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What changed in CATO CORP's 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of CATO CORP's 2025 and 2026 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 2026 report.

+190 added−161 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-27)

Top changes in CATO CORP's 2026 10-K

190 paragraphs added · 161 removed · 140 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

15 edited+2 added−0 removed39 unchanged
Biggest changeSee “Risk Factors – Risks Relating to Our Business – Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with changes, disruptions, increased costs or other problems affecting the Company’s merchandise supply chain; the risks of conducting international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise have and could continue to materially and adversely affect the Company’s business, results of operations and financial condition.” 7 An important component of the Company’s strategy is the allocation of merchandise to individual stores based on an analysis of sales trends by merchandise category, customer profiles and climatic conditions.
Biggest changeSee “Risk Factors – Risks Relating to Our Business – Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with changes, disruptions, increased costs or other problems affecting the Company’s merchandise supply chain, risks associated with trade policies, including costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise.
The Company also takes aggressive markdowns on slow-selling merchandise and typically does not carry over merchandise to the next season. Purchasing, Allocation and Distribution Although the Company purchases merchandise from approximately 600 suppliers, most of its merchandise is purchased from approximately 100 primary vendors.
The Company also takes aggressive markdowns on slow-selling merchandise and typically does not carry over merchandise to the next season. Purchasing, Allocation and Distribution Although the Company purchases merchandise from approximately 620 suppliers, most of its merchandise is purchased from approximately 100 primary vendors.
Though compliance with these laws and regulations has not had a material effect on our capital expenditures, results of operations or competitive position in fiscal 2023, the Company faces ongoing risks related to its efforts to comply with these laws and regulations and risks related to noncompliance, as discussed generally below throughout the “Risk Factors” section and in particular under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” Human Capital 10 As of February 3, 2024, the Company employed approximately 7,300 full-time and part-time associates.
Though compliance with these laws and regulations has not had a material effect on our capital expenditures, results of operations or competitive position in fiscal 2024, the Company faces ongoing risks related to its efforts to comply with these laws and regulations and risks related to noncompliance, as discussed generally below throughout the “Risk Factors” section and in particular under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” 10 Human Capital As of February 1, 2025, the Company employed approximately 7,000 full-time and part-time associates.
Layaway sales represented approximately 3.0%, 2.7% and 2.7% of retail sales in fiscal 2023, 2022 and 2021, respectively. 9 Information Technology Systems The Company’s information technology systems provide daily financial and merchandising information that is used by management to enhance the timeliness and effectiveness of purchasing and pricing decisions.
Layaway sales represented approximately 2.8%, 3.0% and 2.7% of retail sales in fiscal 2024, 2023 and 2022, respectively. 9 Information Technology Systems The Company’s information technology systems provide daily financial and merchandising information that is used by management to enhance the timeliness and effectiveness of purchasing and pricing decisions.
The following table sets forth information with respect to the Company’s development activities since fiscal 2019: 8 Store Development Number of Stores Beginning of Number Number Number of Stores Fiscal Year Year Opened Closed End of Year 2019………………….……...…………. 1,311 5 35 1,281 2020………………….……...…………. 1,281 76 27 1,330 2021……………………….……...……. 1,330 6 25 1,311 2022…………....………….……...……. 1,311 19 50 1,280 2023………….………...….……...……. 1,280 9 111 1,178 The Company periodically reviews its store base to determine whether any particular store should be closed based on its sales trends and profitability.
The following table sets forth information with respect to the Company’s development activities since fiscal 2020: 8 Store Development Number of Stores Beginning of Number Number Number of Stores Fiscal Year Year Opened Closed End of Year 2020………………….……...…………. 1,281 76 27 1,330 2021………………….……...…………. 1,330 6 25 1,311 2022……………………….……...……. 1,311 19 50 1,280 2023…………....………….……...……. 1,280 9 111 1,178 2024………….………...….……...……. 1,178 5 66 1,117 The Company periodically reviews its store base to determine whether any particular store should be closed based on its sales trends and profitability.
The fiscal 2023 loyalty program impact is immaterial to the fiscal 2023 financial statements. The loyalty program is accounted for in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . Layaway Plan Under the Company’s layaway plan, merchandise is set aside for customers who agree to make periodic payments.
The impact of the loyalty program is immaterial to the fiscal 2024 financial statements. The loyalty program is accounted for in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . Layaway Plan Under the Company’s layaway plan, merchandise is set aside for customers who agree to make periodic payments.
In fiscal 2023, purchases from the Company’s largest vendor accounted for approximately 13% of the Company’s total purchases. The Company is not dependent on its largest vendor or any other vendor for merchandise purchases, and the loss of any single vendor or group of vendors would not have a material adverse effect on the Company’s operating results or financial condition.
In fiscal 2024, purchases from the Company’s largest vendor accounted for approximately 14% of the Company’s total purchases. The Company is not dependent on its largest vendor or any other vendor for merchandise purchases, and the loss of any single vendor or group of vendors would not have a material adverse effect on the Company’s operating results or financial condition.
Business: Background The Company, founded in 1946, operated 1,178 fashion specialty stores at February 3, 2024, in 31 states, principally in the southeastern United States, under the names “Cato,” “Cato Fashions,” “Cato Plus,” “It’s Fashion,” “It’s Fashion Metro” and “Versona.” The Cato concept seeks to offer quality fashion apparel and accessories at low prices every day, in junior/missy and plus sizes.
Business: Background The Company, founded in 1946, operated 1,117 fashion specialty stores at February 1, 2025, in 31 states, principally in the southeastern United States, under the names “Cato,” “Cato Fashions,” “Cato Plus,” “It’s Fashion,” “It’s Fashion Metro” and “Versona.” The Cato concept seeks to offer quality fashion apparel and accessories at low prices every day, in junior/missy and plus sizes.
The Company intends to continue this review process to identify underperforming stores. Credit and Layaway Credit Card Program The Company offers its own credit card, which accounted for 3.4%, 3.1% and 2.5% of retail sales in fiscal 2023, 2022 and 2021, respectively.
The Company intends to continue this review process to identify underperforming stores. Credit and Layaway Credit Card Program The Company offers its own credit card, which accounted for 3.4%, 3.4% and 3.1% of retail sales in fiscal 2024, 2023 and 2022, respectively.
Credit and layaway sales under the Company’s plan represented 6% of retail sales in fiscal 2023. See Note 13 to the Consolidated Financial Statements, “Reportable Segment Information,” for a discussion of information regarding the Company’s two reportable segments: Retail and Credit. The Company has operated Cato-branded retail stores for approximately 77 years.
Credit and layaway sales under the Company’s plan represented 6% of retail sales in fiscal 2024. See Note 13 to the Consolidated Financial Statements, “Reportable Segment Information,” for a discussion of information regarding the Company’s two reportable segments: Retail and Credit. The Company has operated Cato-branded retail stores for 78 years.
The Company’s net bad debt expense was 3.6%, 2.0% and 3.0% of credit sales in fiscal 2023, 2022 and 2021, respectively. Customers applying for the Company’s credit card are approved for credit if they have a satisfactory credit record and the Company has considered the customer’s ability to make the required minimum payment.
The Company’s bad debt expense, net of recovery, was 3.9%, 3.6% and 2.0% of credit sales in fiscal 2024, 2023 and 2022, respectively. Customers applying for the Company’s credit card are approved for credit if they have a satisfactory credit record and the Company has positively assessed the customer’s ability to make the required minimum payment.
The Company purchases its remaining merchandise from domestic importers and vendors, which typically minimizes the time necessary to purchase and obtain shipments; however, these vendors are dependent on materials primarily sourced from China. The Company opened its own overseas sourcing operations in the fall of 2014, replacing the Company’s former sourcing agent in 2015.
The Company purchases its remaining merchandise from domestic importers and vendors, which typically minimizes the time necessary to purchase and obtain shipments; however, these vendors are dependent on materials primarily sourced from China. The Company opened its own overseas sourcing operations in 2014.
The Company’s total advertising expenditures were approximately 1.0%, 1.0% and 0.9% of retail sales for fiscal years 2023, 2022 and 2021, respectively. Store Operations The Company’s store operations management team consists of four territorial managers, 11 regional managers and 104 district managers. Regional managers receive a salary plus a bonus based on achieving targeted goals for sales and payroll.
The Company’s total advertising expenditures were approximately 0.8%, 1.0% and 1.0% of retail sales for fiscal years 2024, 2023 and 2022, respectively. Store Operations The Company’s store operations management team consists of four territorial managers, eight regional managers and 70 district managers. Regional managers receive a salary plus a bonus based on achieving targeted goals for sales and payroll.
The level of benefits and eligibility vary depending on the associate’s full-time or part-time status, date of hire, length of service and level of pay. The Company endeavors to promote diversity, to provide opportunities for advancement, and to treat all of its associates with dignity and respect. The Company constantly strives to improve its training programs to develop associates.
The level of benefits and eligibility vary depending on the associate’s full-time or part-time status, date of hire, length of service and level of pay. The Company endeavors to promote an environment where all associates can develop and flourish, to provide opportunities for advancement, and to treat all of its associates with dignity and respect.
Over 80% of store and field management are promoted from within, allowing the Company to internally staff its store base. The Company has training programs at each level of store operations. The Company also performs ongoing reviews of its safety protocols, including measures to promote the health and safety of its associates.
The Company constantly strives to improve its training programs to develop associates. Over 80% of store and field management are promoted from within, allowing the Company to internally staff its store base. The Company has training programs at each level of store operations.
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These risks have and could continue to materially and adversely affect the 7 Company’s business, results of operations and financial condition.” An important component of the Company’s strategy is the allocation of merchandise to individual stores based on an analysis of sales trends by merchandise category, customer profiles and climatic conditions.
