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Income Taxes
 12 Months Ended
Feb. 01, 2025
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.

Until the second quarter of fiscal 2022, the Company had maintained a full valuation allowance against its deferred tax assets since fiscal 2013. 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. As a result of releasing substantially all of the valuation allowance against its deferred tax assets during fiscal 2022, the Company returned to a normal tax provision for fiscal 2023. At February 1, 2025 and

February 3, 2024, the Company continued to provide a valuation allowance of $1.5 million and $2.2 million, respectively, primarily against certain state and foreign NOLs.

As of February 1, 2025, for federal income tax purposes, the Company had net operating loss carryforwards of $3.4 million, which will expire in fiscal 2037, and net operating loss carryforwards of $39.9 million that are not subject to expiration. For state income tax purposes, the Company had $38.3 million of net operating loss carryforwards that are available to offset future taxable income, the majority of which will expire from fiscal 2025 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 February 1, 2025, there has been no such ownership change.

The components of the net deferred tax assets as of February 1, 2025 and February 3, 2024 were as follows (in thousands):

 

 

 

February 1, 2025

 

 

February 3, 2024

 

Deferred tax assets, net:

 

 

 

 

 

 

Net operating loss carryforward

 

$

12,868

 

 

$

13,522

 

Accrued expenses and other

 

 

4,328

 

 

 

4,776

 

Operating lease liabilities

 

 

47,708

 

 

 

40,182

 

Goodwill and intangibles

 

 

(122

)

 

 

(103

)

Inventory reserves

 

 

1,080

 

 

 

866

 

Foreign tax credit carryforward

 

 

102

 

 

 

486

 

Federal wage tax credit carryforward

 

 

861

 

 

 

824

 

State tax credits

 

 

51

 

 

 

147

 

Operating lease right-of-use assets

 

 

(44,212

)

 

 

(35,937

)

Property and equipment

 

 

(1,804

)

 

 

(985

)

 Subtotal

 

$

20,860

 

 

$

23,778

 

Valuation allowance

 

 

(1,517

)

 

 

(2,245

)

Net deferred tax assets

 

$

19,343

 

 

$

21,533

 

For fiscal 2024, the Company had total deferred tax assets of $67.0 million, total deferred tax liabilities of $46.1 million and a valuation allowance of $1.5 million.

The provision (benefit) for income taxes consisted of the following:

 

 

FISCAL YEARS ENDED

 

 

 

February 1, 2025

 

 

February 3, 2024

 

 

January 28, 2023

 

(in thousands)

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

182

 

 

$

—

 

 

$

—

 

State

 

 

381

 

 

 

1,200

 

 

 

830

 

Foreign

 

 

8

 

 

 

8

 

 

 

6

 

 

 

 

571

 

 

 

1,208

 

 

 

836

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

1,108

 

 

 

7,911

 

 

 

(24,794

)

State

 

 

1,082

 

 

 

1,418

 

 

 

(6,830

)

Foreign

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

2,190

 

 

 

9,329

 

 

 

(31,624

)

Total provision (benefit)

 

$

2,761

 

 

$

10,537

 

 

$

(30,788

)

 

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

 

 

 

February 1, 2025

 

 

February 3, 2024

 

 

January 28, 2023

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Federal income tax at the statutory rate

 

$

1,223

 

 

$

8,086

 

 

$

12,250

 

State taxes, net of federal tax benefit

 

 

264

 

 

 

1,000

 

 

 

656

 

State deferred taxes, net of federal benefit

 

 

353

 

 

 

1,418

 

 

 

1,558

 

Section 162(m) limitation

 

 

808

 

 

 

746

 

 

 

1,451

 

Permanent items

 

 

(66

)

 

 

(199

)

 

 

(1,002

)

Taxes stranded in OCI released with termination of retirement plans

 

 

—

 

 

 

890

 

 

 

—

 

Change in valuation allowance (1)

 

 

8

 

 

 

(179

)

 

 

(47,594

)

Adjustment to §382 NOLs

 

 

—

 

 

 

(1,159

)

 

 

1,159

 

Other, net

 

 

171

 

 

 

(66

)

 

 

734

 

Total provision (benefit)

 

$

2,761

 

 

$

10,537

 

 

$

(30,788

)
(1)
The change in the valuation allowance during the fiscal year ended February 1, 2025 excludes the portion of the change in the valuation allowance that related to expired NOLs that were previously fully reserved. The change in the valuation allowance during the fiscal year ended January 28, 2023 included 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.

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.

In fiscal 2022, the Company had a liability for unrecognized tax benefits of $2.0 million that was associated with a prior tax position related to exiting the Company’s direct business in Europe during fiscal 2013. The amount of unrecognized tax benefits was presented as a reduction in the reported amounts of the Company’s federal and state net operating losses carryforwards. No penalties or interest were accrued on this liability. In fiscal 2023, the Company changed this position in its tax return and determined that the liability was no longer necessary.

The Company made tax payments of $1.1 million, $1.6 million, and $0.5 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.