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Item 7. Management’s Discussion and Analysis

2024-03-27 compared with 2023-03-23 · 194 added, 219 removed, 261 unchanged (61% of the section changed)

6 unchanged sentences

understanding and evaluating our financial condition and

generally discusses

year comparisons between fiscal

2022 and fiscal

2021, as well,

as certain fiscal

“Management’s

Condition and

Operations” in

Financial Statements, including the accompanying Notes appearing in

Part II, Item 8 of this

annual report

for the fiscal year ended January 29, 2022.

on Form 10-K.

This section of the annual report

on Form 10-K generally discusses fiscal 2023

2021 that are not included

in this Form 10-K can

be found in “Management’s

Discussion and Analysis of

Form 10-K for the fiscal year ended January 28, 2023.

Recent Developments

Inflationary Cost Pressure and Rising Interest Rates

The current high

inflationary environment continues to

impact the Company

through higher operating

costs, including costs to ship our products to stores and customers, operating supplies, wages, and

consumables across

are increasingly

impacting our

customers’ disposable

as our customers’ willingness to purchase discretionary items such as

apparel, jewelry or shoes.

committed to continue

raising interest rates

until the inflationary

pressures subside.

These rising interest

mortgages, which increasingly is

negatively impacting our customers’

discretionary income.

rising interest rates may negatively impact our customers’ willingness

to purchase our products.

increases and

rising interest

impact during

and will likely continue to have

a negative impact on consumer behavior

and, by extension, our results of

operations and financial condition during fiscal 2023.

Labor Challenges and Wage Inflation

resulting factors

created challenges

availability of sufficient labor from time to time, and have caused a significant increase in the competition

among consumer-facing companies.

This competition

significant increases

distribution center

corporate office.

throughout fiscal 2023.

Inflationary Cost Pressure and High Interest Rates

inflation related to

fuel, food, housing,

including rent, and

other consumable products

and a flattening

wage rates in 2023.

persistence of high interest rates and

inflation negatively affected our customers’

willingness to purchase discretionary items such as apparel, jewelry

Though the Federal Reserve paused

raising rates in the

fall of 2023, it

has indicated it is

These high interest rates have adversely affected the availability and cost of credit for both businesses and

discretionary

products may continue to be negatively impacted by these inflationary

pressures and high interest rates.

believe continued

inflation and

high interest

rates negatively

impacted fiscal

continue to have a negative impact on

consumer behavior and, by extension, our results of

operations and

financial condition during fiscal 2024.

Merchandise Supply Chain

traverses through the Panama Canal or

the Suez Canal.

Due to a sustained regional

drought, the Panama

approximately

draft of vessels

transiting the Panama Canal,

which reduces the volume

and number of

containers carried

increases our

hostilities affecting

increasing both lead times for merchandise during our key selling times and our costs to ship

Both of these situations have negatively impacted 2023 and will likely continue to have a negative impact

on our results of operations and financial condition during fiscal 2024.

Results of Operations

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Fiscal Year Ended

January 28, 2023

February 3, 2024

January 28, 2023

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Interest and other income ……………………………………………

Income before income taxes …………………………………………

Net income …………………………………………………………..

Income (loss) before income taxes …………………………………………

Net income (loss)…………………………………………………………..

Fiscal 2023 Compared to Fiscal 2022

1 unchanged sentence

2023 compared

primarily due

in same-store

partially offset by

stores opened

Same-store sales

decreased primarily

selling price

resulting from

merchandise due to supply chain disruptions in the first half of 2022.

Same-store sales includes stores that

been relocated

the same-store sales calculation after they have been open more than

In fiscal 2022 and fiscal

2021, e-commerce

and same-store sales,

respectively.

calculating same-store

retail industry.

The decrease in

retail sales in fiscal

2023 was primarily due

to a 5.9% decrease

in same-store sales

closed stores

partially offset

week of sales

in 2023 and a

small increase in

sales from stores opened in 2023.

Same-store sales

revenues, comprised

of retail sales and other

revenue (principally

finance charges and

late fees on customer

accounts receivable,

2023 decreased

transactions,

sales includes

been relocated or expanded are also included in the same-store sales calculation after they have been open

e-commerce sales

total sales and same-store sales, respectively.

The method of calculating same-store sales varies across the

(principally finance

customer accounts

receivable, gift

breakage, shipping

e-commerce purchases

layaway fees),

In fiscal 2022, the Company opened 19 new stores and closed 50 stores.

million in fiscal 2021.

The decrease resulted primarily due to

decreases in gift card breakage income and

e-commerce shipping revenues,

partially offset by an increase in finance and layaway charges.

charges for e-commerce purchases

and layaway fees), decreased by 6.7%

compared to 1,280 stores operated at January 28, 2023.

In fiscal 2023, the Company opened nine new stores and closed 111 stores.

shipping revenue.

increase compared to fiscal 2022 credit

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Consolidated Financial

Statements for

of credit-related

“Reportable Segment

credit-related expenses.

credit segment

income before

fiscal 2023 and $0.6 million in fiscal 2022.

2023 compared

million, or 67.7% of retail sales, in fiscal 2022.

The increase in cost of goods sold as a

percentage of sales

resulted primarily

expects markdown

sales increase

optimum selling

includes merchandise

and allowances,

The decrease in cost of goods sold as a percentage of sales

by deleveraging

occupancy and

buying costs.

distribution costs,

occupancy costs,

and inventory

payroll, payroll-related

operating expenses

buying departments

and distribution

sold and excluding depreciation)

decreased by 21.3% to $242.7

million in fiscal 2022

million in fiscal 2021.

Gross margin as presented may not be comparable

to that of other companies.

merchandise costs,

Buying and distribution costs include

payroll, payroll-related costs and operating expenses for

depreciation)

$236.0 million

$242.7 million

presented may

comparable to that of other companies.

Selling, general

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primarily include corporate

processing fees were

$242.6 million in

fiscal 2022 compared

to $267.0 million

in fiscal 2021,

retail sales, SG&A

SG&A expense was

primarily attributable to lower

employee benefit/bonus

expense and lower

insurance costs,

partially offset

resulting from

higher hourly

rates and increased

operating hours.

processing fees were $252.8 million in fiscal

2023 compared to $242.6 million in fiscal

2022, an increase

As a percent of retail sales, SG&A was 36.1% compared to 32.3% in the prior year.

was primarily

attributable to

higher payroll,

insurance and

information technology expenditures.

2023 compared

from property

claims related

hurricanes in

increase in interest

income from short-term investments

due to rising

interest rates, partially

offset by lower short-term investments.

$1.7 million,

primarily due

pre-tax income

federal, state

tax benefits,

interest rates.

Income tax expense was

$10.1 million, or 1.4%

of retail sales in

fiscal 2023 compared to

primarily due to a valuation allowance

recorded against U.S.

federal and state

deferred tax assets due to

pre-tax loss,

partially offset

Global Intangible Low-taxed Income (“GILTI”) and

non-deductible officer’s compensation.

rate differential.

The effective

was 98.4% (Expense)

2022 compared to

5.4% (Expense) in

the Consolidated Financial Statements, “Income Taxes,” for further details.

Statements, “Income Taxes,” for further details.

Off-Balance Sheet Arrangements

4 unchanged sentences

Consolidated Financial

the Consolidated Financial

Statements, the preparation

conformity with

amounts reported

3 unchanged sentences

determination

credit losses,

inventory shrinkage,

the calculation

asset impairment,

workers’ compensation,

positions, and valuation of deferred tax assets.

inherent in the preparation of the Company’s financial statements include the calculation of potential asset

impairment, income tax

valuation allowances, reserves relating

to self-insured health

insurance, workers’

compensation, general

insurance liabilities,

uncertain tax

positions, the

allowance for

credit losses, and inventory shrinkage.

The Company’s critical accounting policies and estimates are discussed with the Audit Committee.

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restrictive covenants.

determining the present value of lease payments.

See Note 11 for further information.

determining the present

value of lease

Consolidated Financial Statements,

“Leases” for further information.

