Citi Trends Inc 10-Q

Item 1. Financial Statements. Citi Trends, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 1, January 30, ​ 2021 2021 Assets ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 131,276 ​ $ 123,177 ​ ​ Inventory ​ 101,803 ​ 103,845 ​ ​ Prepaid and other current assets ​ 19,290 ​ 17,420 ​ ​ Total current assets ​ 252,369 ​ 244,442 ​ ​ Property and equipment, net of accumulated depreciation of $ 281,842 and $ 279,080 as of May 1, 2021 and January 31, 2021, respectively ​ 65,532 ​ 63,514 ​ ​ Operating lease right of use assets ​ ​ 184,694 ​ ​ 179,673 ​ ​ Deferred income taxes ​ 5,141 ​ 6,195 ​ ​ Other assets ​ 1,441 ​ 769 ​ ​ Total assets ​ $ 509,177 ​ $ 494,593 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 109,723 ​ $ 84,832 ​ ​ Operating lease liabilities ​ ​ 48,908 ​ ​ 46,983 ​ ​ Accrued expenses ​ 21,247 ​ 16,592 ​ ​ Accrued compensation ​ 18,067 ​ 29,315 ​ ​ Income tax payable ​ ​ 11,603 ​ ​ 4,623 ​ ​ Layaway deposits ​ 807 ​ 500 ​ ​ Total current liabilities ​ 210,355 ​ 182,845 ​ ​ Noncurrent operating lease liabilities ​ 148,596 ​ 145,828 ​ ​ Other long-term liabilities ​ 2,233 ​ 2,286 ​ ​ Total liabilities ​ 361,184 ​ 330,959 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ ​ Common stock, $ 0.01 par value. Authorized 32,000,000 shares; 15,973,001 shares issued as of May 1, 2021 and 15,981,394 shares issued as of January 30, 2021; 9,331,012 shares outstanding as of May 1, 2021 and 9,876,901 shares outstanding as of January 30, 2021 ​ 158 ​ 158 ​ ​ Paid in capital ​ 94,416 ​ 95,484 ​ ​ Retained earnings ​ 240,815 ​ 209,918 ​ ​ Treasury stock, at cost; 6,641,989 shares held as of May 1, 2021 and 6,104,493 shares held as of January 30, 2021 ​ ( 187,396 ) ​ ( 141,926 ) ​ ​ Total stockholders’ equity ​ 147,993 ​ 163,634 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 8) ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 509,177 ​ $ 494,593 ​ ​ ​ See accompanying notes to the condensed consolidated financial statements (unaudited). 3 Table of Contents Citi Trends, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ ​ May 1, ​ May 2, ​ ​ 2021 2020 Net sales ​ $ 285,381 ​ $ 116,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales (exclusive of depreciation) ​ ​ ( 163,791 ) ​ ​ ( 84,370 ) ​ Selling, general and administrative expenses ​ ​ ( 77,892 ) ​ ​ ( 54,076 ) ​ Depreciation ​ ​ ( 4,697 ) ​ ​ ( 4,946 ) ​ Asset impairment ​ ​ — ​ ​ ( 286 ) ​ Income (loss) from operations ​ ​ 39,001 ​ ​ ( 27,554 ) ​ Interest income ​ ​ 4 ​ ​ 217 ​ Interest expense ​ ​ ( 47 ) ​ ​ ( 163 ) ​ Income (loss) before income taxes ​ ​ 38,958 ​ ​ ( 27,500 ) ​ Income tax (provision) benefit ​ ​ ( 8,061 ) ​ ​ 6,608 ​ Net income (loss) ​ $ 30,897 ​ $ ( 20,892 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income (loss) per common share ​ $ 3.27 ​ $ ( 2.00 ) ​ Diluted net income (loss) per common share ​ $ 3.23 ​ $ ( 2.00 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 9,450 ​ ​ 10,443 ​ Diluted ​ ​ 9,571 ​ ​ 10,443 ​ ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 4 Table of Contents Citi Trends, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ ​ May 1, ​ May 2, ​ ​ 2021 2020 Operating activities: ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 30,897 ​ $ ( 20,892 ) ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation ​ ​ 4,697 ​ ​ 4,946 ​ Non-cash operating lease costs ​ ​ 12,210 ​ ​ 11,756 ​ Asset impairment ​ ​ — ​ ​ 286 ​ Loss on disposal of property and equipment ​ ​ 53 ​ ​ 4 ​ Deferred income taxes ​ ​ 1,054 ​ ​ ( 7,665 ) ​ Insurance proceeds related to operating activities ​ ​ 451 ​ ​ — ​ Non-cash stock-based compensation expense ​ ​ 1,087 ​ ​ 469 ​ Changes in assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Inventory ​ ​ 1,653 ​ ​ 16,373 ​ Prepaid and other current assets ​ ​ ( 1,932 ) ​ ​ 4,201 ​ Other assets ​ ​ ( 402 ) ​ ​ 1 ​ Accounts payable ​ ​ 24,530 ​ ​ 14,030 ​ Accrued expenses and other long-term liabilities ​ ​ ( 8,598 ) ​ ​ ( 6,795 ) ​ Accrued compensation ​ ​ ( 11,248 ) ​ ​ ( 5,490 ) ​ Income tax payable ​ ​ 6,980 ​ ​ 1,101 ​ Layaway deposits ​ ​ 