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What changed in Burlington Stores, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Burlington Stores, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+277 added−287 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-13)

Top changes in Burlington Stores, Inc.'s 2024 10-K

277 paragraphs added · 287 removed · 210 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+3 added−4 removed30 unchanged
Biggest changeOur store base is geographically diversified with stores located in 46 states and Puerto Rico as set forth below: State Number of Stores State Number of Stores State Number of Stores AK 2 LA 7 NY 57 AL 10 MA 20 OH 30 AR 6 MD 21 OK 8 AZ 20 ME 3 OR 7 CA 101 MI 25 PA 41 CO 14 MN 13 PR 15 CT 15 MO 11 RI 6 DE 3 MS 2 SC 12 FL 93 NC 26 SD 1 GA 30 ND 1 TN 15 IA 4 NE 4 TX 100 ID 3 NH 4 UT 9 IL 42 NJ 44 VA 26 IN 18 NM 5 WA 16 KS 5 NV 13 WI 10 KY 8 WV 1 Store Expansion and Real Estate Strategy We continue to explore expansion opportunities both within our current market areas and in other regions.
Biggest changeOur store base is geographically diversified with stores located in 46 states, Washington D.C. and Puerto Rico as set forth below: State Number of Stores State Number of Stores State Number of Stores AK 2 KY 8 NY 65 AL 13 LA 9 OH 30 AR 6 MA 24 OK 11 AZ 21 MD 22 OR 7 CA 108 ME 2 PA 42 CO 16 MI 27 PR 20 CT 15 MN 13 RI 6 DC 1 MO 12 SC 13 DE 3 MS 2 SD 2 FL 101 NC 27 TN 16 GA 35 ND 1 TX 113 IA 4 NE 4 UT 9 ID 3 NH 4 VA 28 IL 40 NJ 47 WA 18 IN 18 NM 5 WI 11 KS 8 NV 14 WV 1 Store Expansion and Real Estate Strategy We continue to explore expansion opportunities both within our current market areas and in other regions.
Any updates to the list of social media channels we may use to communicate material information will be posted on the Investor Relations page of our website at www.burlingtoninvestors.com . 6 The information contained on, or accessible through, our website and these social media channels is not part of this Annual Report and is therefore not incorporated by reference.
Any updates to the list of social media channels we may use to communicate material information will be posted on the Investor Relations page of our website at www.burlingtoninvestors.com . The information contained on, or accessible through, our website and these social media channels is not part of this Annual Report and is therefore not incorporated by reference.
The remaining merchandise units are drop shipped by our vendors directly to our stores. Our two east coast distribution centers are located in Edgewater Park, New Jersey and Burlington, New Jersey. Our three west coast distribution centers are located in San Bernardino, California, Redlands, California, and Riverside, California.
The remaining merchandise units are drop shipped by our vendors directly to our stores. Our two east coast distribution centers are located in Edgewater Park, New Jersey and Burlington, New Jersey. Our three west coast distribution centers are located in San Bernardino, 2 California, Redlands, California, and Riverside, California.
Build Teams & Partnerships. • We Believe Everyone Matters : We listen to the individual viewpoints of our diverse workforce through open and honest communication. • We Win Together : We recognize those who make a difference.
Build Teams & Partnerships. 4 • We Believe Everyone Matters : We listen to the individual viewpoints of our diverse workforce through open and honest communication. • We Win Together : We recognize those who make a difference.
These initiatives include, but are not limited to, those discussed under “Ongoing Initiatives for Fiscal 2023” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. As used in this Annual Report, the terms “Company,” “we,” “us,” or “our” refer to Burlington Stores, Inc. and all of its subsidiaries.
These initiatives include, but are not limited to, those discussed under “Ongoing Initiatives for Fiscal 2024” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. As used in this Annual Report, the terms “Company,” “we,” “us,” or “our” refer to Burlington Stores, Inc. and all of its subsidiaries.
We continue to improve the quality of our brand portfolio, driven by the growth of our merchandising team, wide breadth of our product categories, and a vendor community increasingly committed to grow with Burlington. We carry many different brands, none of which accounted for more than 6% of our net purchases during Fiscal 2022, Fiscal 2021 or Fiscal 2020.
We continue to improve the quality of our brand portfolio, driven by the growth of our merchandising team, wide breadth of our product categories, and a vendor community increasingly committed to grow with Burlington. We carry many different brands, none of which accounted for more than 6% of our net purchases during Fiscal 2023, Fiscal 2022 or Fiscal 2021.
Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well as the following social media channels: Facebook ( www.facebook.com/BurlingtonStores ) and Twitter ( www.twitter.com/burlington ).
Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well as the following social media channels: Facebook ( www.facebook.com/BurlingtonStores ) and X (formerly Twitter) ( www.twitter.com/burlington ).
Our DEI strategy consists of five pillars that support all areas of the business: • Leadership & Workforce Diversity • Inclusive & Equitable Environments for Associates and Customers • Enhanced Education & Awareness • Product, Vendor & Supplier Diversity. • C ommunity Advocacy Burlington has a DEI team that is further supported by an enhanced governance structure consisting of additional DEI counsels to support corporate, merchandising, distribution centers, and field/store operations, along with expanded Associate Resource Groups, which gives associates more ways to participate in DEI efforts as members of an associate-led community.
Our DEI strategy consists of five pillars that support all areas of the business: • Leadership & Workforce Diversity • Inclusive & Equitable Environments for Associates and Customers • Enhanced Education & Awareness • Product, Vendor & Supplier Diversity • Community Advocacy Burlington has a DEI team that is further supported by an enhanced governance structure consisting of additional DEI councils to support corporate, merchandising, distribution centers, and field/store operations, along with expanded Associate Resource Groups, which gives associates more ways to participate in DEI efforts as members of an associate-led community.
In training our associates, our goal is to emphasize knowledgeable, friendly customer service and a sense of professional pride. We have empowered our store teams to provide an outstanding customer experience for every customer in every store, every day. We have streamlined processes and will continue to strive to create opportunities for fast and friendly customer interactions.
In training our associates, our goal is to emphasize knowledgeable, friendly customer service and a sense of professional pride. We have empowered our store teams to provide an outstanding customer experience for every customer in every store, every day. We have and continue to streamline processes and strive to create opportunities for fast and friendly customer interactions.
Sales percentage by major product category over the last three fiscal years was as follows: Category Fiscal 2022 Fiscal 2021 Fiscal 2020 Ladies apparel 22 % 23 % 20 % Accessories and shoes 24 % 23 % 24 % Home 21 % 20 % 21 % Mens apparel 17 % 16 % 16 % Kids apparel and baby 12 % 14 % 15 % Outerwear 4 % 4 % 4 % Human Capital Resources Attracting, developing and retaining top talent is key to our growth, and our success depends on cultivating an engaged and motivated workforce.
Sales percentage by major product category over the last three fiscal years was as follows: Category Fiscal 2023 Fiscal 2022 Fiscal 2021 Ladies apparel 21 % 22 % 23 % Accessories and shoes 27 % 24 % 23 % Home 20 % 21 % 20 % Mens apparel 17 % 17 % 16 % Kids apparel and baby 12 % 12 % 14 % Outerwear 3 % 4 % 4 % Human Capital Resources Attracting, developing and retaining top talent is key to our growth, and our success depends on cultivating an engaged and motivated workforce.
You can access financial and other information about us in the Investor Relations page of our website at www.burlingtoninvestors.com .
You can access financial and other information about us on the Investor Relations page of our website at www.burlingtoninvestors.com .
Of this total square footage, the area that represents the total selling square footage for all stores as of the end of Fiscal 2022, Fiscal 2021, and Fiscal 2020 were 31.0 million, 30.0 million, and 32.3 million respectively. Distribution and Warehousing We have five distribution centers that shipped more than 99% of merchandise units to our stores in Fiscal 2022.
Of this total square footage, the area that represents the total selling square footage for all stores as of the end of Fiscal 2023, Fiscal 2022, and Fiscal 2021 were 31.5 million, 31.0 million, and 30.0 million respectively. Distribution and Warehousing We have five distribution centers that shipped more than 99% of merchandise units to our stores in Fiscal 2023.
Buyers spend time interacting face-to-face with new and existing vendors and on continuously evaluating trends in the market to which we believe our customers would respond positively. Our buyers use a merchant scorecard that rates products across four key attributes—fashion, quality, brand and price—to help formalize a framework for buying decisions.
We seek to purchase a majority of our merchandise in-season. Buyers spend time interacting face-to-face with new and existing vendors and continuously evaluating trends in the market to which we believe our customers would respond positively. Our buyers use a merchant scorecard that rates products across four key attributes—fashion, quality, brand and price—to help formalize a framework for buying decisions.
We have no long-term purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier. We continue to have good working relationships with our suppliers.
We have no long-term purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier.
Item 1. Business Overview We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 927 stores as of January 28, 2023, in 46 states and Puerto Rico.
Item 1. Business Overview We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1007 stores as of February 3, 2024, in 46 states, Washington D.C. and Puerto Rico.
Mill St) 2006 758,000 Leased Redlands, California (Pioneer Ave) 2014 800,000 Leased Riverside, California (Cactus Ave) 2021 900,000 Leased Warehousing Facilities: Burlington, New Jersey (Route 130 North)(a) 1987 525,000 Owned Burlington, New Jersey (Richards Run) 2017 511,000 Leased Burlington, New Jersey (Daniels Way) (c) 2020 208,000 Leased Redlands, California (River Bluff Ave) 2017 543,000 Leased Riverside, California (Oleander Ave) (d) 2023 410,000 Leased San Bernardino, California (Waterman Ave) 2020 394,000 Leased (a) Inclusive of corporate offices.
Mill St) 2006 758,000 Leased Redlands, California (Pioneer Ave) 2014 800,000 Leased Riverside, California (Cactus Ave) 2021 900,000 Leased Ellabell, Georgia 2026 2,057,000 (b) Warehousing Facilities: Burlington, New Jersey (Route 130 North)(a) 1987 525,000 Owned Burlington, New Jersey (Richards Run) 2017 511,000 Leased Redlands, California (River Bluff Ave) 2017 543,000 Leased Riverside, California (Oleander Ave) 2023 410,000 Leased San Bernardino, California (Waterman Ave) 2020 394,000 Leased (a) Inclusive of corporate offices.
Our store base has grown from 13 stores in 1980 to 927 stores as of January 28, 2023. Based on our smaller store prototype, as well as the opportunity presented by accelerating retail disruption and industry wide store closures, our long-term store target remains at 2,000 stores.
Our store base has grown from 13 stores in 1980 to 1007 stores as of February 3, 2024. Based on our smaller store prototype, as well as the ongoing opportunity presented by accelerating retail disruption and industry wide store closures, our long-term store target remains at 2,000 stores.
As of January 28, 2023, associates at one of our stores were subject to a collective bargaining agreement. Corporate Culture We recognize the critical importance of talent and culture to our success.
As of February 3, 2024, associates at one of our stores were subject to a collective bargaining agreement. Corporate Culture We recognize the critical importance of talent and culture to our success.
Fiscal Ye ar End We define our fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. This Annual Report covers the 52-week fiscal year ended January 28, 2023 (Fiscal 2022). The fiscal years ended January 29, 2022 (Fiscal 2021) and January 30, 2021 (Fiscal 2020) also consisted of 52 weeks.
Fiscal Ye ar End We define our fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. This Annual Report covers the 53-week fiscal year ended February 3, 2024 (Fiscal 2023) and the 52-week fiscal years ended January 28, 2023 (Fiscal 2022) and January 29, 2022 (Fiscal 2021).
Fiscal 2022 Fiscal 2021 Fiscal 2020 Stores (beginning of period) 840 761 727 Stores opened(a)(b) 91 84 45 Stores closed(a) (4 ) (5 ) (11 ) Stores (end of period) 927 840 761 (a) Exclusive of relocations.
Fiscal 2023 Fiscal 2022 Fiscal 2021 Stores (beginning of period) 927 840 761 Stores opened(a)(b) 91 91 84 Stores closed(a) (11 ) (4 ) (5 ) Stores (end of period) 1,007 927 840 (a) Exclusive of relocations.
(b) Stores opened during Fiscal 2022, Fiscal 2021 and Fiscal 2020 had an average size of approximately 28,000, 31,000 and 40,000 square feet, respectively. 2 The total gross square footage of all stores as of the end of Fiscal 2022, Fiscal 2021, and Fiscal 2020 were 50.7 million, 49.6 million, and 48.0 million, respectively.