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The Company also performs ongoing reviews of its safety protocols, including measures to promote the health and safety of its associates.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

64 edited+30 added−15 removed85 unchanged
Biggest changeBecause we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with changes, disruptions, increased costs or other problems affecting the Company’s merchandise supply chain; the risks of conducting international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise have and could continue to materially and adversely affect the Company’s business, results of operations and financial condition. 11 A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia.
Biggest changeRisks Relating to Our Business: Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with changes, disruptions, increased costs or other problems affecting the Company’s merchandise supply chain, risks associated with trade policies, including costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise.
If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card-issuing banks’ costs, subject to fines and higher transaction fees.
If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card-issuing banks’ costs and subject to fines and higher transaction fees.
A variety of factors may cause the price of our common stock to fluctuate, perhaps 22 substantially, including, but not limited to, those discussed elsewhere in this report, as well as the following: low trading volume; general market fluctuations resulting from factors not directly related to our operations or the inherent value of our common stock; announcements of developments related to our business; fluctuations in our reported operating results; general conditions or trends affecting or perceived to affect the fashion and retail industry; conditions or trends affecting or perceived to affect the domestic or global economy or the domestic or global credit or capital markets; changes in financial estimates or the scope of coverage given to our Company by securities analysts; negative commentary regarding our Company and corresponding short-selling market behavior; adverse customer relations developments; significant changes in our senior management team; and legal proceedings.
A variety of factors may cause the price of our common stock to fluctuate, perhaps substantially, including, but not limited to, those discussed elsewhere in this report, as well as the following: low trading volume; general market fluctuations resulting from factors not directly related to our operations or the inherent value of our common stock; announcements of developments related to our business; fluctuations in our reported operating results; general conditions or trends affecting or perceived to affect the fashion and retail industry; conditions or trends affecting or perceived to affect the domestic or global economy or the domestic or global credit or capital markets; changes in financial estimates or the scope of coverage given to our Company by securities analysts; negative commentary regarding our Company and corresponding short-selling market behavior; adverse customer relations developments; significant changes in our senior management team; and legal proceedings.
Our e-commerce platform may also expose us to greater potential for security or data breaches involving the unauthorized access to or disclosure of customer information, as discussed above under “A security breach that results in unauthorized access to or disclosure of employee, Company or customer information or a ransomware attack could adversely affect our costs, reputation and results of operations, and efforts to mitigate these risks may continue to increase our costs.” We are also subject to risk related to delays or failures in the performance of third parties, such as shipping companies, including delays associated with labor strikes or slowdowns or adverse weather conditions.
Our e-commerce platform may also expose us to greater potential for security or data breaches involving the unauthorized access to or disclosure of customer information, as discussed above under “A security breach that results in 18 unauthorized access to or disclosure of employee, Company or customer information or a ransomware attack could adversely affect our costs, reputation and results of operations, and efforts to mitigate these risks may continue to increase our costs.” We are also subject to risk related to delays or failures in the performance of third parties, such as shipping companies, including delays associated with labor strikes or slowdowns or adverse weather conditions.
These risks include political unrest, labor disputes, terrorism, war, public health threats, including but not limited to communicable diseases (such as COVID-19), financial or other forms of instability or other events resulting in the disruption of trade from countries affecting our supply chain, increased security requirements for imported merchandise, or the imposition of, or changes in, laws, regulations or changes in duties, quotas, tariffs, taxes or governmental policies regarding or responses to these matters or other factors affecting the availability or cost of imports.
These risks include political unrest, labor disputes, terrorism, war, public health threats, including but not limited to communicable diseases (such as COVID-19 or other pandemics), financial or other forms of instability or other events resulting in the disruption of trade from countries affecting our supply chain, increased security requirements for imported merchandise, or the imposition of, or changes in, laws, regulations or changes in duties, quotas, tariffs, taxes or governmental policies regarding or responses to these matters or other factors affecting the availability or cost of imports.
Any security breach, mishandling, human or programming error or other event that results in the misappropriation, loss or other unauthorized disclosure of employee, Company or customer information, including but not limited to credit card data or other personally identifiable information, could severely damage the 17 Company's reputation, expose it to remediation and other costs and the risks of legal proceedings, disrupt its operations and otherwise adversely affect the Company's business and financial condition.
Any security breach, mishandling, human or programming error or other event that results in the misappropriation, loss or other unauthorized disclosure of employee, Company or customer information, including but not limited to credit card data or other personally identifiable information, could severely damage the Company's reputation, expose it to remediation and other costs and the risks of legal proceedings, disrupt its operations and otherwise adversely affect the Company's business and financial condition.
If the Company does not successfully meet the challenges of operating e-commerce websites or fulfilling customer expectations, the Company's business and sales could be adversely affected. 18 We are subject to payment-related risks. We accept payments using a variety of methods, including third-party credit cards, our own branded credit card, debit cards, gift cards and physical and electronic bank checks.
If the Company does not successfully meet the challenges of operating e-commerce websites or fulfilling customer expectations, the Company's business and sales could be adversely affected. We are subject to payment-related risks. We accept payments using a variety of methods, including third-party credit cards, our own branded credit card, debit cards, gift cards and physical and electronic bank checks.
The interpretation of existing or new laws to existing technology and business practices can be uncertain and may lead to additional compliance risk and cost. Adverse litigation matters may adversely affect our business and our financial condition. From time to time the Company is involved in litigation and other claims against our business.
The interpretation of existing or new laws to existing and evolving technology and business practices can be uncertain and may lead to additional compliance risk and cost. Adverse litigation matters may adversely affect our business and our financial condition. From time to time the Company is involved in litigation and other claims against our business.
These impacts may adversely affect our financial condition, results of operations and our ability to execute our business strategy. Furthermore, these adverse developments affecting the financial services or related perceptions may negatively impact our customers’ discretionary income or our customers’ willingness to purchase apparel, shoes or jewelry products.
These impacts may adversely affect our financial condition, results of operations and our ability to execute our business strategy. Furthermore, these adverse developments affecting the financial services industry or related perceptions may negatively impact our customers’ discretionary income or our customers’ willingness to purchase apparel, shoes or jewelry products.
The development or persistence of any 21 of these adverse factors or failure to comply with covenants on which our borrowing is conditioned may adversely affect our financial condition, results of operations and our ability to access our revolving line of credit and to execute our business strategy.
The development or persistence of any of these adverse factors or failure to comply with covenants on which our borrowing is conditioned may adversely affect our financial condition, results of operations and our ability to access our revolving line of credit and to execute our business strategy.
Our ability to attract consumers and grow our revenues is dependent on the success of our store location strategy and our ability to successfully open new stores as planned. 14 Our sales are dependent in part on the location of our stores in shopping centers and malls where we believe our consumers and potential consumers shop.
Our ability to attract consumers and grow our revenues is dependent on the success of our store location strategy and our ability to successfully open new stores as planned. Our sales are dependent in part on the location of our stores in shopping centers and malls where we believe our consumers and potential consumers shop.
To the extent we explore other countries to source our product or explore 12 increasing the amount of product sourced from current countries, we may be subject to additional increased legal and operational risks associated with doing business in new countries or increasing our business in other countries.
To the extent we explore other countries to source our product or explore increasing the amount of product sourced from current countries, we may be subject to additional increased legal and operational risks associated with doing business in new countries or increasing our business in other countries.
The success of executing our business strategy depends in large part on retaining key management. We compete for key management personnel with other retailers, and our inability to attract and retain qualified personnel could limit our ability to continue to grow.
The success of executing our business strategy depends in large part on retaining key management. We compete for key management personnel with other retailers, and our inability to attract and retain qualified personnel could limit our ability to grow.
These continued issues have and may continue to drive up our ocean freight costs, delay merchandise deliveries, and impact our ability to access the already limited supply of ocean container shipping capacity that we require.
These continued issues have and may continue to drive up our ocean freight costs, delay merchandise 11 deliveries, and impact our ability to access the already limited supply of ocean container shipping capacity that we require.
In addition, our continued expansion into new regions of the country where we have not done business before may present new challenges in competition, distribution and merchandising as we enter these new markets.
In addition, our continued expansion into new regions of the country where 14 we have not done business before may present new challenges in competition, distribution and merchandising as we enter these new markets.
A significant increase in the turnover rate among our store sales associates and managers would increase our recruiting and training costs, as well as possibly cause a decrease in our store operating efficiency and productivity.
A significant increase in 16 the turnover rate among our store sales associates and managers would increase our recruiting and training costs, as well as possibly cause a decrease in our store operating efficiency and productivity.
Primarily these arise in the normal course of business but are subject to risks and uncertainties, and could 20 require significant management time.
Primarily these arise in the normal course of business but are subject to risks and uncertainties, and could require significant management time.
The inability of third-party vendors to produce goods on time and to the Company’s specification may adversely affect the Company’s business, results of operations and financial condition. Our dependence on third-party vendors to manufacture and supply our merchandise subjects us to numerous risks that our vendors will fail to perform as we expect.
The inability of third-party vendors to produce goods on time and to the Company’s specifications may adversely affect the Company’s business, results of operations and financial condition. Our dependence on third-party vendors to manufacture and supply our merchandise subjects us to numerous risks that our vendors will fail to perform as we expect.
The Company may also be subject to regulatory review and audits, the results of which could materially and adversely affect our business, results of operations and financial condition. In addition, governing laws, rules and regulations, and interpretations of existing laws are subject to change from time to time.
The Company may also be subject to regulatory reviews and audits, the results of which could materially and adversely affect our business, results of operations and financial condition. In addition, governing laws, rules and regulations, and interpretations of existing laws are subject to change from time to time.