307 ​ ​ 495 ​ Net cash provided by operating activities ​ ​ 61,739 ​ ​ 12,820 ​ Investing activities: ​ ​ ​ ​ ​ ​ ​ Sales/redemptions of investment securities ​ ​ — ​ ​ 43,754 ​ Purchases of investment securities ​ ​ — ​ ​ ( 522 ) ​ Purchases of property and equipment ​ ​ ( 5,936 ) ​ ​ ( 3,981 ) ​ Insurance proceeds related to investing activities ​ ​ 191 ​ ​ — ​ Net cash (used in) provided by investing activities ​ ​ ( 5,745 ) ​ ​ 39,251 ​ Financing activities: ​ ​ ​ ​ ​ ​ ​ Borrowings under revolving credit facility ​ ​ — ​ ​ 43,700 ​ Payments of debt issuance costs ​ ​ ( 270 ) ​ ​ — ​ Cash used to settle withholding taxes on the vesting of nonvested restricted stock ​ ​ ( 2,155 ) ​ ​ ( 479 ) ​ Dividends paid to stockholders ​ ​ — ​ ​ ( 831 ) ​ Repurchases of common stock ​ ​ ( 45,470 ) ​ ​ ( 6,254 ) ​ Net cash (used in) provided by financing activities ​ ​ ( 47,895 ) ​ ​ 36,136 ​ Net increase in cash and cash equivalents ​ ​ 8,099 ​ ​ 88,207 ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ Beginning of period ​ ​ 123,177 ​ ​ 19,923 ​ End of period ​ $ 131,276 ​ $ 108,130 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 32 ​ $ 163 ​ Cash payments (refunds) of income taxes ​ $ 27 ​ $ ( 45 ) ​ Supplemental disclosures of non-cash investing activities: ​ ​ ​ ​ ​ ​ ​ Accrual for purchases of property and equipment ​ $ 1,023 ​ $ 936 ​ ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 5 Table of Contents Citi Trends, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Paid in ​ Retained ​ Treasury Stock ​ ​ ​ ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Shares ​ Amount ​ Total Balances — January 30, 2021 15,981,394 ​ $ 158 ​ $ 95,484 ​ $ 209,918 6,104,493 ​ $ ( 141,926 ) ​ $ 163,634 Issuance of nonvested shares under incentive plan 17,278 ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — Forfeiture of nonvested shares ( 3,005 ) ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 1,087 ​ ​ — ​ — ​ ​ — ​ ​ 1,087 Net share settlement of nonvested shares ( 22,666 ) ​ ​ — ​ ​ ( 2,155 ) ​ ​ — ​ — ​ ​ — ​ ​ ( 2,155 ) Repurchase of common stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ 537,496 ​ ​ ( 45,470 ) ​ ​ ( 45,470 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ 30,897 ​ — ​ ​ — ​ ​ 30,897 Balances — May 1, 2021 15,973,001 ​ $ 158 ​ $ 94,416 ​ $ 240,815 6,641,989 ​ $ ( 187,396 ) ​ $ 147,993 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Paid in ​ Retained ​ Treasury Stock ​ ​ ​ ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Shares ​ Amount ​ Total Balances — February 1, 2020 15,907,666 ​ $ 157 ​ $ 93,180 ​ $ 186,772 5,073,532 ​ $ ( 109,065 ) ​ $ 171,044 Vesting of nonvested restricted stock units ​ — ​ ​ 1 ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1 Issuance of nonvested shares under incentive plan 86,025 ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 469 ​ ​ — ​ — ​ ​ — ​ ​ 469 Net share settlement of nonvested shares ( 34,487 ) ​ ​ — ​ ​ ( 479 ) ​ ​ — ​ — ​ ​ — ​ ​ ( 479 ) Repurchase of common stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ 260,254 ​ ​ ( 6,254 ) ​ ​ ( 6,254 ) Dividends paid to stockholders ( $ 0.08 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 831 ) ​ — ​ ​ — ​ ​ ( 831 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 20,892 ) ​ — ​ ​ — ​ ​ ( 20,892 ) Balances — May 2, 2020 15,950,332 ​ $ 158 ​ $ 93,170 ​ $ 165,049 5,333,786 ​ $ ( 115,319 ) ​ $ 143,058 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 6 Table of Contents Citi Trends, Inc. Notes to the Condensed Consolidated Financial Statements (unaudited) May 1, 2021 ​ 1. Significant Accounting Policies ​ Basis of Presentation Citi Trends, Inc. and its subsidiary (the “Company”) is a growing specialty value retailer of apparel, accessories and home trends primarily for African American and Latinx families. As of May 1, 2021, the Company operated 584 stores in urban, suburban and rural markets in 33 states. ​ The condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The condensed consolidated balance sheet as of January 30, 2021 is derived from