(b) Stores opened during Fiscal 2023, Fiscal 2022 and Fiscal 2021 had an average size of approximately 27,000, 28,000 and 31,000 square feet, respectively. The total gross square footage of all stores as of the end of Fiscal 2023, Fiscal 2022, and Fiscal 2021 were 51.5 million, 50.7 million, and 49.6 million, respectively.
We compete on the basis of a combination of factors, including, among others, price, breadth, quality and style of merchandise offered, in-store experience, level of customer service, ability to identify and respond to new and emerging fashion trends, brand image and scalability.
Competition The U.S. retail apparel and home furnishings markets are highly fragmented and competitive. We compete on the basis of a combination of factors, including, among others, price, breadth, quality and style of merchandise offered, in-store experience, level of 5 customer service, ability to identify and respond to new and emerging fashion trends, brand image and scalability.
We have designed our merchant organization so that buyers focus primarily on buying, planners focus primarily on planning, and information systems help inform data-driven decisions for both groups. Buyers are in the market each week and focus on purchasing great products for great value. We seek to purchase a majority of our merchandise in-season.
We continue to have good working relationships with our suppliers. 3 We have designed our merchant organization so that buyers focus primarily on buying, planners focus primarily on planning, and information systems help inform data-driven decisions for both groups. Buyers are in the market each week and focus on purchasing great products for great value.
Calendar Year Operational Size (sq. feet) Leased or Owned Primary Distribution Centers: Edgewater Park, New Jersey (Route 130 South)(a) 2004 648,000 Owned Burlington, New Jersey (Daniels Way) 2014 1,000,000 Leased Logan, New Jersey (b) 2022 1,029,000 Leased San Bernardino, California (E.
We previously operated a third warehousing facility in Burlington, New Jersey, which was closed during Fiscal 2023. Calendar Year Operational Size (sq. feet) Leased or Owned Primary Distribution Centers: Edgewater Park, New Jersey (Route 130 South)(a) 2004 648,000 Owned Burlington, New Jersey (Daniels Way) 2014 1,000,000 Leased Logan, New Jersey 2022 1,029,000 Leased San Bernardino, California (E.
As of January 28, 2023, 74% of our associates self-identified as female and 77% of our associates self-identified as having a racial or ethnic minority background. 4 Our staffing requirements fluctuate during the year as a result of the seasonality of our business. We hire additional associates and increase the hours of part-time associates during seasonal peak selling periods.
As of February 3, 2024, 73% of our associates are female, and 78% of our associates have a racial or ethnic minority background. Our staffing requirements fluctuate during the year as a result of the seasonality of our business. We hire additional associates and increase the hours of part-time associates during seasonal peak selling periods.
Burlington.com highlights our great merchandise values, while encouraging customers to visit our stores to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home. Competition The U.S. retail apparel and home furnishings markets are highly fragmented and competitive.
Email reaches our best customers, while social marketing, including relationships with influencers, allows for authentic consumer engagement. Burlington.com highlights our great merchandise values, while encouraging customers to visit our stores to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home.
Our goal is to facilitate a “treasure-hunt” experience for our customers with clean, organized merchandise presentations that highlight the brands, value and diversity of selection within our frequently refreshed assortments. 3 Our Off-Price Sourcing and Merchandising Model We believe that our ability to chase sales within the off-price model enables us to provide our customers with products that are nationally branded, fashionable, high quality and priced right.
Our Off-Price Sourcing and Merchandising Model We believe that our ability to chase sales within the off-price model enables us to provide our customers with products that are nationally branded, fashionable, high quality and priced right.
The core customer is educated, resides in mid- to large-sized metropolitan areas and shops for themselves, their family, and their home.
The core customer is educated, resides in mid- to large-sized metropolitan areas and shops for themselves, their family, and their home. We appeal to value seeking and brand conscious customers who understand the off-price model and love the thrill of the hunt.
Our broad selection provides a wide range of apparel, accessories and furnishings for all ages. Our strategy to chase the sales trend allows us the flexibility to purchase less pre-season merchandise with the balance purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between suppliers and categories.
Our strategy to chase the sales trend allows us the flexibility to purchase less pre-season merchandise with the balance purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between suppliers and categories. This enables us to obtain better terms with our suppliers, which we expect to help offset any rising costs of goods.
In addition, our Nominating and Corporate Governance Committee reviews environmental, social and governance (“ESG”) trends, issues and concerns, including legislative and regulatory developments, that could significantly affect our public affairs. Our Board of Directors provides oversight of ESG matters. Associates As of January 28, 2023, we employed 61,166 associates, including 46,297 part-time and seasonal associates.
In addition, our Nominating and Corporate Governance Committee reviews environmental, social and governance (“ESG”) trends, issues and concerns, including legislative and regulatory developments, that could significantly affect our public affairs. Our Audit Committee receives periodic reports from, and discusses related controls and procedures with, management regarding ESG reporting and disclosures. Our Board of Directors provides oversight of ESG matters.
This enables us to obtain better terms with our suppliers, which we expect to help offset any rising costs of goods. Furthermore, we believe the “treasure hunt” nature of the off-price buying experience drives frequent visits to our stores.
Furthermore, we believe the “treasure hunt” nature of the off-price buying experience drives frequent visits to our stores.
The west coast has three supporting warehouses, located in Redlands, California, Riverside, California, and San Bernardino, California. We entered into a lease for the Riverside, California warehousing facility during Fiscal 2022, and the building is expected to become operational during Fiscal 2023. These six warehousing facilities occupy an aggregate of 2,591,000 square feet and primarily serve as storage facilities.
We also operate warehousing facilities to support our distribution centers. The east coast has two supporting warehouses located in Burlington, New Jersey. The west coast has three supporting warehouses located in Redlands, California, Riverside, California, and San Bernardino, California. These five warehousing facilities occupy an aggregate of 2,383,000 square feet and primarily serve as storage facilities.
We believe that our customers are attracted to our stores principally by the availability of a large assortment of first-quality, current, brand-name merchandise at everyday low prices. Burlington Stores offer customers a complete line of merchandise, including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats.
Burlington Stores offer customers a complete line of merchandise, including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. Our broad selection provides a wide range of apparel, 1 accessories and furnishings for all ages.
Of those associates, 88% worked in our stores, 8% worked in our distribution centers and 4% worked in our corporate organization.
Associates As of February 3, 2024, we employed 71,049 associates, of which 76% were part-time or seasonal associates. Of our associates, 88% worked in our stores, 8% worked in our distribution centers and 4% worked in our corporate organization.
We appeal to value seeking and brand conscious customers who understand the off-price model and love the thrill of the hunt. 5 Marketing and Advertising We use a mix of broad-based and targeted marketing strategies to efficiently deliver the right message to our audience at the right time.
Marketing and Advertising We use a mix of broad-based and targeted marketing strategies to efficiently deliver the right message to our audience at the right time. Broad-based strategies include television and radio, while our digital and streaming audio strategies allow for more personalized and targeted messaging.
(b) This distribution center was used for storage and basic manual processing during Fiscal 2022. The building is expected to be fully operational during Fiscal 2024. (c) The lease for this warehousing facility is expected to terminate during Fiscal 2023. (d) This warehousing facility is expected to become operational during Fiscal 2023.
This building was used for storage and basic manual processing during Fiscal 2023, and is expected to be fully operational during Fiscal 2024. Lastly, we entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia occupying approximately 2,057,000 square feet. This building is expected to be fully operational during Fiscal 2026.
Removed
COVID-19 Results for Fiscal 2020 were significantly impacted by the COVID-19 pandemic. All our stores were temporarily closed for a portion of Fiscal 2020, resulting in a sales decline and higher inventory markdowns. These store closures did not repeat in Fiscal 2021 or Fiscal 2022.
Added
The fiscal year ending February 1, 2025 (“Fiscal 2024”) will have 52 weeks. Our Stores Over 99% of our net sales are derived from stores we operate as Burlington Stores. We believe that our customers are attracted to our stores principally by the availability of a large assortment of first-quality, current, brand-name merchandise at everyday low prices.
Removed
However, certain lingering economic effects of the pandemic did continue to impact results, including supply chain disruptions. 1 Our Stores Over 99% of our net sales are derived from stores we operate as Burlington Stores.
Added
(b) We entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia. This building is expected to be fully operational during Fiscal 2026.
Removed
This building was used for storage and basic manual processing during Fiscal 2022, and is expected to be fully operational during Fiscal 2024. We also operate warehousing facilities to support our distribution centers. The east coast has three supporting warehouses located in Burlington, New Jersey.
Added
Our goal is to facilitate a “treasure-hunt” experience for our customers with clean, organized merchandise presentations that highlight the brands, value and diversity of selection within our frequently refreshed assortments.
Removed
Broad-based strategies include television and radio, while our digital and streaming audio strategies allow for more personalized and targeted messaging. Email reaches our best customers, while social marketing, including relationships with influencers, allows for authentic consumer engagement.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+14 added−35 removed147 unchanged
Biggest changeFinally, outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public-health related concerns could lead us to experience supply disruptions, reduced workforces or labor shortages, transportation delays, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, each of which could have a material adverse effect on our business and results of operations. 13 If we are unable to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.
Biggest changeIf we are unable to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.
If we suffer a substantial loss that is not covered by commercial insurance or our self-insurance reserves, the loss and related expenses could harm our business and operating results. Issues with merchandise safety and shrinkage could damage our sales and financial results.
If we suffer a substantial loss that is not covered by commercial insurance or our self-insurance reserves, the loss and related expenses could harm our business and operating results. Issues with safety and merchandise shrinkage could damage our sales and financial results.
Such factors include: • political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, particularly if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis; • disruptions in the operations of domestic ports through which we import our merchandise, including labor disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship merchandise to alternative ports in 12 the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs; disruptions at ports through which we import our goods could also result in unanticipated inventory shortages; • political or military conflict, which could cause a delay in the transportation of our products to us and an increase in transportation costs; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • disease epidemics, pandemics (including COVID-19), outbreaks and other health-related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas; • natural disasters and industrial accidents, which could have the effect of curtailing production and disrupting supplies; • increases in labor and production costs in goods-producing countries, which would result in an increase in our inventory costs; • the migration and development of manufacturers, which can affect where our products are or will be produced; • fluctuation in our vendors’ local currency against the dollar, which may increase our cost of goods sold; and • changes in import duties, taxes, charges, quotas, loss of “most favored nation” trading status with the United States for a particular foreign country and trade restrictions (including the United States imposing antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).
Such factors include: • political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, particularly if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis; • disruptions in the operations of domestic ports through which we import our merchandise, including labor disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship merchandise to alternative ports in the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs; disruptions at ports through which we import our goods could also result in unanticipated inventory shortages; • political or military conflict, which could cause a delay in the transportation of our products to us and an increase in transportation costs; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • disease epidemics, pandemics, outbreaks and other health-related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas; • natural disasters and industrial accidents, which could have the effect of curtailing production and disrupting supplies; • increases in labor and production costs in goods-producing countries, which would result in an increase in our inventory costs; • the migration and development of manufacturers, which can affect where our products are or will be produced; • fluctuation in our vendors’ local currency against the dollar, which may increase our cost of goods sold; and • changes in import duties, taxes, charges, quotas, loss of “most favored nation” trading status with the United States for a particular foreign country and trade restrictions (including the United States imposing antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).
Like most major corporations, however, we, our customers and our third-party services providers face an evolving, increasing threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks.
Like most major corporations, we, our customers and our third-party services providers face an evolving, increasing threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report. Macroeconomic, Industry and Business Risks A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report. 6 Macroeconomic, Industry and Business Risks A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.
Availability and skill of employees may differ across markets in which we do business and in new markets we enter, and we need to manage our labor needs effectively. 11 In addition, because of the distinctive nature of our off-price model, we must provide significant internal training and development for key employees across the company, including within our buying organization.
Availability and skill of employees may differ across markets in which we do business and in new markets we enter, and we need to manage our labor needs effectively. In addition, because of the distinctive nature of our off-price model, we must provide significant internal training and development for key employees across the company, including within our buying organization.
We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, transactions or business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, 11 transactions or business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
While opportunistic purchasing provides our buyers the ability to buy at desirable times and prices, in the quantities we need and into market trends, it places considerable discretion with our buyers, which subjects us to risks related to the pricing, quantity, nature and timing of inventory flowing to our stores.
While opportunistic purchasing provides our buyers the ability to buy at desirable times and prices, in the 9 quantities we need and into market trends, it places considerable discretion with our buyers, which subjects us to risks related to the pricing, quantity, nature and timing of inventory flowing to our stores.
In addition, information concerning us, whether or not true, may be instantly and easily posted on social media platforms and similar devices at any time, which information may be adverse to our reputation or business. The harm may be immediate without affording us an opportunity for redress or correction.
In addition, information concerning us, whether or not true, may be instantly and easily posted on social media platforms and similar devices at any time, which information may be adverse to our reputation or business. 14 The harm may be immediate without affording us an opportunity for redress or correction.
Complying with local zoning codes, real estate land use restrictions, employment-related laws, and other local laws across numerous jurisdictions is particularly challenging as we grow the number of our stores in new municipalities and need to stay abreast of changes 15 in such local laws.
Complying with local zoning codes, real estate land use restrictions, employment-related laws, and other local laws across numerous jurisdictions is particularly challenging as we grow the number of our stores in new municipalities and need to stay abreast of changes in such local laws.
In addition, any event of default or acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. 17 The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In addition, any event of default or acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
Extreme weather conditions in the areas in which our stores or distribution centers are located - especially in areas with a high 9 concentration of our stores - could have a material adverse effect on our business, financial condition and results of operations.
Extreme weather conditions in the areas in which our stores or distribution centers are located - especially in areas with a high concentration of our stores - could have a material adverse effect on our business, financial condition and results of operations.
Compliance with the evolving privacy regulatory landscape will likely increase the costs of doing business, especially if we face differing regulatory requirements across multiple jurisdictions and/or a lack 16 of adequate regulatory guidance.
Compliance with the evolving privacy regulatory landscape will likely increase the costs of doing business, especially if we face differing regulatory requirements across multiple jurisdictions and/or a lack of adequate regulatory guidance.
Although our arrangements with our vendors frequently provide for indemnification for product liabilities, the vendors may fail to honor those obligations to an extent we consider sufficient or at all.
Although our arrangements with our vendors frequently provide for 15 indemnification for product liabilities, the vendors may fail to honor those obligations to an extent we consider sufficient or at all.
In addition, any failure to continue to add capacity to our existing distribution centers and build out planned additional distribution centers timely and cost effectively could adversely affect our business.
In addition, 12 any failure to continue to add capacity to our existing distribution centers and build out planned additional distribution centers timely and cost effectively could adversely affect our business.
An unfavorable, uncertain or volatile economic environment, as we have experienced recently as a result of inflation, rising interest rates, supply chain disruptions and COVID-19, among other things, has and may continue to cause an increase in inventory shrinkage.
An unfavorable, uncertain or volatile economic environment, as we have experienced recently as a result of inflation, rising interest rates and supply chain disruptions, among other things, has and may continue to cause an increase in inventory shrinkage.
We must carry a significant amount of 8 inventory, especially before the holiday season selling period.
We must carry a significant amount of inventory, especially before the holiday season selling period.
The success of our stores depends on their timely receipt of merchandise, and a strong, efficient and flexible distribution network is critical to our ability to grow and to maintain a low-cost operating structure.
The success of our stores depends in part on their timely receipt of merchandise, and a strong, efficient and flexible distribution network is critical to our ability to grow and to maintain a low-cost operating structure.
Risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business, and we experienced increased shrinkage, as well as increased loss prevention costs, in Fiscal 2022. Loss or theft may be caused by error or misconduct of associates, customers, vendors, organized retail theft, or other third parties.
Risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business, and we experienced increased shrinkage, as well as increased loss prevention costs, in recent years. Loss or theft may be caused by error or misconduct of associates, customers, vendors, organized retail theft, or other third parties.
In addition, natural disasters, industrial accidents, acts of war, and public health issues such as pandemics or epidemics could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
In addition, natural disasters, industrial accidents, acts of war or global international conflicts (such as the conflict in Ukraine or the Hamas-Israel war), and public health issues (such as pandemics or epidemics) could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified Board of Directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new Board of Directors at an annual meeting; • limit the ability of stockholders to remove directors only for cause and only upon the affirmative vote of at least 75% of the outstanding shares of our common stock; • prohibit stockholders from calling special meetings of stockholders; • provide that the Board of Directors is expressly authorized to alter or repeal our amended and restated bylaws; and • require the approval of holders of at least 75% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.
These provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified Board of Directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new Board of Directors at an annual meeting; • limit the ability of stockholders to remove directors only for cause and only upon the affirmative vote of at least 75% of the outstanding shares of our common stock; • prohibit stockholders from calling special meetings of stockholders; • provide that the Board of Directors is expressly authorized to alter or repeal our amended and restated bylaws; and • require the approval of holders of at least 75% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation.
Although we endeavor to protect consumer identity and payment information through the implementation and modification of security technologies, processes and procedures, including training programs for employees to raise awareness about phishing, malware and other cyber risks and certification of our major technology suppliers and any outsourced services through accepted security certification measures, we could experience increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication and complexity.
Although we endeavor to protect consumer identity and payment information through the implementation and modification of security technologies, processes and procedures, including training programs for employees to raise awareness about phishing, malware and other cyber risks, we could experience increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication and complexity.
Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular power center.
Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, a general downturn in the local area where our store is located, increased competition from alternative retail options such as those accessible via the internet or a decline in the desirability of the shopping environment of a particular power center.
Consumer spending habits are affected by, among other things, prevailing global economic conditions, inflation (including the costs of basic necessities and other goods), levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.
These factors include, among other things, prevailing global economic conditions, inflation (including the costs of basic necessities and other goods), levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.
Any decreases in consumer discretionary spending could result in a decrease in store traffic and same store sales, all of which could negatively affect the Company’s business, operations, liquidity, financial results and/or stock price, particularly if consumer spending levels are depressed for a prolonged period of time.
Any decreases in consumer discretionary spending could result in a decrease in store traffic and same store sales, all of which could negatively affect the Company’s business, operations, liquidity, financial results and/or stock price, particularly if consumer spending levels are depressed for a prolonged period of time. We face increased competition from other retailers that could adversely affect our business.
We are subject to federal, state and local laws, rules and regulations in the operation of our business. In addition to complying with current laws, rules and regulations, we must also comply with new and changing laws and regulations, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business.
In addition to complying with current laws, rules and regulations, we must also comply with new and changing laws and regulations, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business.
Failure to effectively execute our opportunistic inventory buying and inventory management strategies could adversely affect our performance and our reputation. 10 In addition to our own execution, we may need to react to factors affecting inventory flow that are outside our control, such as adverse weather, natural disasters, epidemics or pandemics (including COVID-19) or other changes in conditions affecting our vendors and others in our supply chain, such as political instability, labor issues (including strikes or threats of strikes and scarcity of labor) and increased labor costs, reduced freight capacity and other transportation issues, or increasing cost of regulations.
In addition to our own execution, we may need to react to factors affecting inventory flow that are outside our control, such as adverse weather, natural disasters, epidemics or pandemics or other changes in conditions affecting our vendors and others in our supply chain, such as political instability, labor issues (including strikes or threats of strikes and scarcity of labor) and increased labor costs, reduced freight capacity and other transportation issues, or increasing cost of regulations.
A disruption within our distribution network, including the shutdown of or loss of significant capacity by one or more of our current primary distribution centers, such as we experienced in Spring 2020 as a result of the COVID-19 pandemic, could adversely affect our ability to deliver inventory in a timely manner and significantly disrupt our business.
A disruption within our distribution network, including the shutdown of or loss of significant capacity by one or more of our current primary distribution centers could adversely affect our ability to deliver inventory in a timely manner and significantly disrupt our business.
Further, our computer systems and the third-party systems of our vendors are also subject to damage or interruption from a number of non-criminal causes, including power outages; computer and telecommunications failures; computer viruses; and design or usage errors by our employees or contractors.
Further, our computer systems and the third-party systems of our vendors are also subject to damage or interruption from a number of non-criminal causes, including power outages; computer and telecommunications failures; computer viruses; and design or usage errors by our employees or contractors. Moreover, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Our disclosure on these matters and our failure, or perceived failure, to meet our goals and otherwise effectively address these matters, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations.
Our disclosure on these matters and our failure, or perceived failure, to meet our goals and otherwise effectively address these matters, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations. In addition, we could be criticized for the scope of our ESG initiatives.
A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales. Many of our stores are strategically located in off-mall shopping areas known as “power centers.” Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
Many of our stores are strategically located in off-mall shopping areas known as “power centers.” Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations.
If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations. 7 A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales.
These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors they choose or to cause us to take other corporate actions they desire.
These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors they choose or to cause us to take other corporate actions they desire. Our business could be impacted as a result of actions by activist stockholders or others.
These executives and other key personnel may be hired by our competitors, some of which have considerably more financial resources than we do.
We depend on the contributions of key personnel in various functions for our continued success. These executives and other key personnel may be hired by our competitors, some of which have considerably more financial resources than we do.
We have increasingly utilized social media in our marketing and employment recruiting efforts in order to reach as many current and potential new customers and potential employment candidates as efficiently and cost effectively as possible, and have also retained third parties, such as influencers, with expertise and distinction in the social media realm to bolster our social media efforts.
We have increasingly utilized social media in our marketing and employment recruiting efforts in order to reach as many current and potential new customers and potential employment candidates as efficiently and cost effectively as possible, and have also retained third parties, such as influencers, with expertise and distinction in the social media realm to bolster our social media efforts and our perceived affiliation with these individuals could cause us brand or reputational damage in the event they are perceived to be or take actions inconsistent with our brands and values.
Our debt obligations also include $33.4 million of finance lease obligations as of January 28, 2023. Estimated cash required to make interest payments for these debt obligations, net of the impact of our interest rate swap, amounts to approximately $63.5 million in the aggregate for the fiscal year ending February 3, 2024.
Estimated cash required to make interest payments for these debt obligations, net of the impact of our interest rate swap, amounts to approximately $63.1 million in the aggregate for the fiscal year ending February 1, 2025.
The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate significantly. For example, in Fiscal 2022, our stock price fluctuated from a high of $243.94 to a low of $106.47.
Risks Related to Ownership of Our Common Stock Our stock price has been and may continue to be volatile. The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate significantly. For example, in Fiscal 2023, our stock price fluctuated from a high of $239.94 to a low of $115.66.
We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods to a greater extent than we have in recent years due to current economic conditions.
Certain of these risks, such as risks arising from political volatility, may be enhanced in 2024 and other election years. We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods to a greater extent than we have in recent years due to current economic conditions.
Finally, if our vendors are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of high quality merchandise available to us could be materially reduced.
Finally, if our vendors are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of high-quality merchandise available to us could be materially reduced. 10 If our relationships with our vendors are disrupted, we may not be able to acquire the merchandise we require in sufficient quantities or on terms acceptable to us.
Strategic Risks We may not be able to sustain our growth plans or successfully implement our long-range strategic goals. Our growth largely depends on our ability to successfully open and operate new stores, as well as to expand our distribution capabilities in order to support that growth.
Our growth largely depends on our ability to successfully open and operate new stores, as well as to expand our distribution capabilities in order to support that growth.
Potential issues associated with implementing technology initiatives and the time and resources required to optimize the benefits of new elements of our systems and infrastructure could reduce the efficiency of our operations in the short term. 14 We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.
Potential issues associated with implementing technology initiatives and the time and resources required to optimize the benefits of new elements of our systems and infrastructure could reduce the efficiency of our operations in the short term.
As laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our reputation or subject us to fines or other penalties.
As laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our reputation or subject us to fines or other penalties. 16 Risk Related to Our Substantial Indebtedness and Corporate Structure Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.
Many stakeholders, including investors, customers, employees, consumers and others, have increasingly focused on ESG topics, including environmental sustainability and corporate social responsibility matters such as climate change, packaging and waste reduction, energy consumption, and diversity, equity and inclusion. We face pressures from these constituencies to meet our goals related to, and to make significant advancements toward achievements in, these areas.
Many stakeholders, including investors, customers, employees, consumers and others, have increasingly focused on ESG topics, including environmental sustainability and corporate social responsibility matters such as climate change, packaging and waste reduction, energy consumption, and diversity, equity and inclusion in a variety of ways that are not necessarily consistent.
Extreme and/or unseasonable weather conditions caused by climate change or otherwise, or natural disasters, could have a significant adverse effect on our business. Our business is susceptible to risks associated with climate change, which may cause more frequent and extreme weather events.
Our business is susceptible to risks associated with climate change, which may cause more frequent and extreme weather events.
In addition, as we execute inventory localization initiatives, there could be disruptions in inventory flow and placement.
In addition, as we execute inventory localization initiatives, there could be disruptions in inventory flow and placement. Failure to effectively execute our opportunistic inventory buying and inventory management strategies could adversely affect our performance and our reputation.
As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations.
As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The deterioration of income from, 17 or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us.
We accept payments using a variety of methods, including cash, checks, credit and debit cards, and gift cards, and we may offer new payment options over time.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business. We accept payments using a variety of methods, including cash, checks, credit and debit cards, and gift cards, and we may offer new payment options over time.
Damage to our reputation in any form could result in declines in customer loyalty and sales, affect our vendor relationships, development opportunities and associate retention, and otherwise adversely affect our business. Legal, Regulatory, Compliance and Tax Risks Difficulty complying with existing and changing laws, rules, regulations and local codes could negatively affect our business operations and financial performance.
Legal, Regulatory, Compliance and Tax Risks Difficulty complying with existing and changing laws, rules, regulations and local codes could negatively affect our business operations and financial performance. We are subject to federal, state and local laws, rules and regulations in the operation of our business.
Such costs may have an adverse impact our business and results of operations. We also may face potential governmental enforcement actions or private litigation challenging our ESG and sustainability goals, or our disclosure of those goals and our metrics for measuring achievement of them, which may increase our costs of compliance.
We also may face potential governmental enforcement actions or private litigation challenging our ESG and sustainability goals, or our disclosure of those goals and our metrics for measuring achievement of them, which may increase our costs of compliance, damage our reputation, or cause investors or consumers to lose confidence in us. 8 Extreme and/or unseasonable weather conditions caused by climate change or otherwise, or natural disasters, could have a significant adverse effect on our business.
In addition, developing and acting on ESG initiatives, including collecting, measuring and reporting related data, can be costly, difficult and time consuming.
Our failure to meet shifting stakeholder expectations could negatively impact our brand, image, reputation, credibility, and the willingness of our customers and suppliers to do business with us. In addition, developing and acting on ESG initiatives, including collecting, measuring and reporting related data, can be costly, difficult and time consuming.
To the extent that future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other viruses adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described throughout this Annual Report. We face increased competition from other retailers that could adversely affect our business.
Such public health crises, epidemics and pandemics, could adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described throughout this Annual Report. Strategic Risks We may not be able to sustain our growth plans or successfully implement our long-range strategic goals.
As of January 28, 2023, our obligations include (i) $942.0 million, inclusive of original issue discount, under our $1,200.0 million senior secured term loan facility (Term Loan Facility) and (ii) $507.7 million under the Convertible Notes. We had no outstanding balance on our $900.0 million asset-based lending facility (ABL Line of Credit) as of January 28, 2023.
We had no outstanding balance on our $900.0 million asset-based lending facility (ABL Line of Credit) as of February 3, 2024. Our debt obligations also include $29.1 million of finance lease obligations as of February 3, 2024.
Removed
The COVID-19 pandemic has significantly adversely impacted, and future outbreaks of COVID-19, new COVID-19 variants or other public health-related concerns could adversely impact, our business. The COVID-19 pandemic disrupted our business and had a significant adverse impact on our financial performance and condition, operating results, liquidity and cash flows.
Added
Consumer spending levels and shopping behaviors are affected by various economic conditions, which can affect our business or the retail industry generally as a result.
Removed
In particular, in Fiscal 2020, the Company temporarily closed all of its stores, distribution centers (other than processing of received inventory) and corporate offices for a period of months to combat the rapid spread of COVID-19.
Added
Some of our competitors are larger than we are or have more experience than we do in selling certain product lines or through certain channels.
Removed
In addition, as a result of the uncertainty regarding the COVID-19 pandemic, the Company took a number of measures in Fiscal 2020 to manage its liquidity, including careful management of operating expenses, working capital and capital expenditures, as well as temporarily suspending the Company’s share repurchase program.
Added
Additionally, existing competitors may consolidate with other retailers, expand their merchandise offerings, expand their e-commerce capabilities, and/or add new sales channels, change their pricing strategies, or use technology more effectively than we do, including the use of artificial intelligence.
Removed
The COVID-19 pandemic had a sustained adverse impact on global economic activity and caused significant volatility and negative pressure in financial markets, labor markets and the global supply chain.
Added
More generally, consumer e-commerce spending may continue to increase, as it has in recent years, while our business is exclusively in brick-and-mortar stores. If we fail to compete effectively, our sales and results of operations could be adversely affected.
Removed
During the COVID-19 pandemic, governmental authorities nationally and locally took, and may in the future take, numerous actions in an effort to slow the spread of COVID-19, including travel restrictions, restrictions on public gatherings, “shelter at home” orders and advisories, temporary closure of non-essential businesses and quarantining of people who may have been exposed to the virus.
Added
We face pressures from certain constituencies to meet our goals related to, and to make significant advancements toward achievements in, these areas.
Removed
While the impact of the COVID-19 pandemic on our business has largely abated at this time, and the U.S. has announced that the COVID-19 health emergency will expire in May 2023, the impact of COVID-19, including the impact of restrictions imposed to combat its spread, could adversely impact our business, in particular in the event that infection rates in the U.S. rise or new COVID-19 variants emerge.
Added
For example, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on companies doing business in California. In addition, the SEC has adopted final rulemaking on climate change disclosures that could increase compliance burdens and associated regulatory costs and complexity.
Removed
Future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns could adversely impact and cause disruption to our business, financial performance and condition, operating results, liquidity and cash flows.
Added
Public health crises, epidemics or pandemics, such as the COVID-19 pandemic have had, and could in the future have, a negative impact on the Company’s business and operations. Public health crises, epidemics or pandemics have had, and could in the future have, a negative impact on our business and operations, including Company sales and cash flow.
Removed
Factors 7 that could negatively impact our ability to successfully operate during future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns, either more broadly or within our stores, include: • our ability to continue to operate and preserve liquidity; • our ability to retain and incentivize associates; • our ability to manage supply chain disruptions due to closed factories or distribution centers or other events, reduced workforces or labor shortages, increased labor and materials costs, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas; • reduced demand for the merchandise we sell or our ability to move existing inventory, including potentially having to sell existing inventory at a discount or write-down the value of inventory, and the costs, challenges and expenses of updating, procuring and replacing inventory; • delays in, or our ability to complete, planned store openings on the expected terms or timing, or at all; • fluctuations in regional and local economies, including inflation, and related impacts on consumer confidence and spending; • our ability to attract customers to our stores, and the willingness of our associates to staff our stores and distribution centers, given the risks, or perceived risks, of gathering in public places; • our ability to negotiate payment terms with vendors and landlords; • the impact of pandemic-related litigation or claims from customers, associates, suppliers, regulators or other third parties; • incremental costs to operate during a pandemic, including costs of implementing additional safety measures; and • difficulty accessing debt and equity capital on attractive terms, or at all, to fund business operations or address maturing liabilities.
Added
Such public health crises, epidemics and pandemics have the potential to create significant volatility, uncertainty and worldwide economic disruption, resulting in an economic slowdown of potentially extended duration, as seen with the COVID-19 pandemic.
Removed
The extent of future outbreaks of the COVID-19 pandemic, new COVID-19 variants or other public health-related concerns on our business, financial performance and condition, operating results, liquidity and cash flows will depend largely on future developments, including the production and administration of effective medical treatments and vaccines, the timing and extent of the recovery in traffic and consumer spending at our stores, additional costs and delays related to our supply chain, reduced workforces or labor shortages and scarcity of raw materials, and any future required store closures, all of which are highly uncertain and cannot be predicted.
Added
The Company carries information security risk insurance that is designed to mitigate against certain potential losses 13 arising from a cybersecurity incident. However, there is no guarantee that this insurance coverage will be sufficient to cover all possible claims and we could suffer losses that could have a material adverse effect on our business.
Removed
If our relationships with our vendors are disrupted, we may not be able to acquire the merchandise we require in sufficient quantities or on terms acceptable to us.
Added
Damage to our reputation in any form could result in declines in customer loyalty and sales, affect our vendor relationships, development opportunities and associate retention, and otherwise adversely affect our business. The loss of executives or other key personnel may disrupt our business and adversely affect our financial results.
Removed
Risk Related to Our Substantial Indebtedness and Corporate Structure Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.
Added
Additionally, acts of violence at, or threatened against, our stores, including active shooter situations, may, in addition to other operational impact, result in damage and restricted access to our stores and/or store closures for short or extended periods of time, all of which could materially adversely affect our financial performance.
Removed
The discontinuance of LIBOR and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations. Our Term Loan Facility currently uses LIBOR as a reference rate to calculate interest rates.
Added
As of February 3, 2024, our obligations include (i) $933.4 million, inclusive of original issue discount, under our $1,200.0 million senior secured term loan facility (Term Loan Facility) and (ii) $156.2 million under our 2.25% Convertible Notes due April 15, 2025 and $297.1 million under our 1.25% Convertible Notes due December 15, 2027 (collectively, our “Convertible Notes”).
Removed
The United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR, and most LIBOR tenors are not expected to be published after June 30, 2023. The U.S.
Added
These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.
Removed
Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, announced an alternative to U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (SOFR).
Added
Item 1B. Unresolved Staff Comments Not Applicable. 18

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own approximately 43 acres of land in Edgewater Park, New Jersey on which we have constructed our Edgewater Park, New Jersey distribution center and an office facility. We lease approximately 68,000 square feet of office space in New York City (east coast buying office), and 50,000 square feet of office space in Los Angeles, California (west coast buying office).
Biggest changeWe own approximately 43 acres of land in Edgewater Park, New Jersey on which we have constructed our Edgewater Park, New Jersey (Route 130 South) distribution center and an office facility.
Store leases generally provide for fixed monthly rental payments, plus the payment, in most cases, of real estate taxes and 20 other charges with escalation clauses. In many locations, our store leases contain formulas providing for the payment of additional rent based on sales.
Store leases generally provide for fixed monthly rental payments, plus the payment, in most cases, of real estate taxes and other charges with escalation clauses. In some locations, our store leases contain formulas providing for the payment of additional rent based on sales.
Item 2. Pr operties We own the land and/or buildings for 27 of our stores and have leases for 900 of our stores. Our new stores are generally leased for an initial term of ten years, the majority of which are subject to our option to renew such leases for several additional five-year periods.
Item 2. Pr operties We own the land and/or buildings for 26 of our stores and have leases for 981 of our stores. Our new stores are generally leased for an initial term of ten years, the majority of which are subject to our option to renew such leases for several additional five-year periods.
Most of our stores are freestanding or located in regional power centers, strip shopping centers or in malls. We own approximately 235 acres of land in Burlington and Florence, New Jersey on which we have constructed our corporate campus, which includes our corporate headquarters and a warehouse facility.
Some of our stores are freestanding or located in regional power centers, strip shopping centers or in malls. We own approximately 235 acres of land in Burlington and Florence, New Jersey on which we have constructed our corporate campus, which includes our corporate headquarters and the Burlington, New Jersey (Route 130 North) warehousing facility.
As described in Item 1, Business, we currently operate multiple distribution centers and warehousing facilities.
We lease approximately 103,000 square feet of office space in New York City (east coast buying office), and 50,000 square feet of office space in Los Angeles, California (west coast buying office). As described in Item 1, Business, we currently operate multiple distribution centers and warehousing facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLegal Proceedings In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property, privacy and other claims.
Biggest changeLegal Proceedings In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property and other claims.
Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 16, "Commitments and Contingencies," to our Consolidated Financial Statements for further detail. Item 4. Mine Saf ety Disclosures Not applicable. 21 PART II
Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 16, "Commitments and Contingencies," to our Consolidated Financial Statements for further detail. Item 4. Mine Saf ety Disclosures Not applicable. 20 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 21 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6. Reserved 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 40 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 20 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Reserved 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeApparel Retailers Index $ 100.00 $ 108.40 $ 120.16 $ 127.64 $ 137.91 $ 149.71 S&P Retailing Index $ 100.00 $ 107.35 $ 128.30 $ 180.26 $ 189.76 $ 155.80 23 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding our purchases of common stock during the three fiscal months ended January 28, 2023: Month Total Number of Shares Purchased(1) Average Price Paid Per Share(2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) October 30, 2022 through November 26, 2022 68,023 $ 143.91 68,007 $ 388,985 November 27, 2022 through December 31, 2022 161,768 $ 195.99 161,561 $ 357,321 January 1, 2023 through January 28, 2023 45,461 $ 219.85 45,461 $ 347,326 Total 275,252 275,029 (1) The number of shares purchased between October 30, 2022 and November 26, 2022, and between November 27, 2022 and December 31, 2022 include 16 shares and 207 shares, respectively, which were withheld for tax payments due upon the vesting of employee restricted stock awards, and do not reduce the dollar value that may yet be purchased under our share repurchase program.
