What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-04-16 compared with 2024-04-18 · 96 added, 115 removed, 124 unchanged (63% of the section changed)

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

We did not repurchase any shares of our common stock during fiscal 2023.

During fiscal 2022, we repurchased approximately 331,000 shares of our common stock at an aggregate purchase price of $10.0 million.

As of February 3, 2024, approximately $50.0 million remained available under our previously announced share repurchase programs.

The number of shares of common stock repurchased by the Company during the fourth quarter of 2024 and the average price paid per share are as follows:

Total number of

Maximum number (or

shares purchased as

approximate dollar value)

part of publicly

of shares that may yet be

announced plans or

purchased under the

per share (1)

plans or programs (2)

November (11/3/24 - 12/2/24)

December (12/3/24 - 1/1/25)

January (1/2/25 - 2/1/25)

(1) Includes commissions for the shares repurchased under the stock repurchase program.

(2) On November 30, 2021, the Company announced that its board of directors approved a $30 million stock repurchase

On March 15, 2022 the company announced that its board of directors approved an additional $30 million

stock repurchase program.

The programs do not have expiration dates.

Equity Compensation Plan Information.

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As a result of many factors, such as those set forth under the section entitled “ Risk Factors ” and elsewhere in this Report, our actual results may differ materially from those anticipated in these forward-looking statements.

Discussions of our results of operations for the year ended January 28, 2023 compared to the year ended January 29, 2022 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 28, 2023, which was filed with the United States Securities and Exchange Commission on April 13, 2023.

Discussions of our results of operations for the year ended February 3, 2024 compared to the year ended January 28, 2023 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended February 3, 2024, which was filed with the United States Securities and Exchange Commission on April 18, 2024.

Executive Overview

We are a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families.

We are a leading off-price value retailer of apparel, accessories and home trends primarily for African American families.

Our high-quality and trend-right merchandise offerings at everyday low prices are designed to appeal to the fashion and trend preferences of value-conscious customers.

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Fiscal 2024 Business Highlights

● Elevated our in-store experience with our strong value offering, improved inventory levels and assortment optimization focused on African American and multicultural families

● Demonstrated expense control throughout the year while investing in sales-driving initiatives such as marketing tests and inventory rebuilds

● Opened 5 new stores, remodeled 15 stores and closed 14 stores;

ended the year with 15% of the fleet upgraded to our CTx store format

● Leveraged distribution center upgrades made in fiscal 2022 to expand shipping partnerships, resulting in freight rate improvements and greater supply chain flexibility

● Completed the implementation of our upgraded ERP system

● After a mid-year fiscal 2024 CEO transition, began transformation efforts with significant improvement in financial results in the second half of the year.

Comparable stores sales in the first half of 0.7% compared to second half comparable store sales of 6.1%.

● Leveraged extensive, recent customer insights study to sharpen our focus on and understanding of our African American customer base

● Elevated our in-store experience with our updated, three-tiered product assortment strategy, with balanced good-better-best offerings, trend-right fashion and the addition of extreme value branded treasures, all focused on African American families

● Implemented improved allocation methodology and updated in-season markdown approach to ensure improved inventory management and fresh product for our customers

● Opened 1 new store, remodeled 35 stores and closed 12 stores;

ended the year with 23% of the fleet in our updated store format

Fiscal 2024 Financial Highlights

● Total sales of $753.1 million;

● Net loss of $1.46 per share

comparable store sales increase of 3.4% vs fiscal 2023

● Net loss of ($43.2) million, including the impact of $16.5 million of valuation allowance on deferred tax asset and impact of $16.5 million of strategic investments to fuel the transformation

● Cash of $61.1 million at the end of the fiscal year, with no debt

We believe that Citi Trends is in a unique position to serve our loyal customer base, with a long runway for store growth and a motivated leadership team supported by a healthy balance sheet.

As described in more detail in “ Item 1 – Business, ” we have identified four strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years:

Driving Comparable Store Productivity .

We believe that we can drive sales productivity improvements by sharpening our focus on trend development and actively refining our assortment strategies, broadening the appeal of the brand and continuing to roll out the CTx store format.

We believe that we have the potential to grow our fleet to approximately 1,000 locations over time, giving us the opportunity to increase our presence in African-American and multicultural geographies through both densification and new market entries.

Managing Inventory and Maximizing Margin .

We believe that our sourcing methodology further differentiates our model through a combination of products made exclusively for our core customers and highly recognized brands grounded in everyday value.

We are known for delivering newness and freshness, resulting in a high-repeat shopping rate, and our ample monthly liquidity will enable us to chase trends to excite our customer base.

In addition, we leverage consumer insights and analytics to add incremental assortments, and we employ pricing studies to expand margin while ensuring a balanced “ good, better, best ” assortment.

Investing in Our Infrastructure .

We believe that we have an opportunity to make strategic investments in our business that will improve our efficiencies and our capabilities to “ buy, ” “ move ” and “ sell ” our assortments to effectively engage current and new customers.

Making a Difference .

Our team is dedicated to our neighborhoods and committed to positively impacting the African American and multicultural neighborhoods that we serve.

We ’ ll leverage our “ CITI cares ” Council to continue making an impact.

We strongly believe that our business strategy centered around these four areas will accelerate our long-term sales and earnings growth.

As described in more detail in “ Item 1 – Business, ” we have identified five strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years:

Offer Compelling Value Proposition .

We believe that we can drive increases in traffic and basket by focusing on our three-tiered product strategy of opening prices, core value product and familiar brands at incredible values, all focused on the wants and needs of our African American customers.

We believe that delivering newness and freshness results in high customer frequency.

Our expanded offering of “ treasures ” , or extreme value product offerings, further strengthens this strategy and deepens our relationship with our customers.

Focus on the African American Customer.

We believe that a sharpened focus on our African American customers will drive improved sales through a more focused product assortment designed to address their fashion needs and wants, supporting their ability to express themselves through the creation of their own style.

We believe that our refined understanding of our customer will drive increased traffic and conversion in our stores.

Consistent Operational Excellence .

We believe that the work we are doing to develop fundamental retail practices and to ensure consistent execution will produce strong, sustainable financial results while positioning us for future, accelerated growth.

We believe that we can maximize the productivity of our existing 591 stores located in the heart of African American neighborhoods by executing on the three areas of focus stated above and by continued refinement of our store format.

While we believe that maximizing the productivity of our existing fleet provides significant opportunity for sales and earnings growth, we continue to believe that Citi Trends has the potential to grow, and we expect to accelerate square footage expansion in the range of 6% to 10% annually over time.

We believe that our teams across the organization, led by Ken Seipel, our Chief Executive Officer, and their ability to consistently execute while staying focused on our African American customer, providing great product and a welcoming in-store environment, are a key differentiator for our business and are key to the continued transformation of our company.

We strongly believe that our business strategy centered around these five areas will accelerate our long-term sales and earnings growth.

Uncertainties and Challenges

General Economic Conditions

We expect that our operations in the short-term will continue to be influenced by general economic conditions, including on-going inflationary pressures, which are particularly impactful to the communities we serve.

Given the macro-economic environment, we expect low-income families to remain under pressure and to tightly manage their discretionary spend through the majority of fiscal 2024.

In addition, we continue to monitor the impacts on our business of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, consumer confidence, consumer perception of economic conditions, costs to source our merchandise and supply chain disruptions .

We expect that our operations in the short-term will continue to be influenced by general economic conditions, including on-going inflationary pressures, new tariff programs and changes in consumer sentiment.

We continue to monitor the impacts on our business of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, consumer confidence, consumer perception of economic conditions, costs to source our merchandise and supply chain disruptions .

Seasonality and Weather Conditions

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In addition, sales of clothing are directly impacted by the timing of the seasons to which the clothing relates.

While we have expanded our product offerings to become a one-stop shop, traffic to our stores is still influenced by weather patterns to some extent.

Cyber Disruption

As previously disclosed, in January 2023, we experienced a disruption of our back office and distribution center IT systems, (the “ January 2023 cyber disruption ” ) .

In connection with this incident, third party consultants and forensic experts were engaged to assist with the restoration and remediation of the Company ’ s systems and, with the assistance of law enforcement, to investigate the incident.

We do not retain sensitive customer data on our systems.

The impact of the January 2023 cyber disruption was not material to our fiscal 2023 financial results.

In the third quarter of fiscal 2023, we received insurance proceeds (reflected on our Statement of Cash Flows) related to the January 2023 cyber disruption.

This resulted in a gain of $1.2 million that is recorded in Selling, general and administrative expenses on our Statement of Operations .

In fiscal 2023, we recognized $1.7 million of costs related to the cyber disruption in Selling, general and administrative expenses on our Statement of Operations.

We expect to incur ongoing costs to enhance data security and take further steps to prevent unauthorized access to, or manipulation of, our systems and data.

Several putative class action lawsuits have been filed against the Company and several inquiries have been made to the Company with respect to the January 2023 cyber disruption.

At February 3, 2024, we had an accrual of $0.8 million for estimated losses in connection with these matters recorded in Accrued expenses on our Balance Sheet.

See Note 7 to the Financial Statements for more information .

For additional information on cybersecurity and cybersecurity threats, see Item 1C.

Cybersecurity.

While we have expanded our product offerings to balance discretionary with non-discretionary products, traffic to our stores is still influenced by weather patterns to some extent.

Basis of Presentation

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Selling, general and administrative expenses are comprised of store costs, including payroll and occupancy costs, corporate and distribution center costs and advertising costs.

The years ended February 3, 2024, January 28, 2023 and January 29, 2022 are referred to herein as fiscal 2023, fiscal 2022 and fiscal 2021, respectively.

Fiscal 2023 is comprised of 53 weeks, while fiscal years 2022 and 2021 are each comprised of 52 weeks.

The years ended February 1, 2025, February 3, 2024 and January 28, 2023 are referred to herein as fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

Fiscal years 2024 and 2022 are each comprised of 52 weeks, while fiscal 2023 is comprised of 53 weeks.

Results of Operations

The following discussion of our financial performance is based on the consolidated financial statements set forth in the financial pages of this Report.

The following discussion of our financial performance is based on the consolidated financial statements set forth in Item 8 of this Report.

The nature of our business is seasonal.

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Total stores open, end of year

Comparable store sales (decrease) increase (1)

(1) Stores included in the comparable store sales calculation for any year are those stores that were opened prior to the beginning of the preceding fiscal year and were still open at the end of such year.

Relocated stores and expanded stores are included in the comparable store sales results, while stores that are closed permanently or for an extended period are excluded from the comparable store sales results.

Comparable store sales increase (decrease) (1)

(1) Stores included in the comparable store sales calculation for any year are those stores that were open for at least 14 full consecutive months without closure for more than seven days within the same fiscal month.

Remodeled and relocated stores are included in the comparable store sales results, while stores that are closed permanently or for an extended period are excluded from the comparable store sales results.

Key Operating Statistics

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One of the main performance measures we use is comparable store sales growth.

We define a comparable store as a store that has been open for an entire fiscal year.

Therefore, a store will not be considered a comparable store until its 13th month of operation at the earliest or until its 24th month at the latest.

As an example, stores opened in fiscal 2022 and fiscal 2023 were not considered comparable stores in fiscal 2023.

Relocated and expanded stores are included in the comparable store sales results.

Stores that are closed permanently or for an extended period are excluded from the comparable store sales results.

We define a comparable store as a store that has been open for at least 14 full consecutive months without closure for more than seven days within the same fiscal month.

Remodeled and relocated stores are included in the comparable store sales results if the selling square footage is not changed significantly, the store is not closed for more than five days in any fiscal month and the store remains in the same trade area.

We also use other operating statistics, most notably average sales per store, to measure our performance.

As we typically occupy existing space in established outdoor community shopping centers rather than sites built specifically for our stores, store square footage (and therefore sales per square foot) varies by store.

As we typically occupy existing space in established shopping centers rather than sites built specifically for our stores, store square footage (and therefore sales per square foot) varies by store.

We focus on overall store sales volume as the critical driver of profitability.

In addition to sales, we measure cost of sales as a percentage of sales and store operating expenses, with a particular focus on labor, as a percentage of sales.

These results translate into store level contribution, which we use to evaluate overall performance of each individual store.

Finally, we monitor corporate and distribution center expenses against budgeted amounts.

Fiscal 2024 Compared to Fiscal 2023

Net sales decreased $47.1 million, or 5.9%, to $747.9 million in fiscal 2023 from $795.0 million in fiscal 2022.

The decrease in sales was due to a 6.8% decrease in comparable store sales, as well as a decrease of $6.1 million from net store opening and closing activity.

The decrease in comparable store sales was the result of continued inflationary pressures in fiscal 2023 that were particularly impactful to our core customers.

Net sales increased $5.1 million, or 0.7%, to $753.1 million in fiscal 2024 from $747.9 million in fiscal 2023.

The increase in sales was due to a 3.4% increase in comparable store sales, as well as a decrease of $9.1 million from net store opening and closing activity.

The increase in comparable store sales was the result of increased traffic, basket and conversion, particularly in the second half of the year with the implementation of our refined strategies.

Cost of Sales (exclusive of depreciation).

Cost of sales decreased $21.2 million, or 4.4%, to $462.8 million in fiscal 2023 from $484.0 million in fiscal 2022.

As a percentage of net sales, cost of sales deleveraged 100 basis points to 61.9% in fiscal 2023 from 60.9% in fiscal 2022 driven by higher freight costs due to rebuilding inventory in certain categories, as well as an increase in shrinkage costs.

Cost of sales increased $8.2 million, or 1.8%, to $471.0 million in fiscal 2024 from $462.8 million in fiscal 2023.

As a percentage of net sales, cost of sales deleveraged 60 basis points to 62.5% in fiscal 2024 from 61.9% in fiscal 2023 driven by higher markdowns from our large, strategic inventory reset in the second quarter and higher shrink expense, partially offset by lower freight costs as a result of reduced rates from a new carrier relationship.

Selling, General and Administrative ( “ SG&A ” ) Expenses.

SG&A expenses increased $15.7 million, or 5.5%, to $300.2 million in fiscal 2024 from $284.5 million in fiscal 2023.

The increase was primarily due to (1) $2.7 million of rent related to our two distribution center sale-leaseback transactions completed in fiscal 2022;

(2) $1.9 million of store rent and occupancy costs;

(3) $1.9 million of distribution center payroll;

(4) $0.9 million for traffic driving marketing tests;

and (5) $0.6 million for cloud based technology subscriptions.

These increases were partially offset by $2.7 million lower insurance costs.

As a percentage of sales, SG&A expenses deleveraged 290 basis points to 38.0% in fiscal 2023 from 35.1% in fiscal 2022, primarily due to the deleveraging effect of lower sales.

The increase was primarily due to (1) $4.1 million of merit increases for store, DC and corporate roles;

(2) $3.9 million of expenses related to CEO transition and shareholder defense;

(3) $3.1 million of one-time investments, such as consulting fees and store and DC labor to process off-price deals to fuel our strategic initiatives and (4) $1.8 million of store repair and maintenance costs.

As a percentage of sales, SG&A expenses deleveraged 190 basis points to 39.9% in fiscal 2024 from 38.0% in fiscal 2023, due to the aforementioned expense increases.

Depreciation.

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Impairment charges for fiscal 2024 related to underperforming stores totaled $2.5 million, comprised of $1.2 million for leasehold improvements and fixtures and equipment, and $1.3 million for an operating lease right-of-use asset.

There was no impairment expense in fiscal 2022.

Gain on Sale-leasebacks .

In fiscal 2022, we completed sale-leaseback transactions for our distribution centers in Darlington, South Carolina and Roland, Oklahoma that resulted in a combined gain of $64.1 million.

Income Tax Benefit (Expense).

Income tax benefit was $3.9 million in fiscal 2023 compared to income tax expense of $17.0 million in fiscal 2022.

The difference is attributable to a pretax loss this year compared to pretax income last year that included the gain on sale-leasebacks.

Net (Loss) Income.

Net loss was $12.0 million in fiscal 2023 compared to net income of $59.0 million in fiscal 2022, due to the factors discussed above.

Impairment charges for fiscal 2023 related to underperforming stores totaled $1.0 million, comprised of $0.9 million for leasehold improvements and fixtures and equipment, and $0.1 million for an operating right of use asset.

Income Tax (Expense) Benefit.

Income tax expense was $5.8 million in fiscal 2024 compared to income tax benefit of $3.9 million in fiscal 2023.

The difference is attributable to the $16.5 million valuation allowance related to deferred tax assets, primarily associated with net operating loss carryforward generated in fiscal years 2023 and 2024.

The cumulative losses during recent years represents sufficient negative evidence to require a valuation allowance, which will be maintained until sufficient positive evidence exists to support its reversal.

Net loss was $43.2 million in fiscal 2024 compared to net loss of $12.0 million in fiscal 2023, due to the factors discussed above.

Liquidity and Capital Resources

Capital Allocation

Our capital allocation strategy is to maintain adequate liquidity to maintain current operations while investing in opportunities to profitably grow our business, then to return excess cash to shareholders through our share repurchase programs.

Our capital allocation strategy is to maintain adequate liquidity to support current operations while investing in opportunities to profitably grow our business, then to return excess cash to shareholders through our share repurchase programs.

Our year-end cash and cash equivalents balance was $61.1 million compared to $79.7 million at the end of last year.

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and (iv) a revolving credit facility with a $75 million credit commitment.

In fiscal 2022, we completed sale-leaseback transactions of our distribution centers in Darlington, South Carolina and Roland, Oklahoma that resulted in combined pretax proceeds of $81.1 million.

Our year-end inventory balance was $122.6 million, compared with $130.4 million at the end of fiscal 2023.

The increase was the result of targeted inventory rebuilds versus 2022 inventory levels that were too light and an earlier set of the fresh spring assortment in advance of two important selling moments – tax refund season and the earlier 2024 Easter holiday.

The decrease was the result of our large, strategic inventory reset which led to the markdown of aged product in the second quarter plus the impact of a faster supply chain and a focus on improved inventory productivity.

Capital Expenditures

Capital expenditures in fiscal 2024 were $12.1 million, a decrease of $2.8 million from the prior year, primarily due to opening fewer stores in fiscal 2024.

We anticipate capital expenditures in fiscal 2024 of approximately $20 million, primarily for opening up to 5 new stores and remodeling approximately 40 stores, combined with continued investments in our systems and distribution centers.

We anticipate capital expenditures in fiscal 2025 in the range of $18 million to $22 million, primarily for opening up to 5 new stores and remodeling approximately 50 stores, combined with continued investments in our systems and distribution centers.

Share Repurchases

We did not repurchase any shares of our common stock during fiscal 2023.

In fiscal 2024 we returned $3.8 million to shareholders through share repurchases.

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Cash Flows From Operating Activities.

Cash used in operating activities was $9.6 million in fiscal 2023 compared with cash provided of $5.8 million in fiscal 2022.

Cash used in operating activities was $3.8 million in fiscal 2024 compared with cash used of $9.6 million in fiscal 2023.

For fiscal 2024, significant sources of cash included $7.8 million reduction in inventory and a $0.1 million increase in accounts payable.

Significant uses of cash include a $49.5 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities.

For fiscal 2023, significant sources of cash included $3.5 million from insurance proceeds related to operating activities and a $17.9 million increase in accounts payable.

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and (3) a $3.5 million increase in income tax receivable.

For fiscal 2022, significant sources of cash included (1) $72.0 million from net income adjusted for non-cash expenses, insurance proceeds and gain on sale-leasebacks;(2) a $16.8 million decrease in inventory;

and (3) a $3.4 million decrease in income tax receivable.

Significant uses of cash included (1) a $54.8 million decrease in accrued expenses and other long-term liabilities due primarily to payments of operating lease liabilities;

(2) an $18.3 million decrease in accounts payable due primarily to the decrease in inventory;

and (3) an $15.1 million decrease in accrued compensation due to payment in the first quarter of incentive compensation accrued in the preceding fiscal year.

Cash Flows From Investing Activities.

Cash used in investing activities was $13.4 million in fiscal 2023 compared to cash provided of $60.2 million in fiscal 2022.

Cash used in fiscal 2023 consisted of $14.9 million for purchases of property and equipment, partially offset by $1.5 million from insurance proceeds related to investing activities.

Cash provided in fiscal 2022 consisted of $81.1 million net proceeds from the sale of the buildings in the sale-leaseback transactions, partially offset by $22.3 million for purchases of property and equipment.

Cash used in investing activities was $10.1 million in fiscal 2024 compared to cash used of $13.4 million in fiscal 2023.

Cash used in fiscal 2024 consisted entirely of purchases of property and equipment.

Cash used in fiscal 2023 consisted of $14.9 million of purchases of property and equipment, partially offset by $1.5 million from insurance proceeds related to investing activities.

Cash Flows From Financing Activities.

Cash used in financing activities was $4.7 million in fiscal 2024 compared with $0.9 million in fiscal 2023.

Cash used in fiscal 2024 was $3.8 million for share repurchases and $0.9 million to settle withholding taxes on the vesting of restricted stock.

Cash used in fiscal 2023 was to settle withholding taxes on the vesting of restricted stock.

Cash used in fiscal 2022 was primarily for repurchases of our common stock.

Cash Requirements and Commitments

Our principal cash requirements consist of (1) inventory purchases;

(2) capital expenditures to invest in our infrastructure;

(2) capital expenditures to invest in our growth initiatives;

and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs.

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Under the retail inventory method, the cost of inventory is determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory.

Inherent in the retail inventory calculation are certain management judgments and estimates, including, among others, merchandise markups, markdowns and shrinkage, which impact the ending inventory valuation at cost as well as resulting cost of sales.

Inherent in the retail inventory calculation are certain management judgments and estimates, including, among others, merchandise markups, markdowns and shrink, which impact the ending inventory valuation at cost as well as resulting cost of sales.

Merchandise markdowns are reflected in the inventory valuation when the price of an item is lowered in the stores.

As a result, we believe the retail inventory method results in a more conservative inventory valuation than other accounting methods.

We estimate and record an allowance for shrinkage for the period between the last physical count and the balance sheet date.

The estimate of shrinkage can be affected by changes in actual shrinkage trends.

Inventory shrinkage as a percentage of sales in fiscal 2023, fiscal 2022 and fiscal 2021 was 1.0%, 0.7% and 0.4%, respectively.

The allowance for inventory shrinkage was $3.9 million as of February 3, 2024 and $5.8 million as of January 28, 2023.

As a measure of sensitivity, a ten percent change in our estimated shrinkage rates as of February 3, 2024, would not have materially impacted our cost of goods sold in fiscal 2023.

We estimate and record an allowance for shrink for the period between the last physical count and the balance sheet date.

The estimate of shrink can be affected by changes in actual shrink trends.

Inventory shrink as a percentage of sales in fiscal 2024, fiscal 2023 and fiscal 2022 was 1.7%, 1.0% and 0.7%, respectively.

The allowance for inventory shrink was $5.2 million as of February 1, 2025 and $3.9 million as of February 3, 2024.

As a measure of sensitivity, a ten percent change in our estimated shrink as of February 1, 2025, would not have materially impacted our cost of goods sold in fiscal 2024.

Many retailers have arrangements with vendors that provide for rebates and allowances under certain conditions, which ultimately affect the value of the inventory.

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There were no material changes in the estimates or assumptions related to the valuation of inventory during fiscal 2024.

Operating Leases

We lease all of our retail store locations, our distribution centers and certain office space and equipment.

All leases are classified as operating leases.

We record right-of-use assets and lease liabilities based on the present value of future minimum lease payments over the lease term.

In determining the present value of lease payments, we use an incremental borrowing rate that approximates the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term.

Our lessors do not provide an implicit rate, nor is one readily available, therefore we determine an incremental borrowing rate based on a buildup approach which utilizes rates and terms from the Company ’ s existing borrowing facility with adjustments to bridge for impacts to the rate due to differences in collateral, terms and payments.

We record operating lease cost over the estimated term of the lease, which includes options to extend lease terms that are reasonably certain of being exercised, starting when possession of the property is taken from the landlord.

Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term.

In addition, certain leases provide for contingent rents that are not measurable at inception.

These contingent rents are primarily based on a percentage of net sales that are in excess of a predetermined level.

These amounts are excluded from minimum rent and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount can be reasonably estimated.

If an operating lease asset is impaired, the remaining operating lease asset will be amortized on a straight-line basis over the remaining lease term.

The above listing is not intended to be a comprehensive list of all our accounting policies.

In many cases the accounting treatment of a particular transaction is specifically dictated by U.S.

GAAP, with no need for management ’ s judgment in their application.

There are also areas in which management ’ s judgment in selecting any available alternative would not produce a materially different result.

Recent Accounting Pronouncements

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The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “ Expense Disaggregation Disclosures (Topic 220):

Disaggregation of Income Statement Expenses ” ( “ ASU 2024-03 ” ), which requires public entities to disclose additional information that disaggregates certain expense captions into specified categories in the Notes to the consolidated financial statements.

The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods after December 15, 2027, with early adoption permitted.

The disclosure updates are required to be applied prospectively with the option for retrospective application.

The Company is currently evaluating the impact the amended guidance will have on its disclosures.

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 5. Market for Registrant’s Common Equity