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Item 1A. Risk Factors

2022-04-14 compared with 2021-04-14 · 139 added, 79 removed, 170 unchanged (56% of the section changed)

You should carefully consider the following risk factors, together with the other information contained or incorporated by reference into this Report.

You should carefully consider the following risk factors, together with the other information contained or incorporated by reference into this Report and our other filings with the SEC.

The risks and uncertainties described below are not the only ones we face.

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Our financial and operating performance may be materially and adversely affected by the outbreak of the novel coronavirus (“COVID-19”).

Beginning in the first quarter of 2020 and continuing into 2021, there has been a widespread global impact from the COVID-19 pandemic, and our business has been, and will continue to be, impacted by the pandemic and any resulting economic consequences.

In response to COVID-19, the Company temporarily closed all of its retail stores and distribution centers as of March 20, 2020 and temporarily closed its corporate and buying offices with associates working remotely where possible.

As of July 18, 2020, the Company safely reopened all of its stores and distribution centers while following all applicable state and local health protocols, including providing personal protective equipment to employees and implementing social distancing practices as required.

The temporary closure of all of our retail stores and distribution centers and other factors resulting from the pandemic have had an adverse impact on our financial condition, results of operations and liquidity in fiscal 2020.

The extent to which COVID-19 will impact our business operations, consolidated financial results and liquidity will depend on future developments which are highly uncertain and cannot be predicted, including the duration and scope of the pandemic (including the resurgence of COVID-19 cases);

The COVID-19 pandemic has continued to cause significant public health concerns as well as economic disruption, uncertainty, and volatility, all of which have impacted and are expected to continue to impact our business.

The pandemic has adversely affected workforces, customers, consumer sentiment, economies and financial markets, and has impacted our financial results.

In response to the pandemic, governmental authorities in certain jurisdictions have implemented numerous measures in an attempt to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.

The nature and the scope of these actions, as well as decisions we have made to protect the health and safety of our employees, consumers and communities, vary from jurisdiction to jurisdiction, but have impacted our financial results and may continue to do so in the future.

In response to COVID-19, in the first quarter of fiscal 2020, we temporarily closed all of our retail stores and distribution centers and temporarily closed our corporate and buying offices with associates working remotely where possible.

As of July 18, 2020, we safely reopened all of our stores and distribution centers while following all applicable state and local health protocols, including providing personal protective equipment to employees and implementing social distancing practices as required.

We may face additional store closure requirements and other operational restrictions with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, governmental restrictions, including public health directives, quarantine policies or social distancing measures.

During fiscal 2021, we saw improvement in our financial results and positive trends as governments eased restrictions and provided economic stimulus and vaccine distribution accelerated, leading to an increase in spending and increased customer demand.

However, the emergence of new variants of COVID-19 has led to, and for an unknown period of time may continue to lead to, disruptions in local, regional and national markets, including decreased customer foot traffic to our retail stores.

If consumer traffic fails to return to pre-pandemic levels or there are fluctuations in consumer traffic, our sales may be negatively affected.

Such negative impacts may be exacerbated during traditionally peak consumer traffic periods such as the holiday shopping season.

Additionally, the duration and amount of government economic and fiscal stimulus measures in response to the COVID-19 pandemic has and will likely continue to decrease in fiscal 2022, which could have a material impact on our customers’ spending ability and our financial condition.

The extent to which COVID-19 will impact our business operations, consolidated financial results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the pandemic (including the emergence of new variants or additional waves of cases);

our ability to adjust our business strategies to mitigate the impact of the pandemic;

the re-closure of any or all of our retail stores or distribution centers;

the negative impact the pandemic has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending and the extent of any recession resulting from the COVID-19 pandemic, including how quickly economies recover after the pandemic subsides;

the negative impact the pandemic has on global and regional economies and economic activity, including inflation, the duration and magnitude of its impact on consumer discretionary spending and the extent of any recession resulting from the COVID-19 pandemic, including how quickly economies recover after the pandemic subsides;

the duration and extent of economic stimulus;

changes in consumer shopping patterns and the impact on traditionally strong sales periods;

higher insurance costs, changes in consumer shopping patterns and the impact on traditionally strong sales periods;

the ability of our suppliers, vendors and customers to successfully address the impacts of the pandemic;

and actions taken by governments, businesses and individuals in response to the pandemic.

As a result of the current level of uncertainty over the economic and operational impacts stemming from the COVID-19 pandemic, the impact on our business cannot be reasonably estimated at this time.

supply chain interruptions, higher freight and other distribution costs, increased payroll expenses, labor shortages and other difficulties hiring and retaining labor, increased costs to maintain safe work and shopping environments and actions taken by governments, businesses and individuals in response to the pandemic.