If we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory, which may cause excessive markdowns. If we are unable to accurately predict demand for our merchandise, we may end up with inventory shortages, resulting in missed sales.
When we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory, which may cause excessive markdowns. When we are unable to accurately predict demand for our merchandise, we may end up with inventory shortages, resulting in missed sales.
The Company’s failure to successfully operate its e-commerce websites or fulfill customer expectations could adversely impact customer satisfaction, our reputation and our business. Although the Company's e-commerce platform provides another channel to drive incremental sales, provide existing customers the online shopping experience and introduce the Company to a new customer base, it also exposes us to numerous risks.
The Company’s failure to successfully operate its e-commerce websites or fulfill customer expectations could adversely impact customer satisfaction, our reputation and our business. Although the Company's e-commerce platform provides another channel to drive incremental sales, provides existing customers the online shopping experience and introduces the Company to a new customer base, it also exposes us to numerous risks.
In addition, numerous events, whether or not related to actual economic conditions, such as downturns in the stock markets, acts of war or terrorism, political unrest or natural disasters, outbreaks of disease or similar events, may also dampen consumer confidence, and accordingly, lead to reduced consumer spending.
In addition, numerous events, whether or not related to actual economic conditions, such as downturns in the stock markets, acts of war or terrorism, geopolitical uncertainty or unrest or natural disasters, outbreaks of disease or similar events, may also dampen consumer confidence, and accordingly, lead to reduced consumer spending.
Compliance and litigation matters could result in unexpected expenses and liability, as well as have an adverse effect on our operations and our reputation. New legislation or regulation and interpretation of existing laws and regulations, including those related to data privacy, climate change or ESG matters could increase our costs of compliance, technology and business operations.
Compliance and litigation matters could result in unexpected expenses and liability, as well as have an adverse effect on our operations and our reputation. New legislation or regulation and interpretation of existing laws and regulations, including those related to data privacy or sustainability matters, could increase our costs of compliance, technology and business operations.
International activities subject us to numerous U.S. and international regulations, including but not limited to, restrictions on trade, license and permit requirements, import and export license requirements, privacy and data protection laws, environmental laws, records and information management regulations, tariffs and taxes and anti-corruption laws, such as the Foreign Corrupt Practices Act, violations of which by employees or persons acting on the Company’s behalf may result in significant investigation costs, severe criminal or civil sanctions and reputational harm.
International activities subject us to numerous U.S. and international regulations, including but not limited to, restrictions on trade, license and permit requirements, import and export license requirements, privacy and data protection laws, environmental laws, records and information management regulations, tariffs and taxes and anti-corruption laws, violations of which by employees or persons acting on the Company’s behalf may result in significant investigation costs, severe criminal or civil sanctions and reputational harm.
We qualify for exemption as a “controlled company” from compliance with certain New York Stock Exchange corporate governance rules, including the requirements that we have a majority of independent directors on our Board, an independent compensation committee and an independent corporate governance and nominating committee.
Further, we qualify for exemption as a “controlled company” from compliance with certain New York Stock Exchange corporate governance listing standards, including the requirements that we have a majority of independent directors on our Board, an independent compensation committee and an independent corporate governance and nominating committee.
In addition, geopolitical tensions, sanctions, prohibitions, additional tariffs, compliance and reporting requirements have resulted in increased costs associated with merchandise produced in certain regions.
In addition, geopolitical tensions, sanctions, prohibitions, additional actual or threatened tariffs, compliance and reporting requirements have resulted in increased costs associated with merchandise produced in certain regions.
As a result, we are subject to numerous risks that can cause significant delays or interruptions in the supply of our merchandise or increase our costs.
We are subject to numerous risks that can cause significant delays or interruptions in the supply of our merchandise or increase our costs.
Due to the Company’s limited flexibility in price point, the Company may not be able to pass on those cost increases to the consumer, which could have a material adverse effect on our margins, results of operations and financial condition.
These increases in production costs may result in higher merchandise costs to the Company. Due to the Company’s limited flexibility in price point, the Company may not be able to pass on those cost increases to the consumer, which could have a material adverse effect on our margins, results of operations and financial condition.
Any disruption or failure in the operation of our information technology systems, our failure to continue to upgrade or improve such systems, or the cost associated with maintaining, repairing or improving these systems, could adversely affect our business, results of operations and financial condition. Modifications and/or upgrades to our current information technology systems may also disrupt our operations.
Any disruption or failure in the operation of our information technology systems, our failure to continue to upgrade or improve such systems, or the cost associated with maintaining, repairing or improving these systems, could adversely affect our business, results of operations and financial condition.
We are subject to supply chain disruptions affecting transit times and costs, including issues related to a sustained drought in Panama that is causing longer transit times through the Panama Canal and limiting the number of containers on a vessel due to vessel draft restrictions.
A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia. We are subject to supply chain disruptions affecting transit times and costs, including issues related to a sustained drought in Panama that is causing longer transit times through the Panama Canal and limiting the number of containers on a vessel due to vessel draft restrictions.
Further, the activities conducted by our sourcing offices outside the United States subject us to foreign operational risks, as well as U.S. and international regulations and compliance risks, as discussed elsewhere in this “Risk Factors” section, in particular below under “Risk Factors – Risks Relating to Accounting and Legal Matters - Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” Any actual or perceived deterioration in the conditions that drive consumer confidence and spending have and may continue to materially and adversely affect consumer demand for our apparel and accessories and our results of operations.
Further, the activities conducted by our sourcing offices outside the United States subject us to foreign operational risks, as well as U.S. and international regulations and compliance risks, as discussed elsewhere in this “Risk Factors” section, in particular below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or 13 liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
A security breach that results in unauthorized access to or disclosure of employee, Company or customer information or a ransomware attack could adversely affect our costs, reputation and results of operations, and efforts to mitigate these risks may continue to increase our costs. The protection of employee, Company and customer data is critical to the Company.
Modifications and/or upgrades to our current information technology systems may also disrupt our operations. 17 A security breach that results in unauthorized access to or disclosure of employee, Company or customer information or a ransomware attack could adversely affect our costs, reputation and results of operations, and efforts to mitigate these risks may continue to increase our costs.
In addition, our efforts to comply with these existing and new requirements could significantly increase our compliance costs. Risks Relating to Our Investments and Liquidity: We may experience market conditions or other events that could adversely impact the valuation and liquidity of, and our ability to access, our short-term investments, cash and cash equivalents and our revolving line of credit.
Risks Relating to Our Investments and Liquidity: We may experience market conditions or other events that could adversely impact the valuation and liquidity of, and our ability to access, our short-term investments, cash and cash equivalents and our revolving line of credit.
Moreover, the persistence or worsening of inflationary conditions and high interest rates could also lead our customers to reduce their amount of current discretionary spending on our products even in the absence of price increases, which could erode our sales volume and adversely affect our results of operations and financial condition. 13 Adverse developments affecting the financial services industry or events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties could adversely affect our business, financial condition or results of operations.
Moreover, the persistence or worsening of inflationary conditions and high interest rates could also lead our customers to reduce their amount of current discretionary spending on our products even in the absence of price increases, which could erode our sales volume and adversely affect our results of operations and financial condition.
Extreme changes in weather, natural disasters, physical impacts of climate change, public health threats or similar events can influence customer trends and shopping habits.
Extreme weather, natural disasters, impacts of climate change, public health threats or similar events have and may continue to adversely affect our sales or operations from time to time. Extreme changes in weather, natural disasters, physical impacts of climate change, public health threats or similar events can influence customer trends and shopping habits.
In October 2014, we established our own sourcing offices in Asia. If our sourcing offices are unable to successfully oversee merchandise production to ensure that product is produced on time and within the Company’s specifications, our business, brand, reputation, costs, results of operations and financial condition could be materially and adversely affected.
If our sourcing offices are unable to successfully oversee merchandise production to ensure that product is produced on time and within the Company’s specifications, our business, brand, reputation, costs, results of operations and financial condition could be materially and adversely affected. In addition, the current business environment, including geopolitical issues, make operating in certain Asian markets challenging.
As a result, our stores typically generate a higher percentage of our annual net sales and profitability in the first and second quarters of our fiscal year compared to other quarters.
Our business varies with general seasonal trends that are characteristic of the retail apparel industry. As a result, our stores typically generate a higher percentage of our annual net sales and profitability in the first and second quarters of our fiscal year compared to other quarters.
We directly import some of this merchandise and indirectly import the remaining merchandise from domestic vendors who acquire the merchandise from foreign sources. Further, our third-party vendors are dependent on materials primarily sourced from China.
We directly import some of this merchandise and indirectly import the remaining merchandise from domestic vendors who acquire the merchandise from foreign sources. Further, our third-party vendors are dependent on materials primarily sourced from China, and our costs for these materials are likely to increase as a result of newly implemented tariffs on Chinese products.
Risks Relating to Our Business: Continued high interest rates and inflationary conditions have and may continue to adversely impact our customers’ discretionary income or willingness to purchase discretionary items, which may adversely affect our business, margins, results of operations and financial condition.
Any of these events could have a material adverse effect on our business, results of operations and financial condition. 12 Continued high interest rates have and may continue to adversely impact our customers’ discretionary income or willingness to purchase discretionary items, which may adversely affect our business, margins, results of operations and financial condition.
Continued high interest rates have adversely affected our customers’ discretionary income, in part due to increased interest costs associated with credit accounts including revolving credit accounts, car loans, mortgage loans and other credit accounts. In addition, the increased payments due to higher interest rates deter our customers from purchasing discretionary items such as apparel, shoes and jewelry.
Continued high interest rates have adversely affected our customers’ discretionary income, in part due to increased interest costs associated with credit accounts including revolving credit accounts, car loans, mortgage loans and other credit accounts.
Activities conducted by us or on our behalf outside the United States further subject us to numerous U.S. and international regulations and compliance risks, as discussed below under “Risk Factors – Risks Relating to Accounting and Legal Matters - Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could 15 result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” Existing and increased competition in the women’s retail apparel industry may negatively impact our business, results of operations, financial condition and market share.
Activities conducted by us or on our behalf outside the United States further subject us to numerous U.S. and international regulations and compliance risks, as discussed below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” If we are unable to anticipate, identify and respond to rapidly changing fashion trends and customer demands in a timely manner, our business and results of operations could materially suffer.
The women’s retail apparel industry is highly competitive. We compete primarily with discount stores, mass merchandisers, department stores, off-price retailers, specialty stores and internet-based retailers, many of which have substantially greater financial, marketing and other resources than we have. Many of our competitors offer frequent promotions and reduce their selling prices.
We compete primarily with discount stores, mass merchandisers, department stores, off-price retailers, specialty stores and internet-based retailers, many of which have substantially greater financial, marketing and other resources than we have. Many of our competitors offer frequent promotions and reduce their selling prices. In some cases, our competitors are expanding into markets in which we have a significant market presence.
Accordingly, our operating results for any one fiscal period are not necessarily indicative of results to be expected from any future period, and such seasonal and quarterly fluctuations could adversely affect the market price of our common stock.
Accordingly, our operating results for any one fiscal period are not necessarily indicative of results to be expected from any future period, and such seasonal and quarterly fluctuations could adversely affect the market price of our common stock. We cannot provide assurance that we will pay dividends, or that if paid, any dividend payments will be consistent with historical levels.
If we are unable to retain our key management and store associates or attract, train, or retain other skilled personnel in the future, we may not be able to service our customers effectively or execute our business strategy, which could adversely affect our business, operating results and financial condition. 16 The currently competitive environment for hiring new associates and retaining existing associates is causing wages to increase, which has affected and could continue to adversely affect our business, margins, operating results and financial condition if we cannot offset these cost increases.
If we are unable to retain our key management and store associates or attract, train, or retain other skilled personnel in the future, we may not be able to service our customers effectively or execute our business strategy, which could adversely affect our business, operating results and financial condition.
As a result of this competition, we may experience pricing pressures, increased marketing expenditures, increased costs to open new stores, as well as loss of market share, which could materially and adversely affect our business, results of operations and financial condition.
As a result of this competition, we may experience pricing pressures, increased marketing expenditures, increased costs to open new stores, as well as loss of market share, which could materially and adversely affect our business, results of operations and financial condition. 15 Fluctuations in the price, availability and quality of inventory have and may continue to result in higher cost of goods, which the Company may not be able to pass on to its customers.
Cato could discourage potential investors from acquiring our common stock and could also have the effect of preventing, discouraging or deferring a change in control of the Company or other fundamental transaction, all of which could depress the market price of our common stock. In addition, Mr.
Cato could discourage potential investors from acquiring our common stock and could also have the effect of preventing, discouraging or deferring a change in control of the Company, even if the change in control might benefit the shareholders generally.
Risks Relating to the Market Value of Our Common Stock: The interests of our principal shareholder may limit the ability of other shareholders to influence the direction of the Company and otherwise affect our corporate governance and the market price of our common stock. As of March 27, 2024, John P. D.
The interests of our principal shareholder may limit the ability of other shareholders to influence the direction of the Company and otherwise affect our corporate governance and the market price of our common stock. Our common stock consists of two classes: Class A and Class B.
If we elected to utilize these “controlled company” exceptions, our other shareholders could lose the benefit of these corporate governance requirements and the market value of our common stock could be adversely affected. There can be no assurance that we will choose to declare or be able to declare cash dividends in the future.
If we elected to utilize these “controlled company” exceptions, our other shareholders could lose the benefit of these corporate governance requirements and the market value of our common stock could be adversely affected. Item 1B. Unresolved Staff Comments: None.
If we are unable to anticipate, identify and respond to rapidly changing fashion trends and customer demands in a timely manner, our business and results of operations could materially suffer. Customer tastes and fashion trends, particularly for women’s apparel, are volatile, tend to change rapidly and cannot be predicted with certainty.
Customer tastes and fashion trends, particularly for women’s apparel, are volatile, tend to change rapidly and cannot be predicted with certainty. Our success depends in part upon our ability to consistently anticipate, design and respond to changing merchandise trends and consumer preferences in a timely manner.
Generally Accepted Accounting Principles and SEC accounting, disclosures and reporting changes are common and have become more frequent and significant in the past several years.
Changes to accounting rules and regulations may adversely affect our reported results of operations and financial condition. Changes to U.S. Generally Accepted Accounting Principles and SEC accounting, disclosure and reporting rules are common and have become more frequent and significant in the past several years.
Conditions in the stock market generally, or particularly relating to our industry, Company or common stock, may materially and adversely affect the market price of our common stock and make its trading price more volatile. The trading price of our common stock at times has been, and is likely to continue to be, subject to significant volatility.
The trading price of our common stock at times has been, and is likely to continue to be, subject to significant volatility.
Fluctuations in the price, availability and quality of inventory have and may continue to result in higher cost of goods, which the Company may not be able to pass on to its customers. The price and availability of raw materials may be impacted by demand, regulation, weather and crop yields, currency value fluctuations, inflation, as well as other factors.
The price and availability of raw materials may be impacted by demand, regulation, tariffs, weather and crop yields, currency value fluctuations, inflation, as well as other factors. Additionally, manufacturers have and may continue to have increases in other manufacturing costs, such as transportation, labor and benefit costs.
Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
The defense of these claims, even if ultimately successful, may result in costly litigation, and if the Company is not successful in its defense, it could be subject to injunctions and liability for damages or royalty obligations, and the Company’s sales, profitability, cash flows, financial condition and reputation could be adversely affected. 19 Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
If we fail to protect our trademarks and other intellectual property rights or infringe the intellectual property rights of others, our business, brand image, growth strategy, results of operations and financial condition could be adversely affected. 19 We believe that our “Cato”, “It’s Fashion”, “It’s Fashion Metro”, “Versona”, “Cache” and “Body Central” trademarks are integral to our store designs, brand recognition and our ability to successfully build consumer loyalty.
Risks Relating to Accounting and Legal Matters: If we fail to protect our trademarks and other intellectual property rights or infringe the intellectual property rights of others, our business, brand image, growth strategy, results of operations and financial condition could be adversely affected.
Any reduction in our customers’ discretionary spending on our products could erode our sales volume and adversely affect our results of operations and financial condition. Extreme weather, natural disasters, impacts of climate change, public health threats or similar events have and may continue to adversely affect our sales or operations from time to time.
Any reduction in our customers’ discretionary spending on our products could erode our sales volume and adversely affect our results of operations and financial condition.
There can be no assurance that a cash dividend will be declared in the future in any particular amount, or at all. Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of our common stock. Our business varies with general seasonal trends that are characteristic of the retail apparel industry.
There can be no assurance that a cash dividend will be declared in the future in any particular amount, or at all. Conditions in the stock market generally, or particularly relating to our industry, Company or common stock, may materially and adversely affect the market price of our common stock and make its trading price more volatile.
Such fluctuations and market volatility based on these or other factors may materially and adversely affect the market price of our common stock. Item 1B. Unresolved Staff Comments: None.
Such fluctuations and market volatility based on these or other factors may materially and adversely affect the market price of our common stock. Further, securities class action litigation has often been initiated against companies following periods of volatility in their stock price.
Moreover, attracting and retaining skilled personnel has become increasingly challenging in the tight labor market that has persisted since the onset of the COVID-19 pandemic. To offset this turnover as well as support new store growth, we must continually attract, hire and train new store associates to meet our staffing needs.
Like most retailers, we experience significant associate turnover rates, particularly among store sales associates and managers. Moreover, attracting and retaining skilled personnel has been and could continue to be challenging. To offset this turnover as well as support new store growth, we must continually attract, hire and train new store associates to meet our staffing needs.
In some cases, our competitors are expanding into markets in which we have a significant market presence. In addition, our competitors also compete for the same retail store space.
In addition, our competitors also compete for the same retail store space.
Cato has the ability to control the management of the Company as a result of his position as Chief Executive Officer.
This ownership concentration may adversely impact the trading of our Class A common stock because of perceptions of a conflict of interest, thereby depressing the value of our Class A common stock. Mr. Cato also has the ability to control the management of the Company as a result of his position as Chief Executive Officer.
Cato, Chairman, President and Chief Executive Officer, beneficially owned approximately 51.9% of the combined voting power of our common stock. As a result, Mr.
Cato owns a significant economic interest in the Company and the majority of the total voting power of our outstanding common stock at 53.3% as of March 24, 2025. In addition, Mr. Cato serves as Chairman of the Board of Directors, President and Chief Executive Officer. As a result, Mr.
Adverse decisions or settlements of disputes may negatively impact our business, reputation and financial condition.
Adverse decisions or settlements of disputes may negatively impact our business, reputation and financial condition. Continued scrutiny and changing expectations surrounding sustainability matters from investors, customers, government regulators and other stakeholders may impose additional reporting requirements, additional costs and compliance risks.
Continued inflationary pressures limit our customers’ willingness to purchase apparel, shoe or jewelry products, as prices associated with non-discretionary items, including food, fuel and shelter costs increase or remain high, reducing our customers’ discretionary income. Any reduction in our customers’ discretionary spending on our products could erode our sales volume and adversely affect our results of operations and financial condition.
In addition, the increased payments due to higher interest rates, combined with continued inflationary pressures on non-discretionary items, including food, fuel and shelter reduce our customers’ discretionary income and their willingness to purchase discretionary items such as apparel, shoes or jewelry products.
In the U.S., there are various new rules or proposals for new or enhanced disclosure requirements regarding climate emissions, sustainability, workforce diversity and other human capital resources metrics, among other topics. Complying with these complex reporting obligations or expectations may increase our costs associated with compliance, disclosure and reporting.
Public companies from across all industries have and may continue to face scrutiny from investors, customers, regulators and other stakeholders concerning sustainability matters. In the U.S., there have been various new rules or proposals for new or enhanced disclosure requirements regarding climate emissions, sustainability, workforce composition and related metrics, among other topics.
Removed
Our costs are also affected by currency fluctuations, and changes in the value of the dollar relative to foreign currencies have impacted and may continue to impact our cost of goods sold. Any of these factors can materially and adversely affect our business and results of operations.
Added
These risks have and could continue to materially and adversely affect the Company’s business, results of operations and financial condition. We do not own or operate any manufacturing facilities. As a result, the continued success of our operations is tied to our timely receipt of quality merchandise from third party manufacturers at a reasonable cost.
Removed
In addition, increased energy and transportation costs have caused us significant cost increases from time to time, and future adverse changes in these costs or the disruption of the means by which merchandise is transported to us could cause additional cost increases or interruptions of our supply chain, which could be significant.
Added
Additionally, we may be subject to additional costs related to our supply chain such as increased facility fees, fuel, peak surcharg es and other additional charges to transport our goods, which may increase our costs.
Removed
Further, we are subject to increased costs or potential disruptions impacting any port or trade route through which our products move, or we may be subject to increased costs and delays if forced to route freight through different ports than the ones through which our products typically move.
Added
If we are unable to pass these increased sourcing costs onto our vendors or our customers, it may adversely impact our results of operations. Any actual or perceived deterioration in the conditions that drive consumer confidence and spending have and may continue to materially and adversely affect consumer demand for our apparel and accessories and our results of operations.
Removed
If we are forced to source merchandise from other countries or other domestic vendors with foreign sources in different countries, those goods may be more expensive or of a different or inferior quality from the ones we now sell. The operation of our sourcing offices in Asia presents increased operational and legal risks.
Added
The operation of our sourcing offices in Asia presents increased operational and legal risks. In October 2014, we established our own sourcing offices in Asia.
Removed
In addition, the current business environment, including geopolitical issues, make operating in certain Asian markets challenging.
Added
Existing and increased competition in the women’s retail apparel industry may negatively impact our business, results of operations, financial condition and market share. The women’s retail apparel industry is highly competitive.
Removed
Any of these events could have a material adverse effect on our business, results of operations and financial condition.
Added
Our inability to effectively manage inventory may continue to adversely affect our gross margin and results of operations. Adverse developments affecting the financial services industry or events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties could adversely affect our business, financial condition or results of operations.
Removed
Our success depends in part upon our ability to consistently anticipate, design and respond to changing merchandise trends and consumer preferences in a timely manner.
Added
Any reduction in our customers’ discretionary spending on our products could erode our sales volume and adversely affect our results of operations and financial condition. The competitive hiring environment and our failure to attract, train, and retain skilled personnel has and could continue to adversely affect our business and our financial condition.
Removed
Our inability to effectively manage inventory may adversely affect our gross margin and results of operations. Failure to attract, train, and retain skilled personnel could adversely affect our business and our financial condition. Like most retailers, we experience significant associate turnover rates, particularly among store sales associates and managers.
Added
The currently competitive environment for hiring new associates and retaining existing associates is causing wages to increase, which has affected and could continue to adversely affect our business, margins, operating results and financial condition if we cannot offset these cost increases.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe conduct security assessments of third-party providers before engagement and maintain ongoing monitoring to help ensure compliance with our cybersecurity standards. 23 Additionally, we maintain a cybersecurity incident response plan, which is reviewed regularly, and provides a framework for handling and escalating cybersecurity incidents based on the severity of the incident and facilitates cross-functional coordination across the Company.
Biggest changeAdditionally, we maintain and regularly review a cybersecurity incident response plan that provides a framework for handling and escalating cybersecurity incidents based on the severity of the incident and facilitates cross-functional coordination across the Company.
In the event we identify a potential cybersecurity, privacy or other data security issue, we have defined procedures for responding to such issues, including procedures that address when and how to engage with Company executives, our Board of Directors, other stakeholders and law enforcement when responding to such issues.
In the event we identify a potential cybersecurity, privacy or other data security issue, we have defined procedures for responding to such issues, including procedures that address when and how to engage with Company executives, our Board of Directors, other stakeholders 24 and law enforcement when responding to such issues.
Item 1C. Cybersecurity: Risk Management Strategy We recognize the importance of effectively managing cybersecurity risk in protecting our business, customers and employees, and we manage cybersecurity risk as part of our overall risk management system and compliance processes.
Item 1C. Cybersecurity: Risk Management Strategy We recognize the importance of effectively managing cybersecurity risk in protecting our business, customers and employees, and we manage cybersecurity risk as part of our overall risk management strategy and compliance processes.
In recent years, we have increased our investments in cybersecurity risk management within our environment and have developed an enterprise cybersecurity program designed to detect, identify, classify and mitigate cybersecurity and other data security threats. This program classifies potential threats by risk levels, and we typically prioritize our threat mitigation efforts based on those risk classifications.
In recent years, we have increased our investments in cybersecurity risk management and have developed an enterprise cybersecurity program designed to detect, identify, classify and mitigate cybersecurity and other data security threats. This program classifies potential threats by risk levels, and we typically prioritize our threat mitigation efforts based on those risk classifications.
Our CIO reports to our CFO and has served in various roles in information technology and information security for over 30 years.
Our CIO reports to our CFO and has served in various roles in information technology and information security for over 30 25 years.
We maintain a process designed to identify, assess and manage material risks from cybersecurity threats, including risks relating to theft of customer data, primarily payment cards, disruption to business operations or financial reporting systems, fraud, extortion, harm to employee data and violation of privacy laws.
We maintain a process designed to identify, assess and manage material risks from cybersecurity threats, including risks relating to theft of customer data, primarily payment cards, disruption to business operations or financial reporting systems, fraud, extortion, external exposure of employee data and violation of privacy laws.
Through the processes described above, we did not identify risks during the year ended February 3, 2024 from current or past cybersecurity threats or cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Through the processes described above, we did not identify risks during the year ended February 1, 2025 from current or past cybersecurity threats or cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Because we are aware of the risks associated with third-party service providers, we also have implemented processes to oversee and manage these risks.
Because we are aware of the risks associated with third-party service providers, we also have implemented processes to oversee and manage these risks. We conduct security assessments of third-party providers before engagement and maintain ongoing monitoring to help ensure compliance with our cybersecurity standards.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeThe Company also owns approximately 185 acres of land in York County, South Carolina as a potential new site for our distribution center. 24
Biggest changeThe Company also owns approximately 185 acres of land in York County, South Carolina as a potential new site for our distribution center.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 15, “Commitments and Contingencies,” for more information. 25
Biggest changeSee Note 15, “Commitments and Contingencies,” for more information. 26

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−0 removed2 unchanged
Biggest changeRETAILERS, APPL INDEX RUSSELL 2000 INDEX 2/1/2019 100 100 100 1/31/2020 118 111 109 1/29/2021 86 119 142 1/28/2022 128 132 140 1/27/2023 82 144 136 2/2/2024 61 161 139 The graph assumes an initial investment of $100 on February 1, 2019, the last trading day prior to the commencement of the Company’s 2019 fiscal year, and that all dividends were reinvested. 28 Issuer Purchases of Equity Securities The following table summarizes the Company’s purchases of its common stock for the three months ended February 3, 2024: Total Number of Maximum Number Shares Purchased as (or Approximate Dollar Total Number Part of Publicly Value) of Shares that may of Shares Average Price Announced Plans or yet be Purchased Under Period Purchased Paid per Share (1) Programs (2) the Plans or Programs (2) November 2023 - $ - - December 2023 - - - January 2024 - - - Total - $ - - 909,653 (1) Prices include trading costs.
Biggest changeRETAILERS, APPL INDEX RUSSELL 2000 INDEX 1/31/2020 100 100 100 1/29/2021 73 107 130 1/28/2022 108 118 129 1/27/2023 69 129 124 2/2/2024 51 145 127 1/31/2025 28 184 152 The graph assumes an initial investment of $100 on January 31, 2020, the last trading day prior to the commencement of the Company’s 2020 fiscal year, and that all dividends were reinvested. 29 Issuer Purchases of Equity Securities The following table summarizes the Company’s purchases of its common stock for the three months ended February 1, 2025: Total Number of Maximum Number Shares Purchased as (or Approximate Dollar Total Number Part of Publicly Value) of Shares that may of Shares Average Price Announced Plans or yet be Purchased Under Period Purchased Paid per Share (1) Programs (2) the Plans or Programs (2) November 2024 96,306 $ 3.32 96,306 December 2024 320,271 3.35 320,271 January 2025 28,799 3.50 28,799 Total 445,376 $ 3.35 445,376 997,455 (1) Prices include trading costs.
As of March 25, 2024, the approximate number of record holders of the Company’s Class A Common Stock was 5,000 and there were 2 record holders of the Company’s Class B Common Stock. 27 Stock Performance Graph The following graph compares the yearly change in the Company’s cumulative total shareholder return on the Company’s Common Stock (which includes Class A Stock and Class B Stock) for each of the Company’s last five fiscal years with (i) the Dow Jones U.S.
