What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-09-04 compared with 2020-06-04 · 134 added, 102 removed, 134 unchanged (64% of the section changed)

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the effectiveness of our inventory management;

the impact of natural disasters, other public health crises, political crises and other catastrophic events on our stores and our suppliers, as well as on consumer confidence and purchasing in general;

the impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our stores and our suppliers, as well as on consumer confidence and purchasing in general;

risks associated with the seasonality of the retail industry;

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and future stock repurchases under our stock repurchase program and future dividend payments.

For a more detailed discussion of risk factors impacting us, see the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 and “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

For a more detailed discussion of risk factors impacting us, see the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020, “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended May 2, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations.

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These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store.

Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors.

Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle

statements by grouping similar footwear from multiple vendors.

Our e-commerce site offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores.

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Quarter Ended

August 1, 2020

August 3, 2019

Comparable store sales for the periods indicated include stores that have been open for 13 full months after such store’s grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled.

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The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Cost of sales (including buying, distribution and

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Selling, general and administrative expenses

Operating (loss)/income

Operating income/(loss)

Interest income

Income tax (benefit)/expense

Net (loss)/income

Information regarding COVID-19 Coronavirus Pandemic (“COVID-19”)

We continue to closely monitor and manage the impact of the COVID-19 pandemic, and the safety and well-being of our customers, employees and business partners remains our primary concern.

Income tax expense/(benefit)

Net income/(loss)

Information regarding the COVID-19 Coronavirus Pandemic (“COVID-19”)

We continue to closely monitor and manage the impact of the COVID-19 pandemic, and the safety and well-being of our customers, employees and business partners remains a top priority.

The COVID-19 pandemic has significantly impacted and is expected to continue to impact our operations, supply chains, overall economic conditions and consumer spending for the foreseeable future.

As guidance and mandates from governments and health officials continue to evolve, closures of our stores may continue or increase, and sales, including e-commerce sales, may be reduced.

At this time, considerable uncertainty exists regarding how the COVID-19 pandemic may affect the back-to-school and Christmas peak shopping seasons.

In response to the COVID-19 pandemic, a ll of our stores were closed effective March 19, 2020 and substantially all of our stores were closed for approximately 50% of the first quarter.

As guidance and mandates from governments and health officials continue to evolve, closures of some or all our stores may reoccur, and sales, including e-commerce sales, may be reduced.

The COVID-19 pandemic has delayed and lengthened the back-to-school shopping period and, at this time, considerable uncertainty exists regarding how the COVID-19 pandemic may affect the Christmas shopping period.

In response to the COVID-19 pandemic, a ll of our brick-and-mortar stores were closed effective March 19, 2020 and substantially all of our stores were closed for approximately 50% of the first fiscal quarter of 2020.

Our website and mobile app continued to accept order s after March 19, 2020 and e-commerce sales increased significantly as customer buying habits shifted to our online channel .

As of June 4 , 2020, approximately 9 7 % of our stores have re-opened in states that have relaxed or cancelled stay-at-home orders .

As stores have re-opened, we have experienced higher conversion ratios a nd higher per unit transactions , offset by reduced traffic, compared to histori cal trends .

Generally, since the re-opening of certain stores in late April, sales have exceeded our original fiscal 2020 plan , with some stores exceeding plan and other stores showing declines.

E-commerce sales continue to trend higher than in the prior fiscal year and above our original plan for fiscal 2020.

We undertook a number of actions during the quarter to mitigate the financial impact of the COVID-19 pandemic, preserve capital and keep our customers and employees safe.

In the first quarter we have:

Reached agreements with many of our landlords to defer April, May and June lease payments.

We continued to recognize lease expense on a straight-line basis in accordance with Generally Accepted Accounting Principles;

Continued to pay employees while our stores were closed and recorded a $2.0 million tax credit in selling, general and administrative expenses that offset wage expense.

Appro ximately 50% of our stores were reopened by the beginning of our second quarter and substantially all stores had reopened by early June.

As stores have reopened, we experienced increases in conversion , total average transaction and units per transaction despite reduced traffic due to the COVID-19 pandemic .

Generally, since the reopening s , sales exceeded our original fiscal 2020 plan , with some stores exceeding plan and other stores showing declines.

In the last two weeks of the second quarter of fiscal 2020, we experienced declines in sales compared to the prior year due to delays in back-to-school start dates.

In our markets, school district announced return dates are on average a pproximately two to three weeks later than the prior year and we expect fiscal 2020 back-to-school shopping to continue into October.

As of August 31, 2020, 65% of schools in our markets have gone back to school, compared to 95% in a typical year’s back-t o-school shopping period.

We have undertaken a number of actions to mitigate the financial impact of the COVID-19 pandemic, preserve capital and keep our customers and employees safe.

These actions include:

Implementing new health and safety procedures at our stores, corporate headquarters and distribution center.

Materials, such as thermometers, cleaning supplies, new social distancing signage, and personal protective equipment have been distributed to our facilities.

Enhancing our liquidity by exercising the full accordion feature under our existing credit facility to increase our borrowing capacity under the facility, now collateralized by our inventory, from $50.0 million to $100.0 million, and eliminating a covenant through the first quarter of fiscal year 2021 that may have limited our access to the increased borrowing capacity.

Suspending repurchases under our share repurchase program until further notice.

Continuing to pay employees while our stores were closed and recording tax credits in selling, general and administrative (“SG&A”) expenses that offset wage expense.

This credit was associated with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and represents an employee retention tax credit to support wages paid to employees while such employees were not working.

Reduced inventory receipts and negotiated extended payment terms with many of our business partners;

Implemented new health and safety procedures at our stores, corporate headquarters and distribution center.

Materials, such as thermometers, cleaning supplies, new signage, and personal protective equipment have been distributed to our facilities;

Enhanced our liquidity by exercising the full accordion feature under our existing credit facility to increase our borrowing capacity under the facility, now collateralized by our inventory, from $50.0 million to $100.0 million;

Suspended repurchases under our share repurchase program until further notice;

Reduced non-essential corporate spending;

Temporarily reduced the base salaries of our executives and other senior members of the management team and the annual cash retainer fee of the Board of Directors and delayed the implementation of wage increases for certain employees;

Deferred non-essential capital projects;

Postponed marketing activities for brick-and-mortar stores and evaluated promotional activities;

Implemented a temporary freeze on company hiring efforts.

As a result of continuing to straight-line lease expense and pay our employees, our operating expenses in the first quarter of fiscal 2020 were generally consistent with the first quarter of the prior fiscal year.

However, market volatility principally caused by the COVID-19 pandemic reduced our deferred compensation liabilities and decreased our overall operating expenses.

We also recorded a $2.3 million impairment charge on long-lived assets for seven underperforming stores.

Given the uncertainties surrounding the COVID-19 pandemic, additional impairments may result in future periods.

Executive Summary for First Quarter Ended May 2, 2020

Under normal circumstances, like many other retailers, our first quarter sales have historically represented a shift in seasonal footwear from cold weather boots to more warm weather categories, such as sandals.

Weather can be volatile during this period and impact customer behavior.

In addition, the timing and size of tax refunds can also impact our rate of sales growth in the beginning of the fiscal year.

However, in the first quarter of fiscal 2020, normal seasonal effects were completely overshadowed by the temporary closure of our stores effective March 19, 2020 due to the COVID-19 pandemic.

Highlights for the first quarter of fiscal 2020 and a brief discussion of some key initiatives are as follows:

Net sales decreased $106.3 million, or 41.9%, for the quarter ended May 2, 2020, compared to the quarter ended May 4, 2019.

Our net sales decreased due to substantially all of our brick-and-mortar stores being closed for approximately 50% of the quarter, partially offset by increased e-commerce sales.

Prior to March 12, 2020 when we began experiencing the effects of the COVID-19 pandemic, our comparable sales had increased 3.9% compared to the same period in the prior year.

After our brick-and-mortar stores were closed, and through the end of the fiscal quarter, our e-commerce sales increased over 350% compared to the same period in the prior year.

Gross profit decreased $43.7 million, or 58.1%, for the quarter ended May 2, 2020, compared to the quarter ended May 4, 2019.

As a percentage of net sales, gross profit decreased to 21.3% compared to 29.6% in the first quarter of fiscal 2019.

distribution and occupancy costs , which are generally fixed costs , inc reased 6.4 % as a percentage of net sales compared to the first quarter of fiscal 2019 du e to the deleveraging effect of lower sales .

Merchandise margin decreased by 1.9% year-over-year due to a significant increase in e - commerce sales in the first quarter of fiscal 2020 and higher related shipping costs .

Net loss for the quarter ended May 2, 2020 was $16.2 million, or $1.16 per diluted share, compared to net income of $13.9 million, or $0.91 per diluted share, for the quarter ended May 4, 2019.

This decrease was primarily attributable to lower sales and gross profit due to the COVID-19 pandemic.

In addition, the first quarter of fiscal 2019 included a $1.9 million, or $0.13 per diluted share, tax benefit related to the vesting of stock-based compensation that did not recur in fiscal 2020.

We exercised the accordion feature under our Credit Agreement, which expires on March 27, 2022.

As amended, the Credit Agreement allows for borrowing up to $100.0 million, an increase from the previous credit limit of $50.0 million.

The credit facility is now collateralized by our inventory.

Reaching agreements with many of our landlords to defer April, May and June lease payments.

We continued to recognize lease expense on a straight-line basis in accordance with Generally Accepted Accounting Principles.

Temporarily reducing the base salaries of our executives and other senior members of the management team and the annual cash retainer fee of the Board of Directors and delaying the implementation of wage increases for certain employees while a majority of our brick-and-mortar stores were closed.

Reducing inventory receipts and inventory on hand and extending payment terms with many of our business partners.

Reducing or deferring non-essential corporate spending and capital projects and implementing hiring freezes.

Postponing marketing activities for brick-and-mortar stores and evaluating promotional activities.

As a result of continuing to straight-line lease expense and pay our employees, our operating expenses in the first and second quarters of fiscal 2020 were generally consistent with the comparable periods from the prior fiscal year.

However, market volatility principally caused by the COVID-19 pandemic has impacted our deferred compensation liabilities and, as a result, our overall operating expenses.

Year-to-date in fiscal 2020, we recorded $2.5 million in impairment charges on long-lived assets for eight underperforming stores and have closed 12 stores.

Given the uncertainties surrounding the COVID-19 pandemic, additional impairments and closures may result in future periods.

Executive Summary for Second Quarter Ended August 1, 2020

Our second quarter sales have historically been impacted by seasonality, the timing of tax free holidays and back-to-school shopping.

In the second quarter of fiscal 2020, our historical sales patterns were significantly impacted by the COVID-19 pandemic, resulting in a shift in customer behavior away from adult dress product to higher demand in the adult athletics, children’s sandals and infant shoe categories.

The pandemic also impacted the timing of back-to-school start dates in our operating markets, resulting in lower sales in the last two weeks of the second quarter compared to the prior year.

Categories such as children’s athletics were negatively impacted by the delay in back-to-school shopping, posting a comparable store sales decrease in the low double-digits in the second quarter of fiscal 2020.

Highlights for the second quarter of fiscal 2020 and a brief discussion of some key initiatives are as follows:

Net sales were a record $300.8 million for the second quarter, increasing 4.6% compared to our previous record sales set in the third quarter of fiscal 2017.

Compared to the prior year second quarter, net sales increased $32.6 million, or 12.1%.

through our e- commerce platform increased 332 % compared to the prior year period and represented over 20% of total revenues.

This drove a chain - wide c omparable store sales increase of 12.6% during th e second quarter of fiscal 2020 .

Gross profit was generally flat, increasing $0.5 million, or 0.6%, for the quarter ended August 1, 2020, compared to the quarter ended August 3, 2019.

As a percentage of net sales, gross profit decreased to 27.5% compared to 30.6% in the second quarter of fiscal 2019.

Merchandise margin decreased by 3.7% quarter-over-quarter due to higher shipping-related costs associated with e-commerce sales and an increased mix of adult athletic sales.

Athletic products typically carry lower margins compared to seasonal warm weather and dress products.

Of our $32.6 million increase in net sales, $29.0 million was attributable to higher men’s and women’s athletic sales.

Our buying, distribution and occupancy costs, which are generally fixed in nature, decreased 0.6% as a percentage of net sales compared to the second quarter of fiscal 2019 due to the leveraging effect of higher sales.

Net income for the quarter ended August 1, 2020 was $10.1 million, or $0.71 per diluted share, compared to net income of $11.8 million, or $0.80 per diluted share, for the quarter ended August 3, 2019.

This decrease was primarily attributable to a lower gross margin and a higher effective income tax rate.

We ended the quarter with no cash borrowings outstanding and $76.9 million of cash and cash equivalents on our Condensed Consolidated Balance Sheet.

In fiscal 2019, we partnered with a third-party warehouse management software developer to deploy the necessary platforms to enhance our supply chain and order processing systems and have continued to invest in these systems during fiscal 2020.

We further amended our Credit Agreement during the second quarter of fiscal 2020 to eliminate a covenant through the first quarter of fiscal year 2021 that could have limited access to our $100 million of borrowing capacity.

In the second quarter of fiscal 2020, we launched advanced third-party transportation and warehouse management platforms.

We plan to deploy a third-party order management system in the third quarter of fiscal 2020.

We are committed to implementing best practices in these areas and believe these enhanced systems will enable us to meet the complex demands of multi-channel fulfillment, position us for long-term growth and enhance customer satisfaction and convenience in an increasingly competitive environment.

These systems are expected to be fully implemented later in the fiscal year.

In fiscal 2020, we commenced implementation of a new, third-party merchandise planning system.

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We believe this collaborative platform will unify our buy plans, optimize inventory levels, help achieve more sales at higher margins and allow us to set goals for multiple channels and formats common in today’s competitive environment.

In fiscal 2020, we continued to increase the membership in our Shoe Perks customer loyalty program adding 2.2 million members compared the first quarter of the prior year, which brought total membership to 24.2 million customers as of May 2, 2020.

The number of our most loyal customers, those who qualify for the Gold tier, increased 11.7% compared to the first quarter of the prior year and represent approximately 15.0% of total Shoe Perks members as of May 2, 2020.

In the second quarter of fiscal 2020, we continued to increase the membership in our Shoe Perks customer loyalty program, adding over 2 million members compared to the second quarter of the prior year, which brought total membership to over 25 million customers as of August 1, 2020.

The number of our most loyal customers, those who qualify for the Gold tier, increased 11.7% compared to the second quarter of the prior year and represent approximately 16.2% of total Shoe Perks members as of August 1, 2020.

We believe our Shoe Perks program affords us opportunities to communicate, build relationships and engage with our most loyal shoppers, which we believe will result in long-term sales gains.

Results of Operations for the First Quarter Ended May 2, 2020

Net sales were $147.5 million during the first quarter of fiscal 2020, a 41.9% decrease over the prior year’s first quarter net sales of $253.8 million.

The decrease in net sales was primarily due to the temporary closure of our brick-and-mortar stores for approximately 50% of the quarter as a result of the COVID-19 pandemic.

E-commerce sales increased over 160% year-over-year as our customers began to use that sales channel more frequently.

Gross profit margin for the first quarter of fiscal 2020 decreased to 21.3% compared to 29.6% in the first quarter of fiscal 2019.

The decrease was primarily due to higher shipping costs associated with the increased e-commerce sales and the deleveraging effect of lower sales, principally on our occupancy costs, which are primarily fixed costs.

Results of Operations for the Second Quarter Ended August 1, 2020

Net sales were $300.8 million during the second quarter of fiscal 2020, a 12.1% increase over the prior year’s second quarter net sales of $268.2 million.

Comparable stores sales increased 12.6% and e-commerce sales increased 332% quarter-over-quarter.

With respect to product mix, more athletic shoes were sold in the quarter which drove higher revenue.

Gross profit was essentially flat quarter over quarter and gross profit margin decreased to 27.5% compared to 30.6% in the second quarter of fiscal 2019.

The decrease in margin was primarily due to higher shipping-related costs associated with the increase in e-commerce sales and a product mix encompassing increased adult athletics, which generally carry lower margins compared to seasonal and other non-athletic products.

These decreases were partially offset by the leveraging effect of higher sales on buying, distribution, and occupancy costs, which are generally fixed in nature.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $4.8 million in the first quarter of fiscal 2020 to $54.7 million compared to $59.5 million in the first quarter of fiscal 2019.

The primary factors causing the decrease were as follows:

SG&A expenses increased $1.8 million in the second quarter of fiscal 2020 to $68.2 million compared to $66.4 million in the second quarter of fiscal 2019.

The primary factors were as follows:

E-commerce fulfillment costs increased $1.8 million on higher sales through that channel.

Incentive compensation expense increased approximately $1.

3 million due to improved financial performance.

Due to financial market volatility, our deferred compensation plan experienced higher returns compared to the prior year, which increased operating expenses by approximately $1.3 million year-over-year.

Store-level wages decreased $1.9 million.

This decrease was primarily attributable to recording an employee payroll retention tax credit of approximately $2.0 million during the first quarter of 2020, which is a component of the CARES Act that was signed into law in March 2020.

During the quarter we did not furlough any employees.

This decrease was primarily attributable to an employee payroll retention tax credit, a component of the CARES Act that was signed into law in March 2020.

We have not furloughed any employees.

This credit lowered our payroll tax expense to support wages paid to our employees while they were not working.

Our deferred com pensation plan experienced negative market returns in the first quarter of fiscal 2020 , which decreased operating expenses approximately $2.0 million year-over-year .

Share-based compensation expense decreased approximately $0.9 million because fewer awards were outstanding during fiscal 2020 and awards granted in the first quarter of fiscal 2020 were issued at a lower share price and vest over a longer period.

Depreciation was lower by approximately $0.5 million year-over-year primarily due to operating fewer stores during the first quarter of fiscal 2020.

Credit card charges decreased approximately $0.5 million as a result of our reduced net sales.

We recorded a $0.5 million gain in the first quarter of fiscal 2020 associated with an insurance claim and reimbursement related to hurricane damage incurred in 2018.

During the first quarter of fiscal 2020, we recorded impairment charges on long-lived assets totaling $2.3 million on seven underperforming stores, compared to $40,000 recorded in the prior year.

The effective income tax rate for the first quarter of fiscal 2020 was 30.3% as compared to 12.8% for the same period in fiscal 2019.

Our provision for income tax (benefit)/expense is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.

The primary reason for the change in our effective tax rate was the $1.9 million tax benefit related to the vesting of equity-based compensation recognized in the first quarter of fiscal 2019.

This benefit reduced the first quarter fiscal 2019 tax rate by approximately 50%.

The effective income tax rate for the second quarter of fiscal 2020 was 29.6% as compared to 24.5% for the same period in fiscal 2019.

Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.

The increase in effective rate in the quarter was primarily due to a reversal of a net operating loss carryback recorded in the first quarter of fiscal 2020 due to improved financial performance.

For the full fiscal year of 2020, we expect our tax rate to be approximately 23% compared to our 21.6% effective tax rate in fiscal 2019.

Results of Operations for the Six-Month Period Ended August 1, 2020

Net sales were $448.3 million year-to-date in fiscal 2020, a 14.1% decrease over the prior year’s year-to-date net sales of $522.0 million.

The decrease in net sales was primarily due to the temporary closure of our brick-and-mortar stores for approximately 50% of the first quarter of fiscal 2020 as a result of the COVID-19 pandemic.

The decrease in brick-and-mortar sales was partially offset by a 249% increase in e-commerce sales year-over-year as our customers shifted to online shopping amid government mandated stay-at-home orders.

Year-to-date gross profit margin for fiscal 2020 decreased to 25.4% compared to 30.1% year-to-date in fiscal 2019.

The decrease was primarily due to higher shipping-related costs associated with the increase in e-commerce sales, a higher mix of adult athletic sales that carry lower margins and the deleveraging effect of lower sales, primarily on occupancy costs, which are fixed in nature.

Selling, General and Administrative Expenses

Year-to-date SG&A decreased $3.0 million to $122.9 million on a year-to-date basis compared to $126.0 million in fiscal 2019.

The primary factors were as follows:

Store-level wages decreased $5.7 million.

This decrease was primarily attributable to an employee payroll retention tax credit, a component of the CARES Act that was signed into law in March 2020.

We have not furloughed any employees.

This credit lowered our payroll tax expense to support wages paid to our employees while they were not working.

E-commerce fulfillment costs increased $3.3 million due to higher sales through that channel.

Share-based compensation expense decreased approximately $1.5 million as fewer share-based awards were outstanding during fiscal 2020 and awards granted in the first quarter of fiscal 2020 were issued at a lower share price and vest over a longer period compared to awards granted in prior years.

Our deferred compensation plan experienced reduced returns compared to the prior year, which decreased operating expenses approximately $0.8 million year-over-year.

Depreciation and amortization included in selling, general and administrative expenses declined approximately $1.0 million year-over-year primarily due to operating fewer stores during fiscal 2020.

During fiscal 2020, we recorded impairment charges on long-lived assets totaling $2.5 million on eight underperforming stores, compared to $40,000 recorded in the prior year.

The effective income tax rate year-to-date for fiscal 2020 was 31.5% as compared to 18.6% for the same period in fiscal 2019.

The primary reason for the change in our effective tax rate was the $1.9 million tax benefit related to the vesting of equity-based compensation recognized in the first quarter of fiscal 2019 and the timing of other discrete tax adjustments.

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents on hand, receipts from customers and availability under our credit facility.

While the impact of the COVID-19 pandemic, including the temporary closure of our brick-and-mortar stores, economic uncertainty, and future effects on customer behavior, make our operating cash flow less predictable, we believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months.

While the economic uncertainty and future effects on customer behavior caused by the COVID-19 pandemic make our operating cash flow less predictable, we believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months.

Our primary uses of cash are working capital needs, which are principally inventory purchases, store initiatives, dividend payments, the financing of capital projects, including investments in new systems, and various other commitments and obligations.

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Cash Flow - Operating Activities

Our net cash used in operating activities was $42.9 million in the first quarter of fiscal 2020 compared to net cash used in operating activities of $9.3 million in the first quarter of fiscal 2019.

The decrease in operating cash flow was primarily driven by reduced cash receipts on lower sales and our continued investment in software as a service hosted arrangements, partially offset by the timing of payments for inventory and other items for the quarter ended May 2, 2020 compared to the quarter ended May 4, 2019.

Working capital decreased to $185.9 million at May 2, 2020 from $201.6 million at May 4, 2019, primarily due to lower cash positions and increased accounts payable compared to the first quarter of fiscal 2019.

Our current ratio was 2.2 as of May 2, 2020 compared to 2.7 as of May 4, 2019.

Our net cash generated from operating activities was $26.2 million in the first six months of fiscal 2020 compared to net cash generated from operating activities of $10.0 million in the first six months of fiscal 2019.

The increase in operating cash flow was primarily driven by the timing of vendor payments for inventory, partially offset by reduced cash receipts on lower sales and our continued investment in software as a service hosted arrangements.

Working capital decreased to $200.1 million at August 1, 2020 from $212.3 million at August 3, 2019, primarily due to lower inventory positions and increased accounts payable compared to the first six months of fiscal 2019.

Our current ratio was 2.0 as of August 1, 2020 compared to 2.2 as of August 3, 2019.

Cash Flow - Investing Activities

Our cash outflows for investing activities are primarily for capital expenditures.

During the first quarter of fiscal 2020, we expended $3.2 million for the purchase of property and equipment, primarily related to investments in technology and normal asset replacement activities.

During the first quarter of fiscal 2019, we expended $9.2 million for the purchase of property and equipment, of which approximately $7.0 million was for the purchase of our corporate headquarters and the remainder was for continued investments in technology and normal asset replacement activities.

Year-to-date in fiscal 2020, we expended $7.2 million for the purchase of property and equipment, primarily related to investments in technology and normal asset replacement activities.

During the first half of fiscal 2019, we expended $11.5 million for the purchase of property and equipment, of which approximately $7.0 million was for the purchase of our corporate headquarters and the remainder was for continued investments in technology and normal asset replacement activities.

Cash Flow - Financing Activities

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Our cash inflows from financing activities have represented purchases under our Employee Stock Purchase Plan and borrowings under our credit facility.

During the first quarter of fiscal 2020 , net cash used in financing activities was $3.0 million compared to $26.9 million in the first quarter of fiscal 2019 .

The decrease in net cash used in financing activities was primarily due to the suspension of repurchases under our share rep urchase program and fewer shares withheld upon the vesting of equity awards during the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019.

During the first quarter of fiscal 2020 , we borrow ed and repaid $8.7 million under our credit facility.

We had no outstanding borrowings under our credit facility at the end of the quarter .

Letters of credit outstanding were $1.2 million at May 2, 2020.

Year-to-date in fiscal 2020, net cash used in financing activities was $4.2 million compared to $28.1 million year-to-date in fiscal 2019.

The decrease in net cash used in financing activities was primarily due to the suspension of repurchases under our share repurchase program and fewer shares withheld upon the vesting of equity awards during the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019.

During fiscal 2020, we borrowed and repaid $24.9 million under our credit facility.

We had no outstanding borrowings under our credit facility at August 1, 2020.

Year-to-date in fiscal 2019, we borrowed and repaid $20 million under our credit facility.

Letters of credit outstanding were $1.2 million at August 1, 2020.

Our credit facility requires us to maintain compliance with various financial covenants, the most restrictive of which are disclosed in Note 7 – “Debt” to our Notes to Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

W e were in compliance with these covenants as of May 2, 2020.

W e were in compliance with these covenants as of August 1, 2020.

Capital Expenditures

Capital expenditures for fiscal 2020, including actual expenditures during the first quarter, are expected to be $15 million to $20 million, with approximately $8 million to $10 million to be used for new stores, relocations and remodels and approximately $2 million to $3 million for upgrades to our distribution center.

Capital expenditures for fiscal 2020, including actual expenditures during in the first half of that fiscal year, are expected to be $15 million to $16 million, with approximately $8 million to $10 million to be used for new stores, relocations and remodels and approximately $3 million to $4 million for upgrades to our distribution center.

The remaining capital expenditures are expected to be incurred for various other store improvements, continued investments in technology and normal asset replacement activities.

The resources allocated to these projects are subject to near-term changes depending on the impacts associated with the COVID-19 pandemic.

Further, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, the number of stores relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled.

The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

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Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and we continue to focus on generating positive long-term financial performance for our store portfolio.

In fiscal 2020, we expect to open four new stores within our existing 35-state geographic footprint, and we also expect to close seven to ten stores, two of which were closed in the first quarter of fiscal 2020.

In fiscal 2020, we expect to open four new stores within our existing 35-state geographic footprint, two of which were opened in the second quarter.

In the first half of fiscal 2020, we closed 12 stores.

We expect to close one additional store in fiscal 2020.

We expect to pursue opportunities for brick-and-mortar store growth across large and mid-size markets as we leverage customer data from our customer relationship management program and more attractive real estate options become available.

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We will continue to review our store portfolio based on our view of the internal and external opportunities and challenges in the marketplace.

On March 18, 2020, our Board of Directors approved the payment of our first quarter cash dividend to our shareholders.

The first quarter dividend of $0.085 per share was paid on April 20, 2020 to our shareholders of record as of the close of business on April 6, 2020.

During fiscal 2019, the first quarter dividend was in the amount of $0.080 per share.

During the first quarters of fiscal 2020 and 2019, we returned $1.3 million and $2.0 million, respectively, to our shareholders through our quarterly cash dividends.

On June 11, 2020, our Board of Directors approved the payment of our second quarter cash dividend to our shareholders.

The second quarter dividend of $0.090 per share was paid on July 20, 2020 to our shareholders of record as of the close of business on July 6, 2020.

The amount per share represents a 5.9% increase over the first quarter dividend of $0.085 per share paid on April 20, 2020.

During fiscal 2019, the first quarter dividend was in the amount of $0.080 per share and the second quarter dividend was $0.085 per share.

During the first half of fiscal 2020 and 2019, we returned $2.6 million and $3.2 million, respectively, to our shareholders through our quarterly cash dividends.

The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

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See Note 7 – “Debt” to our Notes to Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of our credit facility and its covenants.

Share Repurchase Pro gram

Share Repurchase Program

On December 12, 2019, our Board of Directors authorized a new share repurchase program for up to $50.0 million of outstanding common stock, effective January 1, 2020.

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The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market conditions.

As of May 2, 2020, we had purchased approximately 184,000 shares at an aggregate cost of $6.9 million under this share repurchase program, and we had $43.1 million available for future repurchases.

No share repurchases have been made in the first quarter of fiscal 2020, and we do not anticipate repurchasing any shares in fiscal 2020.

As of August 1, 2020, we had purchased approximately 184,000 shares at an aggregate cost of $6.9 million under this share repurchase program, and we had $43.1 million available for future repurchases.

No share repurchases have been made in fiscal 2020, and, given the uncertainty associated with the COVID-19 pandemic, we do not anticipate repurchasing any shares in fiscal 2020.

However, we expect to reevaluate further share repurchases on an ongoing basis.

The new share repurchase program replaced the prior $50 .0 million share repurchase program that was authorized in December 2018 and expired in accordance with its terms on December 31, 2019.

At its expiration, we had purchased approximately 933,000 shares at an aggregate cost of $30.9 million under the prior repurchase program, including 411,168 shares of common stock at a total cost of $14.0 million during the first quarter of fiscal 2019.

Our credit facility stipulates that distributions in the form of redemptions of Equity Interests (as defined in the credit agreement) can be made solely with cash on hand so long as before and immediately after such distributions there are no revolving loans outstanding under the credit agreement .

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We canceled any seasonal merchandise that had a short selling window and moved seasonal merchandise with longer selling periods to later shipping dates, as applicable.

The back-to-school shopping period has also been impacted by the COVID-19 pandemic and is scheduled to start later and last longer than previous years in many of our markets.

In the last two weeks of the second quarter of fiscal 2020, we experienced comparable store sales declines compared to the same period in the prior year due to the delay in back-to-school start dates.

We anticipate that approximately 40% of school districts in the markets where we operate will return with virtual-only instruction, which may decrease our sales in those markets.

Any other unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability.

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 2. Management’s Discussion and Analysis