There may also be consequences that we do not anticipate at this time or that develop in unexpected ways.

The impacts of the pandemic have had, and may continue to have, an adverse impact on our financial condition, results of operations and liquidity.

We will continue to monitor the effects of COVID-19 and take the necessary actions to safely serve our employees, customers, communities and shareholders.

In addition to the risks specifically described above, the impact of COVID-19 is likely to implicate and exacerbate other risks disclosed in this Item 1A, including co nsumer behavior and expectations, cybersecurity threats, technology systems disruption, supply chain disruptions, labor availability and cost, implementation of our strategic goals, litigation, and regulatory requirements .

Our success depends on our ability to anticipate, identify and respond rapidly to changes in consumers’ fashion tastes, and our failure to adequately evaluate fashion trends could have an adverse effect on our business, financial condition and results of operations.

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The market for home goods and furnishings is also subject to evolving consumer demands.

Accordingly, our success is heavily dependent on our ability to anticipate, identify and capitalize on emerging fashion trends, including products, styles and materials that will appeal to our target consumers.

A failure on our part to anticipate, identify or react appropriately and timely to changes in styles, trends, brand preferences or desired image preferences is likely to lead to lower demand for our merchandise, which could cause, among other things, sales declines, excess inventories and higher markdowns.

Accordingly, our success is heavily dependent on our ability to anticipate, identify and capitalize on emerging fashion and home trends, including products, styles and materials that will appeal to our target consumers.

Because our success depends significantly on our brand image among our core customer market, damage to our brand image as a result of our failure to identify and respond to changing trends and tastes could have a material negative impact on our business.

There can be no assurance that our new product offerings will have the same level of acceptance as our product offerings in the past or that we will be able to adequately and timely respond to the preferences of our customers.

The failure of our product offerings to appeal to our customers could have a material adverse effect on our business, results of operations and financial condition.

If we are unsuccessful in competing with our retail apparel competitors, our market share could decline or our growth could be impaired and, as a result, our business, financial condition and results of operations could be negatively impacted.

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As a result of this competition, we may experience pricing pressures, increased marketing expenditures, increased costs to open new stores, as well as loss of market share, which could materially and adversely affect our business, financial condition and results of operations.

Our ability to attract consumers to our stores depends on the success of the outdoor community shopping centers where our stores are located.

Our ability to attract consumers to our stores depends on several factors, including the success of the outdoor community shopping centers where our stores are located.

We locate our stores primarily in outdoor community shopping centers where we believe our consumers and potential consumers shop.

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We cannot control the development of alternative shopping destinations near our existing stores or the availability or cost of real estate within existing or new shopping destinations.

If our store locations fail to attract sufficient consumer traffic or we are unable to locate replacement locations on terms acceptable to us, our business could suffer.

If our store locations fail to attract sufficient consumer traffic whether because of consumer preferences to shop on the internet or at large warehouse stores, concerns over indoor shopping in light of the COVID-19 pandemic, increased competition in areas where our stores are located, the amount spent on advertising and promotion to attract consumers to our stores, an economic slowdown or a decline in the popularity of outdoor community shopping centers, or if we are unable to locate replacement locations on terms acceptable to us, our business could suffer.

If one or more of the destination retailers or anchor stores located in the community shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, it could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business..

We do not sell our products through the internet.

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The retail landscape is changing with consumers’ shopping habits shifting away from the traditional brick-and-mortar stores to online retailers.

Internet sales have been obtaining an increasing percentage of retail sales over the past few years and this trend is expected to continue.

Internet sales have been obtaining an increasing percentage of retail sales over the past few years and this trend is

expected to continue.

The continued growth of online sales could have a negative impact on our sales, as our customers may decide to make purchases through online retailers.

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Our sales and earnings are significantly higher during the first and fourth quarters each year due to the importance of the spring selling season, which includes Easter, and the fall selling season, which includes Christmas.

Factors negatively affecting us during the first and fourth quarters, including adverse weather, public health pandemics like COVID-19, unfavorable economic conditions, reduced governmental assistance, and tax refund patterns for our customers, will have a greater adverse effect on our financial condition than if our business was less seasonal.

Factors negatively affecting us during the first and fourth quarters, including adverse weather, public health emergencies such as the COVID-19 pandemic, unfavorable economic conditions, reduced governmental assistance, and tax refund patterns for our customers, will have a greater adverse effect on our financial condition than if our business was less seasonal.

Seasonal fluctuations also affect our inventory levels.

In order to prepare for the spring and fall selling seasons, we must order and keep in stock significantly more merchandise than during other parts of the year.

Merchandise must be ordered well in advance of the applicable selling season and before trends are confirmed by sales.

If we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory which may result in increased markdowns.

