What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-25 compared with 2022-12-01 · 66 added, 96 removed, 177 unchanged (48% of the section changed)

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Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation:

● changes in the overall level of consumer spending and volatility in the economy, including as a result of the COVID-19 pandemic and geopolitical events;

● the impact of current inflationary cost pressures on payroll, benefits, supply chain, and other operating costs;

● macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing labor cost pressures, transportation and shipping cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows (including future uncertain impacts);

● changes in the overall level of consumer spending and volatility in the economy, including as a result of macroeconomic conditions and geopolitical events;

● our ability to sustain our growth plans and successfully implement our long-range strategic and financial plan;

● the ability to execute our operational excellence priorities, including continuous improvement, Project SOAR (our replacement enterprise resource planning platform), and supply chain optimization;

● epidemics, pandemics or natural disasters that have and could continue to negatively impact sales;

● our ability to gauge beauty trends and react to changing consumer preferences in a timely manner;

● the possibility that we may be unable to compete effectively in our highly competitive markets;

● the possibility of significant interruptions in the operations of our distribution centers, fast fulfillment centers, and market fulfillment centers;

● the possibility that cybersecurity or information security breaches and other disruptions could compromise our information or result in the unauthorized disclosure of confidential information;

● the possibility of material disruptions to our information systems;

● the possibility of material disruptions to our information systems, including our Ulta.com website and mobile applications;

● the failure to maintain satisfactory compliance with applicable privacy and data protection laws and regulations;

● the possibility that the capacity of our distribution and order fulfillment infrastructure and the performance of our distribution centers and fast fulfillment centers may not be adequate to support our expected future growth plans;

● changes in the wholesale cost of our products;

● a decline in operating results that has and may continue to lead to asset impairment and store closure charges;

● changes in the good relationships we have with our brand partners and/or our ability to continue to offer permanent or temporary exclusive products of our brand partners;

● changes in the wholesale cost of our products and/or interruptions at our brand partners’ or third-party vendors’ operations;

● future epidemics, pandemics or natural disasters could negatively impact sales;

● the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues;

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● our ability to successfully execute our common stock repurchase program or implement future common stock repurchase programs;

● a decline in operating results may lead to asset impairment and store closure charges;

● other risk factors detailed in our public filings with the Securities and Exchange Commission (the SEC), including risk factors contained in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended January 28, 2023, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q (including this report).

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drug stores and mass merchandisers for mass products;

salons and authorized retail outlets for professional hair care products.

and salons and authorized retail outlets for professional hair care products.

We developed a unique specialty retail concept that offers a broad range of brands and price points, select beauty services, and a convenient and welcoming shopping environment.

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We believe our strategy provides us with the competitive advantages that have contributed to our financial performance.

Today, we are the largest beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services.

Today, we are the largest specialty beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services.

Key aspects of our business include:

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Over the long term, our growth strategy is to increase total net sales through growing our comparable sales, expanding omnichannel capabilities, and opening new stores.

Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with comparable sales increases and operating efficiencies, partially offset by incremental investments in people, systems, and supply chain required to support a 1,500 to 1,700 store chain in the U.S.

Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with comparable sales increases and operating efficiencies, partially offset by incremental investments in people, guest experiences, systems, and supply chain required to support a 1,500 to 1,700 store chain in the U.S.

with successful e-commerce and competitive omnichannel capabilities.

Current Trends

Impact of COVID-19

We closely monitor the continuing impact of COVID-19 on all facets of our business.

While operations during the first three quarters of fiscal 2022 did not appear to be negatively impacted, the continuing COVID-19 pandemic could have negative impacts in the future.

The extent of the impact of the pandemic on our future business and financial results will depend on, among other things, the potential temporary reclosing of certain stores, the potential temporary restrictions on certain store operating hours and/or in-store capacity, supply chain disruptions, increased freight costs and higher wholesale costs, the continued duration of the pandemic and any variants of the virus, the duration, timing and severity of the impact on consumer spending, the timing and effectiveness of vaccine distribution, vaccination rates, and how quickly and to what extent normal economic and operating conditions can resume.

Industry trends

Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years.

However, the COVID-19 pandemic and its various impacts changed consumer behavior and consumption of

beauty products due to the closures of offices, retail stores and other businesses and the significant decline in travel, entertainment and social gatherings.

The overall beauty market declined in 2020 but stabilized in 2021, as consumers began to recover from the impacts of COVID-19.

The overall beauty market expanded in 2022 and into the first quarter of fiscal 2023, supported by strong consumer engagement with the beauty category.

We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term.

Impact of inflation and changing prices

Although we do not believe inflation had a material impact on our sales year to date, continued pressure from inflation could have an adverse impact on consumer spending and sales and could lead to an economic recession.

Furthermore, inflationary pressures could negatively impact our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with higher costs.

Impact of inflation and other macroeconomic trends

Although we do not believe inflation had a material impact on our sales during the first quarter of fiscal 2023, continued pressure from inflation or other evolving macroeconomic conditions could have an adverse impact on consumer spending and could lead to a recession.

Furthermore, inflationary pressures, as well as other macroeconomic trends, could negatively impact our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with higher costs.

In addition, inflation could materially increase the interest rates on any future debt.

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Comparable sales include retail sales, salon services, and e-commerce.

In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation.

In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.

There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.

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● shipping and handling costs;

● retail stores occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses;

● retail store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses;

● salon services payroll and benefits;

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Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising.

Interest expense (income), net includes both interest expense and income.

Interest (income) expense, net includes both interest income and expense.

Interest income represents interest primarily from cash equivalents, which include highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less from the date of purchase.

Interest expense includes interest costs and facility fees associated with our credit facility, which is structured as an asset-based lending instrument.

Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising interest rates.

Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase.

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.

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Our quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31.

The Company’s third quarter in fiscal 2022 and 2021 ended on October 29, 2022 and October 30, 2021, respectively.

The Company’s first quarter in fiscal 2023 and 2022 ended on April 29, 2023 and April 30, 2022, respectively.

Our quarterly results of operations have varied in the past and are likely to do so again in the future.

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13 Weeks Ended

39 Weeks Ended

(Dollars in thousands)

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Operating income

Interest expense (income), net

Interest (income) expense, net

Income before income taxes

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13 Weeks Ended

39 Weeks Ended

(Percentage of net sales)

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Operating income

Interest expense (income), net

Interest (income) expense, net

Income before income taxes

Income tax expense

Comparison of 13 weeks ended October 29, 2022 to 13 weeks ended October 30, 2021

Net sales increased $343.0 million or 17.2%, to $2.3 billion for the 13 weeks ended October 29, 2022, compared to $2.0 billion for the 13 weeks ended October 30, 2021.

The net sales increase was primarily due to the favorable impact from the continued resilience of the beauty category, retail price increases, the impact of new brands and product innovation, and an increase of $20.2 million in other revenue compared to the 13 weeks ended October 30, 2021.

The total comparable sales increase of 14.6% during the 13 weeks ended October 29, 2022 was driven by a 10.7% increase in transactions and a 3.5% increase in average ticket.

Gross profit increased $173.3 million or 22.0%, to $962.8 million for the 13 weeks ended October 29, 2022, compared to $789.5 million for the 13 weeks ended October 30, 2021.

Gross profit as a percentage of net sales increased to 41.2% for the 13 weeks ended October 29, 2022, compared to 39.6% for the 13 weeks ended October 30, 2021.

The increase in gross profit margin was primarily due to leverage of fixed costs, strong growth in other revenue, and higher merchandise margin, partially offset by higher inventory shrink.

Selling, general and administrative expenses

Selling, general and administrative (SG&A) expenses increased $93.8 million or 18.6%, to $597.2 million for the 13 weeks ended October 29, 2022, compared to $503.4 million for the 13 weeks ended October 30, 2021.

SG&A expenses as a percentage of net sales increased to 25.5% for the 13 weeks ended October 29, 2022, compared to 25.2% for the 13 weeks ended October 30, 2021, primarily due to deleverage in store payroll and benefits and corporate overhead due to strategic investments, partially offset by lower marketing expenses.

Pre-opening expenses

Pre-opening expenses increased $2.0 million to $3.8 million for the 13 weeks ended October 29, 2022 compared to $1.8 million for the 13 weeks ended October 30, 2021.

Interest expense (income), net

Interest income, net was $0.8 million for the 13 weeks ended October 29, 2022 compared to interest expense, net of $0.4 million for the 13 weeks ended October 30, 2021.

Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase.

Interest expense represents interest on borrowings and fees related to the credit facility.

We did not have any outstanding borrowings on our credit facility as of October 29, 2022, January 29, 2022, and October 30, 2021.

Income tax expense

Income tax expense of $88.1 million for the 13 weeks ended October 29, 2022 represents an effective tax rate of 24.3%, compared to $68.5 million of tax expense representing an effective tax rate of 24.1% for the 13 weeks ended October 30, 2021.

Net income increased $59.3 million or 27.5%, to $274.6 million for the 13 weeks ended October 29, 2022, compared to $215.3 million for the 13 weeks ended October 30, 2021.

The increase in net income is primarily due to the $173.3 million increase in gross profit, partially offset by the $93.8 million increase in SG&A expenses and the $19.6 million increase in income taxes.

Comparison of 39 weeks ended October 29, 2022 to 39 weeks ended October 30, 2021

Net sales increased $1.1 billion or 18.3%, to $7.0 billion for the 39 weeks ended October 29, 2022, compared to $5.9 billion for the 39 weeks ended October 30, 2021.

The net sales increase was primarily due to the favorable impact from the continued resilience of the beauty category, retail price increases, the impact of new brands and product innovation, the easing of COVID-19 restrictions, and an increase of $59.6 million in other revenue compared to the 39 weeks ended October 30, 2021.

The total comparable sales increase of 15.6% during the 39 weeks ended October 29, 2022 was driven by a 9.7% increase in transactions and a 5.4% increase in average ticket.

Gross profit increased $490.8 million or 21.0%, to $2.8 billion for the 39 weeks ended October 29, 2022, compared to $2.3 billion for the 39 weeks ended October 30, 2021.

Gross profit as a percentage of net sales increased to 40.6% for the 39 weeks ended October 29, 2022, compared to 39.7% for the 39 weeks ended October 30, 2021.

The increase in gross profit margin was primarily due to leverage of fixed costs, strong growth in other revenue, and favorable channel mix shifts, partially offset by lower merchandise margin and higher inventory shrink.

Comparison of 13 weeks ended April 29, 2023 to 13 weeks ended April 30, 2022

Net sales increased $288.4 million or 12.3%, to $2.6 billion for the 13 weeks ended April 29, 2023, compared to $2.3 billion for the 13 weeks ended April 30, 2022.

The net sales increase was primarily due to increased comparable sales, strong new store performance, and an increase of $18.9 million in other revenue.

The total comparable sales increase of 9.3% was driven by an 11.0% increase in transactions and a 1.5% decrease in average ticket.

Gross profit increased $113.8 million or 12.1%, to $1.1 billion for the 13 weeks ended April 29, 2023, compared to $941.0 million for the 13 weeks ended April 30, 2022.

Gross profit as a percentage of net sales decreased to 40.0% for the 13 weeks ended April 29, 2023, compared to 40.1% for the 13 weeks ended April 30, 2022.

The decrease in gross profit margin was primarily due to higher inventory shrink, lower merchandise margins, higher supply chain costs, and deleverage of salon expenses, partially offset by strong growth in other revenue and leverage of store fixed costs.

Selling, general and administrative expenses

SG&A expenses increased $221.0 million or 15.7%, to $1.6 billion for the 39 weeks ended October 29, 2022, compared to $1.4 billion for the 39 weeks ended October 30, 2021.

SG&A expenses as a percentage of net sales decreased to 23.4% for the 39 weeks ended October 29, 2022, compared to 23.9% for the 39 weeks ended October 30, 2021, due to lower marketing expenses, partially offset by deleverage in corporate overhead primarily due to strategic investments.

Selling, general and administrative (SG&A) expenses increased $111.2 million or 22.2%, to $612.1 million for the 13 weeks ended April 29, 2023, compared to $501.0 million for the 13 weeks ended April 30, 2022.

SG&A expenses as a percentage of net sales increased to 23.2% for the 13 weeks ended April 29, 2023, compared to 21.4% for the 13 weeks ended April 30, 2022, primarily due to deleverage of store payroll and benefits, deleverage of corporate overhead due to strategic investments, and deleverage of marketing expenses, partially offset by leverage of incentive compensation and store expenses.

Pre-opening expenses

Pre-opening expenses increased $0.6 million to $8.4 million for the 39 weeks ended October 29, 2022, compared to $7.8 million for the 39 weeks ended October 30, 2021.

Interest expense (income), net

Interest income, net was $0.6 million for the 39 weeks ended October 29, 2022 compared to interest expense, net of $1.2 million for the 39 weeks ended October 30, 2021.

Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase.

Interest expense represents interest on borrowings and fees related to the credit facility.

We did not have any outstanding borrowings on our credit facility as of October 29, 2022, January 29, 2022, and October 30, 2021.

Pre-opening expenses were $0.7 million for the 13 weeks ended April 29, 2023 compared to $2.3 million for the 13 weeks ended April 30, 2022.

Interest (income) expense, net

Interest income, net was $7.3 million for the 13 weeks ended April 29, 2023 compared to interest expense, net of $0.4 million for the 13 weeks ended April 30, 2022, due to higher average interest rates and higher average cash balances during the quarter.

We did not have any outstanding borrowings on the credit facility as of April 29, 2023 and April 30, 2022.

Income tax expense

Income tax expense of $289.9 million for the 39 weeks ended October 29, 2022 represents an effective tax rate of 24.3%, compared to $224.2 million of tax expense representing an effective tax rate of 24.4% for the 39 weeks ended October 30, 2021.

Net income increased $205.2 million or 29.5%, to $901.7 million for the 39 weeks ended October 29, 2022 compared to $696.5 million for the 39 weeks ended October 30, 2021.

The increase in net income is primarily due to the $490.8 million increase in gross profit, partially offset by the $221.0 million increase in SG&A expenses and the $65.7 million increase in income taxes.

Income tax expense of $102.4 million for the 13 weeks ended April 29, 2023 represents an effective tax rate of 22.8%, compared to $105.9 million of income tax expense representing an effective tax rate of 24.2% for the 13 weeks ended April 30, 2022.

The lower effective tax rate is primarily due to benefits from income tax accounting for stock-based compensation.

Net income was $347.1 million for the 13 weeks ended April 29, 2023, compared to $331.4 million for the 13 weeks ended April 30, 2022.

The increase in net income is primarily related to the $113.8 million increase in gross profit, the $7.7 million increase in interest income, net, and the $3.5 million decrease in income tax expense, partially offset by the $111.2 million increase in SG&A expenses.

Liquidity and capital resources

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility.

The most significant components of our working capital are merchandise inventories and cash and cash

equivalents reduced by related accounts payable, accrued liabilities and deferred revenue.

As of October 29, 2022, January 29, 2022, and October 30, 2021, we had cash and cash equivalents of $250.6 million, $431.6 million, and $605.1 million, respectively.

Our primary cash needs are for rent, capital expenditures for new, remodeled, and relocated stores, increased merchandise inventories related to store expansion and new brand additions, supply chain improvements, share repurchases, and continued improvement in our information technology systems.

The most significant components of our working capital are merchandise inventories and cash and cash equivalents reduced by accounts payable, accrued liabilities and deferred revenue.

As of April 29, 2023, January 28, 2023, and April 30, 2022, we had cash and cash equivalents of $636.4 million, $737.9 million, and $654.5 million, respectively.

Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for lease expenses, inventory, labor, distribution, advertising and marketing, and tax liabilities) as well as periodic spend for capital expenditures, investments, and share repurchases.

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We believe our ability to generate substantial cash from operating activities and readily secure financing at competitive rates are key strengths that give us significant flexibility to meet our short and long-term financial commitments.

The following table presents a summary of our cash flows for the 39 weeks ended October 29, 2022 and October 30, 2021:

The following table presents a summary of our cash flows:

13 Weeks Ended

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Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.

The increase in net cash provided by operating activities in the first 39 weeks of fiscal 2022 is mainly due to the increase in net income, lower spend on merchandise inventories, and timing of accrued liabilities, partially offset by timing of accounts payable and increase in deferred revenue compared to the first 39 weeks of fiscal 2021.

The increase in net income was primarily due to an increase in gross profit, partially offset by an increase in SG&A expenses and income taxes.

Merchandise inventories, net were $2.11 billion at October 29, 2022, compared to $1.92 billion at October 30, 2021, representing an increase of $198.3 million or 10.3%.

The change in total inventory is primarily due to the following:

● $91 million increase due to new key brand launches;

● $60 million increase due to the addition of 41 net new stores opened since October 30, 2021;

● $47 million increase due to inventory cost increases and inventory receipts to maintain strong in-stocks of key items to support expected demand.

The decrease in net cash provided by operating activities in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 was mainly due to a larger increase in merchandise inventories in the first quarter of fiscal 2023 and the timing of accrued liabilities and receivable collections, partially offset by the increase in net income, a decrease in prepaid expenses, and the timing of accounts payable.

The increase in net income was primarily due to an increase in gross profit resulting from higher sales, an increase in interest income, and a decrease in income taxes, partially offset by an increase in SG&A expenses.

Merchandise inventories, net were $1.75 billion at April 29, 2023, compared to $1.57 billion at April 30, 2022, representing an increase of $180.7 million or 11.5%.

The increase in total inventory is primarily due to the following:

● $102 million increase to support increased demand, product cost increases, and brand expansions;

● $49 million increase due to the addition of 41 net new stores opened since April 30, 2022;

● $28 million increase due to new brand launches.

Investing activities

We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems.

Investment activities for capital expenditures were $204.0 million during the 39 weeks ended October 29, 2022, compared to $108.4 million during the 39 weeks ended October 30, 2021.

During the 39 weeks ended October 29, 2022, we opened 35 new stores, relocated 11 stores and remodeled eight stores, compared to the 39 weeks ended October 30, 2021, when we opened 42 new stores, relocated four stores and remodeled eight stores.

The increase in net cash used in investing activities in the first 39 weeks of fiscal 2022 compared to the first 39 weeks of fiscal 2021 was primarily due to more capital expenditures.

Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems, and supply chain investments we undertake and the timing of these expenditures.

Investing activities for capital expenditures were $109.8 million during the 13 weeks ended April 29, 2023 compared to $71.1 million during the 13 weeks ended April 30, 2022.

During the 13 weeks ended April 29, 2023, we opened 5 new stores, closed one store, remodeled two stores, and relocated one store, compared to the 13 weeks ended April 30, 2022, when we opened 10 new stores and relocated six stores.

The increase in net cash used in investing activities in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 was primarily due to more capital expenditures compared to the first quarter of fiscal 2022.

Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems investments, and supply chain investments that we undertake and the timing of these expenditures.

Based on past performance and current expectations, we believe our sources of liquidity will be sufficient to fund future capital expenditures.

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Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock.

The decrease in net cash used in financing activities in the first 39 weeks of fiscal 2022 compared to the first 39 weeks of fiscal 2021 was primarily due to a decrease in share repurchases.

We had no borrowings outstanding under the credit facility as of October 29, 2022, January 29, 2022, and October 30, 2021.

The zero outstanding borrowings position continues to be due to a combination of factors including sales demand, overall performance of management initiatives including expense control, and inventory and other working capital reductions.

The increase in net cash used in financing activities in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 was primarily due to an increase in share repurchases.

We had no borrowings outstanding under the credit facility as of April 29, 2023, January 28, 2023, and April 30, 2022.

The zero outstanding borrowings position is due to a combination of factors including sales demand, overall performance of management initiatives including expense control, and inventory and other working capital reductions.

We may require borrowings under the facility from time to time in future periods for unexpected business disruptions, to support our new store program, seasonal inventory needs, or share repurchases.

Share repurchase program

In March 2020, the Board of Directors authorized a share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company could repurchase up to $1.6 billion of the Company’s common stock.

The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amount of $177.8 million from the earlier share repurchase program.

The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

In March 2022, the Board of Directors authorized a new share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock.

The 2022 Share Repurchase Program revokes the previously authorized but unused amounts from the 2020 Share Repurchase Program.

In March 2022, the Board of Directors authorized a share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock.

The 2022 Share Repurchase Program revokes the previously authorized but unused amounts from the earlier share repurchase program.

The authorized value of shares available to be repurchased under the 2022 Share Repurchase Program excludes excise tax.

The 2022 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

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Shares repurchased

Total cost of shares repurchased

Total cost of shares repurchased, including excise tax

Credit facility

On March 11, 2020, we entered into Amendment No.

On February 27, 2023, we entered into Amendment No.

2 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder;

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Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.250%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.

As of October 29, 2022, January 29, 2022, and October 30, 2021, we had no borrowings outstanding under the credit facility.

As of October 29, 2022, we were in compliance with all terms and covenants of the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0% to 0.125% or the Term Secured Overnight Financing Rate plus a margin of 1.125% to 1.250% and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.

As of April 29, 2023, January 28, 2023, and April 30, 2022 we had no borrowings outstanding under the credit facility.

As of April 29, 2023, we were in compliance with all terms and covenants of the Loan Agreement.

Our business is subject to seasonal fluctuation.

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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