What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-31 · 156 added, 261 removed, 265 unchanged (61% of the section changed)

18 unchanged sentences

Recent Developments

Inflationary Cost Pressure and High Interest Rates

persistently high prices caused by high inflation

rates, especially related to housing, groceries and

high interest

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 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

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.

Uncertainties and Pressures

Southeast Asia.

regarding how

are evaluating

uncertainties regarding the process, timing and amounts of any

On February 20, 2026,

after the Supreme Court

ruling, a 10% tariff

under Section 122 was

2026, the U.S.

Trade Representative

announced Section 301

investigations into

various countries, including countries where much of our products are manufactured.

The extent to which

these Section

301 investigations will

additional tariffs,

timing of any

potential tariffs,

currently unknown.

Although the tariff amounts are reduced from their levels in the second half of 2025,

acquisition costs in the first half of 2026 and possibly the second half

Results of Operations

3 unchanged sentences

Fiscal Year Ended

February 1, 2025

January 31, 2026

February 1, 2025

11 unchanged sentences

2025 compared

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

The decrease in retail sales

in fiscal 2024

same-store sales,

from closed stores in

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

The increase in

retail sales in fiscal

2025 was primarily due

increase in same-store sales,

closed stores in

primarily due to

higher transactions volume and

slightly higher average sales

per transaction.

same-store sales

14 unchanged sentences

charges for e-commerce purchases

fees), decreased by 8.2% to

$649.8 million in

fiscal 2024 compared to

fees), increased by 0.6%

million in fiscal

2025 compared to

$649.8 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

revenue of $2.6 million or 0.4% of

total revenue.

The increase in

credit revenue was

primarily due to

increases in finance

charges and late

fee income as

card portfolio

Related expenses

principally payroll,

In fiscal 2025, the Company opened no new stores and closed 48 stores.

million in fiscal 2024.

Credit revenue

million represented 0.4%

dollars and percentage compared

administrative

segment income before taxes was $2.2 million in fiscal

2024 and $1.7 million in

credit segment

income before

fiscal 2025, relatively flat in dollars compared to fiscal 2024.

2025 compared

million, or 68.0% of retail sales, in fiscal 2024.

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

resulted primarily

distribution and

freight costs,

increased sales

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

resulted primarily from lower buying, distribution and occupancy costs, partially offset by increased sales of

priced goods.

and deleveraging

sold includes

merchandise costs,

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

(retail sales

Cost of goods

sold includes merchandise

costs, net of

discounts and allowances,

buying costs,

distribution costs,

occupancy costs,

and inventory

payroll, payroll-related

operating expenses

buying departments

and distribution

maintenance for stores and distribution facilities.

Total gross margin dollars (retail sales less cost of goods

sold and excluding

depreciation) decreased by

$205.7 million in

fiscal 2024 from $236.0

depreciation) increased by

4.7% to $215.3

million in fiscal

Gross margin as

presented may not

be comparable to

of other companies.

2025 from $205.7

in fiscal 2024.

Gross margin as presented may not be comparable to that of other companies.

Selling, general

7 unchanged sentences

in fiscal 2024,

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.

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.

closed store and impairment expenses.

depreciation,

fixtures depreciation.

Interest and other income decreased

to $6.7 million in

fiscal 2025 compared to

$11.8 million in

primarily attributable

investment and

disposal of the Company’s corporate aircraft in 2024.

$1.6 million,

primarily due

valuation allowance

recorded against

pre-tax loss,

partially offset

differential.

(Expense) in fiscal

2024 compared to

$1.9 million, or

retail sales in

The effective

(Benefit) in fiscal 2025 compared to

(Expense) in fiscal 2024.

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

The income tax expense decrease

was primarily due to a reduction in foreign income taxes and a larger release of reserves related to expired

limitations for

uncertain tax

Big Beautiful

Bill Act (the “OBBBA”) was signed into law.

The Company considered the impact of the OBBBA in the

second quarter of fiscal 2025.

The changes do not have a material impact on the Company’s

effective tax

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

Off-Balance Sheet Arrangements

Not applicable.

Critical Accounting Policies and Estimates

65 unchanged sentences

value of lease

the Consolidated Financial

Consolidated Financial Statements,

“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

74 unchanged sentences

investments, together

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.

investments of

$7.4 million of

capital expenditures,

months from the

annual report on Form 10-K.

$19.7 million

used in fiscal 2024 and $0.5 million provided in fiscal 2023.

Cash used in operating activities during 2025

primarily attributable

income adjusted

for depreciation,

working capital

subtraction of

for non-operating

for investment.

primarily due

was primarily attributable to

net loss adjusted for

depreciation,

stock-based compensation and changes

primarily due to a lower net loss and a decrease

in merchandise inventory, partially offset by a decrease in

accounts payable.

$37.4 million compared

$34.9 million

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,

2025, the Company

unsecured revolving credit

agreement, which provided

borrowings of

$35.0 million less

any revocable

credit related

commitments, and

was committed

agreement contained

various financial

covenants and limitations, including the maintenance of specific financial

ratios with which the Company

was not in compliance as of

February 1, 2025.

There were no

borrowings outstanding,

or any outstanding

credit facility

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

and $55.1 million at

February 1, 2025 and

February 3, 2024, respectively.

2025 compared

lower accounts

payable, accrued

liabilities and

current lease liability, partially offset by

lower cash and cash equivalents and merchandise

2028 and is secured primarily by inventory

and third-party credit card receivables.

no borrowings outstanding and

the availability under the

facility was $30.0

giving effect

outstanding letter

borrowing availability

zero at January 31, 2026 due to no outstanding borrowings.

Expenditures for property and equipment totaled $3.8 million, $7.9 million

and $12.5 million in fiscal

respectively.

The decrease in

expenditures for fiscal

2024 was primarily

to finishing projects related to

investments in the distribution center and

information technology.

million provided in

fiscal 2023 and

finishing projects related to investments in

the distribution center and information technology.

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

$14.1 million in fiscal 2024 compared to

net cash used of

short-term investments,

offset by a decrease in expenditures for property and equipment and purchases of short-term

used in financing

activities totaled

$0.9 million in

compared to net

The decrease in

cash used during

2025 was primarily due to the

elimination of dividend payments and a

decrease in share repurchases.

The Company does not use derivative financial instruments.

1 unchanged sentence

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

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.

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.

governmental debt

securities held in

managed accounts with

underlying ratings of

corporate bonds

have contractual

maturities which

Treasury notes have a contractual maturity of 15 days.

based on market values determined by management with the assistance of a third-party pricing service.

pricing service

using observable

market information

markets and/or

prices of securities with similar characteristics,

among other factors.

compensation plan

15 unchanged sentences

Recent Accounting Pronouncements

Consolidated Financial

Significant Accounting

See Note 1 to

the Consolidated Financial Statements,

“Summary of Significant Accounting Policies—

Recently Adopted Accounting Policies” and “—Recently Issued Accounting

4 unchanged sentences

but the Company

believe such exposure

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