Impairment of Long-Lived Assets

79 unchanged sentences

allowance should

assets, a valuation allowance is recorded for the proportion of the deferred tax asset it determines may not

assets, a valuation allowance is recorded for the proportion of the deferred tax asset it

determines may not

Liquidity, Capital Resources and Market Risk

6 unchanged sentences

regular operating requirements, including

$71.9 million

obligations and

planned investments

$22.1 million

expenditures,

fiscal 2024 and for the foreseeable future.

$59.8 million provided

$30.7 million

Cash provided

depreciation,

compensation, impairment and

changes in working

of $46.4 million

for fiscal 2022

is primarily due

operating income and

a decrease in

accounts payable

and accrued bonus and benefits, partially offset

by lower accounts receivable and merchandise

$13.4 million in

operating activities

was primarily attributable to net income adjusted for depreciation, share-based compensation, impairment

and changes in

working capital.

decrease of $12.9

million for fiscal

2023 compared to

fiscal 2022 is

deferred taxes.

$55.1 million compared

$74.7 million

respectively.

partially offset by lower accounts payable

and accrued bonus and benefits.

At January 28,

and current lease liability.

At February 3,

2024, the Company

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ratios with which the Company

was in compliance as of January 28, 2023.

There were no borrowings

outstanding under this credit facility

as of the fiscal year ended January 28, 2023 or the fiscal year ended

January 29, 2022.

January 28, 2023, January 29, 2022 and January 30, 2021.

compliance as

borrowings outstanding,

any outstanding

reduced borrowing

availability,

credit facility

February 3, 2024 or the fiscal year ended January 28, 2023.

February 3, 2024 or at January 28, 2023.

2021, respectively.

2 unchanged sentences

for additional

investments in 19 new stores, distribution

center and information technology.

million used in

fiscal 2021 and

investments in nine new stores, our

distribution center and information technology.

million provided

In fiscal 2022,

expenditures for property and equipment.

Net cash used by financing activities totaled $29.3 million in fiscal 2022 compared to net cash used of

$25.3 million

$27.2 million

The decrease in cash used was

due to lower share repurchase amounts,

partially offset by higher dividend payments.

cash provided

was primarily

attributable to

short-term investments,

partially offset

by expenditures

property and equipment.

Net cash used in financing activities totaled

$16.1 million in fiscal 2023 compared to

net cash used of

The decrease in

cash used during

2023 was primarily due to lower

share repurchase amounts.

The Company does not use derivative financial instruments.

Measurements,”

that are measured at fair value.

investment portfolio

primarily invested

taxable governmental

debt securities

managed accounts

with underlying

state, municipal

and corporate

asset-backed securities have

maturities which

contractual maturities

regarding the Company’s financial assets that are measured at fair value.

governmental debt securities held in managed accounts

with underlying ratings of A or

better at February

municipal and corporate bonds and

asset-backed securities have contractual maturities

securities are

1 unchanged sentence

available-for-sale and

Short-term investments,

Restricted cash,

Restricted short-term

investments and

the accompanying

Consolidated Balance

with unrealized

and losses reported net of taxes in Accumulated other comprehensive income.

The asset-backed securities are

securities are

were originated

Short-term investments, Restricted cash, and Other assets on the accompanying Consolidated Balance Sheets.

unrealized gains

in Accumulated

other comprehensive income.

asset-backed securities are bonds

comprised of auto loans

and bank credit

cards that carry

asset-backed securities

that were originated and serviced by captive auto finance units, banks or finance companies.

The bank credit

card receivables

holders of cards from American Express, Citibank,

JPMorgan Chase, Capital One, and Discover.

Additionally,

recorded within Other assets in the

respectively,

Consolidated Balance Sheets.

At January 29, 2022, the Company had

investment securities include corporate and municipal bonds for which quoted prices may

2 unchanged sentences

Their fair value is principally based on market values determined

by management with the assistance of a third-party pricing service.

Since quoted prices in active markets for

identical assets are

20 unchanged sentences

taxes, utilities, insurance and maintenance, which are not included in our estimated lease obligations.

lease obligations.

Recent Accounting Pronouncements

1, Summary of

Significant Accounting Policies,

Recently Adopted Accounting

Consolidated Financial

Significant Accounting

Recently Issued Accounting Pronouncements.”

5 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis