What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-04-13 compared with 2022-04-14 · 92 added, 118 removed, 191 unchanged (52% of the section changed)

4 unchanged sentences

Risks Related to our Business and Operations

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

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 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;

Our financial and operating performance may be materially and adversely affected by pandemics, epidemics or other public health emergencies such as the ongoing COVID-19 pandemic.

The ongoing COVID-19 pandemic has caused public health concerns as well as economic disruption, uncertainty, and volatility, all of which have impacted our business.

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

Future pandemics, epidemics or other public health emergencies could have a material adverse impact on our business, financial condition, and results of operations, which will depend on future developments that are highly uncertain and cannot be predicted.

This includes the duration and scope of any such event;

our ability to adjust our business strategies to mitigate the impact of any such health emergency;

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

the negative impact any such event has on global and regional economies and economic activity, including inflation;

the duration and extent of economic stimulus;

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;

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.

supply chain interruptions;

higher freight and other distribution costs;

increased payroll expenses;

difficulties hiring and retaining labor;

and actions taken by governments, businesses and individuals in response to any such public health emergency.

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 .

In addition to the risks specifically described above, the impact of any pandemic, epidemic or other public health emergency is likely to implicate and exacerbate other risks disclosed in this Item 1A, including consumer 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.

The apparel industry in general and our core customer market in particular are subject to rapidly evolving fashion trends and shifting consumer demands.

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

The apparel industry in general and our core customer in particular are subject to rapidly evolving fashion trends and shifting consumer demands.

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.

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, which could materially adversely affect our business and our brand image.

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.

A failure on our part to anticipate, identify or react appropriately and timely to changes in styles, trends, brand preferences and images is likely to lead to lower demand for our merchandise.

This could cause, among other things, sales declines, excess inventories and higher markdowns, which could materially adversely affect our business and our brand image.

Because our success depends significantly on our brand image among our core customer, 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.

2 unchanged sentences

The retail apparel and home fashion businesses are highly competitive with few barriers to entry.

We compete against a diverse group of retailers, including national chains, mass merchants, smaller discount retail chains that sell only women’s products and general merchandise discount stores which offer a variety of products, including apparel, home fashions and other merchandise we sell for the value-conscious consumer.

We compete against a diverse group of retailers, including national chains, mass merchants, smaller discount retail chains that sell only women’s products and general merchandise discount stores that offer a variety of products, including apparel, home fashions and other merchandise we sell for the value-conscious consumer.

We also compete against local specialty retail stores, regional retail chains, traditional department stores, web-based retail stores and other direct retailers.

8 unchanged sentences

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 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.

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 primarily located.

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

The success of an individual store can depend on favorable placement within a given community shopping center and from the volume of traffic generated by the other destination retailers and the anchor stores in the community shopping centers where our stores are located.

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 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..

Our business could suffer if our store locations fail to attract sufficient consumer traffic due to consumer preferences to shop on the internet or at large warehouse stores, increased competition in our shopping areas, the amount we spend on advertising, 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.

If a destination retailer or anchor store in our community shopping centers closes or leaves, 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.

As the retail industry experiences an increase in online sales, our sales could be adversely affected.

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.

The retail landscape has changed 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.

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.

1 unchanged sentence

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 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.

Factors negatively affecting us during the first and fourth quarters, including adverse weather, pandemics such as 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.

Seasonal fluctuations also affect our inventory levels.

2 unchanged sentences

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.

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 lower 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.

2 unchanged sentences

We depend on our suppliers for the continued availability and satisfactory quality of our merchandise.

Most of our suppliers could discontinue selling to us at any time.

Our suppliers could discontinue selling to us at any time.

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.

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.

We purchase a portion of our products from suppliers that directly ship these products to our stores.

These direct shipment 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 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 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.

4 unchanged sentences

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.

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

We base our purchases of inventory, in part, on our sales forecasts.

If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to markdown excess or slow-moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer demand, leading to lost sales, either of which could adversely affect our financial performance.

We also experience inventory shrinkage due to theft or damage.

Higher rates of inventory shrinkage or increased security or other costs to combat inventory shrinkage could adversely affect our results of operations and financial condition, and our efforts to contain or reduce inventory shrinkage may not be successful.

We rely on numerous third parties in the supply chain to produce and deliver the products that we sell, and our business may be negatively impacted by their failure to comply with applicable law.

Merchandise we sell in our stores is subject to regulatory standards set by various governmental authorities with respect to quality and safety.

Merchandise we sell in our stores is subject to quality and safety regulatory standards set by various governmental authorities.

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 these third parties may not comply with all such applicable laws.

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

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.

9 unchanged sentences

Patent and Trademark Office that we believe are important to our business.

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.

We cannot assure 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 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 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.

In addition, we cannot assure 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.

8 unchanged sentences

changing demographics;

the continuing impacts of the COVID-19 pandemic;

the continuing impacts of COVID-19 and other future pandemics;

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.

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.

Risks Related to General Economic and Market Conditions

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, 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.