If we are unable to accurately predict demand for our merchandise during these periods, we could also end up with inventory shortages resulting in missed sales.

While we believe we have a flexible supply chain, we often enter into agreements to purchase merchandise well in advance of the applicable selling season and before trends are confirmed by sales.

Therefore, we are vulnerable to changes in consumer preference and demand between the time we design and order our merchandise and the season in which this merchandise will be sold.

If we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory which may result in increased markdowns and, therefore, lower than planned margins.

Conversely, if we are unable to accurately predict demand for our merchandise, we could also end up with inventory shortages, which may negatively impact customer relationships, diminish brand loyalty and result in lost sales.

In either event, our sales may be lower and our cost of sales may be higher than historical levels, which could have a material adverse effect on our business, financial condition and results of operations.

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Additionally, if the manufacturers or other owners of brands or trademarks terminate the license agreements under which some of our suppliers sell our products, we may be unable to obtain replacement merchandise of comparable fashion appeal or quality, in the same quantities or at the same prices.

In addition, a number of our suppliers are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions, including economic downturns caused by natural disasters, acts of terror, or public health pandemics (including COVID-19), than larger and better capitalized companies.

We purchase a portion of our products from distributors and directly from large manufacturers who may deliver those products directly to our customers (“drop ship”).

These drop ship delivery relationships enable us to make available to our customers a wide selection of products without having to maintain large amounts of inventory.

The termination or interruption of our relationships with any of these drop ship suppliers could materially adversely affect our business.

In addition, a number of our suppliers are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions, including economic downturns caused by natural disasters, acts of terror, or public health emergencies (including the COVID-19 pandemic), than larger and better capitalized companies.

These smaller suppliers may not have sufficient liquidity during economic downturns to properly fund their businesses, and their ability to supply their products to us could be negatively impacted.

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In order to better serve our customers and maximize sales, we must properly execute our inventory management strategies by appropriately allocating merchandise among our stores, timely and efficiently distributing inventory to such locations, maintaining an appropriate mix and level of inventory in such locations, appropriately changing the allocation of floor space of stores among product categories to respond to customer demand, and effectively managing pricing and markdowns, and there is no assurance we will be able to do so.

In addition, as we implement new inventory allocation initiatives, there could be disruptions in inventory flow and placement.

In addition, as we continue to implement new inventory allocation initiatives, there could be disruptions in inventory flow and placement.

Failure to effectively execute our opportunistic inventory buying and inventory management strategies could adversely affect our business, financial condition and results of operations.

We also face certain risks from our use of third-party order fulfillment and drop shipping by our product vendors for products we do not hold in inventory such as freight cost increases, timely delivery and customer service and delays due to work stoppages.

If we are unable to provide frequent replenishment of fresh, quality, attractively priced merchandise in our stores, it could adversely affect traffic to our stores as well as our sales and margins.

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Regulations in this area may change from time to time.

We rely on numerous third parties to supply quality merchandise that complies with applicable product safety laws and other applicable laws, but they may not comply with their obligations to do so.

We rely on numerous third parties to supply quality merchandise that complies with applicable product safety laws and other applicable laws, but these third parties may not comply with all such applicable laws.

Violations of law by our importers, suppliers, manufacturers or distributors could result in delays in shipments and receipt of goods or damage our reputation, thus causing our sales to decline.

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We cannot assure you that these registrations will prevent imitation of our name, merchandising concept, store design or private label merchandise or the infringement of our other intellectual property rights by others.

Further, the use of social media by the Company and consumers has also increased the risk that the Company’s image and reputation could be negatively impacted.

Further, the use of social media by us and consumers has also increased the risk that our image and reputation could be negatively impacted.

The availability of information, reviews and opinions on social media is immediate, as is its impact.

The opportunity for dissemination of information, including inaccurate and inflammatory information and opinion, is nearly infinite.

Even if we react quickly and appropriately to negative social media about us or our brand, our reputation and customers’ perception of our brand could be negatively impacted.

Imitation of our name, concept, store design or merchandise in a manner that projects lesser quality or carries a negative connotation of our brand image or other damage to our brand image and reputation of the Company in any aspect of its operations could have an adverse effect on our reputation, business, financial condition and results of operations.

The opportunity for dissemination of information, including inaccurate and inflammatory information and opinion via social media, is nearly infinite.

Even if we react quickly and appropriately to negative social media and correct inaccuracies about us or our brand, our reputation and customers’ perception of our brand could be negatively impacted.

Imitation of our name, concept, store design or merchandise in a manner that projects lesser quality or carries a negative connotation of our brand image or other damage to our brand image and reputation in any aspect of its operations could have an adverse effect on our reputation, business, financial condition and results of operations.

In addition, we cannot assure you that others will not try to block the manufacture or sale of our private label merchandise by claiming that our merchandise violates their trademarks or other proprietary rights since other entities may have rights to trademarks that contain the word “Citi” or may have rights in similar or competing marks for apparel and/or accessories.

Although we cannot currently estimate the likelihood of success of any such lawsuit or ultimate resolution of such a conflict, such a controversy could have an adverse effect on our business, financial condition and results of operations.

Failure to attract, train, assimilate and retain skilled personnel could have an adverse effect on our financial condition.

Failure to attract, motivate and retain personnel and control our labor costs could have an adverse effect on our financial condition.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of store sales associates, including store managers, who understand and appreciate our corporate culture and customers, and are able to adequately and effectively represent this culture with our customers.

Like most retailers, we experience significant employee turnover rates, particularly among store sales associates and managers.

We therefore must continually attract, hire and train new personnel to meet our staffing needs.

We constantly compete for qualified personnel with companies in our industry and in other industries.

A significant increase in the turnover rate among our store sales associates and managers would increase our recruiting and training costs and could cause us to be unable to service our customers effectively, thus reducing our ability to operate our stores as profitably as we have in the past.

If we are unable to hire and retain store personnel capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the merchandise we offer, our ability to open new stores may be impaired, the performance of our existing and new stores could be materially adversely affected and our brand image may be negatively impacted.

Our ability to meet our labor needs and control labor costs is subject to various external factors, including increased market pressures with respect to prevailing wage rates, unemployment levels and health and other insurance costs;

the impact of legislation or regulations governing labor relations, immigration, minimum wage, and healthcare benefits;

changing demographics;

the continuing impacts of the COVID-19 pandemic;

and our reputation within the labor market.

As a result of the ongoing COVID-19 pandemic, we have faced and may continue to face additional challenges in recruiting and retention of associates due to health and safety concerns, vaccine or testing mandates and other governmental requirements.

Wage rates for many of our employees are slightly above the federal minimum wage.

As federal and/or state minimum wage rates increase, we may need to increase not only our employees’ wage rates that are under the new minimum, but also the wages paid to our other hourly employees.

Additionally, if we fail to pay such higher wages we could suffer increased employee turnover.

These factors, together with growing competition among potential employers, may result in increased salaries, benefits, or other employee-related costs, or may impair our ability to recruit

and retain employees, which could have an adverse impact on our business, financial condition and results of operations.

In addition, we rely heavily on the experience and expertise of our senior management team and other key management associates, and accordingly, the loss of their services could have a material adverse effect on our business strategy and results of operations.

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Our sales could decline and our store operations could be disrupted as a result of general economic and other factors outside of our control, such as changes in consumer spending patterns and declines in employment levels.

Downturns, or the expectation of a downturn, in general economic conditions, including the effects of unemployment levels, salaries and wage rates, interest rates, levels of consumer debt, inflation in food and energy prices, taxation (including delays in the distribution of tax refunds), government stimulus, consumer confidence, and other macroeconomic factors, could adversely affect consumer spending patterns, our sales and our results of operations.

Downturns, or the expectation of a downturn, in general economic conditions, including the effects of unemployment levels, salaries and wage rates, inflation in energy, food and other consumer good prices, interest rates, higher insurance costs , levels of consumer debt, taxation (including delays in the distribution of tax refunds), government stimulus, consumer confidence, increased fuel costs or fuel shortages, increased shipping, transportation and distribution costs and other macroeconomic factors, could adversely affect consumer spending patterns, our sales and our results of operations.

Consumer confidence may also be affected by domestic and international political or social unrest (including related protests or disturbances), acts of war or terrorism, natural disasters, public health emergencies like the COVID-19 pandemic, or other significant events outside of our control.

These and other social, political and economic factors that contribute to consumer unease or damage to our stores, may lead to a decrease in spending by consumers or disrupt our store operations, which may negatively impact our business, financial condition and results of operations.

Also, because apparel generally is a discretionary purchase, declines in consumer spending patterns may have a more negative effect on apparel retailers than some other retailers.

Also, b ecause apparel generally is a discretionary purchase, declines in consumer spending patterns may have a more negative effect on apparel retailers than some other retailers.

In addition, since many of our stores are located in the southeastern United States, our operations are more susceptible to regional factors than the operations of our more geographically diversified competitors.

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We have distribution centers located in Darlington, South Carolina and Roland, Oklahoma.

Any natural disaster or other disruption to the operation of either of these facilities due to fire, accidents, public health emergency such as the current COVID-19 pandemic, weather conditions or any other cause could damage a significant portion of our inventory, impair our ability to stock our stores adequately and may result in increased supply chain costs or lost sales.

The efficient flow of our merchandise requires that our distribution facilities be operated effectively and have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from the growth of our business.

Any natural disaster or other disruption to the operation of either of these facilities or our drop shipping capabilities due to fire, accidents, public health emergency such as the current COVID-19 pandemic, weather conditions, including natural disasters, or any other cause could damage a significant portion of our inventory, impair our ability to stock our stores adequately and may result in increased supply chain costs or lost sales.

For example, we typically generate higher revenues and gross margins during our fourth fiscal quarter, which includes the year-end holiday season.

Therefore, if weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected.

In addition, the southeastern United States, where the Darlington distribution center and many of our stores are located, is vulnerable to significant damage or destruction from hurricanes and tropical storms.

Such weather events may become increasingly frequent or severe as a result of climate change.

Although we maintain insurance on our stores and other facilities, the economic effects of a natural disaster that affects our distribution centers and/or a significant number of our stores could have an adverse effect on our business, financial condition and results of operations.

We rely upon third-party land-based and air freight carriers for merchandise shipments to our distribution centers and our retail stores.

Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather, public health emergencies, and increased transportation costs, associated with such carriers’ ability to provide delivery services to meet outbound shipping needs.

We currently rely upon third-party transportation providers for all of our merchandise shipments to our distribution centers and our retail stores.

Accordingly, we are subject to the risks, including labor disputes or strikes, union organizing activity, inclement weather, public health emergencies, supply chain interruptions, port delays, increased freight, distribution and transportation costs, associated with such providers’ ability to provide delivery services to meet outbound shipping needs.

In addition, if the cost of fuel rises, the cost to deliver merchandise to our distribution centers and our retail stores may rise and such costs could have an adverse impact on our profitability.

If we change the transportation providers we use, we could face logistical difficulties that could adversely affect deliveries, and we would incur costs and expend resources in connection with such change.

Moreover, we may not be able to obtain terms as favorable as those received from our current independent third-party transportation providers which, in turn, would increase our costs.

Failure to deliver merchandise to our distribution centers and our retail stores in a timely, effective and economically viable manner could adversely affect our business, financial condition and results of operations.

Adverse trade restrictions may disrupt our supply of merchandise.

We also face various risks because much of our merchandise is imported from abroad.

We do not own or operate any manufacturing or production facilities and therefore depend upon third parties for the manufacture of all of our merchandise.

The inability of a manufacturer to ship goods on time and to our specifications, or to operate in compliance with our guidelines or any other applicable laws, could negatively impact our business.

We do not own or operate any manufacturing or production facilities.

We purchase the products we sell directly from a large assortment of vendors, and a substantial portion of this merchandise is manufactured outside of the United States and imported by our vendors from countries such as China and other areas of the Far East.

As a result, we are dependent upon our timely receipt of quality merchandise from third-party manufacturers.

If our manufacturers do not ship orders to us in a timely manner or meet our quality

standards, it could cause delays in responding to consumer demands or inventory shortages and negatively affect consumer confidence in the quality and value of our brand or negatively impact our competitive position.

Any of these factors could have a material adverse effect on our financial condition or results of operations.

Furthermore, we are susceptible to increases in sourcing costs, which we may not be able to pass on to customers, and changes in payment terms from manufacturers, which could adversely affect our financial condition and results of operations.

We maintain compliance guidelines for our vendors that dictate various standards, including product quality, manufacturing practices, labor compliance and legal compliance.

If any of our manufacturers fail to comply with applicable laws or these guidelines, or engage in any socially unacceptable business practices, such as poor working conditions, child labor, disregard for environmental standards or otherwise, our brand reputation could be negatively impacted and our results of operations could in turn be materially adversely affected.

Adverse trade restrictions may disrupt our supply of merchandise.

We also face various risks because much of our merchandise is imported.

We purchase our merchandise from a large assortment of vendors, and a substantial portion of this merchandise is manufactured outside of the United States and imported by our vendors from countries such as China and other areas of the Asia-Pacific region.

The countries in which our merchandise currently is manufactured or may be manufactured in the future could become subject to new trade restrictions imposed by the United States or other foreign governments.

There is increased uncertainty with respect to trade relations between the United States and other countries, especially China.

There is continuing uncertainty with respect to trade relations between the United States and such countries, especially China.

Trade restrictions, including increased customs restrictions and tariffs or quotas against apparel or home items, as well as United States or foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce the supply or impede the timely delivery of merchandise available to us and have an adverse effect on our business.

