What changed in this filing

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Item 1. Financial Statements

2025-06-11 compared with 2024-12-11 · 157 added, 222 removed, 252 unchanged (60% of the section changed)

7 unchanged sentences

Income tax receivable

Assets held for sale

Total current assets

Property and equipment, net of accumulated depreciation of $ 294,363 and $ 276,446 as of November 2, 2024 and February 3, 2024, respectively

Property and equipment, net of accumulated depreciation of $ 293,473 and $ 297,396 as of May 3, 2025 and February 1, 2025, respectively.

Operating lease right of use assets

Deferred income taxes

Liabilities and Stockholders ’ Equity

7 unchanged sentences

Noncurrent operating lease liabilities

Deferred Tax Liability

Other long-term liabilities

3 unchanged sentences

Authorized 32,000,000 shares;

16,434,037 shares issued as of November 2, 2024 and 16,354,714 shares issued as of February 3, 2024;

8,630,024 shares outstanding as of November 2, 2024 and 8,550,701 shares outstanding as of February 3, 2024

16,472,844 shares issued as of May 3, 2025 and 16,497,092 shares issued as of February 1, 2025;

8,273,038 shares outstanding as of May 3, 2025 and 8,547,841 shares outstanding as of February 1, 2025

Paid in capital

1 unchanged sentence

Treasury stock, at cost;

7,804,013 shares held as of November 2, 2024 and February 3, 2024

8,199,806 shares held as of May 3, 2025 and 7,949,251 shares held as of February 1,2025

Total stockholders ’ equity

9 unchanged sentences

Asset impairment

Loss from operations

Interest income

Interest expense

Loss before income taxes

Income tax benefit

Basic net loss per common share

Diluted net loss per common share

Weighted average number of shares outstanding

Citi Trends, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Thirty-Nine Weeks Ended

Cost of sales (exclusive of depreciation)

Selling, general and administrative expenses

Asset impairment

Loss from operations

Income (loss) from operations

Interest income

Interest expense

Loss before income taxes

Income (loss) before income taxes

Income tax benefit

Basic net loss per common share

Diluted net loss per common share

Net income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

Weighted average number of shares outstanding

3 unchanged sentences

(in thousands)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Asset impairment

2 unchanged sentences

Deferred income taxes

Insurance proceeds related to operating activities

Non-cash stock-based compensation expense

Gain on insurance related to operating activities

Changes in assets and liabilities:

8 unchanged sentences

Purchases of property and equipment

Insurance proceeds related to investing activities

Net cash used in investing activities

1 unchanged sentence

Cash used to settle withholding taxes on the vesting of nonvested restricted stock

Repurchases of common stock

Net cash used in financing activities

14 unchanged sentences

Balances — February 1, 2025

Vesting of nonvested shares

Issuance of nonvested shares

2 unchanged sentences

Net share settlement of nonvested shares

Repurchase of common stock

Balances — May 3, 2025

Vesting of nonvested shares

Issuance of nonvested shares

Issuance of vested shares

Forfeiture of nonvested shares

Stock-based compensation expense

Net share settlement of nonvested shares

Balances — August 3, 2024

Issuance of nonvested shares under incentive plan

Forfeiture of nonvested shares

Stock-based compensation expense

Net share settlement of nonvested shares

Balances — November 2, 2024

Treasury Stock

Balances — January 28, 2023

Balances — February 3, 2024

Vesting of nonvested shares

3 unchanged sentences

Net share settlement of nonvested shares

Balances — April 29, 2023

Issuance of nonvested shares

Forfeiture of nonvested shares

Stock-based compensation expense

Net share settlement of nonvested shares

Balances — July 29, 2023

Forfeiture of nonvested shares

Stock-based compensation expense

Net share settlement of nonvested shares

Balances — October 28, 2023

Balances — May 4, 2024

See accompanying notes to the condensed consolidated financial statements (unaudited).

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (unaudited)

November 2, 2024

Significant Accounting Policies

1 unchanged sentence

Citi Trends, Inc.

and its subsidiary (the “ Company ” ) is a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families.

As of November 2, 2024, the Company operated 593 stores in urban, suburban and rural markets in 33 states.

and its subsidiary (the “ Company ” ) is a leading off-price value retailer of apparel, accessories and home trends primarily for African American families in the United States.

As of May 3, 2025, the Company operated 591 stores in urban, suburban and rural markets in 33 states.

The condensed consolidated financial statements are prepared in accordance with U.S.

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These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2024 Form 10-K.

Results of a period shorter than a full year may not be indicative of results expected for the entire year as a result of the seasonality of our business, among other things.

The following contains references to fiscal years 2024 and 2023, which represent fiscal years ending or ended on February 1, 2025 and February 3, 2024, respectively.

Fiscal 2024 has a 52 -week accounting period, and fiscal 2023 had a 53 -week accounting period.

Operating results for the first quarter of 2025 are not necessarily indicative of the results that may be expected for the fiscal year as a result of the seasonality of the business and the current economic uncertainty.

The following contains references to fiscal years 2025 and 2024, which represent fiscal years ending or ended on January 31, 2026 and February 1, 2025, respectively.

Fiscal 2025 and fiscal 2024 both have 52 -week accounting periods.

Assets Held for Sale

Assets and liabilities to be disposed of by sale are classified as “ held for sale ” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use, and the disposal group is available for immediate sale and the sale is probable.

These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year.

Disposal groups are measured at the lower of carrying amount or fair value less costs to sell, and long-lived assets included within the disposal group are no longer depreciated or amortized.

The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group.

As of May 3, 2025, the Company had $ 0.2 million of assets classified as held for sale.

Cash and Cash Equivalents/Concentration of Credit Risk

8 unchanged sentences

The dilutive effect of stock-based compensation arrangements is accounted for using the treasury stock method.

The Company includes as assumed proceeds the amount of compensation cost attributed to future services and not yet recognized.

For the third quarter of 2024 and 2023, there were 258,000 and 318,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

For the thirty-nine weeks ended November 2, 2024 and October 28, 2023, there were 242,000 and 259,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

The following table provides a reconciliation of the weighted average number of common shares outstanding used to calculate basic earnings per share to the number of common shares and common stock equivalents outstanding used in calculating diluted earnings per share:

The Company includes the amount of compensation cost attributed to future services and not yet recognized as assumed

For the first quarter of 2025 and 2024, there were 0 and 272,000 shares of nonvested restricted stock, respectively, excluded from the calculation of diluted earnings per share because of antidilution.

The following table provides the weighted average number of common shares outstanding used to calculate basic earnings per share to the number of common shares and common stock equivalents outstanding used in calculating diluted earnings per share:

Thirteen Weeks Ended

November 2, 2024

October 28, 2023

Weighted average number of common shares outstanding (basic)

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Weighted average number of common shares and common stock equivalents outstanding (diluted)

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

Weighted average number of common shares outstanding (basic)

Incremental shares from assumed vesting of nonvested restricted stock

Weighted average number of common shares and common stock equivalents outstanding (diluted)

Revolving Credit Facility

In October 2011, the Company entered into a five-year , $ 50 million credit facility with Bank of America.

The facility was amended in August 2015 and May 2020 to extend the maturity dates.

The facility was further amended in April 2021 to modify terms and extend the maturity date to April 15, 2026.

In May 2023, the facility was amended to replace the London Interbank Offered Rate ( “ LIBOR ” ) with the Secured Overnight Financing Rate ( “ SOFR ” ).

The facility was amended in August 2015, May 2020, and April 2021 to modify terms and extend the maturity dates.

The facility was further amended on April 10, 2025 to extend the maturity date to April 10, 2030.

The amended facility provides a $ 75 million credit commitment and a $ 25 million uncommitted “ accordion ” feature that under certain circumstances could allow the Company to increase the size of the facility to $ 100 million.

1 unchanged sentence

The facility has an unused commitment fee of 0.25 % and permits the payment of cash dividends subject to certain limitations.

Borrowings under the credit facility bear interest (a) for SOFR Loans, at a rate equal to the SOFR Rate plus a SOFR adjustment equal to 0.10 % plus either 1.25 % , 1.50 % or 1.75 % , or (b) for Base Rate Loans, at a rate equal to the highest of (i) the prime rate, (ii) the Federal Funds Rate plus 0.5 % or (iii) the Eurodollar Rate plus 1.0 % , plus, in each case either 0.25 % , 0.50 % or 0.75 % , based in any such case on the average daily availability for borrowings under the facility.

As of November 2, 2024, the Company had no borrowings under the credit facility and $ 1.4 million of letters of credit outstanding.

