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INCOME TAXES
 3 Months Ended
May 03, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company utilizes the asset and liability method of accounting for income taxes as set forth in FASB ASC 740—Income Taxes. This method requires recognition of deferred tax assets and liabilities, measured by currently enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation and amortization, rent expense, inventory, stock-based compensation, net operating loss carryforwards, tax credits, and various accruals and reserves.
The Company’s provision for income taxes was $1.3 million during the First Quarter 2025, compared to $2.1 million during the First Quarter 2024. The Company’s effective tax rate was a provision of (4.1)% and (5.8)% in the First Quarter 2025 and First Quarter 2024, respectively. The Company continues to adjust its valuation allowance based upon its ongoing operating results.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act allows net operating losses (“NOLs”) incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to offset 100% of taxable income and to generate a refund of previously paid income taxes. Pursuant to the CARES Act, the Company carried back the taxable year 2020 tax loss of $150.0 million to prior years. As of May 3, 2025, the remaining income tax receivable of $19.1 million is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.
The Company accrues interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. The total amount of unrecognized tax benefits was $6.6 million, $6.5 million, and $7.4 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively, and is included within long-term liabilities. Additional interest expense recognized in the First Quarter 2025 and First Quarter 2024 related to unrecognized tax benefits was not significant.
The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company files a consolidated U.S. income tax return for federal income tax purposes. The Company is no longer subject to income tax examinations by U.S. federal, state and local or foreign tax authorities for tax years 2015 and prior.
The Internal Revenue Service is currently conducting an examination of the Company’s tax return for fiscal year 2020 in conjunction with its review of the CARES Act NOL carryback to earlier fiscal years. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues arise as a result of a tax audit, and are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.