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● enhanced security measures at United States and foreign ports, which could delay delivery of imports;

● imposition of new or supplemental duties, trade restrictions, sanctions, tariffs, quotas, taxes, and other charges on imports;

● imposition of new or supplemental duties, trade restrictions, sanctions, tariffs, quotas, taxes, environmental regulations, emissions standards and other charges on imports;

● compliance with new or changing import/export controls;

● delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with import regulations, organized labor strikes or congestion at United States ports;

● concerns about human rights and working conditions in countries where merchandise is manufactured and produced;

● concerns about human rights and working conditions in countries where our merchandise is manufactured and produced;

● local business practice and political issues, including issues relating to compliance with domestic or international labor and environmental standards.

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We may not be able to sustain our growth plans or successfully implement our long-term strategic goals.

Our growth strategy includes successfully opening and operating new stores and expanding our specialty value model within our current markets and into new geographic regions.

There are significant risks associated with our ability to continue to expand successfully and manage the implementation of this growth effectively.

Our growth strategy includes successfully opening and operating new stores, optimizing product assortment and investing in infrastructure to expand our specialty value model within our current markets and into new geographic regions and customer demographics.

Growth can add complexity to effective information sharing and requires significant attention from our management and other functions across our business in order to expand successfully and manage the implementation of this growth effectively.

If any aspect of our expansion strategy does not achieve the success we expect, in whole or in part, we may fail to meet our financial performance expectations, slow our planned growth or close stores or operations.

The success of opening new stores 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 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.

We may not be able to execute our growth strategies successfully, on a timely basis, or at all.

The success of opening new stores 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 increased 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.

Our ability to expand successfully into other geographic markets will also depend on acceptance of our retail store experience by customers in those markets, including

our ability to design our stores in a manner that resonates locally and to offer the correct product assortment to appeal to consumers in such markets.

Part of our growth strategy involves expanding our stores to the Latinx demographic, and we may not be able to successfully market to or predict demographic trends among this demographic.

There can be no assurance that any newly opened stores will be received as well as, or achieve net sales or profitability levels consistent with, our projected targets or be comparable to those of our existing stores in the time periods estimated by us, or at all.

These risks may increase with further growth, and we may not be able to execute our growth strategies successfully, on a timely basis, or at all, which may adversely affect our business plans, sales and results.

Additionally, increases in sales in existing stores are dependent on factors such as competition, including from online retailers, merchandise selection, store operations and customer satisfaction.

If we fail to realize our goals of successfully managing our store operations and increasing our customer retention and recruitment levels, our sales may not increase and our growth may be impacted adversely.

The extent of the impact from the COVID-19 pandemic on our business and financial results could also impact our growth plans and long-term strategic goals.

If we fail to implement these strategies successfully, or if these strategies do not yield the desired outcomes, our financial condition and results of operations would be adversely affected.

We depend upon strong cash flows from our operations to supply capital to fund our operations, growth, stock repurchases and dividends and interest and debt repayment.

Our business depends upon our operations to continue to generate strong cash flow to supply capital to support our general operating activities, to fund our growth and our return of cash to stockholders through our stock repurchase programs and dividends, if any, and to pay our interest and debt repayments.

We may engage in strategic transactions that could negatively impact our liquidity, increase our expenses and present significant distractions to management.

We may consider strategic transactions and business arrangements, including, but not limited to, acquisitions, asset purchases, partnerships, joint ventures, restructurings and investments.

Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could harm our financial condition and results of operations.

We depend upon strong cash flows from our operations to supply capital to fund our operations, growth, stock repurchases and interest and debt repayments.

Our business depends upon our operations to continue to generate strong cash flow to supply capital to support our general operating activities, to fund our growth and our return of cash to stockholders through our stock repurchase programs, if any, and to pay our interest and debt repayments.

For example, as a result of the ongoing COVID-19 pandemic, we temporarily closed our stores beginning in March 2020.

We also suspended both our share repurchase program and the payment of our quarterly cash dividends.

We resumed our share repurchase program in the third quarter of fiscal 2020, although the amount and continuation of repurchases will be influenced by the evolving economic environment and business conditions.

Our inability to continue to generate sufficient cash flows to support these activities could adversely affect our growth plans, capital expenditures, operating expenses and financial performance, including our earnings per share.

Changes in the capital and credit markets, including market disruptions, limited liquidity, and interest rate fluctuations may increase the cost of financing or restrict our access to these potential sources of liquidity.

Changes in the capital and credit markets, including market disruptions, limited liquidity, inflation and interest rate fluctuations may increase the cost of financing or restrict our access to these potential sources of liquidity.

Our continued access to these liquidity sources on favorable terms depends on multiple factors, including our operating performance and maintaining strong credit ratings.

In March 2020, we borrowed $43.7 million from our revolving credit facility to add to our cash balances in order to provide enhanced financial flexibility due to uncertain market conditions arising from the impact of the COVID-19 pandemic.

