On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide, causing public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers. On March 14, 2020, the Company announced that it temporarily closed all stores globally; however, the Company continued to fulfill digital orders from its stores where permitted by local authorities. The Company’s distribution and fulfillment centers remained open to support the digital business and the Wholesale segment operations but have done so with additional safety procedures and enhanced cleaning to protect the health of employees. The Company closed its offices and showrooms globally with the exception of location dependent employees. All other corporate and showroom employees are working remotely. The coronavirus pandemic continues to materially impact the Company’s operations in the United States and globally, and related government and private sector responsive actions have and will continue to adversely affect its business operations. Because it is impossible to predict the effect and ultimate impact of the coronavirus pandemic, current financial information may not be necessarily indicative of future operating results and the Company’s plans as described below may change.

In response to the coronavirus pandemic, the Company has taken many additional measures to protect its financial position and increase financial flexibility during this challenging time period. Those include:

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Furloughing a substantial number of store, wholesale and home office associates,

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Suspending all new hiring except in its fulfillment and call centers,

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Suspending all merit raises and bonuses for fiscal 2021,

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Borrowing $220,000 (and subsequently repaying $100,000 on June 17, 2020) under its Amended Credit Facility to further protect its cash reserves (see Note 6, “Debt”),

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Reducing its capital budget by over $140,000 from approximately $260,000 to approximately $120,000 by delaying or cancelling projects,

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Adjusting inventory levels by cancelling or delaying many orders and asking for price concessions on those remaining,

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Reducing all non-payroll expenses, including creative, marketing, and travel, among others,

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Extending payment terms for both merchandise and non-merchandise vendor invoices by 30 days,

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Reducing certain occupancy and occupancy related expenses,

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Reducing investments in two Company growth initiatives: Nuuly and expansion into China,

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Reducing senior leadership compensation for the duration of the furlough time period,

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Eliminating Board of Directors’ cash compensation through the date of the 2021 Annual Meeting of Shareholders, and

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Suspending share repurchases for the foreseeable future (see Note 9, “Shareholders’ Equity”).

As a result of the coronavirus pandemic, during the three months ended April 30, 2020, the Company recorded certain additional reserves and non-cash charges. During the three months ended April 30, 2020, the Company assessed the value of its inventory in the Retail and Wholesale segments and recorded a $43,327 increase in its inventory obsolescence reserves. During the three months ended April 30, 2020, the Company recorded a $5,800 increase in allowance for doubtful accounts reserves for Wholesale segment customer accounts receivables as a result of the significant disruption and uncertainty currently in the wholesale macro environment. Finally, during the three months ended April 30, 2020, the Company determined that certain long-lived assets at the Company’s retail locations were unable to recover their carrying value primarily due to the impact of the mandated store closures and anticipated reduced store net sales during the remainder of fiscal 2021 as a result of the coronavirus pandemic. These assets were written down to a fair value resulting in impairment charges of $14,528 across 39 retail locations.

As a result of the global coronavirus pandemic, governments in the United States, United Kingdom (“U.K.”), Canada and various other jurisdictions have implemented programs to encourage companies to retain and pay employees that are unable to work or are limited in the work that they can perform in light of closures or a significant decline in sales. The Company continued to pay all employees through at least April 1, 2020. On March 31, 2020, the Company announced it furloughed a substantial number of store, wholesale and home office employees beginning April 1. Impacted employees continued to receive enrolled benefits during the furlough period. As such, the Company qualifies for certain of these programs which will partially offset related expenses. The Company is evaluating the reimbursement it is eligible to receive under such programs and will record the cumulative benefit in the second quarter of fiscal 2021 and through the eligibility period of such programs.

Beginning April 25, 2020, the Company started to reopen stores in select states and countries. When the Company reopened these stores, it did so in accordance with local government guidelines. As of June 24, 2020, the Company has reopened more than 570 of its stores globally and intends to continue reopening stores around the world as states and countries permit the reopening of retail operations. The Company has not changed its remote work arrangements for its corporate employees.