the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (the “2020 Form 10-K”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2020 Form 10-K. Operating results for the first quarter of 2021 are not necessarily indicative of the results that may be expected for the fiscal year, as a result of the seasonality of the business and the current uncertainty surrounding the economic impact of the novel coronavirus (“COVID-19”) pandemic and the duration and extent of any economic stimulus programs. ​ Fiscal Year The following contains references to fiscal years 2021 and 2020, which represent fiscal years ending or ended on January 29, 2022 and January 30, 2021, respectively. Fiscal 2021 and 2020 both have 52 -week accounting periods. ​ Recently Adopted Accounting Standards Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s consolidated financial statements. ​ In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which removes certain exceptions in the application of Topic 740 for franchise taxes, investments, intra-period allocations and interim calculations, and also adds guidance to reduce complexity in accounting for income taxes. The Company adopted ASU 2019-12 on January 31, 2021.The adoption of the new standard did not have a material impact to the Company’s consolidated financial position, results of operations or cash flows. ​ 2. COVID-19 Update ​ In March 2020, the World Health Organization declared the spread of the coronavirus (“COVID-19”) a global pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. The pandemic has caused and may continue to cause significant disruptions in the U.S. economy as the virus continues to spread or has a resurgence in certain jurisdictions. Measures have been implemented by the U.S. government in an effort to contain the virus, including lockdowns, physical distancing, travel restrictions, limitations on public gatherings, work from home and restrictions on nonessential businesses. ​ The COVID-19 pandemic has resulted in periods of disruption for the Company, including the temporary closure of stores and limited store operating hours, reduced customer traffic and consumer spending, and delays in the manufacturing and shipping of products. The Company saw improvement in its financial results and positive trends during the latter half of fiscal 2020 and into the first quarter of 2021 as certain governments began to gradually ease restrictions and provide economic stimulus and vaccine distribution accelerated, leading to an increase in spending and increased customer demand. The Company expects continued uncertainty in its business and the global economy, although the extent and duration is unknown, by the COVID-19 pandemic and its effects on the economy in a variety of ways, potentially including volatility in employment trends and consumer confidence, the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities, timing and effectiveness of vaccines, the duration and extent of any economic stimulus programs, supply chain interruptions, increased distribution and transportation costs, increased payroll expenses, and increased costs in an effort to maintain safe work and shopping environments. The impacts of the pandemic 7 Table of Contents have had, and may continue to have, an adverse impact on the Company’s financial condition, results of operations and liquidity. The Company will continue to monitor the effects of COVID-19 and take the necessary actions to serve our associates, customers, communities and shareholders. ​ 3. Cash and Cash Equivalents/Concentration of Credit Risk ​ For purposes of the condensed consolidated balance sheets and condensed consolidated statements of cash flows, the Company considers all highly liquid investments with maturities at date of purchase of three months or less to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents. The Company places its cash and cash equivalents in what it believes to be high credit quality banks and institutional money market funds. The Company maintains cash accounts that exceed federally insured limits. ​ 4. Earnings per Share ​ Basic earnings per