What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-27 · 258 added, 187 removed, 268 unchanged (62% of the section changed)

16 unchanged sentences

Discussion and Analysis of

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

Form 10-K for the fiscal year ended February 3, 2024.

Recent Developments

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

persistently high prices caused by high inflation

rates, especially related to housing, groceries 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

interest rates

have adversely

availability and

credit for our customers, including

revolving credit and auto loans,

and continue to negatively impact

customers’ disposable income.

Our customers’

willingness to purchase

our products may

negatively impacted by these inflationary pressures and high interest

disposable income

adversely impacted

likely continue

consumer behavior and, by extension, our results of operations and financial condition during

at least part

of fiscal 2025.

Merchandise Supply Chain and Tariff Pressures

A significant amount of

our merchandise is manufactured

overseas, principally in Southeast

approximately 37% and

also reduced the

permissible draft of

vessels transiting the

Panama Canal, which

reduced the volume

and number of

containers carried

increases our

containers carried by container

ships and increased

conditions improved as

Canal authority

increased the

daily transits

permissible draft

of vessels, raising the number of

transits to 95% of pre-drought operations in the

second quarter and back

to pre-drought

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.

surrounding the

Suez Canal are causing container ships to travel longer distances around the Cape of Good Hope, which is

increasing lead times for merchandise and

our costs to ship these

goods, as well as decreasing the

certain Asian

our shipments

were negatively

countries that

merchandise to

incrementally

these conditions

negative impact on

of operations

and financial

condition for the foreseeable future.

Chinese products may have several impacts on the results

of our financial operations.

Our costs associated

with products made in China are likely to increase.

These cost increases will negatively impact our results

chain issues,

move production

Potential supply

products being

port congestion,

transit times

product deliveries, any of which may

negatively impact our results of operations

and financial condition.

Results of Operations

4 unchanged sentences

February 1, 2025

January 28, 2023

February 3, 2024

Retail sales …………………………………………………………..

5 unchanged sentences

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

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

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

Loss before income taxes …………………………………………

Net loss…………………………………………………………..

Fiscal 2024 Compared to Fiscal 2023

1 unchanged sentence

2024 compared

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.

Fiscal 2024 had 52 weeks versus 53 weeks in fiscal 2023.

The decrease in retail sales

in fiscal 2024

same-store sales,

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

from closed stores in

transactions, partially offset by fewer returns and slightly higher average sales per transaction.

same-store sales

In fiscal 2024 and fiscal 2023, e-commerce sales were less than 5%

of total sales and same-store

calculating same-store sales

varies across the

retail industry.

result, our same-

calculation may

comparable to

similarly titled

measures reported

revenues, comprised of

revenue (principally finance

customer accounts receivable,

gift card breakage, shipping

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.

fees), decreased by 8.2% to

$649.8 million in

fiscal 2024 compared to

$708.1 million in

In fiscal 2024, the Company opened five new stores and closed 66

Other revenue,

revenues, remained

2024 compared

to fiscal 2023.

increase compared to fiscal 2023 credit

7 unchanged sentences

fee income as

accounts receivable

Credit revenue

the Company’s

card portfolio

2 unchanged sentences

administrative

Consolidated Financial

“Reportable Segment

credit-related expenses.

credit segment

income before

fiscal 2023 and $0.6 million in fiscal 2022.

segment income before taxes was $2.2 million in fiscal

2024 and $1.7 million in

2024 compared

million, or 66.3% of retail sales, in fiscal 2023.

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

by deleveraging

occupancy and

buying costs.

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

resulted primarily

distribution and

freight costs,

increased sales

priced goods,

and deleveraging

sold includes

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.

distribution costs include payroll, payroll-related costs and operating expenses for the buying departments

(retail sales

sold and excluding

depreciation) decreased by

$205.7 million in

fiscal 2024 from $236.0

million in fiscal

Gross margin as

presented may not

be comparable to

of other companies.

Selling, general

2 unchanged sentences

primarily include corporate

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

processing fees were

$231.5 million in

fiscal 2024 compared

to $252.8 million

in fiscal 2023,

decrease in SG&A expense in fiscal 2024 was primarily attributable to decreased incentive compensation,

insurance, closed store and impairment expenses, partially offset by increased professional

Depreciation expense

decreased slightly

depreciated older

period impairments of leasehold improvements and fixtures,

partially offset by the distribution

information technology expenditures.

2023 compared

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

Interest and other

income increased to

$11.8 million

in fiscal 2024

compared to $5.1

million in fiscal

The increase is

primarily attributable to a $3.2

million net gain on

sale of land held

for investment,

corporate aircraft

equity securities,

interest earned on the Company’s investments.

$1.9 million,

primarily due

valuation allowance

recorded against

pre-tax loss,

partially offset

rate differential.

The effective

Statements, “Income Taxes,” for further details.

differential.

