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What changed in Burlington Stores, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Burlington Stores, Inc.'s 2024 and 2025 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 2025 report.

+256 added−259 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-15)

Top changes in Burlington Stores, Inc.'s 2025 10-K

256 paragraphs added · 259 removed · 209 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also offer a wide array of benefits for our associates and their families, including health and wellness and retirement benefits. Customer Demographic Our core customer is 25-49 years old, has an average annual household income of $25,000-$100,000, and is more ethnically diverse than the general population.
Biggest changeCustomer Demographic Our core customer is 25-49 years old, is more ethnically diverse than the general population, and most have an annual household income of $25,000-$100,000. The core customer is educated, resides in mid- to large-sized metropolitan areas and shops for themselves, their family, and their home.
Build Teams & Partnerships. 4 • We Believe Everyone Matters : We listen to the individual viewpoints of our diverse workforce through open and honest communication. • We Win Together : We recognize those who make a difference.
Build Teams & Partnerships. • We Believe Everyone Matters : We listen to the individual viewpoints of our diverse workforce through open and honest communication. 4 • We Win Together : We recognize those who make a difference.
Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well as the following social media channels: Facebook ( www.facebook.com/BurlingtonStores ) and X (formerly Twitter) ( www.twitter.com/burlington ).
Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in the Company to review the information posted on our website, as well as the following social media channels: Facebook ( www.facebook.com/BurlingtonStores ) and X (formerly Twitter) ( www.x.com/burlington ).
Mill St) 2006 758,000 Leased Redlands, California (Pioneer Ave) 2014 800,000 Leased Riverside, California (Cactus Ave) 2021 900,000 Leased Ellabell, Georgia 2026 2,057,000 (b) Warehousing Facilities: Burlington, New Jersey (Route 130 North)(a) 1987 525,000 Owned Burlington, New Jersey (Richards Run) 2017 511,000 Leased Redlands, California (River Bluff Ave) 2017 543,000 Leased Riverside, California (Oleander Ave) 2023 410,000 Leased San Bernardino, California (Waterman Ave) 2020 394,000 Leased (a) Inclusive of corporate offices.
Mill St.) 2006 758,000 Leased Redlands, California (Pioneer Ave.) 2014 800,000 Leased Riverside, California (Cactus Ave.)(c) 2021 900,000 Leased Ellabell, Georgia(b) 2026 2,057,000 Owned Warehousing Facilities: Burlington, New Jersey (Route 130 North)(a) 1987 525,000 Owned Burlington, New Jersey (Richards Run) 2017 511,000 Leased Redlands, California (River Bluff Ave.) 2017 543,000 Leased Riverside, California (Oleander Ave.) 2023 410,000 Leased San Bernardino, California (Waterman Ave.) 2020 394,000 Leased (a) Inclusive of corporate offices.
Our goal is to create a welcoming, diverse and inclusive environment where our associates can build a career for life. Oversight and Management Our Human Resources department is tasked with managing associate-related matters, including recruiting and hiring, compensation and benefits, performance management, and learning and development.
Our goal is to create a welcoming and inclusive environment where our associates can build a career for life. Oversight and Management Our Human Resources department is tasked with managing associate-related matters, including recruiting and hiring, compensation and benefits, performance management, and learning and development.
These initiatives include, but are not limited to, those discussed under “Ongoing Initiatives for Fiscal 2024” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. As used in this Annual Report, the terms “Company,” “we,” “us,” or “our” refer to Burlington Stores, Inc. and all of its subsidiaries.
These initiatives include, but are not limited to, those discussed under “Ongoing Initiatives for Fiscal 2025” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. As used in this Annual Report, the terms “Company,” “we,” “us,” or “our” refer to Burlington Stores, Inc. and all of its subsidiaries.
We continue to improve the quality of our brand portfolio, driven by the growth of our merchandising team, wide breadth of our product categories, and a vendor community increasingly committed to grow with Burlington. We carry many different brands, none of which accounted for more than 6% of our net purchases during Fiscal 2023, Fiscal 2022 or Fiscal 2021.
We continue to improve the quality of our brand portfolio, driven by the growth of our merchandising team, wide breadth of our product categories, and a vendor community increasingly committed to grow with Burlington. We carry many different brands, none of which accounted for more than 6% of our net purchases during Fiscal 2024, Fiscal 2023 or Fiscal 2022.
Sales percentage by major product category over the last three fiscal years was as follows: Category Fiscal 2023 Fiscal 2022 Fiscal 2021 Ladies apparel 21 % 22 % 23 % Accessories and shoes 27 % 24 % 23 % Home 20 % 21 % 20 % Mens apparel 17 % 17 % 16 % Kids apparel and baby 12 % 12 % 14 % Outerwear 3 % 4 % 4 % Human Capital Resources Attracting, developing and retaining top talent is key to our growth, and our success depends on cultivating an engaged and motivated workforce.
Sales percentage by major product category over the last three fiscal years was as follows: Category Fiscal 2024 Fiscal 2023 Fiscal 2022 Ladies apparel 21 % 21 % 22 % Accessories and shoes 27 % 27 % 24 % Home 20 % 20 % 21 % Mens apparel 17 % 17 % 17 % Kids apparel and baby 12 % 12 % 12 % Outerwear 3 % 3 % 4 % Human Capital Resources Attracting, developing and retaining top talent is key to our growth, and our success depends on cultivating an engaged and motivated workforce.
Item 1. Business Overview We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1007 stores as of February 3, 2024, in 46 states, Washington D.C. and Puerto Rico.
Item 1. Business Overview We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1,108 stores as of February 1, 2025, in 46 states, Washington D.C. and Puerto Rico.
In training our associates, our goal is to emphasize knowledgeable, friendly customer service and a sense of professional pride. We have empowered our store teams to provide an outstanding customer experience for every customer in every store, every day. We have and continue to streamline processes and strive to create opportunities for fast and friendly customer interactions.
In training our associates, our goal is to emphasize friendly customer service and a sense of professional pride. We have empowered our store teams to provide a satisfying customer experience for every customer in every store, every day. We have and continue to streamline processes and strive to create opportunities for fast and friendly customer interactions.
We seek to purchase a majority of our merchandise in-season. Buyers spend time interacting face-to-face with new and existing vendors and continuously evaluating trends in the market to which we believe our customers would respond positively. Our buyers use a merchant scorecard that rates products across four key attributes—fashion, quality, brand and price—to help formalize a framework for buying decisions.
Buyers spend time interacting face-to-face with new and existing vendors and continuously evaluating trends in the market to which we believe our customers would respond positively. Our buyers use a merchant scorecard that rates products across four key attributes—fashion, quality, brand and price—to help formalize a framework for buying decisions.
Fiscal Ye ar End We define our fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. This Annual Report covers the 53-week fiscal year ended February 3, 2024 (Fiscal 2023) and the 52-week fiscal years ended January 28, 2023 (Fiscal 2022) and January 29, 2022 (Fiscal 2021).
Fiscal Ye ar End We define our fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. This Annual Report covers the 52-week fiscal year ended February 1, 2025 (Fiscal 2024), the 53-week fiscal year ended February 3, 2024 (Fiscal 2023), and the 52-week fiscal year ended January 28, 2023 (Fiscal 2022).
Our store base has grown from 13 stores in 1980 to 1007 stores as of February 3, 2024. Based on our smaller store prototype, as well as the ongoing opportunity presented by accelerating retail disruption and industry wide store closures, our long-term store target remains at 2,000 stores.
Our store base has grown from 13 stores in 1980 to 1,108 stores as of February 1, 2025. Based on our smaller store prototype, as well as the ongoing opportunity presented by accelerating retail disruption and industry wide store closures, our long-term store target remains at 2,000 stores.
As of February 3, 2024, associates at one of our stores were subject to a collective bargaining agreement. Corporate Culture We recognize the critical importance of talent and culture to our success.
As of February 1, 2025, associates at one of our stores were subject to a collective bargaining agreement. Corporate Culture We recognize the critical importance of talent and culture to our success.
As of February 3, 2024, 73% of our associates are female, and 78% of our associates have a racial or ethnic minority background. Our staffing requirements fluctuate during the year as a result of the seasonality of our business. We hire additional associates and increase the hours of part-time associates during seasonal peak selling periods.
As of February 1, 2025, 73% of our associates are female, and 79% of our associates have a racial or ethnic minority background. Our staffing requirements fluctuate during the year as a result of the seasonality of our business. We hire additional associates and increase the hours of part-time associates during seasonal peak selling periods.
Our Off-Price Sourcing and Merchandising Model We believe that our ability to chase sales within the off-price model enables us to provide our customers with products that are nationally branded, fashionable, high quality and priced right.
Our Off-Price Sourcing and Merchandising Model We believe that our ability to chase sales within the off-price model enables us to provide our customers with products that are nationally branded, fashionable, high quality and at a compelling value.
Our store base is geographically diversified with stores located in 46 states, Washington D.C. and Puerto Rico as set forth below: State Number of Stores State Number of Stores State Number of Stores AK 2 KY 8 NY 65 AL 13 LA 9 OH 30 AR 6 MA 24 OK 11 AZ 21 MD 22 OR 7 CA 108 ME 2 PA 42 CO 16 MI 27 PR 20 CT 15 MN 13 RI 6 DC 1 MO 12 SC 13 DE 3 MS 2 SD 2 FL 101 NC 27 TN 16 GA 35 ND 1 TX 113 IA 4 NE 4 UT 9 ID 3 NH 4 VA 28 IL 40 NJ 47 WA 18 IN 18 NM 5 WI 11 KS 8 NV 14 WV 1 Store Expansion and Real Estate Strategy We continue to explore expansion opportunities both within our current market areas and in other regions.
Our store base is geographically diversified with stores located in 46 states, Washington D.C. and Puerto Rico as set forth below: State Number of Stores State Number of Stores State Number of Stores AK 2 KY 9 NY 70 AL 12 LA 11 OH 31 AR 8 MA 25 OK 16 AZ 25 MD 24 OR 7 CA 112 ME 2 PA 42 CO 16 MI 30 PR 22 CT 16 MN 14 RI 6 DC 1 MO 12 SC 13 DE 3 MS 4 SD 2 FL 119 NC 36 TN 17 GA 37 ND 1 TX 123 IA 5 NE 5 UT 9 ID 3 NH 6 VA 33 IL 45 NJ 53 WA 18 IN 19 NM 5 WI 16 KS 9 NV 13 WV 1 Store Expansion and Real Estate Strategy We continue to explore expansion opportunities both within our current market areas and in other regions.
Of this total square footage, the area that represents the total selling square footage for all stores as of the end of Fiscal 2023, Fiscal 2022, and Fiscal 2021 were 31.5 million, 31.0 million, and 30.0 million respectively. Distribution and Warehousing We have five distribution centers that shipped more than 99% of merchandise units to our stores in Fiscal 2023.
Of this total square footage, the area that represents the total selling square footage for all stores as of the end of Fiscal 2024, Fiscal 2023, and Fiscal 2022 was 32.7 million, 31.5 million, and 31.0 million respectively. Distribution and Warehousing We have six distribution centers that shipped more than 99% of merchandise units to our stores in Fiscal 2024.
The remaining merchandise units are drop shipped by our vendors directly to our stores. Our two east coast distribution centers are located in Edgewater Park, New Jersey and Burlington, New Jersey. Our three west coast distribution centers are located in San Bernardino, 2 California, Redlands, California, and Riverside, California.
The remaining merchandise units are drop shipped by our vendors directly to our stores. Our three east coast distribution centers are located in Edgewater Park, New Jersey; Burlington, New Jersey; and Logan, New Jersey, which became fully operational in Fiscal 2024. Our 2 three west coast distribution centers are located in San Bernardino, California, Redlands, California, and Riverside, California.
(b) Stores opened during Fiscal 2023, Fiscal 2022 and Fiscal 2021 had an average size of approximately 27,000, 28,000 and 31,000 square feet, respectively. The total gross square footage of all stores as of the end of Fiscal 2023, Fiscal 2022, and Fiscal 2021 were 51.5 million, 50.7 million, and 49.6 million, respectively.
(b) Stores opened during Fiscal 2024, Fiscal 2023 and Fiscal 2022 had an average size of approximately 27,000, 27,000 and 28,000 square feet, respectively. The total gross square footage of all stores as of the end of Fiscal 2024, Fiscal 2023, and Fiscal 2022 was 51.8 million, 51.5 million, and 50.7 million, respectively.
We have no long-term purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier.
We have no long-term 3 purchase commitments or arrangements with any of our suppliers, and believe that we are not dependent on any one supplier. We continue to have good working relationships with our suppliers.
Our Marks include, but are not limited to, “Burlington Stores,” “BCF,” “Burlington,” “Burlington Coat Factory,” “Cohoes,” “B” and “Baby Depot.” We consider these Marks and the accompanying name recognition to be valuable to our business. We believe that our rights to these properties are adequately protected. Our rights in these Marks endure for as long as they are used.
Our Marks include, but are not limited to, “Burlington,” “Burlington Coat Factory,” “B, stylized ” and “DEALS. BRANDS. WOW!” We consider these Marks and the accompanying name recognition to be valuable to our business. We believe that our rights to these properties are adequately protected. Our rights in these Marks endure for as long as they are used.
The fiscal year ending February 1, 2025 (“Fiscal 2024”) will have 52 weeks. Our Stores Over 99% of our net sales are derived from stores we operate as Burlington Stores. We believe that our customers are attracted to our stores principally by the availability of a large assortment of first-quality, current, brand-name merchandise at everyday low prices.
Our Stores Over 99% of our net sales are derived from stores we operate as Burlington Stores. We believe that our customers are attracted to our stores principally by the availability of a large assortment of first-quality, current, brand-name merchandise at everyday low prices.
Competition The U.S. retail apparel and home furnishings markets are highly fragmented and competitive. We compete on the basis of a combination of factors, including, among others, price, breadth, quality and style of merchandise offered, in-store experience, level of 5 customer service, ability to identify and respond to new and emerging fashion trends, brand image and scalability.
We compete on the basis of a combination of factors, including, among others, price, breadth, quality and style of merchandise offered, in-store experience, level of customer service, ability to identify and respond to new and emerging fashion trends, brand image and scalability.
We previously operated a third warehousing facility in Burlington, New Jersey, which was closed during Fiscal 2023. Calendar Year Operational Size (sq. feet) Leased or Owned Primary Distribution Centers: Edgewater Park, New Jersey (Route 130 South)(a) 2004 648,000 Owned Burlington, New Jersey (Daniels Way) 2014 1,000,000 Leased Logan, New Jersey 2022 1,029,000 Leased San Bernardino, California (E.
Calendar Year Operational Size (sq. feet) Leased or Owned Primary Distribution Centers: Edgewater Park, New Jersey (Route 130 South)(a) 2004 648,000 Owned Burlington, New Jersey (Daniels Way) 2014 1,000,000 Leased Logan, New Jersey 2022 1,029,000 Leased San Bernardino, California (E.
We continue to have good working relationships with our suppliers. 3 We have designed our merchant organization so that buyers focus primarily on buying, planners focus primarily on planning, and information systems help inform data-driven decisions for both groups. Buyers are in the market each week and focus on purchasing great products for great value.
We have designed our merchant organization so that buyers focus primarily on buying, planners focus primarily on planning, and information systems help inform data-driven decisions for both groups. Buyers are in the market each week and focus on purchasing great products for great value. We seek to purchase a majority of our merchandise in-season.
(b) We entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia. This building is expected to be fully operational during Fiscal 2026.
(b) We entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia. The purchase option was exercised during Fiscal 2024. This building is expected to be fully operational during Fiscal 2026. (c) During Fiscal 2024, we negotiated a purchase agreement for the Cactus Ave. distribution center in Riverside, California.
Associates As of February 3, 2024, we employed 71,049 associates, of which 76% were part-time or seasonal associates. Of our associates, 88% worked in our stores, 8% worked in our distribution centers and 4% worked in our corporate organization.
Associates As of February 1, 2025, we employed 77,532 associates, of which 78% were part-time or seasonal associates. Of our associates, 90% worked in our stores, 7% worked in our distribution centers and 3% worked in our corporate organization.
Trademarks We are the owner of certain registered and common law trademarks, service marks and tradenames (collectively referred to as the Marks) that we use in connection with our business.
Although we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns. 5 Trademarks We are the owner of certain registered and common law trademarks, service marks and tradenames (collectively referred to as the Marks) that we use in connection with our business.
Fiscal 2023 Fiscal 2022 Fiscal 2021 Stores (beginning of period) 927 840 761 Stores opened(a)(b) 91 91 84 Stores closed(a) (11 ) (4 ) (5 ) Stores (end of period) 1,007 927 840 (a) Exclusive of relocations.
Fiscal 2024 Fiscal 2023 Fiscal 2022 Stores (beginning of period) 1,007 927 840 Stores opened(a)(b) 116 91 91 Stores closed(a) (15 ) (11 ) (4 ) Stores (end of period) 1,108 1,007 927 (a) Exclusive of relocations during Fiscal 2024, Fiscal 2023 and Fiscal 2022 of 31, 13 and 22 stores, respectively.
Email reaches our best customers, while social marketing, including relationships with influencers, allows for authentic consumer engagement. Burlington.com highlights our great merchandise values, while encouraging customers to visit our stores to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home.
Burlington.com highlights our great merchandise values, while encouraging customers to visit our stores to discover fantastic deals on the brands and products they love - from stylish apparel to everything they need and want for their entire family and home. Competition The U.S. retail apparel and home furnishings markets are highly fragmented and competitive.
These five distribution centers occupy an aggregate of 4,106,000 square feet, and each includes processing, shipping and storage capabilities. In addition, we entered into a lease during Fiscal 2021 for an additional distribution center in Logan, New Jersey occupying approximately 1,029,000 square feet.
These six distribution centers occupy an aggregate of 5,135,000 square feet, and each includes processing, shipping and storage capabilities. In addition, we entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia occupying approximately 2,057,000 square feet. The purchase option was exercised during Fiscal 2024.
In addition to being merit based, Burlington reviews compensation for all associates at every level of the business based on market analysis, seeking to ensure associates are fairly and appropriately compensated. Through this process, we have increased the wages of our hourly associates every year since 2010.
Compensation and Benefits As part of our commitment to offer competitive wages, Burlington works to ensure that our pay structure aligns with industry standards. In addition to being merit based, Burlington reviews compensation for all associates at every level of the business based on market analysis, seeking to ensure associates are fairly and appropriately compensated.
We also operate warehousing facilities to support our distribution centers. The east coast has two supporting warehouses located in Burlington, New Jersey. The west coast has three supporting warehouses located in Redlands, California, Riverside, California, and San Bernardino, California. These five warehousing facilities occupy an aggregate of 2,383,000 square feet and primarily serve as storage facilities.
This building is expected to be fully operational during Fiscal 2026. We also operate warehousing facilities to support our distribution centers. The east coast has two supporting warehouses located in Burlington, New Jersey. The west coast has three supporting warehouses located in Redlands, California, Riverside, California, and San Bernardino, California.
Sales of cold weather clothing are increased by early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is still driven, in part, by weather patterns.
Sales of cold weather clothing are increased by early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather conditions in the Spring.
Learning and Development We support our associates’ career growth by offering a blended learning approach that includes online education, on-the-job training, coaching and career development. All associates, including full- and part-time, in our stores, distribution centers and corporate offices, are offered training and development opportunities.
The survey results help us understand the associate experience, evaluate our performance, identify our strengths and pinpoint opportunities for improvement. Learning and Development We support our associates’ career growth by offering a blended learning approach that includes online education, on-the-job training, coaching and career development.
Marketing and Advertising We use a mix of broad-based and targeted marketing strategies to efficiently deliver the right message to our audience at the right time. Broad-based strategies include television and radio, while our digital and streaming audio strategies allow for more personalized and targeted messaging.
We appeal to value seeking and brand conscious customers who understand the off-price model and love the thrill of the hunt. Marketing and Advertising We use a mix of broad-based and targeted marketing strategies to efficiently deliver the right message to our audience at the right time.
Our learning and development programs are integral to the development of our associates and enable them to take on new and expanded roles across our organization. Compensation and Benefits As part of our commitment to offer competitive wages, Burlington works to ensure that our pay structure aligns with industry standards.
All associates, including full- and part-time, in our stores, distribution centers and corporate offices, are offered training and development opportunities. Our learning and development programs are integral to the development of our associates and enable them to take on new and expanded roles across our organization.
Removed
This building was used for storage and basic manual processing during Fiscal 2023, and is expected to be fully operational during Fiscal 2024. Lastly, we entered into a lease with a purchase option during Fiscal 2023 for an additional distribution center in Ellabell, Georgia occupying approximately 2,057,000 square feet. This building is expected to be fully operational during Fiscal 2026.
Added
These five warehousing facilities occupy an aggregate of 2,383,000 square feet and primarily serve as storage facilities. We previously operated a third warehousing facility in Burlington, New Jersey, which was closed during Fiscal 2023.
Removed
In addition, our Nominating and Corporate Governance Committee reviews environmental, social and governance (“ESG”) trends, issues and concerns, including legislative and regulatory developments, that could significantly affect our public affairs. Our Audit Committee receives periodic reports from, and discusses related controls and procedures with, management regarding ESG reporting and disclosures. Our Board of Directors provides oversight of ESG matters.
Added
Through this process, we have increased the wages of our hourly associates every year since 2010. We also offer a wide array of benefits for our associates and their families, including health and wellness and retirement benefits.
Removed
The survey results help us understand the associate experience, evaluate our performance, identify our strengths and pinpoint opportunities for improvement. Diversity, Equity and Inclusion As Burlington continues to grow, innovate, and thrive, we are integrating diversity, equity, and inclusion ("DEI") best practices across the entire spectrum of business functions.
Added
Broad-based strategies include television and radio, while our digital and streaming audio strategies allow for more personalized and targeted messaging. Email reaches our best customers, while social media marketing, including relationships with influencers, allows for authentic consumer engagement.
Removed
Our DEI strategy consists of five pillars that support all areas of the business: • Leadership & Workforce Diversity • Inclusive & Equitable Environments for Associates and Customers • Enhanced Education & Awareness • Product, Vendor & Supplier Diversity • Community Advocacy Burlington has a DEI team that is further supported by an enhanced governance structure consisting of additional DEI councils to support corporate, merchandising, distribution centers, and field/store operations, along with expanded Associate Resource Groups, which gives associates more ways to participate in DEI efforts as members of an associate-led community.
Removed
The core customer is educated, resides in mid- to large-sized metropolitan areas and shops for themselves, their family, and their home. We appeal to value seeking and brand conscious customers who understand the off-price model and love the thrill of the hunt.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified Board of Directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new Board of Directors at an annual meeting; • limit the ability of stockholders to remove directors only for cause and only upon the affirmative vote of at least 75% of the outstanding shares of our common stock; • prohibit stockholders from calling special meetings of stockholders; • provide that the Board of Directors is expressly authorized to alter or repeal our amended and restated bylaws; and • require the approval of holders of at least 75% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation.