common share amounts are calculated using the weighted average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted average number of common shares outstanding plus the additional dilution for all potentially dilutive securities, such as nonvested restricted stock. During loss periods, diluted loss per share amounts are based on the weighted average number of common shares outstanding, because the inclusion of common stock equivalents would be antidilutive. ​ The dilutive effect of stock-based compensation arrangements is accounted for using the treasury stock method. The Company includes as assumed proceeds the amount of compensation cost attributed to future services and not yet recognized. For the first quarters of 2021 and 2020, there were 38,000 and 179,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution. ​ The following table provides a reconciliation of the weighted average number of common shares outstanding used to calculate basic earnings per share to the number of common shares and common stock equivalents outstanding used in calculating diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ May 1, 2021 May 2, 2020 Weighted average number of common shares outstanding ​ 9,449,792 ​ 10,442,636 Incremental shares from assumed vesting of nonvested restricted stock ​ 121,044 ​ — Weighted average number of common shares and common stock equivalents outstanding ​ 9,570,836 ​ 10,442,636 ​ ​ ​ 5. Impairment of Assets ​ If facts and circumstances indicate that a long-lived asset or operating lease right-of-use asset may be impaired, the carrying value is reviewed. If this review indicates that the carrying value of the asset will not be recovered as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its estimated fair value. There was no impairment expense recorded in the first quarter of 2021. In the first quarter of 2020, non-cash impairment charges related to an underperforming store totaled $ 0.3 million, comprised of $ 0.2 million for an operating lease right-of-use asset and $ 0.1 million for leasehold improvements and fixtures and equipment. ​ ​ ​ ​ 6. Revolving Credit Facility ​ In October 2011, the Company entered into a five-year , $ 50 million credit facility with Bank of America. The facility was amended in August 2015 and May 2020 to extend the maturity dates. The facility was amended again on April 15, 2021 to modify terms and extend the maturity date to April 15, 2026. The amended facility provides a $ 75 million credit commitment and a $ 25 million uncommitted “accordion” feature that under certain circumstances could allow the Company to increase the size of the facility to $ 100 million. The facility is secured by the Company’s inventory, accounts receivable and related assets, but not its real estate, fixtures and equipment, and it contains one financial covenant, a fixed charge coverage ratio, which is applicable and tested only in certain circumstances. The facility has an unused commitment fee of 0.20 % and permits the payment of cash dividends subject to certain limitations. Borrowings under the credit facility bear interest (a) for 8 Table of Contents Eurodollar Loans, at a rate equal to the Eurodollar Rate plus either 1.25 % , 1.50 % or 1.75 % , or (b) for Base Rate Loans, at a rate equal to the highest of (i) the prime rate, (ii) the Federal Funds Rate plus 0.5 % or (iii) the Eurodollar Rate plus 1.0 % , plus, in each case either 0.25 % , 0.50 % or 0.75 % , based in any such case on the average daily availability for borrowings under the facility. ​ 7. Income Taxes ​ Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. If there is a change in tax rates, the Company would recognize the impact of such change in income in the period that includes the enactment date. ​ For the first quarter of 2021, the Company utilized the annual effective tax rate method to calculate income taxes. For the first quarter of 2020, the Company utilized the discrete effective tax rate method based on the determination that the full-year tax rate was not reliably predictable. The tax rate was 20.7 % for the first quarter of 2021, compared to 24.0 % (benefit) for the first quarter of 2020. The difference in the tax rate was due to pretax income for the first quarter of 2021 compared to a pretax loss in the prior year. ​ 8. Commitments and Contingencies ​ The Company from time to time is involved in various legal proceedings incidental to the conduct of its business, including claims by customers, landlords, employees or former employees. Once it becomes probable that the Company will incur costs in connection with a legal proceeding and such costs can be reasonably estimated, the Company establishes appropriate reserves. While legal proceedings are subject to uncertainties and the outcome of any such matter is not predictable, the Company is not aware of any legal proceedings pending or threatened against it that it expects to have a material adverse effect on its financial condition, results of operations or liquidity. ​ 9. Stock Repurchases and Cash Dividends ​ Repurchases of Common Stock In November 2019, the Company’s board of directors approved a program that authorized the repurchase of up to $ 25.0 million in shares of the Company’s common stock. During the first quarter of 2020, the Company repurchased 260,254 shares of its common stock at an aggregate cost of $ 6.3 million. ​ In March 2020, the Company’s board of directors approved another program that authorized the repurchase of up to $ 30.0 million in shares of the Company’s common stock. Shortly thereafter, due to the economic uncertainty stemming from the COVID-19 pandemic, the Company temporarily suspended any repurchases. In September 2020, the Company announced the reinstatement of this program. In December 2020, the Company announced that its board of directors approved an additional $ 30.0 million stock repurchase program. In the first quarter of 2021, the Company repurchased 287,496 shares of its common stock under this program at an aggregate cost of $ 23.6 million. In addition, on March 23, 2021, the Company completed a block repurchase of 250,000 shares of its common stock at an aggregate cost of $ 21.9 million. ​ On June 2, 2021, the Company announced that its board of directors approved another program that authorized the repurchase of up to $ 30.0 million in shares of the Company’s common stock. ​ Dividends On February 18, 2020, the Company’s board of directors declared a dividend of $ 0.08 per common share, which was paid on March 17, 2020 to stockholders of record as of March 3, 2020. On April 28, 2020, the Company announced the suspension of future cash dividends due to the current economic uncertainty stemming from the COVID-19 pandemic. Any determination to declare and pay cash dividends for future quarters will be made by the Company’s board of directors. ​ 9 Table of Contents 10. Revenue ​ Revenue Recognition The Company’s primary source of revenue is derived from the sale of clothing and accessories to its customers with the Company’s performance obligations satisfied immediately when the customer pays for their purchase and receives the merchandise. Sales taxes collected by the Company from customers are excluded from revenue. Revenue from layaway sales is recognized at the point in time when the merchandise is paid for and control of the goods is transferred to the customer, thereby satisfying the Company’s performance obligation. The Company defers revenue from the sale of gift cards and recognizes the associated revenue upon the redemption of the cards by customers to purchase merchandise. ​ Sales Returns The Company allows customers to return merchandise for up to thirty days after the date of sale. Expected refunds to customers are recorded based on estimated margin using historical return information. ​ Disaggregation of Revenue The Company’s retail operations represent a single operating segment based on the way the Company manages its business. Operating decisions and resource allocation decisions are made at the Company level in order to maintain a consistent retail store presentation. The Company’s retail stores sell similar products, use similar processes to sell those products, and sell their products to similar classes of customers. ​ In the following table, the Company’s revenue from contracts with customers is disaggregated by major product line. The percentage of net sales related to each classification of its merchandise assortment was approximately: ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ May 1, May 2, ​ 2021 2020 Ladies 29 % ​ 28 % ​ Kids 20 % ​ 22 % ​ Mens 18 % ​ 16 % ​ Accessories & Beauty 17 % ​ 16 % ​ Home & Lifestyle 8 % ​ 8 % ​ Footwear 8 % ​ 10 % ​ ​ ​ ​ 11. Leases ​ The Company leases its retail store locations and certain office space and equipment. Leases for store locations are typically for a term of five years with options to extend for one or more five-year periods. The Company analyzes all leases at inception to determine if a right-of-use asset and lease liability should be recognized. Leases with an initial term of 12 months or less and leases with mutual termination clauses are not included on the condensed consolidated balance sheets. The lease liability is measured at the present value of future lease payments as of the lease commencement date. ​ Total lease cost is comprised of operating lease costs, short-term lease costs, and variable lease costs, which include rent paid as a percentage of sales, common area maintenance, real estate taxes and insurance for the Company’s real estate leases. Lease costs consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ May 1, 2021 ​ May 2, 2020 Operating lease cost $ 12,953 ​ $ 12,553 Variable lease cost ​ 2,981 ​ 1,793 Short term lease cost ​ 316 ​ 364 Total lease cost ​ $ 16,250 ​ $ 14,710 ​ ​ In response to the impact of the COVID-19 pandemic on the Company’s operations, the Company suspended certain lease payments in 2020 under its existing lease agreements. During the suspension of payments, the Company continued to recognize expenses and liabilities for lease obligations and corresponding right-of-use assets on the balance sheet in accordance with the applicable accounting guidance. The Company is engaging in ongoing discussions with landlords regarding the potential restructuring of lease payments and rent concessions. As of May 1, 2021, the Company negotiated 10 Table of Contents contractual rent concessions on many leases in the form of early renewals, rent deferrals and rent abatements. The Company elected to account for qualifying COVID-19 related rent concessions as if they were part of the enforceable rights and obligations under the existing lease agreements, as permitted by the updated guidance provided by the FASB in April 2020. As a result of this election, the Company recognized rent abatement credits of approximately $ 0.1 million during the first quarter of 2021. ​ Future minimum lease payments as of May 1, 2021 are as follows (in thousands): ​ ​ ​ ​ ​ ​ Fiscal Year Lease Costs Remainder of 2021 $ 38,533 ​ 2022 ​ ​ 48,529 ​ 2023 ​ 40,631 ​ 2024 ​ 32,395 ​ 2025 ​ 22,253 ​ Thereafter ​ 32,418 ​ Total future minimum lease payments ​ ​ 214,759 ​ Less: imputed interest ​ ​ ( 17,255 ) (1) Total present value of lease liabilities ​ $ 197,504 (2) ​ (1) Calculated using the discount rate for each lease. (2) Includes short-term and long-term portions of operating lease liabilities. ​ Certain operating leases provide for fixed monthly rents, while others provide for contingent rents computed as a percentage of net sales and others provide for a combination of both fixed monthly rents and contingent rents computed as a percentage of net sales. ​ Supplemental cash flows and other information related to operating leases are as follows (in thousands, except for weighted average amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ May 1, 2021 ​ May 2, 2020 Cash paid for operating leases $ 13,919 ​ $ 4,032 Right of use assets obtained in exchange for new operating lease liabilities ​ $ 17,529 ​ $ 8,962 ​ ​ ​ ​ ​ Weighted average remaining lease term (years) - operating leases ​ 5.17 ​ 5.20 Weighted average discount rate - operating leases ​ ​ 3.07 % ​ ​ 3.45 % ​ ​ ​ ​ ​ 11 Table of Contents