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 inflation, 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, inflation in energy, food and other consumer good prices, interest rates, higher insurance costs , levels of consumer debt, changes in tax rates and policies (including delays in the distribution of tax refunds), government stimulus, consumer confidence, consumer perception of economic conditions, 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.

The low-income consumer, which is our core customer, is especially sensitive to these factors.

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, pandemics like COVID-19, 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.

2 unchanged sentences

Therefore, any adverse economic conditions that have a disproportionate effect on the southeastern United States could have a greater negative effect on our sales and results of operations than on retailers with a more geographically diversified store base.

A significant disruption to our distribution process or southeastern retail locations could have an adverse effect on our business, financial condition and results of operations.

A significant disruption to our distribution process or retail locations could have an adverse effect on our business, financial condition and results of operations.

Our ability to distribute our merchandise to our store locations in a timely manner is essential to the efficient and profitable operation of our business.

1 unchanged sentence

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.

Any natural disaster or other disruption to the operation of either of these facilities or our direct shipping capabilities due to fire, accidents, public health emergencies such as the 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.

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.

The midwestern United States, where the Roland distribution center and many stores are located, is vulnerable to significant damage or destruction from tornados and hail storms.

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

10 unchanged sentences

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.

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.

10 unchanged sentences

We also face a variety of other risks generally associated with relying on vendors that do business in foreign markets and import merchandise from abroad, such as:

● political or labor instability, natural disasters, public health emergencies, including the current COVID-19 pandemic, or the threat of terrorism, in particular in countries where our vendors source merchandise;

● political or labor instability, natural disasters, public health emergencies, including the COVID-19 pandemic, or the threat of terrorism, in particular in countries where our vendors source merchandise;

● increases in merchandise costs due to raw material price inflation or changes in purchasing power caused by fluctuations in currency exchange rates;

10 unchanged sentences

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 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.

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 multicultural demographic and other multicultural groups, and we may not be able to successfully market to or predict demographic trends among these groups.

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

1 unchanged sentence

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.

We depend upon strong cash flows from our operations, as well as cash on our balance sheet, to supply capital to fund our operations, growth, stock repurchases and interest obligations.

Our business depends upon the cash on our balance sheet as well as 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 obligations.

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.

1 unchanged sentence

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

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.

We maintain a revolving credit facility with Bank of America through April 15, 2026 which provides for 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 28, 2023, we had no borrowings outstanding under this facility.

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.

For example, a systemic failure of the banking system in the United States or globally could potentially result in a situation in which we lose our ability to draw down funds from our revolving credit facility, lose access to our deposits and are unable to obtain financing from other sources.

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

We maintain deposit balances with certain financial institutions that are above the federal insurance limit.

A failure of these institutions could result in loss of these deposits.

We may be unable to negotiate future leases or renegotiate current leases on the same favorable terms as we had in the past.

Our strategic growth plan depends in part on our ability to renew current leases and enter into new leases for future stores.

We currently lease all of our store locations and are subject to the risks associated with leasing real estate.

If we decide to close stores, we may be required to continue to perform obligations under the applicable leases, including, among other things, paying rent and operating expenses for the balance of the lease term, or paying to exercise rights to terminate, and the performance of any of these obligations may be expensive.

When the current lease terms for our stores expire, we may be unable to negotiate renewals which could lead to the closing or relocating stores on less favorable terms or in a less favorable location.

We currently lease all of our store locations and distribution centers and are subject to the risks associated with leasing real estate.

If we decide to close stores or distribution centers, we may be required to continue to perform obligations under the applicable leases, including, among other things, paying rent and operating expenses for the balance of the lease term, or paying to exercise rights to terminate, and the performance of any of these obligations may be expensive.

When the current lease terms for our stores or distribution centers expire, we may be unable to negotiate renewals which could lead to the closing or relocating stores or centers on less favorable terms or in a less favorable location.

If we fail to successfully implement our various marketing efforts or if our competitors are more effective with their programs than we are, our revenue or results of operations may be adversely affected.

1 unchanged sentence

Although we use marketing to drive customer traffic through various media including digital/social media and e-mail, some of our competitors expend more for their marketing programs than we do, or use different approaches than we do, which may provide them with a competitive advantage.

Further, we may not effectively implement strategies with respect to rapidly evolving Internet-based and other digital or mobile communication channels, including social media.

Further, we may not effectively implement strategies with respect to rapidly evolving Internet-based and other digital

or mobile communication channels, including social media.

Our programs may not be or remain effective or could require increased expenditures, which could have a significant adverse effect on our revenue and results of operations.

Risks Related to Regulatory, Legal and Cybersecurity

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

Compliance risks in our business include areas such as employment law, taxation, securities laws, consumer protection laws, licensing, intellectual property, customer relations and personal injury claims, among others.

If we fail to comply with these laws, rules and regulations, we may be subject to judgments, fines or other costs or penalties, which could have an adverse effect on our financial condition and results of operations .

Changes in government regulations could have an adverse effect on our financial condition and results of operations.

Our business is subject to numerous federal, state and local laws and regulations.

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 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.