(Expense) in fiscal

2024 compared to

(Expense) in fiscal

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

Off-Balance Sheet Arrangements

42 unchanged sentences

shrinkage and

actual shrinkage results

inventory shrinkage,

inventory on hand.

Actual shrinkage results are used to estimate inventory shrinkage, which is accrued for

period between

last physical

inventory and

the financial

reporting date.

markdowns to clear slow moving inventory.

financial reporting

Company regularly

moving inventory.

Lease Accounting

14 unchanged sentences

value of lease

Consolidated Financial Statements,

the Consolidated Financial

“Leases,” for further information.

14 unchanged sentences

determines that

cash flows associated with those long-lived assets will not be sufficient to recover the carrying value.

cash flows associated with those long-lived assets will not be sufficient to recover

the carrying value.

determination is based on a

63 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

This evaluation

requires significant

consideration of

all available

taxable income.

Liquidity, Capital Resources and Market Risk

3 unchanged sentences

investments, together

flows from operations, will be

adequate to fund the Company’s

regular operating requirements, including

expenditures,

fiscal 2024 and for the foreseeable future.

$13.4 million in

operating activities

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

and changes in

operations and

asset-backed revolving line

requirements,

planned investments of $7.3 million of capital expenditures,

for the next twelve months from the issuance

of this report.

provided in fiscal 2023 and $13.4 million provided in fiscal 2022.

Cash used in operating activities during

primarily attributable

income adjusted

for depreciation,

working capital

decrease of $12.9

million for fiscal

2023 compared to

fiscal 2022 is

deferred taxes.

subtraction of

for non-operating

for investment.

primarily due

$34.9 million compared

$55.1 million

respectively.

partially offset by lower accounts payable

and current lease liability.

and $74.7 million at February 3,

2024 and January 28, 2023, respectively.

compared to the prior

year is primarily due

to lower short-term investments and

accounts receivables, higher

accounts payable and accrued expenses, partially offset

by higher inventory and lower current

lease liability.

At February 1,

6 unchanged sentences

credit related

commitments, and

was committed

agreement contained

various financial

covenants and limitations, including the maintenance of specific financial

ratios with which the Company

compliance as

was not in compliance as of

February 1, 2025.

There were no

borrowings outstanding,

any outstanding

reduced borrowing

availability,

or any outstanding

credit facility

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

February 3, 2024 or at January 28, 2023.

ended February

Company terminated

unsecured revolving

credit when it entered into a

new $35.0 million asset-backed revolving line

of credit (the “ABL Facility”)

secured primarily by

inventory and third-party

credit card receivables.

31, 2025 there

additional information regarding the ABL Facility, see Note 1 to the Consolidated Financial Statements.

February 1, 2025 or at February 3, 2024.

2024, the Company amended

the now terminated

unsecured revolving credit agreement

to modify a definition used in calculating the Company’s

minimum EBITDAR coverage ratio to add back

corresponding minimum

determine the

EBITDAR coverage ratio in exchange for a secured position in any

future borrowings.

fiscal 2024, 2023

2022, respectively.

expenditures for

were primarily

for additional

investments in nine new stores, our

distribution center and information technology.

million provided

$25.3 million

cash provided

The decrease in

expenditures for fiscal

2024 was primarily

attributable to

short-term investments,

partially offset

by expenditures

property and equipment.

to finishing projects related to

investments in the distribution center and

information technology.

million provided in

fiscal 2023 and

$16.0 million provided

In fiscal 2024,

the increase in

investments and other assets, partially offset by expenditures for property and equipment.

Net cash used in financing activities totaled

3 unchanged sentences

cash used during

2023 was primarily due to lower

share repurchase amounts.

The Company does not use derivative financial instruments.

6 unchanged sentences

asset-backed securities have contractual maturities

securities are

classified as

available-for-sale and

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.

which range from nine days to 2.8 years.

Treasury notes have contractual maturities which range

from 13 days to 2.5 years.

These securities are classified as available-for-sale and are recorded as Short-term

investments and Other

assets on the

accompanying Consolidated Balance

are carried at

comprehensive

Additionally,

corporate equities,

respectively,

Consolidated Balance Sheets.

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

not be available on

active exchanges for identical instruments.

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

not available, these

prices are determined

by the pricing

service using observable

characteristics, among other factors.

available on active exchanges for identical

Their fair value is principally based on market

determined by management with the assistance

of a third-party pricing service.

Since quoted prices in active

observable market information such as quotes from less active markets and/or quoted prices of securities with

similar characteristics, among other factors.

compensation plan

17 unchanged sentences

Significant Accounting

Recently Issued Accounting Pronouncements.”

Recently Adopted Accounting Policies and Recently Issued Accounting

Pronouncements.”

Quantitative and Qualitative Disclosures About Market Risk:

4 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