Biggest changeApparel Retailers Index $ 100.00 $ 110.85 $ 117.75 $ 127.23 $ 138.11 $ 156.55 22 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding our purchases of common stock during the three fiscal months ended February 3, 2024: Month Total Number of Shares Purchased Average Price Paid Per Share(1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) October 29, 2023 through November 25, 2023 76,490 $ 127.91 76,490 $ 708,186 November 26, 2023 through December 30, 2023 468,668 $ 173.04 468,668 $ 627,085 December 31, 2023 through February 3, 2024 60,153 $ 194.39 60,153 $ 615,393 Total 605,311 605,311 (1) Includes commissions for the shares repurchased under our publicly announced share repurchase programs.
This graph assumes an initial 22 investment of $100 and assumes the reinvestment of dividends, if any. Such returns are based on historical results and are not intended to suggest future performance.
This graph assumes an initial investment of $100 and 21 assumes the reinvestment of dividends, if any. Such returns are based on historical results and are not intended to suggest future performance.
The following graph compares the cumulative total stockholder return on our common stock from the closing prices as of the end of each fiscal year from February 3, 2018 through January 28, 2023, with the return on the Standard & Poor’s (S&P) 500 Index, the Dow Jones United States Apparel Retailers Index, and the S&P Retailing Index over the same period.
The following graph compares the cumulative total stockholder return on our common stock from the closing prices as of the end of each fiscal year from February 2, 2019 through February 3, 2024, with the return on the Standard & Poor’s (S&P) 500 Index and the Dow Jones United States Apparel Retailers Index over the same period.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “BURL.” Holders As of February 25, 2023, we had six holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “BURL.” Holders As of March 2, 2024, we had one holder of record of our common stock.
As of January 28, 2023, we had $347.3 million remaining under our share repurchase authorization. For a further discussion of our share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Repurchase Program.”
For a further discussion of our share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Repurchase Program.”
Base Period Indexed Returns for Fiscal Years Ended Company / Index February 3, 2018 February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 Burlington Stores, Inc. $ 100.00 $ 148.48 $ 187.88 $ 215.03 $ 198.95 $ 195.58 S&P 500 Index $ 100.00 $ 97.99 $ 116.78 $ 134.47 $ 160.45 $ 147.37 Dow Jones U.S.
Base Period Indexed Returns for Fiscal Years Ended Company / Index February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 Burlington Stores, Inc. $ 100.00 $ 126.53 $ 144.82 $ 133.99 $ 131.72 $ 114.46 S&P 500 Index $ 100.00 $ 119.18 $ 137.23 $ 163.75 $ 150.40 $ 183.21 Dow Jones U.S.
There were no shares withheld for tax payments between January 1, 2023 and January 28, 2023. (2) Includes commissions for the shares repurchased under our publicly announced share repurchase programs. (3) On February 16, 2022, our Board of Directors authorized the repurchase of $500.0 million of common stock, which is authorized to be executed through February 2024.
(2) On February 16, 2022, our Board of Directors authorized the repurchase of up to $500 million of common stock, which was authorized to be executed through February 2024. On August 15, 2023, our Board of Directors authorized the repurchase of up to an additional $500 million of common stock, which is authorized to be executed through August 2025.
Removed
Beginning with Fiscal 2022, we added the Dow Jones United States Apparel Retailers Index due to the similarities of the companies in that index with our line of business, and we will no longer provide a comparison to the S&P Retailing Index in future years.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRefer to the section below entitled “Results of Operations” for further explanation. 30 The following table shows our reconciliation of net income (loss) to Adjusted EBIT for Fiscal 2022, Fiscal 2021 and Fiscal 2020: (unaudited) (in thousands) Fiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Reconciliation of net income (loss) to Adjusted EBIT: Net income (loss) $ 230,123 $ 408,839 $ (216,499 ) Interest expense 66,474 67,502 97,767 Interest income (8,799 ) (189 ) (1,253 ) Loss on extinguishment of debt (a) 14,657 156,020 202 Costs related to debt issuances and amendments (b) — 3,419 3,633 Net favorable lease costs (c) 18,591 21,914 24,078 Impairment charges - long-lived assets 21,402 7,748 6,012 Litigation matters (d) 10,500 — 22,788 E-commerce closure (e) — — 1,549 Income tax expense (benefit) 77,386 136,459 (221,124 ) Adjusted EBIT $ 430,334 $ 801,712 $ (282,847 ) (a) Relates to the partial repurchases of the Convertible Notes, the redemption of the Secured Notes, as well as the refinancing of the Term Loan Facility.
Biggest changeRefer to the section below entitled “Results of Operations” for further explanation. 28 The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for Fiscal 2023, Fiscal 2022 and Fiscal 2021: (unaudited) (in thousands) Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 (53 Weeks) Reconciliation of net income to Adjusted EBIT and Adjusted EBITDA Net income $ 339,649 $ 230,123 $ 408,839 Interest expense 78,399 66,474 67,502 Interest income (24,633 ) (8,799 ) (189 ) Net favorable lease costs (a) 15,263 18,591 21,914 Loss on extinguishment of debt (b) 38,274 14,657 156,020 Costs related to debt amendments (c) 97 — 3,419 Impairment charges - long-lived assets 6,367 21,402 7,748 Litigation matters (d) 1,500 10,500 — Income tax expense 126,124 77,386 136,459 Adjusted EBIT 581,040 430,334 801,712 Depreciation and amortization 307,064 270,398 249,217 Adjusted EBITDA $ 888,104 $ 700,732 $ 1,050,929 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the Merger Transaction.
The Convertible Notes bear interest at a rate of 2.25% per year, payable semi-annually in cash, in arrears on April 15 and October 15 of each year, beginning on October 15, 2020. The Convertible Notes will mature on April 15, 2025, unless earlier converted, redeemed or repurchased.
The 2025 Convertible Notes bear interest at a rate of 2.25% per year, payable semi-annually in cash, in arrears on April 15 and October 15 of each year, beginning on October 15, 2020. The 2025 Convertible Notes will mature on April 15, 2025, unless earlier converted, redeemed or repurchased.
Additionally, due to the impact of the COVID-19 pandemic in Fiscal 2020, we are using Fiscal 2019 as the comparable previous year period when calculating comparable store sales for Fiscal 2021. The method of calculating comparable store sales varies across the retail industry. As a result, our definition of comparable store sales may differ from other retailers.
Due to the impact of the COVID-19 pandemic in Fiscal 2020, we are using Fiscal 2019 as the comparable previous year period when calculating comparable store sales for Fiscal 2021. The method of calculating comparable store sales varies across the retail industry. As a result, our definition of comparable store sales may differ from other retailers.
Gross margin is the difference between net sales and the cost of sales. Our cost of sales and gross margin may not be comparable to those of other entities, since some entities may include all of the costs related to their buying and distribution functions, certain store-related costs and other costs, in cost of sales.
Gross Margin . Gross margin is the difference between net sales and the cost of sales. Our cost of sales and gross margin may not be comparable to those of other entities, since some entities may include all of the costs related to their buying and distribution 29 functions, certain store-related costs and other costs, in cost of sales.
We present sales, net of sales taxes, in our Consolidated Statements of Income (Loss). We account for layaway sales in compliance with ASC Topic No. 606 “Revenue from Contracts with Customers.” Layaway sales are recognized upon delivery of merchandise to the customer.
We present sales, net of sales taxes, in our Consolidated Statements of Income. We account for layaway sales in compliance with ASC Topic No. 606 “Revenue from Contracts with Customers.” Layaway sales are recognized upon delivery of merchandise to the customer.
A critical accounting estimate meets two criteria: (1) it requires assumptions about highly uncertain matters and (2) there would be a material effect on the Consolidated Financial Statements from either using a different, although reasonable, amount within the range of the estimate in the current period or from reasonably likely period-to-period changes in the estimate. 38 While there are a number of accounting policies, methods and estimates affecting our Consolidated Financial Statements as addressed in Note 1 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies,” areas that are particularly critical and significant include: Revenue Recognition .
A critical accounting estimate meets two criteria: (1) it requires assumptions about highly uncertain matters and (2) there would be a material effect on the Consolidated Financial Statements from either using a different, although reasonable, amount within the range of the estimate in the current period or from reasonably likely period-to-period changes in the estimate. 37 While there are a number of accounting policies, methods and estimates affecting our Consolidated Financial Statements as addressed in Note 1 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies,” areas that are particularly critical and significant include: Revenue Recognition .
We present Adjusted Net Income (loss), Adjusted EBITDA and Adjusted EBIT, because we believe they are useful supplemental measures in evaluating the performance of our business and provide greater transparency into our results of operations.
We present Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT because we believe they are useful supplemental measures in evaluating the performance of our business and provide greater transparency into our results of operations.
Adjusted Net Income (Loss) has limitations as an analytical tool, and should not be considered either in isolation or as a substitute for net income (loss) or other data prepared in accordance with GAAP.
Adjusted Net Income has limitations as an analytical tool, and should not be considered either in isolation or as a substitute for net income or other data prepared in accordance with GAAP.
We include certain of these costs in the line items “Selling, general and administrative expenses” and “Depreciation and amortization” in our Consolidated Statements of Income (Loss).
We include certain of these costs in the line items “Selling, general and administrative expenses” and “Depreciation and amortization” in our Consolidated Statements of Income.
Sales of cold weather clothing are increased by early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns. Competition and Margin Pressure.
Sales of cold weather clothing are generally increased by early cold weather during the Fall, while sales of warm weather clothing are generally increased by early warm weather conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns. Competition and Margin Pressure.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in the line item “Accumulated other comprehensive loss” on the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in the line item “Accumulated other comprehensive income” on the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
For Fiscal 2022, we define comparable store sales as merchandise sales of those stores commencing on the first day of the fiscal month one year after the end of their grand opening activities, which normally conclude within the first two months of operations.
We define comparable store sales as merchandise sales of those stores commencing on the first day of the fiscal month one year after the end of their grand opening activities, which normally conclude within the first two months of operations.
Cash Flows for Fiscal 2021 Compared with Fiscal 2020 For a discussion of our cash flows for Fiscal 2021 compared to Fiscal 2020, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Fiscal 2021 10-K.
Cash Flows for Fiscal 2022 Compared with Fiscal 2021 For a discussion of our cash flows for Fiscal 2022 compared to Fiscal 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Fiscal 2022 10-K.
The Convertible Notes have an initial conversion rate of 4.5418 shares per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $220.18 per share of our common stock), subject to adjustment if certain events occur. The Convertible Notes are our general unsecured obligations.
The 2025 Convertible Notes have an initial conversion rate of 4.5418 shares per $1,000 principal amount of 2025 Convertible Notes (equivalent to an initial conversion price of approximately $220.18 per share of the Company’s common stock), subject to adjustment if certain events occur. The 2025 Convertible Notes are general unsecured obligations of the Company.
We define Adjusted EBITDA as net income (loss), exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) income tax expense (benefit); (v) depreciation and amortization; (vi) impairment charges; (vii) costs related to debt issuances and amendments; (viii) amounts related to certain litigation matters; (ix) costs related to closing the e-commerce store; and (x) other unusual, non-recurring or extraordinary expenses, losses, charges or gains We define Adjusted EBIT as net income (loss), exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) income tax expense(benefit); (v) impairment charges; (vi) net favorable lease costs; (vii) costs related to debt issuances and amendments; (viii) amounts related to certain litigation matters; (ix) costs related to closing the e-commerce store; and (x) other unusual, non-recurring or extraordinary expenses, losses, charges or gains.
We define Adjusted EBITDA as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) costs related to debt amendments; (v) income tax expense; (vi) depreciation and amortization; (vii) net favorable lease costs; (viii) impairment charges; (ix) amounts related to certain litigation matters; and (x) other unusual or non-recurring expenses, losses, charges or gains We define Adjusted EBIT as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) costs related to debt amendments; (v) income tax expense; (vi) impairment charges; (vii) net favorable lease costs; (viii) amounts related to certain litigation matters; and (ix) other unusual or non-recurring expenses, losses, charges or gains.
In addition, natural disasters, public health issues, industrial accidents and acts of war in various parts of the world, such as the current war in Ukraine, could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
In addition, natural disasters, public health issues, industrial accidents and acts of war or conflicts in various parts of the world (such as the conflict in Ukraine or the Hamas-Israel war), could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
Selling, general and administrative expenses The following table details selling, general and administrative expenses for Fiscal 2022 compared with Fiscal 2021.
Selling, general and administrative expenses The following table details selling, general and administrative expenses for Fiscal 2023 compared with Fiscal 2022.
A 1% change in the dollar amount of retail markdowns would have resulted in an increase in markdown dollars, at cost, of approximately $3.0 million for Fiscal 2022. Estimates are used to record inventory shortage at retail stores between physical inventories. Actual physical inventories are conducted at least annually to calculate actual shortage.
A 1% change in the dollar amount of retail markdowns would have resulted in an increase in markdown dollars, at cost, of approximately $2.9 million for Fiscal 2023. Estimates are used to record inventory shortage at retail stores between physical inventories. Actual physical inventories are conducted at least annually to calculate actual shortage.
Among other limitations, Adjusted EBIT does not reflect: • net interest expense; • losses on the extinguishment of debt; • costs related to debt issuances and amendments; • net favorable lease cost; • amounts charged for certain litigation matters; • impairment charges on long-lived assets; • costs related to closing the e-commerce store; • income tax expense (benefit); and • other unusual, non-recurring or extraordinary expenses, losses, charges or gains.
Among other limitations, Adjusted EBIT does not reflect: • net interest expense; • net favorable lease costs; • losses on the extinguishment of debt; • costs related to debt issuances and amendments; • amounts charged for certain litigation matters; • impairment charges on long-lived assets; • income tax expense; and • other unusual or non-recurring expenses, losses, charges or gains.
The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the U.S., or public health issues such as pandemics or epidemics, including the continuing COVID-19 pandemic, could lead to a decrease in spending by consumers.
The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the U.S., or public health issues such as pandemics or epidemics, could lead to a decrease in spending by consumers.
In addition, consumer purchasing patterns may be influenced by consumers’ disposable income, credit availability and debt levels. 26 A broad, protracted slowdown in the U.S. economy, an extended period of high unemployment rates, inflation rates, an uncertain global economic outlook or a credit crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis.
In addition, consumer purchasing patterns are generally influenced by consumers’ disposable income, credit availability and debt levels. 25 A broad, protracted slowdown or downturn in the U.S. economy, an extended period of high unemployment or inflation rates, an uncertain domestic or global economic outlook or a financial crisis could adversely affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual basis.
The change in our comparable store sales was as follows: Fiscal Year Ended January 28, 2023 -13% January 29, 2022 15% Various factors affect comparable store sales, including, but not limited to, weather conditions, current economic conditions, the timing of our releases of new merchandise and promotional events, the general retail sales environment, consumer preferences and buying trends, changes in sales mix among distribution channels, competition, and the success of marketing programs Gross Margin .
Fiscal Year Ended Change in Comparable Store Sales February 3, 2024 4% January 28, 2023 -13% January 29, 2022 15% Various factors affect comparable store sales, including, but not limited to, weather conditions, current economic conditions, the timing of our releases of new merchandise and promotional events, the general retail sales environment, consumer preferences and buying trends, changes in sales mix among distribution channels, competition, and the success of marketing programs.
The total Topic No. 740 liability was $11.9 million, inclusive of $8.0 million of interest and penalties included in our total Topic No. 740 liability neither of which is presented in the table above as we are not certain if and when these payments would be required.
The total Topic No. 740 liability was $10.1 million, inclusive of $7.0 million of interest and penalties included in our total Topic No. 740 liability neither of which is presented in the table above as we are not certain if and when these payments would be required.
Consumer spending habits, including spending for the merchandise that we sell, are affected by, among other things, prevailing global economic conditions, inflation, including the costs of basic necessities and other goods, levels of employment, salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.
In addition to inflation, consumer spending habits, including spending for the merchandise that we sell, are affected by, among other things, prevailing global economic conditions, the costs of basic necessities and other goods, levels of employment, salaries and wage rates, prevailing interest rates, reductions in government benefits and lower tax refunds, housing costs, energy costs, commodities pricing, income tax rates and policies, consumer confidence and consumer perception of economic conditions.
Loss on Extinguishment of Debt During Fiscal 2022, we entered into separate, privately negotiated exchange agreements with certain holders of the Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $64.6 million in aggregate principal amount of Convertible Notes held by them for $78.2 million in cash.
During the first quarter of Fiscal 2022, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $64.6 million in aggregate principal amount of 2025 Convertible Notes held by them for $78.2 million in cash.
Our average interest rates and average balances related to our variable rate debt for Fiscal 2022 compared with Fiscal 2021 are summarized in the table below: Fiscal Year Ended January 28, January 29, 2023 2022 Average balance – ABL Line of Credit (in millions) $ — $ — Average interest rate – ABL Line of Credit — — Average balance – Term Loan Facility (in millions) (a) $ 952.2 $ 960.4 Average interest rate – Term Loan Facility 4.0% 2.0% (a) Excludes original issue discount Income tax expense Income tax expense was $77.4 million for Fiscal 2022 compared with $136.5 million for Fiscal 2021.
Our average interest rates and average balances related to our variable rate debt for Fiscal 2023 compared with Fiscal 2022 are summarized in the table below: Fiscal Year Ended February 3, January 28, 2024 2023 Average balance – ABL Line of Credit (in millions) $ — $ — Average interest rate – ABL Line of Credit — — Average balance – Term Loan Facility (in millions) (a) $ 942.5 $ 952.2 Average interest rate – Term Loan Facility 7.2% 4.0% (a) Excludes original issue discount Income tax expense Income tax expense was $126.1 million for Fiscal 2023 compared with $77.4 million for Fiscal 2022.
We have opportunities to expand our offerings in certain existing categories, such as ladies’ apparel, bath and cosmetic merchandise, housewares, and décor for the home, and maintain the flexibility to introduce new categories as we expand our merchandising capabilities. • Expanding and Enhancing Our Retail Store Base.
We have opportunities to expand our offerings in certain existing categories, such as ladies’ apparel, beauty, and home merchandise, and maintain the flexibility to introduce new categories as we expand our merchandising capabilities. • Expanding and Enhancing Our Retail Store Base.
General We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 927 stores as of January 28, 2023 in 46 states and Puerto Rico.
General We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1007 stores as of February 3, 2024 in 46 states, Washington D.C. and Puerto Rico.
However, future 33 impairment charges could be required if we do not achieve our current revenue or cash flow projections for each store. Refer to Note 6, “Impairment Charges,” for further discussion. Other income, net Other income, net improved $15.3 million to $26.9 million during Fiscal 2022.
However, future 31 impairment charges could be required if we do not achieve our current revenue or cash flow projections for each store. Refer to Note 6, “Impairment Charges,” for further discussion. Other income, net Other income, net improved $14.0 million to $40.9 million during Fiscal 2023.
Key performance and non-GAAP measures used by management include net income (loss), Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin, inventory, store payroll and liquidity. 27 Net income (loss) . We earned net income of $230.1 million during Fiscal 2022 compared with of $408.8 million during Fiscal 2021.
Key performance and non-GAAP measures used by management include net income, Adjusted Net Income, Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin, inventory, store payroll and liquidity. 26 Net income . We earned net income of $339.6 million during Fiscal 2023 compared with $230.1 million during Fiscal 2022.
An increase in workers’ compensation claims by employees, health insurance claims by employees or general liability claims may result in a corresponding increase in our costs related to these claims. Insurance reserves amounted to $86.2 million and $81.6 million at January 28, 2023 and January 29, 2022, respectively.
An increase in workers’ compensation claims by employees, health insurance claims by employees or general liability claims may result in a corresponding increase in our costs related to these claims. Insurance reserves amounted to $94.8 million and $86.2 million at February 3, 2024 and January 28, 2023, respectively.
Adjusted EBITDA has limitations as an analytical tool, and should not be considered either in isolation or as a substitute for net income (loss) or other data prepared in accordance with GAAP.
Adjusted EBIT and Adjusted EBITDA have limitations as analytical tools, and should not be considered either in isolation or as a substitute for net income or other data prepared in accordance with GAAP.
We estimate that we will spend approximately $560 million, net of approximately $10 million of landlord allowances, in capital expenditures during Fiscal 2023, including approximately $300 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
We estimate that we will spend approximately $750 million, net of approximately $40 million of landlord allowances, in capital expenditures during Fiscal 2024, including approximately $340 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
We define Adjusted Net Income (Loss) as net income (loss), exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) costs related to debt issuances and amendments; (iii) loss on extinguishment of debt; (iv) impairment charges; (v) amounts related to certain litigation matters; (vi) non-cash interest on the 2.25% Convertible Senior Notes due 2025 (Convertible Notes); (vii) costs related to closing the e-commerce store; and (viii) other unusual, non-recurring or extraordinary expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income (Loss).
We define Adjusted Net Income as net income, exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) loss on extinguishment of debt; (iii) costs related to debt amendments; (iv) impairment charges; (v) amounts related to certain litigation matters; and (vi) other unusual or non-recurring expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.
Among other limitations, Adjusted Net Income (Loss) does not reflect the following items, net of their tax effect: • net favorable lease costs; • costs related to debt issuances and amendments; • losses on extinguishment of debt; • amounts charged for certain litigation matters; • non-cash interest expense related to original issue discount on the Convertible Notes; • impairment charges on long-lived assets; • costs related to closing the e-commerce store; and • other unusual, non-recurring or extraordinary expenses, losses, charges or gains.
Among other limitations, Adjusted Net Income does not reflect the following items, net of their tax effect: • net favorable lease costs; • losses on extinguishment of debt; • costs related to debt amendments; • impairment charges on long-lived assets; • amounts charged for certain litigation matters; and • other unusual or non-recurring expenses, losses, charges or gains.
Impairment charges—long-lived assets Impairment charges related to long-lived assets were $21.4 million and $7.7 million during Fiscal 2022 and Fiscal 2021, respectively, related to four stores sold below carrying value as well as impairment of store-level assets and lease assets at twelve stores during Fiscal 2022, compared to impairment of store-level assets and lease assets at nine stores during Fiscal 2021.
Impairment charges—long-lived assets Impairment charges related to long-lived assets were $6.4 million and $21.4 million during Fiscal 2023 and Fiscal 2022, respectively, related to unrecoverable fixed assets at eleven underperforming stores and unrecoverable lease assets at three of those stores during Fiscal 2023, compared to four stores sold below carrying value as well as impairment of store-level assets and lease assets at twelve stores during Fiscal 2022.
Our store and supply chain teams must continue to respond to the challenge of becoming more responsive to the sales chase, enhancing their ability at flexing up and down based on trends. Their ability to appropriately flex based on the ongoing trends allows us to maximize leverage on sales. • Optimizing Markdowns.
Our store and supply chain teams must continue to respond to the sales chase, enhancing their ability at flexing up and down based on trends, and allowing us to maximize leverage on sales. • Optimizing Markdowns.
Working capital equals current assets (exclusive of restricted cash) minus current liabilities. We had working capital at January 28, 2023 of $365.3 million compared with $593.4 million at January 29, 2022.
Working capital equals current assets (exclusive of restricted cash) minus current liabilities. We had working capital at February 3, 2024 of $298.2 million compared with $365.3 million at January 28, 2023.
Executive Summary Store Openings, Closings and Relocations During Fiscal 2022, we opened 113 new stores, inclusive of 22 relocations, and closed four stores, exclusive of the aforementioned relocations, bringing our store count as of January 28, 2023 to 927 stores. We continue to pursue our growth plans and invest in capital projects that meet our financial requirements.
Executive Summary Store Openings, Closings and Relocations During Fiscal 2023, we opened 104 new stores, inclusive of 13 relocations, and closed 11 stores, exclusive of the aforementioned relocations, bringing our store count as of February 3, 2024 to 1007 stores. We continue to pursue our growth plans and invest in capital projects that meet our financial requirements.
Refer to the section below entitled “Results of Operations” for further explanation. 28 The following table shows our reconciliation of net income (loss) to Adjusted Net Income (Loss) for Fiscal 2022, Fiscal 2021 and Fiscal 2020: (unaudited) (in t housands) Fiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Reconciliation of net income (loss) to Adjusted Net Income (Loss): Net income (loss) $ 230,123 $ 408,839 $ (216,499 ) Net favorable lease costs (a) 18,591 21,914 24,078 Non-cash interest expense on convertible notes (b) — — 23,988 Costs related to debt issuances and amendments (c) — 3,419 3,633 Loss on extinguishment of debt (d) 14,657 156,020 202 Impairment charges - long-lived assets 21,402 7,748 6,012 Litigation matters (e) 10,500 — 22,788 E-commerce closure (f) — — 1,549 Tax effect (g) (14,503 ) (24,741 ) (35,273 ) Adjusted Net Income (Loss) $ 280,770 $ 573,199 $ (169,522 ) (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction).
Refer to the section below entitled “Results of Operations” for further explanation. 27 The following table shows our reconciliation of net income to Adjusted Net Income for Fiscal 2023, Fiscal 2022 and Fiscal 2021: (unaudited) (in thousands) Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 (53 Weeks) Reconciliation of net income to Adjusted Net Income: Net income $ 339,649 $ 230,123 $ 408,839 Net favorable lease costs (a) 15,263 18,591 21,914 Loss on extinguishment of debt (b) 38,274 14,657 156,020 Costs related to debt amendments (c) 97 — 3,419 Impairment charges - long-lived assets 6,367 21,402 7,748 Litigation matters (d) 1,500 10,500 — Tax effect (e) (7,770 ) (14,503 ) (24,741 ) Adjusted Net Income $ 393,380 $ 280,770 $ 573,199 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction).
Gross margin as a percentage of net sales decreased to 40.4% during Fiscal 2022, compared with 41.6% during Fiscal 2021, driven primarily by decreased merchandise margins, primarily due to higher markdowns and increased shortage, as well as increased freight costs. 31 Product sourcing costs, which are included in selling, general and administrative expenses, decreased approximately 120 basis points as a percentage of net sales.
Gross margin as a percentage of net sales expanded to 42.5% during Fiscal 2023, compared with 40.4% during Fiscal 2022, driven primarily by higher merchandise margins and improved freight costs. Product sourcing costs, which are included in selling, general and administrative expenses, increased approximately 20 basis points as a percentage of net sales. Inventory .
The table above excludes our irrevocable letters of credit guaranteeing payment and performance under certain leases, insurance contracts, debt agreements, merchandising agreements and utility agreements in the amount of $51.1 million as of January 28, 2023. As of January 28, 2023, insurance reserves amounted to $86.2 million.
The table above excludes our irrevocable letters of credit guaranteeing payment and performance under certain leases, insurance contracts, debt agreements, merchandising agreements and utility agreements in the amount of $75.8 million as of February 3, 2024. As of February 3, 2024, insurance reserves amounted to $94.8 million.
In addition, we made capital expenditures of $145.1 million to support our supply chain initiatives, with the remaining capital to support information technology and other business initiatives. We incurred cash spend on capital expenditures of $319.0 million, net of approximately $34.1 million of landlord allowances, during Fiscal 2021.
In addition, we made capital expenditures of $116.4 million to support our supply chain initiatives, with the remaining capital to support information technology and other business initiatives. We incurred capital expenditures of $427.0 million (inclusive of accrued capital expenditures), net of approximately $23.1 million of landlord allowances, during Fiscal 2022.
Certain of the general factors that may cause such fluctuations are discussed in Item 1A, Risk Factors and elsewhere in this Annual Report. 39 Inflation During Fiscal 2022 and Fiscal 2021, we have experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods.
Certain of the general factors that may cause such fluctuations are discussed in Item 1A, Risk Factors and elsewhere in this Annual Report. Inflation While freight rates are now moderating, we have experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods, as well as in occupancy, wages, and other operating costs.
We intend to expand and enhance our retail store base through the following initiatives: • Adhering to a Market Focused and Financially Disciplined Real Estate Strategy. We have grown our store base consistently since our founding in 1972, developing more than 99% of our stores organically.
We intend to expand and enhance our retail store base through the following initiatives: • Adhering to a Market Focused and Financially Disciplined Real Estate Strategy. We have grown our store base consistently since our founding in 1972. We believe there is significant opportunity to expand our retail store base in the United States.
Percentage of Net Sales Fiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Other revenue 0.2 0.2 0.2 Total revenue 100.2 100.2 100.2 Cost of sales 59.6 58.4 61.8 Selling, general and administrative expenses 33.1 30.8 40.5 Costs related to debt issuances and amendments — 0.0 0.1 Depreciation and amortization 3.1 2.7 3.8 Impairment charges - long-lived assets 0.2 0.1 0.1 Other income - net (0.3 ) (0.1 ) (0.1 ) Loss on extinguishment of debt 0.2 1.7 0.0 Interest expense 0.8 0.7 1.7 Total costs and expenses 96.7 94.3 107.9 Income (loss) before income tax expense (benefit) 3.5 5.9 (7.7 ) Income tax expense (benefit) 0.9 1.5 (3.8 ) Net income (loss) 2.6 % 4.4 % (3.9 )% 32 Performance for Fiscal Year Ended January 28, 2023 (Fiscal 2022) Compared with Fiscal Year Ended January 29, 2022 (Fiscal 2021) Net sales Net sales decreased $622.0 million, or 6.7%, to $8,684.5 million, primarily driven by a decrease of 13% in comparable store sales during Fiscal 2022.
Percentage of Net Sales Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 Net sales 100.0 % 100.0 % 100.0 % Other revenue 0.2 0.2 0.2 Total revenue 100.2 100.2 100.2 Cost of sales 57.5 59.6 58.4 Selling, general and administrative expenses 33.9 33.1 30.8 Costs related to debt amendments 0.0 — 0.0 Depreciation and amortization 3.2 3.1 2.7 Impairment charges - long-lived assets 0.1 0.2 0.1 Other income - net (0.4 ) (0.3 ) (0.1 ) Loss on extinguishment of debt 0.4 0.2 1.7 Interest expense 0.8 0.8 0.7 Total costs and expenses 95.5 96.7 94.3 Income before income tax expense 4.7 3.5 5.9 Income tax expense 1.3 0.9 1.5 Net income 3.4 % 2.6 % 4.4 % 30 Performance for Fiscal Year Ended February 3, 2024 (Fiscal 2023) Compared with Fiscal Year Ended January 28, 2023 (Fiscal 2022) Net sales Net sales improved $1,024.4 million, or 11.8%, to $9,709.0 million, primarily driven by 80 net new stores since the end of Fiscal 2022, an increase of 4% in comparable store sales during Fiscal 2023, and additional sales of $138.0 million from the 53rd week in Fiscal 2023.
Additionally, lower-to-moderate income shoppers continue to face economic pressure due to higher cost of living. Our strategy to chase the sales trend allows us the flexibility to purchase less pre-season merchandise with the balance purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between suppliers and categories.
Our strategy to chase the sales trend allows us the flexibility to purchase less pre-season merchandise with the balance purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between suppliers and categories.
(2) Represents interest payments on (i) the outstanding balance of the Term Loan Facility, with an interest rate of 6.4% as of January 28, 2023; (ii) $450.0 million interest rate swap with a fixed LIBOR of 2.2%; and (iii) the outstanding balance of the Convertible Notes, with an interest rate of 2.25%. (3) Finance lease obligations include future interest payments.
(2) Represents interest payments on (i) the outstanding balance of the Term Loan Facility, with an interest rate of 7.4% as of January 28, 2023; (ii) $450.0 million interest rate swap with a SOFR rate of 2.16%; (iii) the outstanding balance of the 2025 Convertible Notes, with an interest rate of 2.25%; and (iv) the outstanding balance of the 2027 Convertible Notes, with an interest rate of 1.25%.
Refer to the section below entitled “Liquidity and Capital Resources” for further explanation. Results of Operations The following table sets forth certain items in the Consolidated Statements of Income (Loss) as a percentage of net sales for the periods indicated.
Results of Operations The following table sets forth certain items in the Consolidated Statements of Income as a percentage of net sales for the periods indicated.
Capital Expenditures For Fiscal 2022, cash spend for capital expenditures, net of $23.1 million of landlord allowances, amounted to $428.0 million. These capital expenditures include approximately $190.5 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
Capital Expenditures For Fiscal 2023, capital expenditures, net of $14.6 million of landlord allowances, amounted to $522.5 million (inclusive of accrued capital expenditures). These capital expenditures include approximately $291.0 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
Debt and Hedging As of January 28, 2023, our obligations, inclusive of original issue discount, include $942.0 million under our Term Loan Facility, $507.7 million of Convertible Notes and no outstanding borrowings on our ABL Line of Credit. Our debt obligations also include $33.4 million of finance lease obligations as of January 28, 2023.
Debt and Hedging As of February 3, 2024, our obligations, inclusive of original issue discount, include $933.4 million under our Term Loan Facility, $453.2 million of 2025 Convertible Notes and 2027 Convertible Notes, and no outstanding borrowings on our ABL Line of Credit. Our debt obligations also include $29.1 million of finance lease obligations as of February 3, 2024.
This authorization was completed during the second quarter of Fiscal 2022. On February 16, 2022, our Board of Directors authorized the repurchase of up to an additional $500.0 million of common stock, which is authorized to be executed through February 2024. During Fiscal 2022, we repurchased 1,756,811 shares of common stock for $302.7 million under our share repurchase program.
Share Repurchase Program On February 16, 2022, our Board of Directors authorized the repurchase of up to an additional $500.0 million of common stock, which was authorized to be executed through February 2024. As of the end of Fiscal 2023, we had $115.4 million remaining under this share repurchase authorization.
We believe there is significant opportunity to expand our retail store base in the United States. As a result of our smaller store prototype, we have identified numerous market opportunities that we believe will allow us to operate 2,000 stores over the long term. • Maintaining Focus on Unit Economics and Returns.
As a result of our smaller store prototype, we have identified numerous market opportunities that we believe will allow us to operate 2,000 stores over the long term.
Net cash used in financing activities was $391.7 million during Fiscal 2022 compared to $778.0 million during Fiscal 2021. This change was primarily driven by higher debt redemptions in Fiscal 2021 compared to Fiscal 2022, partially offset by more share repurchases in Fiscal 2022. Changes in working capital also impact our cash flows.
Net cash used in financing activities was $318.8 million during Fiscal 2023 compared to $391.7 million during Fiscal 2022. This change was primarily driven by additional debt issued on the Convertible Notes exchange and lower share repurchases, partially offset by increased convertible debt repayments. Changes in working capital also impact our cash flows.
As of January 28, 2023, we had $347.3 million remaining under our share repurchase authorization. We are authorized to repurchase shares of our outstanding common stock from time to time on the open market or in privately negotiated transactions under our repurchase program.
During Fiscal 2023, we repurchased 1,354,031 shares of common stock for $231.9 million under our share repurchase program. We are authorized to repurchase shares of our outstanding common stock from time to time on the open market or in privately negotiated transactions under our repurchase program.
Inventory . Inventory at January 28, 2023 increased to $1,182.0 million from $1,021.0 million at January 29, 2022. This increase primarily relates to a 32% increase in comparable store inventory, a 30% increase in reserve inventory, and 87 net new stores since the end of Fiscal 2021.
Inventory at February 3, 2024 decreased to $1,087.8 million from $1,182.0 million at January 28, 2023. This decrease primarily relates to a decrease in reserve inventory and a decrease in comparable store inventory, partially offset by 80 net new stores since the end of Fiscal 2022.
We believe that we will be able to leverage our growing sales over the fixed costs of our business. In addition, by more conservatively planning our comparable store sales growth, we are forcing even tighter expense control throughout all areas of our business.
We believe sales growth will drive fixed cost operating leverage. In addition, by more conservatively planning our comparable store sales growth, we are forcing even tighter expense control throughout all areas of our business. We believe that this should put us in a strong position to drive favorable operating leverage on any sales ahead of the plan.
These expenses are recorded in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income (Loss) (b) Represents non-cash accretion of original issue discount on the Convertible Notes.
These expenses are recorded in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income.
During the first quarter of Fiscal 2022, we entered into separate, privately negotiated exchange agreements with certain holders of the Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $64.6 million in aggregate principal amount of Convertible Notes held by them for $78.2 million in cash. See Note 7, “Long Term Debt,” for additional information.
These exchanges resulted in aggregate pre-tax debt extinguishment charges of $38.3 million. During Fiscal 2022, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes, whereby the holders exchanged $64.6 million in aggregate principal amount of 2025 Convertible Notes held by them for $78.2 million in cash.
The dollar basis increase was primarily due to the same drivers listed above. Depreciation and amortization Depreciation and amortization expense amounted to $270.4 million during Fiscal 2022, compared with $249.2 million during Fiscal 2021. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to our supply chain, as well as new and non-comparable stores.
Depreciation and amortization Depreciation and amortization expense amounted to $307.1 million during Fiscal 2023, compared with $270.4 million during Fiscal 2022. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, our supply chain investments, and costs incurred during the 53rd week of Fiscal 2023.
Cost of sales Cost of sales as a percentage of net sales increased to 59.6% during Fiscal 2022, primarily driven by decreased merchandise margins, as a result of higher markdowns and increased shortage, as well as increased freight costs. On a dollar basis, cost of sales decreased $264.4 million, or 4.9%, primarily driven by our overall decrease in sales.
Cost of sales Cost of sales as a percentage of net sales decreased to 57.5% during Fiscal 2023, primarily driven by higher merchandise margins and improved freight costs. On a dollar basis, cost of sales increased $412.3 million, or 8.0%, primarily driven by our overall increase in sales.
At January 28, 2023, we had $795.7 million available under the ABL Line of Credit. We did not have any borrowings during Fiscal 2022. Convertible Notes On April 16, 2020, we issued $805.0 million of Convertible Notes.
We did not have any borrowings during Fiscal 2023. 2025 Convertible Notes On April 16, 2020, we issued $805.0 million of 2025 Convertible Notes.
Uncertainties and Challenges As we strive to increase profitability, there are uncertainties and challenges that we face that could have a material impact on our revenues or income. General Economic Conditions.
Additionally, we plan to continue challenging the processes and operating norms throughout the organization with the belief that this will lead to incremental efficiency improvements and savings. Uncertainties and Challenges As we strive to increase profitability, there are uncertainties and challenges that we face that could have a material impact on our revenues or income. General Economic Conditions.
In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and inventory levels within our stores. By appropriately managing our inventories, we believe we will be better able to deliver a continual flow of fresh merchandise to our customers. Store Payroll as a Percentage of Net Sales .
By appropriately managing our inventories, we believe we will be better able to deliver a continual flow of fresh merchandise to our customers. Store Payroll as a Percentage of Net Sales . Store payroll as a percentage of net sales measures our ability to manage our payroll in accordance with increases or decreases in net sales.
Fluctuations in Operating Results We expect that our revenues and operating results may fluctuate from fiscal quarter to fiscal quarter or over the longer term.
We are currently determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures. 38 Fluctuations in Operating Results We expect that our revenues and operating results may fluctuate from fiscal quarter to fiscal quarter or over the longer term.
(6) Represents severance payments in the normal course of business that are included in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income (Loss).
The table above excludes estimated commitments for services to be used in our business of up to approximately $165 million over the next five years. (6) Represents severance payments in the normal course of business that are included in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income.
Performance for Fiscal Year Ended January 29, 2022 (Fiscal 2021) Compared with Fiscal Year Ended January 30, 2021 (Fiscal 2020) For a discussion related to Fiscal 2021 performance compared to Fiscal 2020 performance, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 (Fiscal 2021 10-K).
Performance for Fiscal Year Ended January 28, 2023 (Fiscal 2022) Compared with Fiscal Year Ended January 29, 2022 (Fiscal 2021) For a discussion related to Fiscal 2022 performance compared to Fiscal 2021 performance, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 (Fiscal 2022 10-K). 32 Liquidity and Capital Resources Our ability to satisfy interest and principal payment obligations on our outstanding debt will depend largely on our future performance which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control.
We believe that this should drive faster turns and lower markdowns, while simultaneously improving our customers’ shopping experience. • Investment in Merchandising Capabilities. We plan to continue investing in training and coaching, improved tools and reporting, incremental headcount, especially in growing or under-developed businesses, and other forms of 25 merchant support.
We plan to continue investing in training and coaching, improved tools and reporting, incremental headcount, especially in growing or under-developed businesses, and other forms of 24 merchant support.
The effective tax rate was 25.2% related to pretax income of $307.5 million for Fiscal 2022, and 25.0% related to pretax income of $545.3 million for Fiscal 2021. The decrease in tax expense is primarily driven by the decrease in pretax income.
The effective tax rate was 27.1% related to pretax income of $465.8 million for Fiscal 2023, and 25.2% related to pretax income of $307.5 million for Fiscal 2022.
(in millions) Fiscal Year Ended January 28, 2023 Percentage of Net Sales January 29, 2022 Percentage of Net Sales $ Variance % Change Store related costs $ 1,739.0 20.0 % $ 1,766.7 19.0 % $ (27.7 ) (1.6 )% Product sourcing costs 677.6 7.8 618.3 6.6 59.3 9.6 Corporate costs 301.8 3.5 311.6 3.3 (9.8 ) (3.1 ) Marketing and strategy costs 47.0 0.5 61.1 0.7 (14.1 ) (23.1 ) Other selling, general and administrative expenses 112.0 1.3 110.8 1.2 1.2 1.1 Selling, general and administrative expenses $ 2,877.4 33.1 % $ 2,868.5 30.8 % $ 8.9 0.3 % The increase in selling, general and administrative expenses as a percentage of net sales was primarily driven by deleverage in occupancy and increased product sourcing costs, partially offset by decreased incentive compensation, store payroll costs, and advertising costs.
(in millions) Fiscal Year Ended February 3, 2024 Percentage of Net Sales January 28, 2023 Percentage of Net Sales $ Variance % Change Store related costs $ 1,972.6 20.3 % $ 1,739.7 20.0 % $ 232.9 13.4 % Product sourcing costs 780.3 8.0 677.8 7.8 102.5 15.1 Corporate costs 353.4 3.6 300.7 3.5 52.7 17.5 Marketing and strategy costs 53.7 0.6 47.0 0.5 6.7 14.3 Other selling, general and administrative expenses 128.3 1.4 112.2 1.3 16.1 14.3 Selling, general and administrative expenses $ 3,288.3 33.9 % $ 2,877.4 33.1 % $ 410.9 14.3 % The increase in selling, general and administrative expenses as a percentage of net sales was primarily driven by increased incentive compensation, store payroll, product sourcing costs, and a 20 basis point impact for costs related to acquiring store leases from Bed, Bath & Beyond (as described below).
At various times throughout the year, traditional full-price department store chains and specialty shops offer brand-name merchandise at substantial markdowns, which can result in prices approximating those offered by us at our Burlington Stores. Recently, an overhang of inventory across the retail industry has driven a surge in promotional activity at other retailers.
At various times throughout the year, traditional full-price department store chains and specialty shops offer brand-name merchandise at substantial markdowns, which can result in prices approximating those offered by us at our Burlington Stores. We anticipate that competition will increase in the future. Therefore, we will continue to look for ways to differentiate our stores from those of our competitors.
We believe that these actions will also allow us to take more advantage of great opportunistic buys. • Operating with Leaner Inventories. We are planning to carry less inventory in our stores going forward compared to historical levels, which we believe should result in the customer finding a higher mix of fresh receipts and great merchandise values.
We are planning to carry less inventory in our stores going forward compared to historical levels, which we believe should result in the customer finding a higher mix of fresh receipts and great merchandise values. We believe that this should drive faster turns and lower markdowns, while simultaneously improving our customers’ shopping experience. • Investment in Merchandising Capabilities.
The magnitude of reserve inventory, at any one point in time, is dependent on the buying opportunities identified in the marketplace. Reserve inventory includes all inventory that is being stored for release either later in the season, or in a subsequent season. We intend to use our reserve merchandise to effectively chase sales trends.
Reserve inventory includes all inventory that is being stored for release either later in the season, or in a subsequent season. We intend to use our reserve merchandise to effectively chase sales trends. In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and inventory levels within our stores.
However, there can be no assurance that we would be able to offset declines in our comparable store sales with savings initiatives in the event that the economy declines. As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by tender offer, by exchange transaction or otherwise.
However, there can be no assurance that we would be able to offset potential declines in our comparable store sales with savings initiatives in the event that the economy declines.
These costs significantly impacted results in Fiscal 2021 and Fiscal 2022, and there remains significant uncertainty around when and if freight costs will return to pre-pandemic levels. We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods, as well as in occupancy and other operating costs.
While freight rates are now moderating compared to Fiscals 2022 and 2021, we have experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods, as well as in occupancy and other operating costs.
We define store payroll as regular and overtime payroll for all store personnel as well as regional and territory personnel, exclusive of payroll charges related to corporate and warehouse employees. Store payroll as a percentage of net sales was 8.0% and 8.1% during Fiscal 2022 and Fiscal 2021, respectively. Liquidity. Liquidity measures our ability to generate cash.
The method of calculating store payroll varies across the retail industry. As a result, our store payroll as a percentage of net sales may differ from other retailers. We define store payroll as regular and overtime payroll for all store personnel as well as regional and territory personnel, exclusive of payroll charges related to corporate and warehouse employees.
Management measures liquidity through cash flow, which is the measure of cash generated from or used in operating, financing, and investing activities. Cash and cash equivalents, including restricted cash and cash equivalents, decreased $218.5 million during Fiscal 2022, compared with a decrease of $289.2 million during Fiscal 2021.
Store payroll as a percentage of net sales was 8.2% and 8.0% during Fiscal 2023 and Fiscal 2022, respectively. Liquidity. Liquidity measures our ability to generate cash. Management measures liquidity through cash flow, which is the measure of cash generated from or used in operating, financing, and investing activities.
In addition, we estimate that we will spend approximately $115 million to support our supply chain initiatives, with the remaining capital used to support our information technology and other business initiatives. 35 Share Repurchase Program On August 18, 2021, our Board of Directors authorized the repurchase of up to $400.0 million of common stock, which was authorized to be executed through August 2023.
In addition, we estimate that we will spend approximately $210 33 million to support our supply chain initiatives, with the remaining capital used to support our information technology and other business initiatives.
We believe that our markdown system allows us to maximize sales and gross margin dollars based on forward-looking sales forecasts, sell-through targets and exit dates. Additionally, as we plan to carry less inventory in our stores compared to historical levels, we expect to drive faster turns, which in turn should reduce the amount of markdowns taken. • Enhancing Purchasing Power.
We believe that our markdown system allows us to maximize sales and gross margin dollars based on forward-looking sales forecasts, sell-through targets and exit dates.
Comparable store sales measure performance of a store during the current reporting period against the performance of the same store in the corresponding period of a prior year. Comparable store sales were not meaningful for Fiscal 2020 due to the extended store closures resulting from the COVID-19 pandemic.
(d) Represents amounts charged for certain litigation matters. Comparable Store Sales . Comparable store sales measure performance of a store during the current reporting period against the performance of the same store in the corresponding period of a prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe manage our interest rate risk through the use of interest rate derivative contracts. For our floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant. On June 24, 2021, we terminated our previous interest rate swap and entered into a new interest rate swap.
Biggest changeAdditionally, during Fiscal 2023, we amended the Term Loan Credit Agreement changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate. We manage our interest rate risk through the use of interest rate derivative contracts. For our floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.
This sensitivity analysis assumes our mix of financial instruments and all other 40 variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions.
This sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions.
If we do not have sufficient cash flow to service our interest payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected. We cannot be assured that any replacement borrowing or equity financing could be successfully completed. 41
If we do not have sufficient cash flow to service our interest payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected. We cannot be assured that any replacement borrowing or equity financing could be successfully completed. 40
Based on $947.0 million outstanding as floating-rate debt, a one percentage point interest rate increase or decrease as of January 28, 2023 ( after considering our interest rate swap contract and assuming current borrowing level remains constant), would cause an increase or decrease, respectively, to cash interest expense of $4.8 million per year.
Based on $937.4 million outstanding as floating-rate debt, a one percentage point interest rate increase or decrease as of February 3, 2024 ( after considering our interest rate swap contract and assuming current borrowing level remains constant), would cause an increase or decrease, respectively, to cash interest expense of $4.9 million per year.
The new interest rate swap, which hedges $450.0 million of variable rate exposure under our Term Loan Facility, is designated as a cash flow hedge and expires on June 24, 2028. Refer to Note 8, “Derivative Instruments and Hedging Activities,” for further discussion regarding our derivative transactions.
On June 24, 2021, we terminated our previous interest rate swap and entered into a new interest rate swap. The new interest rate swap, which hedges $450.0 million of variable rate exposure under our Term Loan Facility, is designated as a cash flow hedge and expires on June 24, 2028.
Primary exposures include changes in interest rates, as borrowings under our ABL Line of Credit bear interest based on SOFR and borrowings under our Term Loan Facility bear interest at floating rates based on LIBOR or the base rate, in each case plus an applicable borrowing margin.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk We are exposed to certain market risks as part of our ongoing business operations. Primary exposures include changes in interest rates, as borrowings under our ABL Line of Credit and Term Loan Facility bear interest based on SOFR, in each case plus an applicable borrowing margin.
We have unlimited interest rate risk related to borrowings on our variable rate debt in excess of the notional principal amount of our interest rate swap contract. At January 28, 2023, we had $947.0 million of floating-rate debt, exclusive of original issue discount.
Refer to Note 8, “Derivative Instruments and Hedging Activities,” for further discussion regarding our derivative transactions. We have unlimited interest rate risk related to borrowings on our variable rate debt in excess of the notional principal amount of our interest rate swap contract. 39 At February 3, 2024, we had $937.4 million of floating-rate debt, exclusive of original issue discount.
Removed
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk We are exposed to certain market risks as part of our ongoing business operations.
Added
During the second quarter of Fiscal 2023, we amended our interest rate swap to be based on SOFR rather than LIBOR, which resulted in an updated swap rate of 2.16%. This amendment was covered under the guidance in ASU 2020-04, Reference Rate Reform ("ASC 848") and did not impact the hedge accounting relationship.

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