We are subject to numerous federal, state and local laws and regulations that govern numerous aspects of our business.

In recent years, a number of new laws and regulations have been adopted, there has been expanded enforcement of certain existing laws and regulations by federal, state and local agencies, and the interpretation of certain laws and regulations has become increasingly complex.

These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events.

Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations governing areas such as minimum wage or living wage requirements, workplace-regulation and other labor or employment benefits laws, supply chain, taxes, including changes to corporate tax rates, privacy and information security, or environmental regulation such as carbon emission standards and environmental, social and governance (ESG) programs, transparency and reporting, could increase our costs of doing business or impact our sales, operations or profitability.

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.

6 unchanged sentences

We do not currently have redundant systems for all functions performed by our management information systems.

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;

Any interruption in these systems, such as the interruption we experienced in January 2023 (described below), could impair our ability to manage our inventory effectively, which could have an adverse effect on our business.

Our co mputer 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;

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

security breaches;

2 unchanged sentences

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.

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

For example, as previously disclosed in our Form 8-K filed with the SEC on February 23, 2023, we experienced a disruption of our back office and distribution center IT systems in January 2023 due to what is known as Hive ransomware.

The incident did not result in a material disruption to our business or operations, material costs net of insurance coverage or other adverse material consequences;

however, there can be no assurance of a similar result in the future.

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

3 unchanged sentences

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

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

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

These safeguards include, but are not limited to, routine penetration and vulnerability testing, network segmentation, strong encryption protocols, virus and malware protection, email security scanning, simulation training, vendor assessments, and on-going monitoring and patching activities.

These safeguards include, but are not limited to, routine penetration

and vulnerability testing, network segmentation, strong encryption protocols, virus and malware protection, email security scanning, simulation training, vendor assessments, and on-going monitoring and patching activities.

There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data.

As we accept debit and credit card payments in our stores, we are subject to the Payment Card Industry’s Data Security Standards (“PCI DSS”) to which we attest compliance annually.

For the protection of our customer’s payment information, we utilize chip enabled pin pads with point-to-point encryption technology.

In addition, we do not retain the customer’s encrypted, hashed, or tokenized payment information within our internal systems.

However, even as we comply with PCI DSS and employ point-to-point encryption technology, we may not be able to prevent or detect a compromise of cardholder data.

In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements, compliance with those requirements could also result in additional costs.

Cyberattacks continue to evolve and there can be no assurance that an attacker would be unable to gain access to the information we collect.

These attacks can come in many forms, including computer hacking, acts of vandalism or theft, malware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks.

Although we continue to develop, and further enhance, our systems and processes that are designed to protect personal information and prevent data loss and other security breaches and disruptions such as the one we experienced in the past, such measures cannot provide absolute security.

Cyberattacks continue to evolve and there can be no assurance that a future attacker would be unable to gain access to the information we collect.

These attacks can come in many forms, including computer hacking, acts of vandalism or theft, malware, ransomware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks.

Additionally, a failure of a third party service provider to monitor and secure their environment could lead to unauthorized access of our private or confidential information.

Any cyberattack or a breach of our data could expose us to costly fines, private litigation and response measures, credit card brand assessments, government enforcement actions, disruption of business operations, negative publicity, erode customer confidence in the effectiveness of our data security measures, and decrease our current or potential customers’ willingness to shop in our stores which could adversely affect our business and financial conditions.

Any future cyberattack or a breach of our data could expose us to costly fines, private litigation and response measures, credit card brand assessments, government enforcement actions, disruption of business operations, negative publicity, erode customer confidence in the effectiveness of our data security measures, and decrease our current or potential customers’ willingness to shop in our stores which could adversely affect our business and financial conditions.

Furthermore, there can be no assurance that any limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

Our existing general liability insurance coverage and coverage for errors and omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims, or our insurers may deny coverage as to any future claim.

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.

Additionally, a failure to adhere to the payment card industry’s data security standards could lead to significant penalties from payment card associations, termination of our ability to receive credit or debit card payments, any of which could have a material adverse effect on our business and financial condition.

While we maintain cyber insurance coverage, it may not be adequate for liabilities or costs actually incurred, and we cannot be certain that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage of a future claim.

Risks Relating to Ownership of our Common Stock

We experience fluctuations and variability in our comparable store sales and quarterly results of operations and, as a result, the market price of our common stock may fluctuate substantially.

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 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.

Our stock price is subject to volatility.

9 unchanged sentences

● changes in accounting principles;

● the passage of legislation or other developments affecting us;

● the passage of legislation or other regulatory developments affecting us;

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

● changes in economic or financial market conditions;

● changes in economic or financial market conditions, including without limitation, the systemic failure of the banking system in the United States or globally;

● 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;

● our involvement in any litigation or investigations by government authorities, including litigation judgments, settlements or other litigation-related costs;

● cyber events, such as the ransomware incident we experienced in January 2023;

● natural disasters, public health emergencies, such as the COVID-19 pandemic, 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.”

4 unchanged sentences

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 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.

8 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors