the proactive measures we put in place will be adequate to safeguard against all data security breaches or misuses of data.

In fact, as more business activities have shifted online due to COVID-19 restrictions and otherwise, and as many of our non-store associates are working remotely, we face an increased risk due to the potential interruptions to internal or external information technology infrastructure as well as increased threats and attempts to breach our security networks.

We employ various security measures and technologies to actively monitor, prevent and mitigate cyber-attacks.

Despite advances in security hardware, software, and encryption technologies, the methods and tools used to obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect, and there is no guarantee that the proactive measures we put in place will be adequate to safeguard against all data security breaches or misuses of data.

As many of our non-store associates continue to work remotely, we face an increased risk due to the potential interruptions to internal or external information technology infrastructure as well as ongoing threats and attempts to breach our security networks.

Although we endeavor to protect consumer identity and payment information through the implementation and modification of security technologies, processes and procedures, including training programs for employees to raise awareness about phishing, malware and other cyber risks and certification of our major technology suppliers and any outsourced services through accepted security certification measures, we could experience increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication and complexity.

In addition, there are additional inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented.

In addition, there are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented.

Potential issues associated with implementing technology initiatives and the time and resources required to optimize the benefits of new elements of our systems and infrastructure could reduce the efficiency of our operations in the short term.

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If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.

If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired.

In addition, our customers could lose confidence in certain payment types,

which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.

In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.

As a result, our business and operating results could be adversely affected.

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In addition to complying with current laws, rules and regulations, we must also comply with new and changing laws and regulations, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business.

Complying with local zoning codes, real estate land use restrictions, employment-related laws, and other local laws across numerous jurisdictions is particularly challenging as we grow the number of our stores in new municipalities and need to stay abreast of changes in such local laws.

in such local laws.

The increasing proliferation of local laws, some of which may be conflicting, further complicates our efforts to comply with all of the various laws, rules and regulations that apply to our business.

We could also be negatively impacted by changes in government regulations in areas including taxes (such as the increase in the corporate tax rate proposed by the Biden administration), healthcare and environmental protection.

All of the above legal, regulatory and administrative requirements collectively affect multiple aspects of our business, including those involving labor and employment benefits;

We could also be negatively impacted by changes in government regulations in areas including taxes, healthcare and environmental protection.

All of the above legal, regulatory and administrative requirements may, individually or collectively, affect multiple aspects of our business, including those involving labor and employment benefits;

health, welfare and finance;

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In addition, we require our vendors to adhere to various conduct, compliance and other requirements, including those relating to employment and labor (including wages and working conditions), health and safety, and anti-bribery standards.

Although we have implemented policies and procedures to facilitate

compliance with laws and regulations, this does not guarantee that vendors and other third parties with whom we do business will not violate such laws and regulations or our policies.

Although we have implemented policies and procedures to facilitate compliance with laws and regulations, this does not guarantee that vendors and other third parties with whom we do business will not violate such laws and regulations or our policies.

If we or other third parties with whom we do business fail to comply with these laws, rules and regulations, we may be subject to judgments, fines or other costs or penalties, which could materially adversely affect our business operations and financial performance.

The insurance we carry may not always pay, or be sufficient to pay or reimburse us, for our losses.

We are primarily self-insured and we purchase insurance only for catastrophic types of events for such risks as workers’

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Issues with the safety of merchandise, and issues with the authenticity of merchandise, or customer concerns about such issues, regardless of our fault, could cause damage to our reputation and could result in lost sales, uninsured product liability claims or losses, merchandise recalls and increased costs, and regulatory, civil or criminal fines or penalties, any of which could have a material adverse effect on our financial results.

In addition, risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business.

Loss may be caused by error or misconduct of associates, customers, vendors or other third parties.

An unfavorable, uncertain or volatile economic environment, as we have experienced recently as a result of inflation, rising interest rates, supply chain disruptions and COVID-19, among other things, has and may continue to cause an increase in inventory shrinkage.

Risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business, and we experienced increased shrinkage, as well as increased loss prevention costs, in Fiscal 2022.

Loss or theft may be caused by error or misconduct of associates, customers, vendors, organized retail theft, or other third parties.

Our inability to effectively prevent and/or minimize the loss or theft of assets, or to effectively reduce the impact of those losses, could adversely affect our financial performance.

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and other companies’

could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of customer and/or employee information, and some of our current or future business plans;

and a material failure on our part to comply could subject us to fines or other regulatory sanctions and potentially to lawsuits.

In recent years, there has been increasing regulatory enforcement and litigation activity in the area of privacy, data protection and information security in various states in which we operate.

Compliance with the evolving privacy regulatory landscape will likely increase the costs of doing business, especially if we face differing regulatory requirements across multiple jurisdictions and/or a lack of adequate regulatory guidance.

obligation to protect such sensitive data becomes increasingly rigorous, with new and evolving requirements applicable to our business, compliance with those requirements could result in additional costs and could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of customer and/or employee information, and some of our current or future business plans.

A material failure on our part to comply could subject us to fines or other regulatory sanctions and potentially to lawsuits.

In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information security in various states in which we operate.

of adequate regulatory guidance.

New legislation or regulations, including any potential comprehensive federal privacy legislation, as well as any associated inquiries or investigations or any other government actions, could also result in negative publicity, require significant management time and attention, and subject us to remedies that may harm our business, including fines or demands or orders that we modify or cease existing business practices.