In April 2021, we amended our revolving credit facility 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 us to increase the size of the facility to $100 million.

As of January 29, 2022, we had no borrowings outstanding under this facility and $0.6 million in letters of credit outstanding.

Although we currently have available a credit facility to fund our current operating needs, if necessary, we cannot be certain that we will be able to replace our existing credit facility or refinance any future debt at a reasonable cost when necessary.

If our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.

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Risks Related to Regulatory, Legal and Cybersecurity

Increases in the minimum wage could have an adverse effect on our operating costs, financial condition and results of operations.

Wage rates for many of our employees are slightly above the federal minimum wage.

Any increase in the cost of our labor could have a material adverse effect on our operating costs, financial condition and results of operations.

Failure to comply with legal requirements could have an adverse effect on our financial condition and results of operations.

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New legal requirements in any number of areas could result in higher compliance costs.

Changes in areas, such as workplace-regulation and other labor or employment benefits laws, supply chain, privacy and information security, or environmental regulation may require extensive structural and organizational changes that could be difficult to implement, disrupt our business, cause reputational harm and materially adversely affect our operations and financial results.

Additionally, in response to the COVID-19 pandemic state and local governments have implemented measures to slow the spread of the virus, which resulted in the Company temporarily closing its stores on March 20, 2020.

As of July 18, 2020, the Company safely reopened all of its stores and distribution centers while following all applicable state and local health protocols.

Future extended closures required by law or additional restrictions on our operations may have adverse effects on our financial condition.

Changes in areas, such as workplace-regulation and other labor or employment benefits laws, supply chain, privacy and information security, or environmental regulation such as carbon emission standards and ESG performance, transparency and reporting may require extensive structural and organizational changes that could be difficult to implement, disrupt our business, cause reputational harm and materially adversely affect our operations and financial results.

Additionally, in response to the COVID-19 pandemic state and local governments have implemented measures to slow the spread of the virus, including face mask mandates, social distancing requirements, vaccine verification and increased cleaning protocols, which may be difficult or costly to implement.

Extended or additional restrictions on our operations may have adverse effects on our financial condition.

In addition to increased regulatory compliance requirements, changes in laws could make ordinary conduct of our business more expensive or require us to change the way we do business.

For example, changes in federal and state minimum wage laws could raise the wage requirements for certain of our employees, which would likely cause us to reexamine our entire wage structure for stores.

Other laws related to employee benefits and treatment of employees, including laws related to limitations on employee hours, work scheduling, supervisory status, leaves of absence, mandated health benefits or overtime pay, could also negatively impact us, such as by increasing compensation and benefits costs for overtime and medical expenses.

Any failure of our management information systems or the inability of third parties to continue to upgrade and maintain our systems could have an adverse effect on our business, financial condition and results of operations.

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Any interruption in these systems could impair our ability to manage our inventory effectively, which could have an adverse effect on our business.

Our computer systems and the third-party systems we rely on are also subject to damage or interruption from a number of causes, including power outages;

computer and telecommunications failures;

computer viruses, malware, phishing or distributed denial-of-service attacks;

security breaches;

cyber-attacks;

catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes;

acts of war or terrorism and design or usage errors by our employees or contractors.

Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.

We depend on third-party suppliers to maintain and periodically upgrade our management information systems.

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Over the normal course of business operations, we obtain certain private or confidential information of our employees, customers, and vendors.

This information may be stored within our internal information technology environments or hosted by third party service providers.

This information may be stored within our internal information technology environments or hosted by third party service

We have implemented security procedures and technology that are intended to safeguard this information from cybersecurity attacks and data breaches.

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The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, operating results and financial condition.

If we fail to implement and maintain effective internal controls in our business, there could be an adverse effect on our business, financial condition, results of operations and stock price.

Section 404 of the Sarbanes Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal controls over financial reporting and an audit of such controls by our independent registered public accounting firm.

If we fail to maintain the adequacy of our internal controls, we may be unable to conclude on an ongoing basis that we have effective internal controls over financial reporting.

Moreover, effective internal controls, particularly those related to revenue recognition and accounting for inventory/cost of sales, are necessary for us to produce reliable financial reports and are important in our effort to prevent financial fraud.

If we cannot produce reliable financial reports or prevent fraud, our business, financial condition and results of operations could be harmed, investors could lose confidence in our reported financial information, the market price of our stock could decline significantly and we may be unable to obtain additional financing to operate and expand our business.

Risks Relating to Ownership of our Common Stock

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Our comparable store sales and quarterly results have fluctuated significantly in the past based on a number of economic, seasonal and competitive factors, as well as changes in our merchandise mix, and we expect them to continue to fluctuate in the future.