Biggest changeThese provisions: • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified Board of Directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered three-year terms, which will be phased out by the time of the 2027 Annual Meeting of Stockholders, in accordance with an amendment to our Certificate of Incorporation, approved by our stockholders in 2024, to declassify the Board in phases and provide for the annual election of the entire Board for one-year terms; • until the 2027 Annual Meeting of Stockholders, limit the ability of stockholders to remove directors only for cause and only upon the affirmative vote of at least 75% of the voting power of all outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class; beginning with the 2027 Annual Meeting of Stockholders, when the Board will no longer be classified, directors may be removed with or without cause as required by Delaware law; • prohibit stockholders from calling special meetings of stockholders; • provide that the Board of Directors is expressly authorized to alter or repeal our amended and restated bylaws; and • require the approval of holders of at least 75% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation.
Such factors include: • political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, particularly if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis; • disruptions in the operations of domestic ports through which we import our merchandise, including labor disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship merchandise to alternative ports in the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs; disruptions at ports through which we import our goods could also result in unanticipated inventory shortages; • political or military conflict, which could cause a delay in the transportation of our products to us and an increase in transportation costs; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • disease epidemics, pandemics, outbreaks and other health-related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas; • natural disasters and industrial accidents, which could have the effect of curtailing production and disrupting supplies; • increases in labor and production costs in goods-producing countries, which would result in an increase in our inventory costs; • the migration and development of manufacturers, which can affect where our products are or will be produced; • fluctuation in our vendors’ local currency against the dollar, which may increase our cost of goods sold; and • changes in import duties, taxes, charges, quotas, loss of “most favored nation” trading status with the United States for a particular foreign country and trade restrictions (including the United States imposing antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).
Such factors include: • political or labor instability in countries where vendors are located or at foreign ports which could result in lengthy shipment delays, which, particularly if timed ahead of the Fall and Winter peak selling periods, could materially and adversely affect our ability to stock inventory on a timely basis; • disruptions in the operations of domestic ports through which we import our merchandise, including labor disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship merchandise to alternative ports in the United States or through the use of more expensive means, and shipping to alternative ports in the United States could result in increased lead times and transportation costs; disruptions at ports through which we import our goods could also result in unanticipated inventory shortages; 11 • political or military conflict, which could cause a delay in the transportation of our products to us and an increase in transportation costs; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • disease epidemics, pandemics, outbreaks and other health-related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas; • natural disasters and industrial accidents, which could have the effect of curtailing production and disrupting supplies; • increases in labor and production costs in goods-producing countries, which would result in an increase in our inventory costs; • the migration and development of manufacturers, which can affect where our products are or will be produced; • fluctuation in our vendors’ local currency against the dollar, which may increase our cost of goods sold; and • changes in import duties, tariffs, taxes, charges, quotas, loss of “most favored nation” trading status with the United States for a particular foreign country and trade restrictions (including the United States imposing antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).
If we do not continue to attract qualified individuals, train them in our business model, support their development and retain them, our performance could be adversely affected or our growth could be limited. We are also dependent upon temporary personnel to adequately staff our distribution facilities, with heightened dependence during busy periods such as the holiday season.
If we do not continue to attract qualified individuals, train 10 them in our business model, support their development and retain them, our performance could be adversely affected or our growth could be limited. We are also dependent upon temporary personnel to adequately staff our distribution facilities, with heightened dependence during busy periods such as the holiday season.
In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of these companies. Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable.
In 17 addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of these companies. Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable.
In addition, even if holders of Convertible Notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders of our 2027 Convertible Notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2027 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report. 6 Macroeconomic, Industry and Business Risks A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report. Macroeconomic, Industry and Business Risks A downturn in general economic conditions or consumer spending or inflationary conditions could adversely affect our business.
The Company carries information security risk insurance that is designed to mitigate against certain potential losses 13 arising from a cybersecurity incident. However, there is no guarantee that this insurance coverage will be sufficient to cover all possible claims and we could suffer losses that could have a material adverse effect on our business.
The Company carries information security risk insurance that is designed to mitigate against certain potential losses arising from a cybersecurity incident. However, there is no guarantee that this insurance coverage will be sufficient to cover all possible claims and we could suffer losses that could have a material adverse effect on our business.
If we are not able to adjust appropriately to such factors, our inventory management may be affected, which could impact our performance and our reputation. Operational Risks If we cannot optimize our existing stores or maintain favorable lease terms, our growth strategy and profitability could be negatively impacted. We lease substantially all of our store locations.
If we are not able to adjust appropriately to such factors, our inventory management may be affected, which could impact our performance and our reputation. 9 Operational Risks If we cannot optimize our existing stores or maintain favorable lease terms, our growth strategy and profitability could be negatively impacted. We lease substantially all of our store locations.
We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, 11 transactions or business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, transactions or business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
Finally, if our vendors are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of high-quality merchandise available to us could be materially reduced. 10 If our relationships with our vendors are disrupted, we may not be able to acquire the merchandise we require in sufficient quantities or on terms acceptable to us.
Finally, if our vendors are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of high-quality merchandise available to us could be materially reduced. If our relationships with our vendors are disrupted, we may not be able to acquire the merchandise we require in sufficient quantities or on terms acceptable to us.
While opportunistic purchasing provides our buyers the ability to buy at desirable times and prices, in the 9 quantities we need and into market trends, it places considerable discretion with our buyers, which subjects us to risks related to the pricing, quantity, nature and timing of inventory flowing to our stores.
While opportunistic purchasing provides our buyers the ability to buy at desirable times and prices, in the quantities we need and into market trends, it places considerable discretion with our buyers, which subjects us to risks related to the pricing, quantity, nature and timing of inventory flowing to our stores.
In addition, information concerning us, whether or not true, may be instantly and easily posted on social media platforms and similar devices at any time, which information may be adverse to our reputation or business. 14 The harm may be immediate without affording us an opportunity for redress or correction.
In addition, information concerning us, whether or not true, may be instantly and easily posted on social media platforms and similar devices at any time, which information may be adverse to our reputation or business. The harm may be immediate without affording us an opportunity for redress or correction.
If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing all or a portion of our debt, selling material assets or operations or raising additional debt or equity capital.
If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing all or a portion of our debt, selling material 16 assets or operations or raising additional debt or equity capital.
Acceptance of these payment methods subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly.
Acceptance of these payment methods subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification 13 requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly.
As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The deterioration of income from, 17 or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us.
As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The deterioration of income from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us.
In addition, any event of default or acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In addition, any event of default or acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. The conditional conversion feature of the 2027 Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
Failure to identify customer trends and preferences to meet customer demand could negatively impact our performance and reputation. Because our success depends on our ability to meet customer demand, we work to follow customer trends and preferences on an ongoing basis and to buy inventory in response to those trends and preferences.
Failure to identify customer trends and preferences to meet customer demand could negatively impact our performance and reputation. 7 Because our success depends on our ability to meet customer demand, we work to follow customer trends and preferences on an ongoing basis and to buy inventory in response to those trends and preferences.
If one or more holders elect to convert their Convertible Notes, we would be required to settle the principal portion of our conversion obligation in cash, which could adversely affect our liquidity.
If one or more holders elect to convert their 2027 Convertible Notes, we would be required to settle the principal portion of our conversion obligation in cash, which could adversely affect our liquidity.
Although our arrangements with our vendors frequently provide for 15 indemnification for product liabilities, the vendors may fail to honor those obligations to an extent we consider sufficient or at all.
Although our arrangements with our vendors frequently provide for indemnification for product liabilities, the vendors may fail to honor those obligations to an extent we consider sufficient or at all.
In the event the conditional conversion feature of our Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert their notes at any time during specified periods at their option.
In the event the conditional conversion feature of our 2027 Convertible Notes is triggered, holders of our 2027 Convertible Notes will be entitled to convert their notes at any time during specified periods at their option.
Despite advances in security hardware, software, and encryption technologies, the methods and tools used to obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect, and there is no guarantee that the proactive measures we put in place will be adequate to safeguard against all data security breaches or misuses of data.
Despite advances in security hardware, and software, the methods and tools used to obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect, and there is no guarantee that the proactive measures we put in place will be adequate to safeguard against all data security breaches or misuses of data.
In addition, 12 any failure to continue to add capacity to our existing distribution centers and build out planned additional distribution centers timely and cost effectively could adversely affect our business.
In addition, any failure to continue to add capacity to our existing distribution centers and build out planned additional distribution centers timely and cost effectively could adversely affect our business.
Like most major corporations, we, our customers and our third-party services providers face an evolving, increasing threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks.
Like most major corporations, we, our customers and our third-party services providers face an evolving, increasing threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to disrupt operations and/or access personal and other sensitive information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks.
An unfavorable, uncertain or volatile economic environment, as we have experienced recently as a result of inflation, rising interest rates and supply chain disruptions, among other things, has and may continue to cause an increase in inventory shrinkage.
An unfavorable, uncertain or volatile economic environment, as we have experienced recently as a result of inflation, fluctuating interest rates and supply chain disruptions, among other things, has and may continue to cause an increase in inventory shrinkage.
