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Income Taxes | 12 Months Ended
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Jan. 28, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | F. INCOME TAXES The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The accounting standards require current recognition of net deferred tax assets to the extent it is more likely than not such net assets will be realized. To the extent that the Company believes its net deferred tax assets will not be realized, a valuation allowance must be recorded against those assets. Since the end of fiscal 2013, the Company had maintained a full valuation allowance against its deferred tax assets. During the second quarter of fiscal 2022, the Company determined that it was more likely than not that it would be able to realize the benefit of substantially all of its deferred tax assets in the United States. In reaching this determination, the Company considered the cumulative three years of profitability, its six consecutive quarters of sales growth and profitability at the time of the assessment, its expectations regarding the generation of future taxable income and the ability to utilize the Company’s net operating loss (“NOLs”) carryforwards as well as the overall improvement in the Company's business, brand repositioning and current market position. As a result, for fiscal 2022, the valuation allowance against the Company's deferred tax assets decreased by $47.6 million, of which $31.6 million was recorded as a non-recurring tax benefit in fiscal 2022 related to the release of the valuation allowance on deferred tax assets expected to be realized in future periods. At January 28, 2023, the Company continued to provide a valuation allowance of $2.4 million primarily against certain state and foreign NOLs. As of January 28, 2023, for federal income tax purposes, the Company had net operating loss carryforwards of $39.3 million, which will expire from fiscal 2034 through fiscal 2037 and net operating loss carryforwards of $39.6 million that are not subject to expiration. For state income tax purposes, the Company had $65.0 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2024 through fiscal 2045. Additionally, the Company has $5.3 million of net operating loss carryforwards related to the Company’s operations in Canada, which will expire from fiscal 2025 through fiscal 2041. The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards, which may be used in future years. As of January 28, 2023, there has been no such ownership change. The components of the net deferred tax assets as of January 28, 2023 and January 29, 2022 were as follows (in thousands):
|  | January 28, 2023 |  |  | January 29, 2022 |
Deferred tax assets, net: |  |  |  |  |  |
Net operating loss carryforward |  | $ | 21,736 |  |  | $ | 36,790 |
Accrued expenses and other |  |  | 5,597 |  |  |  | 5,223 |
Operating lease liabilities |  |  | 37,793 |  |  |  | 40,301 |
Goodwill and intangibles |  |  | (62 | ) |  |  | 11 |
Unrecognized loss on pension and pension expense |  |  | 1,714 |  |  |  | 1,883 |
Inventory reserves |  |  | 900 |  |  |  | 1,054 |
Foreign tax credit carryforward |  |  | 486 |  |  |  | 486 |
Federal wage tax credit carryforward |  |  | 824 |  |  |  | 824 |
State tax credits |  |  | 147 |  |  |  | 147 |
Operating lease right-of-use assets |  |  | (32,583 | ) |  |  | (33,103 | )
Property and equipment |  |  | (2,672 | ) |  |  | (3,597 | )
Subtotal |  | $ | 33,880 |  |  | $ | 50,019 |
Valuation allowance |  |  | (2,425 | ) |  |  | (50,019 | )
Net deferred tax assets |  | $ | 31,455 |  |  | $ | — |
For fiscal 2022, the Company had total deferred tax assets of $69.2 million, total deferred tax liabilities of $35.3 million and a valuation allowance of $2.4 million. The provision (benefit) for income taxes consisted of the following:
|  | FISCAL YEARS ENDED |
|  | January 28, 2023 |  |  | January 29, 2022 |  |  | January 30, 2021 |
(in thousands) |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | 830 |  |  |  | 912 |  |  |  | 99 |
Foreign |  |  | 6 |  |  |  | 5 |  |  |  | 7 |
|  |  | 836 |  |  |  | 917 |  |  |  | 106 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (24,794 | ) |  |  | — |  |  |  | — |
State |  |  | (6,830 | ) |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
|  |  | (31,624 | ) |  |  | — |  |  |  | — |
Total provision (benefit) |  | $ | (30,788 | ) |  | $ | 917 |  |  | $ | 106 |
The following is a reconciliation between the statutory and effective income tax rates in dollars for the provision (benefit) for income tax:
|  | FISCAL YEARS ENDED |
|  | January 28, 2023 |  |  | January 29, 2022 |  |  | January 30, 2021 |
(in thousands) |  |  |  |  |  |  |  |  |
Federal income tax at the statutory rate |  | $ | 12,250 |  |  | $ | 12,102 |  |  | $ | (13,531 | )
State taxes, net of federal tax benefit |  |  | 656 |  |  |  | 721 |  |  |  | 78 |
State deferred taxes, net of federal benefit |  |  | 1,558 |  |  |  | — |  |  |  | — |
Section 162(m) limitation |  |  | 1,451 |  |  |  | 1,375 |  |  |  | 197 |
Permanent items |  |  | 21 |  |  |  | (893 | ) |  |  | 245 |
Change in valuation allowance (1) |  |  | (47,594 | ) |  |  | (12,421 | ) |  |  | 13,167 |
Other, net |  |  | 870 |  |  |  | 33 |  |  |  | (50 | )
Total provision (benefit) |  | $ | (30,788 | ) |  | $ | 917 |  |  | $ | 106 |
(1) The change in the valuation allowance includes a non-recurring income tax benefit of $31.6 million in connection with the Company’s substantial release of the valuation allowance in fiscal 2022 related to the deferred tax assets expected to be realized in future periods. The change in valuation allowance excludes the amounts allocable to state income tax, which is presented in state taxes, net of federal tax benefit, and other comprehensive income. As discussed in Note A, the Company’s financial statements reflect the expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return, based solely on the technical merits of the tax position. The following table shows the liability for unrecognized tax benefits associated with a prior tax position related to exiting the Company’s direct business in Europe during fiscal 2013. There were no changes to the unrecognized tax benefits in fiscal 2022, fiscal 2021 or fiscal 2020. The amount of unrecognized tax benefits has been presented as a reduction in the reported amounts of the Company’s federal and state net operating losses carryforwards. No penalties or interest have been accrued on this liability because the carryforwards have not yet been utilized. The reversal of this liability would result in a tax benefit being recognized in the period in which the Company determines the liability is no longer necessary.
|  | FISCAL YEARS ENDED |
|  | January 28, 2023 |  |  | January 29, 2022 |  |  | January 30, 2021 |
(in thousands) |  |  |  |  |  |  |  |  |
Balance at the beginning of the fiscal year |  | $ | 2,000 |  |  | $ | 2,000 |  |  | $ | 2,000 |
Changes due to tax positions from current year |  |  | — |  |  |  | — |  |  |  | — |
Changes due to tax positions from prior years |  |  | — |  |  |  | — |  |  |  | — |
Changes due to lapsing of statute of limitations |  |  | — |  |  |  | — |  |  |  | — |
Balance at the end of the fiscal year |  | $ | 2,000 |  |  | $ | 2,000 |  |  | $ | 2,000 |
The Company made tax payments of $0.5 million, $0.6 million, and $0.1 million for fiscal 2022, fiscal 2021, and fiscal 2020, respectively. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law which contained provisions that include a 15% corporate minimum tax effective for taxable years beginning after December 31, 2022 and a 1% excise tax on certain stock buybacks after December 31, 2022. The Company expects the impact of these provisions to be immaterial.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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