Since the beginning of fiscal 2014, our quarter-to-quarter comparable store sales have ranged from a decrease of 44.5% to an increase of 16.7%, with the decrease of 44.5% occurring in the first quarter of fiscal 2020 as a result of the COVID-19 pandemic.

Since the beginning of fiscal 2014, our quarter-to-quarter comparable store sales have ranged from a decrease of 44.5% to an increase of 142.0%, with the decrease of 44.5% occurring in the first quarter of fiscal 2020 and the increase of 142.0% occurring in the first quarter of 2021, both as a result of the COVID-19 pandemic that caused us to temporarily close our chain of stores during the first quarter of 2020.

This variability could cause our comparable store sales and quarterly results to fall below the expectations of securities analysts or investors, which could result in a decline in the market price of our common stock.

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● actual or anticipated fluctuations in our operating results;

● changes in securities analysts’ recommendations or estimates of our financial performance;

● changes in preferences of our customers;

● changes in securities analysts’ recommendations or estimates of our financial performance or our failure to meet any such estimates;

● changes in market valuations or operating performance of our competitors or companies similar to ours;

● announcements by us, our competitors or other retailers;

● announcements by us, our competitors or other retailers , including strategic actions by us or our competitors,

such as acquisitions, restructurings, significant contracts, joint marketing relationships, joint ventures or capital commitments ;

● market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

● additions and departures of key personnel;

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● the passage of legislation or other developments affecting us;

● the trading volume of our common stock in the public market;

● the trading volume of our common stock in the public market and size of our public float ;

● changes in economic or financial market conditions;

● natural disasters, terrorist acts, acts of war or periods of civil unrest;

● global economic, legal and regulatory factors unrelated to our performance;

● natural disasters, public health emergencies, terrorist acts, acts of war or periods of civil unrest;

● the realization of some or all of the risks described in this section entitled “Risk Factors.”

In addition, the stock markets have experienced significant price and trading volume fluctuations from time to time, and the market prices of the equity securities of retailers have been extremely volatile and have recently experienced sharp price and trading volume changes.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.

In addition, the stock markets have experienced significant price and trading volume fluctuations from time to time, including in recent months, and the market prices and trading volumes of the equity securities of retailers have been volatile, including our common stock.

These broad market fluctuations may adversely affect the market price of our common stock .

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Any determination to declare and pay cash dividends on our common stock in the future (quarterly or otherwise) will be based, among other things, our board of directors’ conclusion in each instance that the declaration and payment of a cash dividend is in the best interest of our stockholders and is in compliance with all laws and agreements applicable to the dividend and upon our financial condition, results of operations, business and cash requirements.

As part of the actions the Company has taken to increase its cash position and preserve financial flexibility in light of current uncertainties resulting from the COVID-19 pandemic, the Company suspended the payment of dividends for the near-term.

On March 13, 2020, the Company announced a share repurchase program, however, due in part to the COVID-19 pandemic and related economic downturn, no repurchases have been made under such program and the Company has suspended any future purchases and plans to continue to monitor the situation based on business conditions and regard for its financial liquidity needs.

There can be no assurance that our existing share repurchase authorization will be completed or that our board of directors will approve another repurchase program in the future.

As part of the actions we took to increase our cash position and preserve financial flexibility in light of uncertainties resulting from the COVID-19 pandemic, we suspended our share repurchase program and the payment of quarterly cash dividends.

We resumed our share repurchase program in the third quarter of fiscal 2020, although the amount and continuation of repurchases will be influenced by the evolving economic environment.

Additionally, there can be no assurance that our existing share repurchase authorizations will be completed or that our board of directors will approve additional repurchase programs in the future.

We presently have no intention to reinstate the dividend, and there can be no assurance that we will resume paying dividends on a regular basis .

Provisions in our certificate of incorporation and by-laws and Delaware law may delay or prevent our acquisition by a third party.

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We are also subject to several provisions of the Delaware General Corporation Law that could delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock or may otherwise be in the best interests of our stockholders.

Our business could be negatively affected as a result of a proxy fight and the actions of activist shareholders.

If we become engaged in a proxy contest with activist shareholders in the future, our business could be adversely affected because:

● Responding to proxy contests, litigation and other actions by activist stockholders can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees.

● Perceived uncertainties as to our future direction may result in the loss of potential business opportunities and harm our ability to attract new investors and to retain and attract experienced executives and employees.

● If individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to retain and attract experienced directors, executives and employees, to effectively and timely implement our business strategy and create additional value for stockholders.

● We may experience a significant increase in legal fees, administrative, advisor and associated costs incurred in connection with responding to a proxy contest or related action.

These factors could adversely impact our results of operations and could also cause our stock price to experience periods of volatility or stagnation.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors