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Income Taxes
 12 Months Ended
Jan. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

The components of income (loss) before income taxes are as follows:

 

 

Fiscal Year Ended January 31,

 

 

2024

 

 

2023

 

 

2022

 

Domestic

 

$

378,265

 

 

$

217,894

 

 

$

389,059

 

Foreign

 

 

3,342

 

 

 

3,385

 

 

 

15,572

 

 

$

381,607

 

 

$

221,279

 

 

$

404,631

 

 

The components of the provision for income tax expense/(benefit) are as follows:

 

 

Fiscal Year Ended January 31,

 

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

46,714

 

 

$

49,695

 

 

$

75,533

 

State

 

 

19,422

 

 

 

12,950

 

 

 

18,972

 

Foreign

 

 

3,086

 

 

 

1,512

 

 

 

2,205

 

 

$

69,222

 

 

$

64,157

 

 

$

96,710

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

$

24,141

 

 

$

(4,724

)

 

$

(4,151

)

State

 

 

(1,152

)

 

 

671

 

 

 

498

 

Foreign

 

 

1,722

 

 

 

1,476

 

 

 

958

 

 

 

24,711

 

 

 

(2,577

)

 

 

(2,695

)

 

$

93,933

 

 

$

61,580

 

 

$

94,015

 

 

The following table reflects the differences between the statutory U.S. federal income tax rate and the Company’s effective tax rate:

 

 

Fiscal Year Ended January 31,

 

 

2024

 

 

2023

 

 

2022

 

Expected provision at statutory U.S. federal tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State and local income taxes, net of federal tax benefit

 

 

3.8

 

 

 

4.9

 

 

 

3.8

 

Foreign taxes

 

 

(0.2

)

 

 

0.3

 

 

 

(1.8

)

Nondeductible expenses

 

 

0.8

 

 

 

1.6

 

 

 

0.1

 

General business credits

 

 

(1.4

)

 

 

—

 

 

 

—

 

Other

 

 

0.6

 

 

 

—

 

 

 

0.1

 

Effective tax rate

 

 

24.6

%

 

 

27.8

%

 

 

23.2

%

 

The variance in percentages for the components of the effective tax rate are primarily due to the ratio of foreign taxable losses to global taxable profits and the favorable impact of general business credits in fiscal 2024.

The significant components of deferred tax assets and liabilities as of January 31, 2024 and 2023 are as follows:

 

 

January 31,

 

 

2024

 

 

2023

 

Deferred tax liabilities:

 

 

 

 

 

 

Prepaid expense

 

$

(2,776

)

 

$

(2,727

)

Depreciation

 

 

(80,196

)

 

 

(46,552

)

Operating lease right-of-use assets

 

 

(216,635

)

 

 

(224,099

)

Other temporary differences

 

 

(262

)

 

 

(353

)

Gross deferred tax liabilities

 

 

(299,869

)

 

 

(273,731

)

Deferred tax assets:

 

 

 

 

 

 

Operating lease liabilities

 

 

253,762

 

 

 

260,596

 

Deferred rent

 

 

13,721

 

 

 

15,296

 

Inventory

 

 

25,297

 

 

 

22,967

 

Accounts receivable

 

 

1,034

 

 

 

1,114

 

Net operating loss carryforwards

 

 

14,376

 

 

 

18,369

 

Tax uncertainties

 

 

1,811

 

 

 

1,430

 

Accrued salaries and benefits

 

 

31,534

 

 

 

24,084

 

Income tax credits

 

 

3,738

 

 

 

4,540

 

Other temporary differences

 

 

32,731

 

 

 

29,362

 

Gross deferred tax assets, before valuation allowances

 

 

378,004

 

 

 

377,758

 

Valuation allowances

 

 

(31,959

)

 

 

(33,087

)

Net deferred tax assets

 

$

46,176

 

 

$

70,940

 

 

Net deferred tax assets are attributed to the jurisdictions in which the Company operates. As of January 31, 2024 and 2023, respectively, $18,421 and $42,277 were attributable to U.S. federal, $19,637 and $18,458 were attributed to state jurisdictions and $8,118 and $10,205 were attributed to foreign jurisdictions.

As of January 31, 2024, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for tax purposes of approximately $50,700 that do not expire. Certain U.S. subsidiaries of the Company had state net operating loss carryforwards for tax purposes of approximately $23,767 that expire from 2024 through 2044 and approximately $12,482 that do not expire. Certain U.S. subsidiaries of the Company had state credit carryforwards for tax purposes of approximately $5,137 that expire from 2027 through 2029. As of January 31, 2024, the Company had full and partial valuation allowances for certain foreign and state net operating loss carryforwards and a partial valuation allowance against state credit carryforwards where it was uncertain the carryforwards would be utilized. The Company had no valuation allowance for certain other foreign and state net operating loss carryforwards where management believes it is more-likely-than-not the tax benefit of these carryforwards will be realized.

As of January 31, 2024, approximately $114,365 of cash and cash equivalents were held by the Company’s non-U.S. subsidiaries for which no deferred taxes have been provided. The Company has accumulated undistributed earnings generated by foreign subsidiaries of approximately $406,470. Since such earnings have previously been subject to the one-time deemed repatriation transition tax required by the U.S. Tax Cuts and Jobs Act or other U.S. tax requirements on undistributed foreign earnings, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. The Company continues to believe that foreign earnings are indefinitely reinvested excluding earnings that have previously been subject to the one-time deemed repatriation transition tax required by the U.S. Tax Cuts and Jobs Act. With respect to outside basis differences in all other non-U.S. subsidiaries, the Company expects that either (i) such basis differences will not reverse in the foreseeable future, or (ii) such basis differences will reverse in a tax-neutral manner.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

 

 

January 31,

 

Tax Benefit Reconciliation

 

2024

 

 

2023

 

 

2022

 

Balance at the beginning of the period

 

$

18,734

 

 

$

18,945

 

 

$

22,259

 

Increases in tax positions for prior years

 

 

54

 

 

 

1,055

 

 

 

28

 

Decreases in tax positions for prior years

 

 

(26

)

 

 

(974

)

 

 

(3,178

)

Increases in tax positions for current year

 

 

332

 

 

 

147

 

 

 

249

 

Settlements

 

 

(117

)

 

 

(177

)

 

 

—

 

Lapse in statute of limitations

 

 

(315

)

 

 

(262

)

 

 

(413

)

Balance at the end of the period

 

$

18,662

 

 

$

18,734

 

 

$

18,945

 

 

The total amount of net unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $23,066 and $21,890 as of January 31, 2024 and 2023, respectively. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income, which is consistent with the recognition of these items in prior reporting periods. During the years ended January 31, 2024, 2023 and 2022, the Company recognized expense of $1,629, $1,145 and $630, respectively, related to interest and penalties. The Company accrued $6,214 and $4,586 for the payment of interest and penalties as of January 31, 2024 and 2023, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is under audit in certain state and foreign jurisdictions. Certain federal, foreign and state jurisdictions are subject to audit from fiscal 2010 to 2022. It is possible that a state or foreign examination may be resolved within 12 months. Due to the potential for resolution of federal and foreign audit and state examinations, and the expiration of various statutes of limitation, it is possible that the Company’s gross unrecognized tax benefits balance may change within the next 12 months by a range of zero to $17,623.

Tax Credit Investment

On February 10, 2023, the Company committed $100,000 to purchase an equity membership interest in a federal low-income housing tax credit entity. An initial payment of $20,000 was paid at closing with the remaining balance payable in quarterly installments over a five-year period beginning in fiscal 2024. The present value of such payments was $62,120 and was recorded as an increase to the initial tax credit investment asset and liability. In exchange for the total payments of $100,000, the Company expects to realize a comparable amount of tax credits and other tax benefits that will reduce its future federal income tax payments. Although the investment vehicle is considered a variable interest entity, the Company is not the primary beneficiary, and therefore, the investment is not consolidated. The Company has elected to use the practical expedient method of amortization, which approximates the proportional amortization method, to amortize the investment to income tax expense in proportion to the tax credits received over an estimated 10-year tax credit period beginning in the first quarter of fiscal 2024. During the year ended January 31, 2024, interest expense related to the accretion of the liability was $6,190 and a net benefit of $6,669 was included in "Income tax expense" in the Consolidated Statements of Income. The carrying value of the investment is recorded in "Deferred income taxes and other assets" in the Consolidated Balance Sheets. The liabilities for the present value of the estimated future capital contributions are recorded in "Accrued expenses and other current liabilities" and "Deferred rent and other liabilities" in the Consolidated Balance Sheets. The following table summarizes the balances related to the investment at January 31, 2024:

 

 

January 31,

 

 

2024

 

Deferred income taxes and other assets

$

66,214

 

Accrued expenses and other current liabilities

 

10,507

 

Deferred rent and other liabilities

 

47,293