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Accruals are established based on our best estimates of our potential liability.

However, we cannot accurately predict the ultimate outcome of any such proceedings due to the

inherent uncertainties of litigation.

However, we cannot accurately predict the ultimate outcome of any such proceedings due to the inherent uncertainties of litigation.

Regardless of the outcome or whether the claims are meritorious, legal and regulatory proceedings may require that we devote substantial time and expense to defend our Company.

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Our debt obligations also include $33.4 million of finance lease obligations as of January 28, 2023.

Estimated cash required to make interest payments for these debt obligations amounts to approximately $33.1 million in the aggregate for the fiscal year ending January 28, 2023.

Estimated cash required to make interest payments for these debt obligations, net of the impact of our interest rate swap, amounts to approximately $63.5 million in the aggregate for the fiscal year ending February 3, 2024.

Our ability to make payments on and to refinance our debt, and to fund planned capital expenditures, will depend on our ability to generate cash in the future, which is to some extent subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

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In the event the conditional conversion feature of our Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert their notes at any time during specified periods at their option.

If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.

In addition, even if holders of Convertible Notes do not elect to convert their notes,

we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

If one or more holders elect to convert their Convertible Notes, we would be required to settle the principal portion of our conversion obligation in cash, which could adversely affect our liquidity.

In addition, even if holders of Convertible Notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Convertible Notes, or may otherwise depress the price of our common stock.

The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Convertible Notes.

The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders, as we will deliver shares of our common stock with respect to any excess over principal upon conversion of any of the Convertible Notes.

The Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances.

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The discontinuance of LIBOR and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations.

Certain of our credit agreements currently use LIBOR as a reference rate to calculate interest rates.

Our Term Loan Facility currently uses LIBOR as a reference rate to calculate interest rates.

The United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR, and most LIBOR tenors are not expected to be published after June 30, 2023.

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dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (SOFR).

However, the market transition away from LIBOR is complicated, and there can be no assurance that SOFR will become a widely accepted benchmark in place of LIBOR.

To address a potential transition away from LIBOR, the Term Loan Facility and ABL Line of Credit agreements each were amended in 2021 to provide for an agreed upon methodology to replace LIBOR with a SOFR-based rate (or, if a SOFR-based rate is unavailable, amend such agreements to substitute LIBOR with an agreed replacement rate), subject to our consent and the applicable administrative agent, and in each case subject to a short lender negative consent period.

However, there is no guarantee that any such amendment to adopt a replacement rate would be agreed by the applicable agents and lenders or that such consents would be obtained, and in such event we would be required to pay a rate of interest higher than expected on the amount owed under such agreements where the interest rate is subject to LIBOR.

To address a potential transition away from LIBOR, the Term Loan Facility was amended in 2021 to provide for an agreed upon methodology to replace LIBOR with a SOFR-based rate (or, if a SOFR-based rate is unavailable, amend such agreements to substitute LIBOR with an agreed replacement rate, subject to our consent and the applicable administrative agent, and in each case subject to a short lender negative consent period).

However, to the extent that any such replacement rate would require the consent of the administrative agent or lenders under the Term Loan Facility, there is no guarantee that any such amendment to adopt a replacement rate would be agreed by such administrative agent and the lenders under the Term Loan Facility or that such consents would be obtained, and in such event we would be required to pay a rate of interest higher than expected on the amount owed under such agreements where the interest rate is subject to LIBOR.

We have also entered into LIBOR based interest rate swap agreements to manage our exposure to interest rate movements resulting from changes in the benchmark interest rate of LIBOR.

Any replacement of LIBOR as the basis on which interest on our floating-rate debt and/or under our interest rate swaps is calculated may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, any successor rate to SOFR under our Term Loan Facility and ABL Line of Credit agreements may not have the same characteristics as SOFR or LIBOR, and each of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

As a result of the transition to SOFR, our interest expense could increase and our available cash flow for general corporate requirements may be adversely affected.

In addition, there remains uncertainty as to the longer-term impact of the discontinuation of LIBOR and the adoption of SOFR and other alternative reference rates, which could affect our overall financial condition or results of operations.

In addition, any further changes or reforms to the determination or supervision of LIBOR, SOFR and other alternative reference rates may result in a sudden or prolonged increase or decrease in reported LIBOR, SOFR or other alternative reference rates.

Additionally, any potential successor rate to SOFR under our Term Loan Facility and ABL Line of Credit agreements may not have the same characteristics as SOFR or LIBOR.

Each of the foregoing risks could have a material adverse effect on our business, financial condition and results of operations.

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

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expectations and sales of large blocks of our common stock, among other factors, could cause the market price of our common stock to fluctuate substantially.

addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of these companies.

In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of these companies.

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable.

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Responding to such actions could be costly and time-consuming, disrupt our operations, may not align with our business strategies and could divert the attention of our Board of Directors and senior management from the pursuit of current business strategies.

Perceived uncertainties as to our future direction as a result of stockholder activism or potential changes to the composition of the Board of Directors may lead to the perception of a change in the direction of the business or other instability, and may make it more difficult to attract and retain qualified personnel and business partners.

Perceived uncertainties as to our future direction as a result of stockholder activism or potential changes to the composition of the Board of Directors may lead to the perception of a change in the direction of the business or other instability, and may affect our stock price or may make it more difficult to attract and retain qualified personnel and business partners.

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-K

Item 1. Business