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Income Taxes | 12 Months Ended
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Feb. 01, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11 Income Taxes The components of earnings (loss) from continuing operations before income taxes is comprised of the following:
|  | Fiscal Year |
(In thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
United States |  | $ | (1,476 | ) |  | $ | (43,859 | ) |  | $ | 68,326 |
Foreign |  |  | 10,784 |  |  |  | 22,085 |  |  |  | 21,747 |
Total Earnings (Loss) from Continuing Operations before Income Taxes |  | $ | 9,308 |  |  | $ | (21,774 | ) |  | $ | 90,073 |
Income tax expense from continuing operations is comprised of the following:
|  | Fiscal Year |
(In thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 1,711 |  |  | $ | (3,672 | ) |  | $ | 39,095 |
International |  |  | 2,007 |  |  |  | 3,419 |  |  |  | 2,984 |
State |  |  | 1,100 |  |  |  | 744 |  |  |  | 3,805 |
Total Current Income Tax Expense |  |  | 4,818 |  |  |  | 491 |  |  |  | 45,884 |
Deferred |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 20,226 |  |  |  | (5,060 | ) |  |  | (25,704 | )
International |  |  | 515 |  |  |  | 1,074 |  |  |  | 748 |
State |  |  | 6,017 |  |  |  | 7,438 |  |  |  | (1,438 | )
Total Deferred Income Tax Expense (Benefit) |  |  | 26,758 |  |  |  | 3,452 |  |  |  | (26,394 | )
Net Interest Related to Income Taxes |  |  |  |  |  |  |  |  |
U.S. federal |  |  | (3,062 | ) |  |  | (2,728 | ) |  |  | (1,662 | )
International |  |  | — |  |  |  | — |  |  |  | — |
State |  |  | 203 |  |  |  | 66 |  |  |  | 3 |
Total Net Interest Related to Income Taxes |  |  | (2,859 | ) |  |  | (2,662 | ) |  |  | (1,659 | )
Tax Expense Recognized for Unrecognized Tax Benefits (“UTBS”) in the Statement of Operations |  |  |  |  |  |  |  |  |
U.S. federal |  |  | — |  |  |  | — |  |  |  | — |
International |  |  | — |  |  |  | — |  |  |  | — |
State |  |  | 103 |  |  |  | 573 |  |  |  | — |
Total Tax Expense Recognized for UTBS in the Statement of Operations |  |  | 103 |  |  |  | 573 |  |  |  | — |
Total Income Tax Expense – Continuing Operations |  | $ | 28,820 |  |  | $ | 1,854 |  |  | $ | 17,831 |
Note 11 Income Taxes, Continued Reconciliation of the United States federal statutory rate to our effective tax rate from continuing operations is as follows:
|  | Fiscal Year |
|  | 2025 |  |  | 2024 |  |  | 2023 |
U. S. federal statutory rate of tax |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
State taxes (net of federal tax benefit) |  |  | 1.06 |  |  |  | (0.92 | ) |  |  | 2.08 |
Foreign rate differential |  |  | 1.89 |  |  |  | 0.76 |  |  |  | (0.02 | )
Change in valuation allowance |  |  | 305.14 |  |  |  | (33.57 | ) |  |  | (1.12 | )
Uncertain tax position |  |  | 1.10 |  |  |  | (2.63 | ) |  |  | — |
Credits |  |  | (9.83 | ) |  |  | 4.54 |  |  |  | (1.18 | )
Global intangible low-tax income |  |  | — |  |  |  | (2.34 | ) |  |  | — |
Permanent items |  |  | 11.56 |  |  |  | (4.50 | ) |  |  | 0.64 |
IRS interest |  |  | (25.99 | ) |  |  | 9.90 |  |  |  | (1.46 | )
Other |  |  | 3.70 |  |  |  | (0.75 | ) |  |  | (0.14 | )
Effective Tax Rate |  |  | 309.63 | % |  |  | (8.51 | )% |  |  | 19.80 | %
We are subject to a tax on global intangible low-tax income (“GILTI”). GILTI taxes foreign income in excess of deemed return on tangible assets of a foreign corporation and we elected to treat this tax as a period cost. The impact from GILTI was not material for Fiscal 2025, 2024 or 2023. As of February 3, 2024, our Consolidated Balance Sheets included a $56.8 million non-current prepaid income tax receivable. This receivable related to the remaining uncollected portion of our $107.2 million carryback of our Fiscal 2021 federal tax losses to prior tax periods under the CARES Act. Due to an IRS audit, the refund claim had been under review by the requirements of the Joint Committee on Taxation refund review process. On January 17, 2025, we executed Form 870 with the IRS exam team and began the process of completing the separate Joint Committee on Taxation review of our claim. Form 870 is used upon completion of an IRS examination to indicate the taxpayer’s agreement with the revenue agent’s report of proposed adjustments and agreement to pay any deficiency. As a result, we now expect a refund of $59.3 million based on additional accrued interest and minor changes to the refund as agreed to on Form 870. Further, we now expect to complete the remaining requirements of the Joint Committee on Taxation governmental review process and collect the refund during Fiscal 2026. As such, we have moved the receivable from noncurrent prepaid income taxes to prepaids and other current assets on the Consolidated Balance Sheets as of February 1, 2025. Note 11 Income Taxes, Continued Deferred tax assets and liabilities are comprised of the following:
(In thousands) | February 1, 2025 |  |  | February 3, 2024 |
Pensions | $ | 738 |  |  | $ | 348 |
Lease obligation |  | 126,744 |  |  |  | 127,220 |
Book over tax depreciation |  | 14,359 |  |  |  | 12,976 |
Expense accruals |  | 8,509 |  |  |  | 10,054 |
Uniform capitalization costs |  | 8,840 |  |  |  | 7,515 |
Provisions for discontinued operations and restructurings |  | 723 |  |  |  | 561 |
IRC Section 163 interest limitation |  | — |  |  |  | 1,049 |
Inventory valuation |  | 1,356 |  |  |  | 1,235 |
Tax net operating loss and credit carryforwards |  | 23,732 |  |  |  | 24,164 |
Allowances for bad debts and notes |  | 484 |  |  |  | 915 |
Deferred compensation and restricted stock |  | 2,694 |  |  |  | 2,773 |
Outside basis difference |  | 816 |  |  |  | — |
Identified intangibles |  | 5,414 |  |  |  | 5,987 |
Other |  | 30 |  |  |  | 33 |
Gross deferred tax assets |  | 194,439 |  |  |  | 194,830 |
Deferred tax asset valuation allowance |  | (72,355 | ) |  |  | (43,961 | )
Deferred tax asset net of valuation allowance |  | 122,084 |  |  |  | 150,869 |
Identified intangibles |  | (5,220 | ) |  |  | (5,318 | )
Right of use asset |  | (119,945 | ) |  |  | (119,658 | )
Tax over book depreciation |  | — |  |  |  | (2,736 | )
Other |  | (993 | ) |  |  | (555 | )
Gross deferred tax liabilities |  | (126,158 | ) |  |  | (128,267 | )
Net Deferred Tax Assets (Liabilities) | $ | (4,074 | ) |  | $ | 22,602 |
The deferred tax balances have been classified in our Consolidated Balance Sheets as follows:
|  | As of Fiscal Year Ended |
(In thousands) |  | 2025 |  |  | 2024 |
Net non-current asset |  | $ | 389 |  |  | $ | 26,230 |
Net non-current liability |  |  | (4,463 | ) |  |  | (3,628 | )
Net Deferred Tax Assets (Liabilities) |  | $ | (4,074 | ) |  | $ | 22,602 |
As of February 1, 2025 and February 3, 2024, we had state net operating loss carryforwards of $11.2 million and $9.9 million, respectively. We provided a valuation allowance against these attributes of $11.2 million as of February 1, 2025 and $8.1 million as of February 3, 2024. Expiration of these attributes will occur in various years through 2045. As of each of February 1, 2025 and February 3, 2024, we had state tax credits of $0.6 million. We provided a valuation allowance against these attributes of $0.6 million as of each of February 1, 2025 and February 3, 2024 and $0.5 million of these credits will expire after Fiscal 2025 and the remaining credits have a carryforward period of 5 years. Note 11 Income Taxes, Continued As of February 1, 2025 and February 3, 2024, we had foreign net operating loss carryforwards of $40.0 million and $41.4 million, respectively, which have a carryforward period of at least 16 years. We regularly evaluate the need for a valuation allowance against our deferred tax assets. In making this determination, we consider all available evidence, both positive and negative, including but not limited to earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. and foreign deferred tax assets. Based on this assessment, as of February 1, 2025, we have provided a total valuation allowance of approximately $72.4 million on U.S. and foreign deferred tax assets for which management has determined it is more likely than not that the deferred tax assets will not be realized. The $28.4 million net increase in valuation allowance during Fiscal 2025 from the $44.0 million provided for as of February 3, 2024 relates primarily to our decision to record a full valuation allowance against our U.S. deferred tax assets of $26.2 million in the third quarter of Fiscal 2025, which was included in income tax expense in our Consolidated Statements of Operations. The decision was based on our expectation that the U.S. jurisdiction will be in a cumulative loss position within the near term which we believe is a new significant piece of negative evidence in the third quarter of Fiscal 2025. Due to the weight of the cumulative loss position for our U.S. jurisdiction in our objective analysis of all the positive and negative evidence, we no longer believe it is more likely than not we will realize certain U.S. deferred tax assets. Based upon evaluation of our worldwide operations and specific plans to remit foreign earnings back to the U.S., we can no longer assert that earnings from certain foreign operations will be indefinitely reinvested. As of February 1, 2025, we believe there are no deferred taxes applicable to the accumulated undistributed earnings of those foreign operations beyond the amounts recorded for deemed repatriation of such earnings, as required in the Tax Cuts and Jobs Act (the “Act”). The earnings of our remaining foreign operations are indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual U.S. deferred taxes on unremitted international earnings. If our unremitted international earnings were not considered indefinitely reinvested as of February 1, 2025, an immaterial amount of additional deferred taxes would have been provided. As of February 1, 2025, foreign tax credit carryforwards of approximately $2.7 million were available to reduce possible future U.S. income taxes and expire from 2028 to 2031. As a result of the Act, we may no longer utilize certain U.S. foreign tax credit carryforwards. A valuation allowance of $2.5 million has been established against these credits. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits.
|  | Fiscal Year |
(In thousands) |  | 2025 |  |  | 2024 |  |  | 2023 |
Unrecognized Tax Benefit – Beginning of Period |  | $ | 751 |  |  | $ | 178 |  |  | $ | 178 |
Gross Decreases – Tax Positions in a Prior Period |  |  | (144 | ) |  |  | — |  |  |  | — |
Gross Increases – Tax Positions in a Prior Period |  |  | 541 |  |  |  | — |  |  |  | — |
Gross Increases – Tax Positions in a Current Period |  |  | 57 |  |  |  | 573 |  |  |  | — |
Settlements |  |  | (541 | ) |  |  | — |  |  |  | — |
Unrecognized Tax Benefit – End of Period |  | $ | 664 |  |  | $ | 751 |  |  | $ | 178 |
Note 11 Income Taxes, Continued The amount of unrecognized tax benefits which would impact the annual effective tax rate if recognized were $0.7 million as of February 1, 2025, $0.8 million as of February 3, 2024 and $0.2 million as of January 28, 2023. The amount of unrecognized tax benefits may change during the next twelve months but we do not believe the change, if any, will be material to our consolidated financial position or results of operations. We recognize interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations and it was not material for Fiscal 2025, 2024 or 2023. We recorded $2.9 million, $2.7 million and $1.7 million of interest income within income tax expense, net on the Consolidated Statements of Operations for the years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively, primarily related to our outstanding federal refund request. We file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With few exceptions, our state and local income tax returns for fiscal years ended January 29, 2022 and beyond remain subject to examination. In addition, we have subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from two to six years. As part of the IRS audit of our federal income tax return for the fiscal year ended January 30, 2021, we have extended the statute of limitations for our fiscal years February 1, 2020, forward through March 31, 2026. The Organization for Economic Cooperation and Development has proposed a 15% global minimum tax applied on a country-by country basis (the "Pillar Two rule"), and many countries, including countries in which we operate, have enacted or begun the process of enacting laws adopting the Pillar Two rule. The first component of the Pillar Two rule became effective as of January 1, 2024 and did not have a material impact on the Company’s effective tax rate in Fiscal 2025. The second component is expected to go into effect in Fiscal 2026. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our tax provision or effective tax rate.

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