Impairment of Assets

If facts and circumstances indicate that a long-lived asset or operating lease right-of-use asset may be impaired, the carrying value is reviewed.

If this review indicates that the carrying value of the asset will not be recovered as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its estimated fair value.

In the third quarter of 2024, non-cash impairment expense related to underperforming stores totaled $ 0.6 million, comprised of $ 0.3 million for leasehold improvements and fixtures and equipment, and $ 0.3 million for operating lease right of use assets.

In the third quarter of 2023, non-cash impairment expense related to underperforming stores totaled $ 0.2 million, primarily for leasehold improvements and fixtures and equipment.

The provision for income taxes for the interim period in 2024 is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items.

Management judgment is required in projecting ordinary income to estimate the Company ’ s annual effective tax rate.

For the first thirty-nine weeks of 2023 the Company used the discrete effective tax rate method to determine its tax expense based upon interim period results.

The Company determined that since small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rate, the annual effective tax rate method would not have provided a reliable estimate for the first thirty-nine weeks of 2023.

As of November 2, 2024, we had approximately $ 15.3 million in net deferred tax assets (DTA).

At this time, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs.

If we are not able to generate

sufficient taxable income to realize these DTAs, a substantial valuation allowance to reduce our U.S.

DTAs may be required, which would materially increase our expenses in the period the allowance is recognized and adversely affect our results of operations.

As of November 2, 2024, our net DTA includes approximately $ 9.3 million related to net operating loss (NOL) carryforwards that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods.

NOL carryforwards may be subject to annual limitations under Internal Revenue Code Section 382 (Section 382) (or comparable provisions of foreign or state law) in the event that certain changes in ownership were to occur.

In addition, tax credit carryforwards may be subject to annual limitations under Internal Revenue Code Section 383 (Section 383).

We are required to evaluate our NOL and tax credit carryforwards and whether certain changes in ownership have occurred as measured under Section 382 that would limit our ability to utilize a portion of our NOL and tax credit carryforwards.

If it is determined that an ownership change has occurred, there may be annual limitations on the use of these NOL and tax credit carryforwards under Sections 382 and 383 (or comparable provisions of foreign or state law).

Borrowings under the credit facility bear interest (a) for SOFR Loans, at a rate equal to the SOFR Rate plus a SOFR adjustment equal to 0.10 % plus either 1.50 % , 1.75 % or 2.00 % , or (b) for Base Rate Loans, at a rate equal to the highest of (i) the prime rate, (ii) the Federal Funds Rate plus 0.5 % and (iii) the Term SOFR Rate plus 1.0 % , plus, in each case either 0.50 % , 0.75 % or 1.00 % , based in any such case on the average daily availability for borrowings under the facility.

As of May 3, 2025, the Company had no borrowings under the credit facility and $ 2.2 million of letters of credit outstanding.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

If realization of the deferred tax asset is not considered more likely than not, then a valuation allowance is recorded to reduce the deferred tax asset to its net realizable value.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible and income tax credits may be utilized, management believes sufficient negative evidence exists to require a valuation allowance.

We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in no deferred tax asset balance being recognized.

Commitments and Contingencies

5 unchanged sentences

Such repurchases may be made in the open market, through block trades or through other negotiated transactions.

There were no stock repurchases in the first thirty-nine weeks of 2024 or the first thirty-nine weeks of 2023.

At November 2, 2024, $ 50.0 million remained available under the Company ’ s stock repurchase authorization.

Share repurchases were as follows (in thousands, except per share data):

Thirteen Weeks Ended

Total number of shares purchased

Average price paid per share (including commissions)

Total investment

At May 3, 2025, $ 40.0 million remained available under the Company ’ s stock repurchase authorization.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “ Improvement to Income Tax Disclosures (Topic 740) ” , ( “ ASU 2023-09 ” ) which requires additional disclosures for income tax rate reconciliations, income taxes paid, and certain other tax disclosures.

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

Adoption is required for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact this standard will have 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 ” 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 this standard will have on its disclosures.

Revenue Recognition

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Sales Returns

The Company allows customers to return merchandise for up to 30 days after the date of sale subject to certain conditions.

The Company allows customers to return merchandise for up to 30 days after the date of sale.

Expected refunds to customers are recorded based on estimated margin using historical return information.

3 unchanged sentences

The Company ’ s retail stores sell similar products, use similar processes to sell those products, and sell their products to similar classes of customers.

In the following table, the Company ’ s revenue from contracts with customers is disaggregated by “ CITI ” or major merchandise category.

The percentage of net sales for each CITI with the merchandise assortment was approximately:

In the following table, the Company ’ s revenue from contracts with customers is disaggregated by Division or product category.

The following table provides the percentage of net sales for each Division within the merchandise assortment:

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Accessories & Beauty

8 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Operating lease cost

2 unchanged sentences

Total lease cost

Future minimum lease payments as of November 2, 2024 are as follows (in thousands):

Remainder of 2024

Future minimum lease payments as of May 3, 2025 are as follows (in thousands):

Total future minimum lease payments

1 unchanged sentence

Total present value of lease liabilities

(1) Calculated using the discount rate for each lease.

(1) Calculated using the incremental borrowing rate for each lease.

(2) Includes short-term and long-term portions of operating lease liabilities.

1 unchanged sentence

Supplemental cash flows and other information related to operating leases are as follows (in thousands, except for weighted average amounts):

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

Thirteen Weeks Ended

Cash paid for operating leases

2 unchanged sentences

Weighted average discount rate - operating leases

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ” ( “ ASU 2023-07 ” ), which expands reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 requires disclosure of (i) significant segment expenses that are regularly provided to the CODM and included within the segment measure of profit or loss, (ii) an amount and description of its composition for other segment items to reconcile to segment profit or loss, and (iii) the title and position of the Company ’ s CODM.

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

The new standard will be effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the ASU to determine the impact of the amended guidance.

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ” ( “ ASU 2023-09 ” ).

The amendments in ASU 2023-09 require public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

The new standard will be effective on a prospective basis for fiscal years beginning after December 15, 2024 and interim periods therein, with early adoption permitted.

The Company is currently evaluating the ASU to determine the impact of the amended guidance.

Segment Reporting

The Company is an off-price value retailer of fashion apparel, accessories and home trends primarily for African American families.

The retail operations represent a single operating segment based on the way the Company manages its business.

The Company ’ s Chief Executive Officer, as our chief operating decision maker ( “ CODM ” ), manages and allocates resources to the operations of the Company on a consolidated basis.

This enables the Chief Executive Officer to assess the Company ’ s overall level of available resources and determine how best to deploy these resources across retail stores that are in line with the Company ’ s long-term company-wide strategic goals.

The Company ’ s retail stores sell similar products, use similar processes to sell those products, and sell their products to similar classes of customers.

All sales and assets are located within the United States.

The CODM assesses performance based on consolidated net (loss) income that is reported on the statement of operations as part of the annual budgeting and forecasting process.

The CODM considers budget-to-actual variances on a monthly basis when making decisions about allocating capital and personnel.

The CODM does not review assets in evaluating results, therefore such information is not provided.

The following table summarizes the Company ’ s one reportable segment profit or loss, including significant segment expenses, and includes the reconciliation to consolidated net (loss) income (in thousands):

Thirteen Weeks Ended

Cost of sales (exclusive of depreciation shown separately below)

Merchandising and other

Freight in and out

Selling, general, and administrative expenses

Store expenses - payroll and related expenses

Store expenses - rent

Corporate expenses - payroll and related expenses

Distribution center expenses - payroll and related expenses

Other segment expenses (1)

Asset impairment

Interest income

Interest expense

Income tax (provision) benefit

Net income (loss)

(1) Other segment expenses represent other store, corporate and distribution center expenses including utilities, repairs, supplies, insurance, professional fees and other miscellaneous fees.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

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Except for specific historical information, many of the matters discussed in this Form 10-Q may express or imply projections of revenues or expenditures, statements of plans and objectives for future operations, growth or initiatives, statements of future economic performance, capital allocation expectations or statements regarding the outcome or impact of pending or threatened litigation.

These, and similar statements, are forward-looking statements concerning matters that involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from those expressed or implied by these statements.

These, and similar statements, are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, concerning matters that involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from those expressed or implied by these statements.

All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors.

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changes in market interest rates and market levels of wages;

impacts of natural disasters such as hurricanes;

the imposition of new taxes on imports, new tariffs and changes in existing tariff rates;

the imposition of new trade restrictions and changes in existing trade restrictions;

impact of natural disasters such as hurricanes;

uncertainty and economic impact of pandemics, epidemics or other public health emergencies;

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interruptions in suppliers ’ businesses;

the impact of the cyber disruption we identified on January 14, 2023, including legal, reputational, financial and contractual

risks resulting from the disruption, and other risks related to cybersecurity, data privacy and intellectual property;

the results of pending or threatened litigation;

risks related to cybersecurity, data privacy and intellectual property;

temporary changes in demand due to weather patterns;

seasonality of the Company ’ s business;

changes in market interest rates and market level wages;

the results of pending or threatened litigation;

delays associated with building, opening, remodeling and operating new stores;

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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.

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.

As of November 2, 2024, we operated 593 stores in urban, suburban and rural markets in 33 states.

We are a highly differentiated off-price value retailer known for trendy fashions, great brands and amazing prices.

We offer culturally relevant fashion – what we call “ Cultural Cachet ” – in apparel, accessories and home trends primarily for African American families in the United States.

We curate a three-tiered mix of product featuring well-known brands, core product and opening price goods, with intermittent extreme value deals.

Our core product styles are curated trend-right, high quality, value for the price.

We offer an assortment of opening price product for the price conscious customer, all sold at competitive prices.

Plus, for the treasure hunters, we often have “ extreme value ” product deals on well-known branded product at 50% to 75% off the manufacturer ’ s suggested retail price.

Consumer insights research validates that our unique culturally relevant styling, and strong value for the price, fosters deep customer loyalty and high shopping frequency in the neighborhoods in which we operate.

As of May 3, 2025, we operated 591 stores in urban, suburban and rural markets in 33 states.

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 remainder 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 Patterns

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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 include more non-apparel goods, traffic to our stores is still influenced by weather patterns to some extent.

Cyber Disruption (January 2023)

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 the first thirty-nine weeks of 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.

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 November 2, 2024, we had an accrual of $0.7 million for estimated losses in connection with these matters recorded in Accrued expenses on our Balance Sheet.

For additional information regarding these lawsuits, see Note 7 of the Annual Report on Form 10-K for the fiscal year ended February 3, 2024 .

While we have expanded our product offerings to balance discretionary with non-discretionary product, 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 following discussion contains references to fiscal years 2024 and 2023, which represent fiscal years ending or ended on February 1, 2025 and February 3, 2024, respectively.

Fiscal 2024 has a 52-week accounting period and fiscal 2023 had a 53-week accounting period.

This discussion and analysis should be read with the unaudited condensed consolidated financial statements and the notes thereto contained in Part 1, Item 1 of this Report.

The following discussion contains references to fiscal years 2025 and 2024, which represent fiscal years ending or ended on January 31, 2026 and February 1, 2025, respectively.

Fiscal 2025 and fiscal 2024 have a 52-week accounting period.

This discussion and analysis should be read with the unaudited condensed consolidated financial statements and the notes thereto contained in Part I, Item 1 of this Report.

Results of Operations

1 unchanged sentence

Expenses and, to a greater extent, operating income, vary by quarter.

Results of a period shorter than a full year may not be indicative of results expected for the entire year as a result of the seasonality of our business, among other things.

Results of a period shorter than a full year may not be indicative of results expected for the entire year as a result of the seasonality of our business and the current economic uncertainty.

Key Operating Statistics

1 unchanged sentence

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

In fiscal years following those with 53 fiscal weeks, the prior year period is shifted by one week to compare similar retail calendar weeks.

Additionally, for 2024, we updated our definition of a comparable store.

We now 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 or relocated stores are considered comparable stores 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.

This change aligns more with industry standards in regard to measuring “ comp store ” sales performance.

This change is effective for fiscal year 2024 and forward.

For fiscal year 2024, the definition change results in six stores becoming comparable stores in 2024, which would not have become a comparable store until 2025 under the prior definition.

The revised definition would result in no change to the full year 2023 comparable store sales results of 5.3%.

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.

2 unchanged sentences

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.

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

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

Thirteen Weeks Ended November 2, 2024 and October 28, 2023

Sales comparisons for 2024 to the prior year are affected by the shift in the calendar caused by last year having 53 weeks.

Net sales decreased $0.4 million, or 0.3%, to $179.1 million in the third quarter of 2024 from $179.5 million in the third quarter of 2023.

The shift in the retail calendar contributed $7.0 million to revenue for the thirteen weeks ended November 2, 2024.

Comparable store sales, on a comparable weeks basis, increased 5.7%, resulting in an increase of $9.6 million in sales.

Net store opening and closing activity resulted in a net decrease of $2.8 million in sales.

Cost of Sales (exclusive of depreciation).

Cost of sales (exclusive of depreciation) decreased $3.1 million, or 2.7%, to $107.8 million in the third quarter of 2024 from $110.9 million in the third quarter of 2023.

Cost of sales as a percentage of sales decreased to 60.2% in the third quarter of 2024 from 61.8% in the third quarter of 2023.

The 160 basis points decrease was driven by a 40 basis points decrease in shrink (driven by physical inventory results), and a decrease of 120 basis points in other cost of sales.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased $5.1 million, or 7.3%, to $74.7 million in the third quarter of 2024 from $69.7 million in the third quarter of 2023.

The increase was driven by corporate expense (primarily payroll and professional fees) of $2.2 million, including $1.6 million of one-time expenses for strategic initiatives, occupancy expense of $1.0 million, and third quarter 2023 gain on insurance of $2.0 million.

As a percentage of sales, Selling, general and administrative expenses increased to 41.7% in the third quarter of 2024 from 38.8% in the third quarter of 2023, primarily driven by the aforementioned items.

Depreciation.

Depreciation expense increased $0.1 million, or 0.1%, to $4.8 million in the third quarter of 2024 from $4.7 million in the third quarter of 2023.

Non-cash impairment expense related to underperforming stores totaled $0.6 million in the third quarter of 2024, comprised of $0.3 million for leasehold improvements and fixtures and equipment, and $0.3 million for operating lease right of use assets.

Non-cash impairment expense related to underperforming stores totaled $0.2 million in the third quarter of 2023 primarily due to leasehold improvements and fixtures and equipment.

Income Tax Benefit.

Income tax benefit was $1.3 million in the third quarter of 2024 and in the third quarter of 2023.

The effective tax rate for the third quarter of 2024 and 2023 was 15.1% and 25.5%, respectively.

The difference is attributable to fluctuations in permanent items during the third quarter of 2024.

Net loss was $7.2 million in the third quarter of 2024 compared to net loss of $3.9 million in the third quarter of 2023 due to the factors discussed above.

Thirty-Nine Weeks Ended November 2, 2024 and October 28, 2023

Sales comparisons for 2024 to the prior year are affected by the shift in the retail calendar caused by last year having 53 weeks.

Net sales increased $9.1 million, or 1.7%, to $541.9 million in the first thirty-nine weeks of 2024 from $532.8 million in the same period of 2023.

The shift in the retail calendar contributed $3.1 million to revenue for the thirty-nine weeks ended November 2, 2024.

Comparable store sales, on a comparable weeks basis, increased 2.3%, resulting in an increase of $3.2 million in sales.

Net store opening and closing activity resulted in a net decrease of $6.2 million in sales.

Thirteen Weeks Ended May 3, 2025 and May 4, 2024

Net sales increased $15.4 million, or 8.3%, to $201.7 million in the first quarter of 2025 from $186.3 million in the first quarter of 2024.

The increase in sales was due to a 9.9% increase in comparable store sales.

Cost of Sales (exclusive of depreciation).

Cost of sales (exclusive of depreciation) increased $11.9 million, or 3.6%, to $343.7 million in the first thirty-nine weeks of 2024 from $331.8 million in the same period of 2023.

Cost of sales as a percentage of sales increased to 63.4% in the first thirty-nine weeks of 2024 from 62.3% in the same period of 2023.

The 110 basis points increase was driven by an increase of 120 basis points of markdowns and a 100 basis points increase in shrink, partially offset by a decrease of 50 basis points of freight and a decrease of 60 basis points in other cost of sales.

Cost of sales (exclusive of depreciation) increased $7.6 million, or 6.6%, to $121.9 million in the first quarter of 2025 from $114.3 million in the first quarter of 2024.

Cost of sales as a percentage of sales

decreased to 60.4% in the first quarter of 2025 from 61.3% in the first quarter of 2024.

The change was due to a decrease in shrink expense, a decrease in freight expense and an increase in initial markup offset by an increase in markdowns.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased $12.7 million, or 6.1%, to $222.7 million in the first thirty-nine weeks of 2024 from $210.0 million in the same period of 2023.

The increase was primarily driven by one-time CEO transition related expenses of $3.2 million, corporate expenses (primarily payroll, insurance and professional fees) of $6.5 million, stores selling and advertising expense of $4.7 million, and distribution center costs of $0.3 million, partially offset by lower incentive compensation expense of $2.0 million.

As a percentage of sales, Selling, general and administrative expenses increased to 41.1% in the first thirty-nine weeks of 2024 from 39.4% in the first thirty-nine weeks of 2023, due to the aforementioned items.

Selling, general and administrative expenses increased $0.7 million, or 0.9%, to $74.9 million in the first quarter of 2025 from $74.2 million in the first quarter of 2024.

The increase was primarily due to an increase in distribution center expenses and incentive compensation accrual, partially offset by lower corporate expenses.

As a percentage of sales, selling, general and administrative expenses decreased to 37.1% in the first quarter of 2025 from 39.8% in the first quarter of 2024.

Depreciation.

Depreciation expense increased $0.2 million, or 1.4%, to $14.3 million in the first thirty-nine weeks of 2024 from $14.1 million in the same period last year.

Non-cash impairment expense related to underperforming stores totaled $1.8 million in the first thirty-nine weeks of 2024, comprised of $0.9 million for leasehold improvements and fixtures and equipment, and $0.9 million for operating lease right of use assets.

Non-cash impairment expense related to underperforming stores totaled $0.2 million in the first thirty-nine weeks of 2023, comprised primarily of leasehold improvements and fixtures and equipment.

Income Tax Benefit.

Income tax benefit was $10.0 million in the first thirty-nine weeks of 2024 compared to $5.3 million in the first thirty-nine weeks of 2023.

The effective tax rate for the thirty-nine weeks of 2024 and 2023 was 25.6% and 25.4%, respectively.

Net (Loss) Income.

Net loss was $29.0 million in the first thirty-nine weeks of 2024 compared to net loss of $15.5 million in the same period of 2023 due to the factors discussed above.

Depreciation expense decreased $0.4 million, or 8.8%, to $4.4 million in the first quarter of 2025 from $4.8 million in the first quarter of 2024.

Income Tax Benefit/Expense.

There was no income tax expense in the first quarter of 2025 compared to a tax benefit of $2.8 million in the first quarter of 2024.

For the first quarter of 2025 and the first quarter of 2024, we used the annual effective tax rate to determine income tax expense based upon interim period results.

Net Income/Loss.

Net income was $0.9 million in the first quarter of 2025 compared to net loss of $3.4 million in the first quarter of 2024 due to the factors discussed above.

Liquidity and Capital Resources

Capital Allocation

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

Our quarter-end cash and cash equivalents balance was $38.9 million compared to cash and cash equivalents of $59.7 million at the end of the third quarter last year.

Our quarter-end cash and cash equivalents balance was $41.6 million compared to $58.2 million at the end of the first quarter of 2024.

Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.

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

Our quarter-end inventory balance was $127.5 million, down 1.7% compared to $129.7 million at the end of the third quarter last year.

Our quarter-end inventory balance was $109.9 million, compared with $119.0 million at the end of the first quarter of 2024.

The decrease was primarily due to a strategic decrease in our average in-store inventory and lower pack-and-hold inventory.

Capital Expenditures

Capital expenditures in the first thirty-nine weeks of 2024 were $7.6 million, a decrease of $4.0 million over the first thirty-nine weeks of 2023, as we pared back our investments in new stores and remodels.

We anticipate capital expenditures in fiscal 2024 to be in the range of $14 million to $18 million, primarily for the opening of one new store and remodeling existing stores, combined with ongoing investments in our systems.

Stock Repurchases

We did not repurchase any shares of our common stock in the first thirty-nine weeks of fiscal 2024 or fiscal 2023.

See Part II of this Report and Note 8 to the Financial Statements for more information.

Capital expenditures in the first quarter of 2025 were $2.1 million, an increase of $0.5 million from the first quarter of 2024, as we invest in more existing store remodels.

We anticipate capital expenditures in fiscal 2025 of approximately $20 million, primarily for opening up to five new stores and remodeling approximately 50 stores, combined with ongoing investments in various technology platforms.

Share Repurchases

In the first quarter of fiscal 2025, we returned $6.3 million to shareholders through share repurchases.

See Part II, Item 2 of this Report and Note 7 to the Financial Statements for more information.

Revolving Credit Facility

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Additional details of the credit facility are in Note 4 to the Financial Statements .

At the end of the third quarter of 2024, we had no borrowings under the credit facility and $1.4 million in letters of credit outstanding.

At the end of the first quarter of 2025, we had no borrowings under the credit facility and $2.2 million in letters of credit outstanding.

Cash Flows From Operating Activities .

Net cash used in operating activities was $32.3 million in the first thirty-nine weeks of 2024 compared to $32.9 million in the same period of 2023.

Sources of cash for the first thirty-nine weeks of 2024 included (1) net loss adjusted for non-cash items totaling $16.1 million (compared to net loss adjusted for non-cash items of $36.0 million in the first thirty-nine weeks of 2023);

(2) a decrease in inventory of $2.9 million in the first thirty-nine weeks of 2024 (compared to an increase of $23.9 million in the first thirty-nine weeks of 2023);

(3) a decrease in accrued compensation of $2.9 million (compared to an increase of $1.8 million in the first thirty-nine weeks of 2023);

and (4) an increase in layaway deposits of $1.2 million in the first thirty-nine weeks of 2024 (compared to an increase of $0.9 million in the same period last year).

Significant uses of cash from operating activities in the first thirty-nine weeks of 2024 included (1) a $35.9 million decrease in accrued expenses and other long-term liabilities (compared to a $45.5 million decrease in the first thirty-nine weeks of 2023) due primarily to payments of operating lease liabilities;

(2) a $17.9 million decrease in accounts payable (compared to a $2.3 million decrease in the first thirty-nine weeks of 2023);

and (3) a $2.3 million increase in prepaid and other current assets (compared to a $1.7 million dollar decrease in the same period last year).

Net cash used in operating activities was $11.0 million in the first quarter of 2025 compared to cash used of $19.6 million in the first quarter of 2024.

Sources of cash in the first quarter of 2025 resulted from

net income adjusted for non-cash expenses totaling $18.5 million (compared to a net loss adjusted for non-cash items of $11.5 million in the first quarter of 2024), and a decrease of $12.7 million in inventory (compared to a decrease of $11.4 million in 2024).

Significant uses of cash during the first quarter of 2025 included (1) a $21.9 million decrease in accounts payable (compared to a decrease of $28.1 million in the first quarter of 2024) due primarily to timing of vendor payments;

and (2) a decrease of $19.4 million in accrued expenses and other long-term liabilities (compared to a decrease of $14.5 million in the first quarter of 2024) due primarily to payments of operating lease liabilities.

Cash Flows From Investing Activities.

Cash used in investing activities was $7.6 million in the first thirty-nine weeks of 2024 compared to cash used of $10.1 million in the same period last year.

Cash used in the first thirty-nine weeks of fiscal 2024 and fiscal 2023 consisted of purchases of property and equipment.

Cash used in investing activities was $2.1 million in the first quarter of 2025 compared to $1.6 million in the first quarter of 2024.

Cash used in the first quarter of 2025 and 2024 consisted of purchases of property and equipment.

Cash Flows From Financing Activities.

Cash used in financing activities was $0.9 million in the first thirty-nine weeks of 2024 compared to $0.9 million in the same period last year.

Cash used in the first thirty-nine weeks of fiscal 2024 and fiscal 2023 consisted of payments to settle withholding taxes on restricted stock that vested.

Cash used in financing activities was $6.4 million in the first quarter of 2025 compared to $0.3 million in the first quarter of 2024.

Cash used in the first quarter of 2025 was $0.1 million to settle withholding taxes on the vesting of restricted stock and $6.3 million for share repurchases, compared to $0.3 million used in the first quarter of 2024 to settle withholding taxes on the vesting of restricted stock.

Cash Requirements and Commitments

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Historically, we have met these cash requirements using cash flow from operations and short-term trade credit.

As of November 2, 2024, our contractual commitments for operating leases totaled $225.2 million (with $49.4 million due within 12 months).

As of May 3, 2025, our contractual commitments for operating leases totaled $220.4 million (with $50.4 million due within 12 months).

See Note 10 to the Financial Statements for more information regarding lease commitments.

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Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risk during the thirty-nine weeks ended November 2, 2024 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 .

There have been no material changes in our market risk during the thirteen weeks ended May 3, 2025 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

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-Q

Item 1. Financial Statements