As of March 24, 2025, the approximate number of record holders of the Company’s Class A Common Stock was 5,000 and there were 2 record holders of the Company’s Class B Common Stock. 28 Stock Performance Graph The following graph compares the yearly change in the Company’s cumulative total shareholder return on the Company’s Common Stock (which includes Class A Stock and Class B Stock) for each of the Company’s last five fiscal years with (i) the Dow Jones U.S.
(2) During the fourth quarter ended February 3, 2024, the Company did not repurchase or retire any shares under this program. As of February 3, 2024, the Company had 909,653 shares remaining in open authorizations. There is no specified expiration date for the Company’s repurchase program. 29
(2) During the fourth quarter ended February 1, 2025, the Company repurchased and retired 445,376 shares under this program for approximately $1,491,984 or an average market price of $3.35 per share. As of the fourth quarter ended February 1, 2025, the Company had 997,455 shares remaining in open authorizations. There is no specified expiration date for the Company’s repurchase program.
Added
The Board of Directors authorized an increase of 1,000,000 shares in the Company’s share repurchase program on December 23, 2024. 30

Item 7. Management's Discussion & Analysis

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

47 edited+17 added−6 removed25 unchanged
Biggest changeBoth of these situations have negatively impacted 2023 and will likely continue to have a negative impact on our results of operations and financial condition during fiscal 2024. 30 Results of Operations The table below sets forth certain financial data of the Company expressed as a percentage of retail sales for the years indicated: Fiscal Year Ended February 3, 2024 January 28, 2023 Retail sales ………………………………………………………….. 100.0 % 100.0 % Other revenue………………………………………………………… 1.1 0.9 Total revenues ………………………………………………………. 101.1 100.9 Cost of goods sold ………………………………………………….. 66.3 67.7 Selling, general and administrative…………………………………. 36.1 32.3 Depreciation ………………………………………………………… 1.4 1.5 Interest and other income …………………………………………… 0.7 0.8 Income (loss) before income taxes ………………………………………… (2.0) 0.2 Net income (loss)…………………………………………………………..
Biggest changeResults of Operations The table below sets forth certain financial data of the Company expressed as a percentage of retail sales for the years indicated: Fiscal Year Ended February 1, 2025 February 3, 2024 Retail sales ………………………………………………………….. 100.0 % 100.0 % Other revenue………………………………………………………… 1.2 1.1 Total revenues ………………………………………………………. 101.2 101.1 Cost of goods sold ………………………………………………….. 68.0 66.3 Selling, general and administrative…………………………………. 36.1 36.1 Depreciation ………………………………………………………… 1.5 1.4 Interest and other income …………………………………………… 1.8 0.7 Loss before income taxes ………………………………………… (2.5) (2.0) Net loss…………………………………………………………..
Since quoted prices in active markets for 35 identical assets are not available, these prices are determined by the pricing service using observable market information such as quotes from less active markets and/or quoted prices of securities with similar characteristics, among other factors. Deferred compensation plan assets consist primarily of life insurance policies.
Since quoted prices in active markets for identical assets are not available, these prices are determined by the pricing service using observable market information such as quotes from less active markets and/or quoted prices of securities with similar characteristics, among other factors. Deferred compensation plan assets consist primarily of life insurance policies.
Level 2 investment securities include corporate and municipal bonds for which quoted prices may not be available on active exchanges for identical instruments. Their fair value is principally based on market values determined by management with the assistance of a third-party pricing service.
Level 2 investment securities include corporate, state and municipal bonds for which quoted prices may not be available on active exchanges for identical instruments. Their fair value is principally based on market values determined by management with the assistance of a third-party pricing service.
The most significant accounting estimates inherent in the preparation of the Company’s financial statements include the calculation of potential asset impairment, income tax valuation allowances, reserves relating to self-insured health insurance, workers’ 32 compensation, general and auto insurance liabilities, uncertain tax positions, the allowance for customer credit losses, and inventory shrinkage.
The most significant accounting estimates 33 inherent in the preparation of the Company’s financial statements include the calculation of potential asset impairment, income tax valuation allowances, reserves relating to self-insured health insurance, workers’ compensation, general and auto insurance liabilities, uncertain tax positions, the allowance for customer credit losses, and inventory shrinkage.
Further, in determining when to close a store, the Company considers real estate development in the area and perceived local market conditions, which can be difficult to predict and may be subject to change. 33 Insurance Liabilities The Company is primarily self-insured for healthcare, workers’ compensation and general liability costs.
Further, in determining when to close a store, the Company considers real estate development in 34 the area and perceived local market conditions, which can be difficult to predict and may be subject to change. Insurance Liabilities The Company is primarily self-insured for healthcare, workers’ compensation and general liability costs.
This section of the annual report on Form 10-K generally discusses fiscal 2023 and fiscal 2022 and year-to-year comparisons between fiscal 2023 and fiscal 2022, as well as certain fiscal 2021 items.
This section of the annual report on Form 10-K generally discusses fiscal 2024 and fiscal 2023 and year-to-year comparisons between fiscal 2024 and fiscal 2023, as well as certain fiscal 2022 items.
See Note 11 to the Consolidated Financial Statements, “Leases” for further information. Impairment of Long-Lived Assets The Company invests in leaseholds, right-of use assets and equipment primarily in connection with the opening and remodeling of stores and in computer software and hardware.
See Note 11 to the Consolidated Financial Statements, “Leases,” for further information. Impairment of Long-Lived Assets The Company invests in leaseholds, right-of use assets and equipment primarily in connection with the opening and remodeling of stores and in computer software and hardware.
These funds are designed to mirror the return of existing mutual funds and money market funds that are observable and actively traded. Contractual Obligations Contractual obligations for future payments at February 3, 2024 relate primarily to operating lease commitments for store leases. Operating leases represent minimum required lease payments under non- cancellable lease terms.
These funds are designed to mirror the return of existing mutual funds and money market funds that are observable and actively traded. Contractual Obligations Contractual obligations for future payments at February 1, 2025 relate primarily to operating lease commitments for store leases. Operating leases represent minimum required lease payments under non- cancellable lease terms.
Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies, Recently Issued Accounting Pronouncements.”
Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies, Recently Adopted Accounting Policies and Recently Issued Accounting Pronouncements.”
At February 3, 2024, the Company had an unsecured revolving credit agreement, which provided for borrowings of up to $35.0 million less the balance of any revocable letters of credit related to purchase commitments, and was committed through May 2027.
At February 1, 2025, the Company had an unsecured revolving credit agreement, which provided for borrowings of up to $35.0 million less the balance of any revocable letters of credit related to purchase commitments, and was committed through May 2027.
Additionally, at February 3, 2024 and January 28, 2023, the Company had $1.1 and $0.9 million, respectively, of corporate equities, which are recorded within Other assets in the accompanying Consolidated Balance Sheets. Level 1 category securities are measured at fair value using quoted active market prices.
Additionally, at February 1, 2025 and February 3, 2024, the Company had $0.0 million and $1.1 million of corporate equities, respectively, which are recorded within Other assets in the accompanying Consolidated Balance Sheets. Level 1 category securities are measured at fair value using quoted active market prices.
Merchandise Supply Chain A significant amount of our merchandise is manufactured overseas, principally Southeast Asia, and traverses through the Panama Canal or the Suez Canal.
Merchandise Supply Chain and Tariff Pressures A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia, and traverses through the Panama Canal or the Suez Canal.
Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s annual report on Form 10-K for the fiscal year ended January 28, 2023.
Discussions of fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s annual report on Form 10-K for the fiscal year ended February 3, 2024.
Total gross margin dollars (retail sales less cost of goods sold and excluding depreciation) decreased by 2.8% to $236.0 million in fiscal 2023 from $242.7 million in fiscal 2022. Gross margin as presented may not be comparable to that of other companies.
Total gross margin dollars (retail sales less cost of goods sold and excluding depreciation) decreased by 12.8% to $205.7 million in fiscal 2024 from $236.0 million in fiscal 2023. Gross margin as presented may not be comparable to that of other companies.
The decrease in working 34 capital compared to the prior year is primarily due to lower short-term investments and lower inventory, partially offset by lower accounts payable and current lease liability.
The decrease in working capital compared to the prior year is primarily due to lower short-term investments and accounts receivables, higher accounts payable and accrued expenses, partially offset by higher inventory and lower current lease liability.
Total revenues, comprised of retail sales and other revenue (principally finance charges and late fees on customer accounts receivable, gift card breakage, shipping charges for e-commerce purchases and layaway fees), decreased by 6.7% to $708.1 million in fiscal 2023 compared to $759.3 million in fiscal 2022.
Total revenues, comprised of retail sales and other revenue (principally finance charges and late fees on customer accounts receivable, gift card breakage, shipping charges for e-commerce purchases and layaway fees), decreased by 8.2% to $649.8 million in fiscal 2024 compared to $708.1 million in fiscal 2023.
Selling, general and administrative expenses (“SG&A”), which primarily include corporate and store payroll, related payroll taxes and benefits, insurance, supplies, advertising, bank and credit card processing fees were $252.8 million in fiscal 2023 compared to $242.6 million in fiscal 2022, an increase of 4.2%. As a percent of retail sales, SG&A was 36.1% compared to 32.3% in the prior year.
Selling, general and administrative expenses (“SG&A”), which primarily include corporate and store payroll, related payroll taxes and benefits, insurance, supplies, advertising, bank and credit card processing fees were $231.5 million in fiscal 2024 compared to $252.8 million in fiscal 2023, a decrease of 8.4%. As a percent of retail sales, SG&A was 36.1% compared to 36.1% in the prior year.
These high interest rates have adversely affected the availability and cost of credit for both businesses and our customers. Increasing costs related to revolving credit, auto loans and mortgages continue to negatively impact our customers’ discretionary income. Our customers’ willingness to purchase our products may continue to be negatively impacted by these inflationary pressures and high interest rates.
These high interest rates have adversely affected the availability and cost of credit for our customers, including revolving credit and auto loans, and continue to negatively impact our customers’ disposable income. Our customers’ willingness to purchase our products may continue to be negatively impacted by these inflationary pressures and high interest rates.
The income tax expense increase was primarily due to a valuation allowance recorded against U.S. federal and state deferred tax assets due to a pre-tax loss, partially offset by foreign rate differential. The effective tax rate was (73.5%) (Expense) in fiscal 2023 compared to 98.4% (Expense) in fiscal 2022.
The income tax expense decrease was primarily due to a valuation allowance recorded against U.S. federal and state deferred tax assets in the prior fiscal year due to a pre-tax loss, partially offset by foreign rate differential. The effective tax rate was (12.1%) (Expense) in fiscal 2024 compared to (73.5%) (Expense) in fiscal 2023.
Stores that have been relocated or expanded are also included in the same-store sales calculation after they have been open more than 15 months. In fiscal 2023 and fiscal 2022, e-commerce sales were less than 5% and 6% of total sales and same-store sales, respectively. The method of calculating same-store sales varies across the retail industry.
Same-store sales includes stores that have been open more than 15 months. Stores that have been relocated or expanded are also included in the same-store sales calculation after they have been open more than 15 months. In fiscal 2024 and fiscal 2023, e-commerce sales were less than 5% of total sales and same-store sales.
Income tax expense was $10.1 million, or 1.4% of retail sales in fiscal 2023 compared to income tax expense of $1.7 million, or 0.2% of retail sales in fiscal 2022.
Income tax expense was $1.9 million, or 0.3% of retail sales in fiscal 2024 compared to income tax expense of $10.1 million, or 1.4% of retail sales in fiscal 2023.
The credit agreement contains various financial covenants and limitations, including the maintenance of specific financial ratios with which the Company was in compliance as of February 3, 2024.
The credit agreement contained various financial covenants and limitations, including the maintenance of specific financial ratios with which the Company was not in compliance as of February 1, 2025.
The decrease in cost of goods sold as a percentage of sales resulted primarily from lower ocean freight costs and increased sales of regular priced goods, partially offset by deleveraging of occupancy and buying costs. Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution costs, occupancy costs, and freight and inventory shrinkage.
The increase in cost of goods sold as a percentage of sales resulted primarily from higher distribution and freight costs, increased sales of markdown priced goods, and deleveraging of occupancy and buying costs. Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution costs, occupancy costs, and freight and inventory shrinkage.
Depreciation expense decreased from fiscal 2022 due to fully depreciated older stores and prior period impairments of leasehold improvements and fixtures, partially offset by store development and information technology expenditures. Interest and other income decreased to $5.1 million in fiscal 2023 compared to $5.9 million in fiscal 2022.
Depreciation expense decreased slightly from fiscal 2023 due to fully depreciated older stores and prior period impairments of leasehold improvements and fixtures, partially offset by the distribution center and information technology expenditures. Interest and other income increased to $11.8 million in fiscal 2024 compared to $5.1 million in fiscal 2023.
As a result, our same-store sales calculation may not be comparable to similarly titled measures reported by other companies.
The method of calculating same-store sales varies across the retail industry. As a result, our same- store sales calculation may not be comparable to similarly titled measures reported by other companies.
Total credit segment income before taxes was $0.9 million in fiscal 2023 and $0.6 million in fiscal 2022. 31 Cost of goods sold was $464.3 million, or 66.3% of retail sales, in fiscal 2023 compared to $509.7 million, or 67.7% of retail sales, in fiscal 2022.
Total credit segment income before taxes was $2.2 million in fiscal 2024 and $1.7 million in 32 fiscal 2023. Cost of goods sold was $436.4 million, or 68.0% of retail sales, in fiscal 2024 compared to $464.3 million, or 66.3% of retail sales, in fiscal 2023.
Physical inventories are conducted throughout the year to calculate actual shrinkage and inventory on hand. Estimates based on actual shrinkage results are used to estimate inventory shrinkage, which is accrued for the period between the last physical inventory and the financial reporting date.
Physical inventories are conducted throughout the year to calculate actual shrinkage and inventory on hand. Actual shrinkage results are used to estimate inventory shrinkage, which is accrued for the period between the last physical inventory and the financial reporting date. The Company regularly reviews its inventory levels to identify slow moving merchandise and uses markdowns to clear slow moving inventory.
We believe continued inflation and high interest rates negatively impacted fiscal 2023 and will likely continue to have a negative impact on consumer behavior and, by extension, our results of operations and financial condition during fiscal 2024.
Although interest rates and inflation have decreased, we believe the pressure on our customers’ disposable income adversely impacted fiscal 2024 and will likely continue to have a negative impact on consumer behavior and, by extension, our results of operations and financial condition during at least part of fiscal 2025.
The Company operated 1,178 stores at February 3, 2024 compared to 1,280 stores operated at January 28, 2023. In fiscal 2023, the Company opened nine new stores and closed 111 stores. Other revenue, a component of total revenues, increased to $7.7 million in fiscal 2023 from $6.9 million in fiscal 2022.
The Company operated 1,117 stores at February 1, 2025 compared to 1,178 stores operated at February 3, 2024. In fiscal 2024, the Company opened five new stores and closed 66 stores. Other revenue, a component of total revenues, remained flat at $7.7 million in fiscal 2024 compared to fiscal 2023.
The Company regularly reviews its inventory levels to identify slow moving merchandise and uses markdowns to clear slow moving inventory. Lease Accounting The Company determines whether an arrangement is a lease at inception. The Company has operating leases for stores, offices, warehouse space and equipment.
Lease Accounting The Company determines whether an arrangement is a lease at inception. The Company has operating leases for stores, offices, warehouse space and equipment.
Liquidity, Capital Resources and Market Risk The Company believes that its cash, cash equivalents and short-term investments, together with cash flows from operations, will be adequate to fund the Company’s regular operating requirements, including $66.9 million of lease obligations and planned investments of $8.7 million of capital expenditures, for fiscal 2024 and for the foreseeable future.
Liquidity, Capital Resources and Market Risk The Company believes that its cash, cash equivalents and short-term investments, together with cash flows from operations and its new asset-backed revolving line of credit (see below), will be adequate to fund the Company’s regular operating requirements, including $64.6 million of lease obligations and planned investments of $7.3 million of capital expenditures, for the next twelve months from the issuance of this report.
Due to a sustained regional drought, the Panama Canal has reduced the number of transits by approximately 37% and has also reduced the permissible draft of vessels transiting the Panama Canal, which reduces the volume and number of containers carried by container ships and increases our costs.
In the first quarter of 2024, the drought conditions experienced in the region surrounding the Panama Canal reduced the number of transits by approximately 37% and also reduced the permissible draft of vessels transiting the Panama Canal, which reduced the volume and number of containers carried by container ships and increased our costs.
Net cash used in financing activities totaled $16.1 million in fiscal 2023 compared to net cash used of $29.3 million for fiscal 2022 and $31.8 million for fiscal 2021. The decrease in cash used during fiscal 2023 was primarily due to lower share repurchase amounts. The Company does not use derivative financial instruments.
Net cash used in financing activities totaled $14.1 million in fiscal 2024 compared to net cash used of $16.1 million for fiscal 2023 and $29.3 million for fiscal 2022. The decrease in cash used during fiscal 2024 was primarily due to reduction in dividends paid, partially offset by an increase in share repurchase amounts.
Expenditures for property and equipment totaled $12.5 million, $19.4 million and $4.1 million in fiscal 2023, 2022 and 2021, respectively. The expenditures for fiscal 2023 were primarily for additional investments in nine new stores, our distribution center and information technology.
Expenditures for property and equipment totaled $7.9 million, $12.5 million and $19.4 million in fiscal 2024, 2023 and 2022, respectively. The decrease in expenditures for fiscal 2024 was primarily due to finishing projects related to investments in the distribution center and information technology.
Net cash provided by investing activities totaled $19.8 million for fiscal 2023 compared to $16.0 million provided in fiscal 2022 and $25.3 million used in fiscal 2021. In fiscal 2023, the cash provided was primarily attributable to the net sales of short-term investments, partially offset by expenditures for property and equipment.
In fiscal 2024, the increase in cash provided was primarily attributable to sales of other assets and the net sales of short-term investments and other assets, partially offset by expenditures for property and equipment.
There were no borrowings outstanding, nor any outstanding letters of credit that reduced borrowing availability, under this credit facility as of the fiscal year ended February 3, 2024 or the fiscal year ended January 28, 2023. The Company had no outstanding revocable letters of credit relating to purchase commitments at February 3, 2024 or at January 28, 2023.
There were no borrowings outstanding, or any outstanding letters of credit, under this credit facility as of the fiscal year ended February 1, 2025 or the fiscal year ended February 3, 2024.
The recent hostilities affecting the Red Sea and Suez Canal are causing container ships to travel a much longer distance around the Cape of Good Hope, which is increasing both lead times for merchandise during our key selling times and our costs to ship these goods.
The hostilities affecting the region surrounding the Suez Canal are causing container ships to travel longer distances around the Cape of Good Hope, which is increasing lead times for merchandise and our costs to ship these goods, as well as decreasing the pool of containers available. The combination of these situations has negatively impacted fiscal 2024.
The decrease in retail sales in fiscal 2023 was primarily due to a 5.9% decrease in same-store sales and sales from closed stores in 2022 and stores closed in the first half of 2023, partially offset by an additional week of sales in 2023 and a small increase in sales from stores opened in 2023.
The decrease in retail sales in fiscal 2024 was primarily due to a 3.2% decrease in same-store sales, from closed stores in 2023 and an additional week of sales in 2023. Same-store sales for the fiscal year 2024 decreased primarily due to lower transactions, partially offset by fewer returns and slightly higher average sales per transaction.
The increase in SG&A expense in fiscal 2023 was primarily attributable to higher payroll, insurance and closed store expenses. Depreciation expense was $9.9 million in fiscal 2023 compared to $11.1 million in fiscal 2022.
The decrease in SG&A expense in fiscal 2024 was primarily attributable to decreased incentive compensation, insurance, closed store and impairment expenses, partially offset by increased professional fees. Depreciation expense was $9.8 million in fiscal 2024 compared to $9.9 million in fiscal 2023.
The state, municipal and corporate bonds and asset-backed securities have contractual maturities which range from seven days to 3.1 years. The U.S. Treasury Notes have contractual maturities which range from four days to 2.0 years. These securities are classified as available-for-sale and are recorded as Short-term investments, Restricted cash, and Other assets on the accompanying Consolidated Balance Sheets.
Treasury notes have contractual maturities which range from 13 days to 2.5 years. These securities are classified as available-for-sale and are recorded as Short-term investments and Other assets on the accompanying Consolidated Balance Sheets. These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated other comprehensive income.
The increase in credit revenue was primarily due to increases in finance charges and late fee income as a result of higher accounts receivable balances. Credit revenue is comprised of interest earned on the Company’s private label credit card portfolio and related fee income.
Credit revenue of $2.7 million represented 0.4% of total revenue in fiscal 2024, a $0.1 million increase compared to fiscal 2023 credit revenue of $2.6 million or 0.4% of total revenue. The increase in credit revenue was primarily due to increases in finance charges and late fee income as a result of higher accounts receivable balances.
(3.4) % - % Fiscal 2023 Compared to Fiscal 2022 Retail sales decreased by 6.9% to $700.3 million in fiscal 2023 compared to $752.4 million in fiscal 2022.
(2.8) % (3.4) % Fiscal 2024 Compared to Fiscal 2023 Retail sales decreased by 8.3% to $642.1 million in fiscal 2024 compared to $700.3 million in fiscal 2023. Fiscal 2024 had 52 weeks versus 53 weeks in fiscal 2023.
The decrease of $12.9 million for fiscal 2023 compared to fiscal 2022 is primarily due to lower net operating income partially offset by a decrease in merchandise inventories and deferred taxes. At February 3, 2024, the Company had working capital of $55.1 million compared to $74.7 million and $111.5 million at January 28, 2023 and January 29, 2022, respectively.
At February 1, 2025, the Company had working capital of $34.9 million compared to $55.1 million and $74.7 million at February 3, 2024 and January 28, 2023, respectively.
Cash provided by operating activities during fiscal 2023 was $0.5 million as compared to $13.4 million in fiscal 2022 and $59.8 in fiscal 2021. Cash provided by operating activities during 2023 was primarily attributable to net income adjusted for depreciation, share-based compensation, impairment and changes in working capital.
Cash used in operating activities during fiscal 2024 was $19.7 million as compared to $0.5 million provided in fiscal 2023 and $13.4 million provided in fiscal 2022.
Recent Developments Inflationary Cost Pressure and High Interest Rates Our customers’ disposable income was negatively impacted by high interest rates and continued inflation related to fuel, food, housing, including rent, and other consumable products and a flattening of wage rates in 2023.
Recent Developments Inflationary Cost Pressure and High Interest Rates The pressure on our customers’ disposable income continued in fiscal 2024, due to prolonged and persistently high prices caused by high inflation rates, especially related to housing, groceries and fuel, as well as high interest rates.
See Note 4 to the Consolidated Financial Statements, “Fair Value Measurements,” for information regarding the Company’s financial assets that are measured at fair value. The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at February 3, 2024.
The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at February 36 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual maturities which range from nine days to 2.8 years. The U.S.
Related expenses include principally payroll, postage and other administrative expenses and totaled $1.7 million in fiscal 2023 compared to $1.7 million in fiscal 2022. See Note 13 to the Consolidated Financial Statements, “Reportable Segment Information” for a schedule of credit-related expenses.
Credit revenue is comprised of interest earned on the Company’s private label credit card portfolio and related fee income. Related expenses include principally payroll, postage and other administrative expenses and totaled $1.6 million in fiscal 2024 compared to $1.6 million in fiscal 2023.
Removed
The persistence of high interest rates and inflation negatively affected our customers’ willingness to purchase discretionary items such as apparel, jewelry and shoes. Though the Federal Reserve paused raising rates in the fall of 2023, it has indicated it is committed to maintaining interest rates at or near these elevated levels until inflation subsides to its targeted levels.
Added
These conditions improved as the Panama Canal authority increased the daily transits and the permissible draft of vessels, raising the number of transits to 95% of pre-drought operations in the second quarter and back to pre-drought levels in the third and fourth quarters.
Removed
Fiscal 2023 had 53 weeks versus 52 weeks in fiscal 2022. Same-store sales for the fiscal year 2023 decreased primarily due to lower transactions, partially offset by fewer returns and slightly higher average sales per transaction. Same-store sales includes stores that have been open more than 15 months.
Added
In addition, the third and fourth quarters were impacted by later shipments in part due to congestion at certain Asian ports. In the third quarter, our shipments were negatively impacted by the U.S. port strike on the east coast and civil unrest in some Asian countries that caused merchandise to miss its shipping windows.
Removed
The increase was due to increases in gift card breakage and finance charges associated with the Company’s proprietary credit card, partially offset by decreases in e-commerce shipping revenue. Credit revenue of $2.6 million represented 0.4% of total revenue in fiscal 2023, a $0.4 million increase compared to fiscal 2022 credit revenue of $2.2 million or 0.3% of total revenue.
Added
Though conditions incrementally improved in the fourth quarter, we believe the totality of these conditions will likely continue to have a negative impact on our results of operations and financial condition for the foreseeable future.
Removed
The decrease is primarily attributable to receiving a Business Recovery Grant from the State of North Carolina in fiscal 2022, partially offset by higher amounts earned on investments due to higher interest rates.
Added
In addition to the supply chain issues, the newly implemented additional provisional tariffs on Chinese products may have several impacts on the results of our financial operations. Our costs associated with products made in China are likely to increase.
Removed
These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated other comprehensive income. The asset-backed securities are bonds comprised of auto loans and bank credit cards that carry AAA ratings.
Added
These cost increases will negatively impact our results of operations and financial condition unless we are able to mitigate these costs by having our vendors 31 share the costs of tariffs, increase retail pricing or move production to another county. Certain product categories such as shoes and handbags will be difficult to source in other countries.
Removed
The auto loan asset-backed securities are backed by static pools of auto loans that were originated and serviced by captive auto finance units, banks or finance companies. The bank credit card asset-backed securities are backed by revolving pools of credit card receivables generated by account holders of cards from American Express, Citibank, JPMorgan Chase, Capital One, and Discover.
Added
These provisional tariffs may also cause supply chain issues, as companies move production from China.
Added
Potential supply chain issues such as products being late due to port congestion, longer transit times and dwell times at port, and container availability may impact the costs we pay for ocean freight or the timeliness of our product deliveries, any of which may negatively impact our results of operations and financial condition.
Added
The increase is primarily attributable to a $3.2 million net gain on sale of land held for investment, gains on the disposal of the Company’s corporate aircraft and certain equity securities, as well as higher interest earned on the Company’s investments.
Added
This evaluation requires significant judgment and involves the consideration of all available positive and negative evidence, including our historical operating results, the existence of cumulative losses in recent years, ongoing prudent and feasible tax planning strategies, and projections of future taxable income.
Added
Cash used in operating activities during 2024 was primarily attributable to net income adjusted for depreciation, changes in working capital and 35 subtraction of net income for non-operating gains on sale of assets held for investment.
Added
The decrease of $20.2 million for fiscal 2024 compared to fiscal 2023 is primarily due to an increase in merchandise inventories and gains on sale of assets held for investments, partially offset by an increase in accounts payable.
Added
On March 13, 2025, the Company terminated the unsecured revolving line of credit when it entered into a new $35.0 million asset-backed revolving line of credit (the “ABL Facility”) secured primarily by inventory and third-party credit card receivables. As of March 31, 2025 there were no borrowings under the ABL Facility and availability under the ABL Facility was $30.0 million.
Added
For additional information regarding the ABL Facility, see Note 1 to the Consolidated Financial Statements. The Company had no outstanding revocable letters of credit relating to purchase commitments at February 1, 2025 or at February 3, 2024.
Added
On April 25, 2024, the Company amended the now terminated unsecured revolving credit agreement to modify a definition used in calculating the Company’s minimum EBITDAR coverage ratio to add back certain income tax receivables included in the calculation of the ratio.
Added
On November 1, 2024, the Company amended the now terminated unsecured revolving credit agreement to lower the minimum EBITDAR coverage ratio and the corresponding minimum cash and investments used to determine the EBITDAR coverage ratio in exchange for a secured position in any future borrowings.
Added
Net cash provided by investing activities totaled $29.0 million for fiscal 2024 compared to $19.8 million provided in fiscal 2023 and $16.0 million provided in fiscal 2022.
Added
The Company does not use derivative financial instruments. See Note 4 to the Consolidated Financial Statements, “Fair Value Measurements,” for information regarding the Company’s financial assets that are measured at fair value.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk: The Company is subject to market rate risk from exposure to changes in interest rates based on its financing, investing and cash management activities, but the Company does not believe such exposure is material. 36
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk: The Company is subject to market rate risk from exposure to changes in interest rates based on its financing, investing and cash management activities, but the Company does not believe such exposure is material. 37

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