If we or third parties with which we do business were to fall victim to successful cyber-attacks or experience other material cybersecurity incidents, including the loss of individually identifiable customer or other sensitive data, we may incur substantial costs and suffer other negative consequences, which may include: • remediation costs, such as liability for stolen assets or information, repairs of system damage or replacement of systems, and incentives to customers or business partners in an effort to maintain relationships after an attack; • increased cybersecurity protection costs, which may include the cost of continuing to make organizational changes, deploy additional personnel and protection technologies, train employees, and engage third party consultants; • lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack; • litigation and legal risks, including regulatory actions by state and federal governmental authorities; • increased cybersecurity and other insurance premiums; • reputational damage that adversely affects customer or investor confidence; and • damage to our competitiveness, stock price, and long-term stockholder value.
If we or third parties with which we do business were to fall victim to successful cyber-attacks or experience other material cybersecurity incidents, including the loss of individually identifiable customer or other confidential data or the inability to provide contracted services, we may incur substantial costs and suffer other negative consequences, which may include: • remediation costs, such as liability for stolen assets or information, repairs of system damage or replacement of systems, and incentives to customers or business partners in an effort to maintain relationships after an attack; • increased cybersecurity protection costs, which may include the cost of continuing to make organizational changes, deploy additional personnel and protection technologies, train employees, and engage third party consultants; • lost revenues resulting from operational disruption or the unauthorized use of proprietary information or the failure to retain or attract customers following an attack; • litigation and legal risks, including regulatory actions by state and federal governmental authorities; • increased cybersecurity and other insurance premiums; • reputational damage that adversely affects customer or investor confidence; and • damage to our competitiveness, stock price, and long-term stockholder value.
Many stakeholders, including investors, customers, employees, consumers and others, have increasingly focused on ESG topics, including environmental sustainability and corporate social responsibility matters such as climate change, packaging and waste reduction, energy consumption, and diversity, equity and inclusion in a variety of ways that are not necessarily consistent.
Many stakeholders, including investors, customers, employees, consumers and others, have increasingly focused on ESG topics, including environmental sustainability and corporate social responsibility matters such as climate change, packaging and waste reduction, and energy consumption in a variety of ways that are not necessarily consistent.
Our disclosure on these matters and our failure, or perceived failure, to meet our goals and otherwise effectively address these matters, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations. In addition, we could be criticized for the scope of our ESG initiatives.
Our disclosure on these matters and our failure, or perceived failure, to meet our goals and otherwise address these matters to our stakeholders’ satisfaction, could harm our reputation, which could negatively impact our business, our relationship with our various stakeholders, and our results of operations. In addition, we could be criticized for the scope of our ESG initiatives.
The increasing proliferation of local laws, some of which may be conflicting, further complicates our efforts to comply with all of the various laws, rules and regulations that apply to our business. We could also be negatively impacted by changes in government regulations in areas including taxes, healthcare and environmental protection.
The increasing proliferation of local laws, some of which may be conflicting, further complicates our efforts to comply with all of the various laws, rules and regulations that apply to our business. We could also be negatively impacted by changes in government regulations, initiatives or programs in areas including taxes, healthcare, immigration and environmental protection.
We had no outstanding balance on our $900.0 million asset-based lending facility (ABL Line of Credit) as of February 3, 2024. Our debt obligations also include $29.1 million of finance lease obligations as of February 3, 2024.
We had no outstanding balance on our $900.0 million asset-based lending facility (ABL Line of Credit) as of February 3, 2024. Our debt obligations also include $25.0 million of finance lease obligations as of February 1, 2025.
Although we endeavor to protect consumer identity and payment information through the implementation and modification of security technologies, processes and procedures, including training programs for employees to raise awareness about phishing, malware and other cyber risks, we could experience increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication and complexity.
Although we endeavor to maintain reliable operations and protect consumer identity and payment information through the development of security talent and the implementation of technologies, processes and procedures, including training programs for employees to raise awareness about phishing, malware and other cyber risks, we could experience increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication and complexity.
In addition to complying with current laws, rules and regulations, we must also comply with new and changing laws and regulations, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business.
In addition to complying with current laws, rules and regulations, we must also comply with new and changing laws and regulations, executive orders and other directives, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory authorities, and reforms in jurisdictions where we do business.
We employ various security measures and technologies to actively monitor, prevent and mitigate cyber-attacks.
We employ various security measures and technologies to actively monitor, prevent, mitigate, and recover from cyber-attacks.
As many of our non-store associates continue to work remotely, we face an increased risk due to the potential interruptions to internal or external information technology infrastructure as well as ongoing threats and attempts to breach our security networks.
As many of our non-store associates continue to work in a hybrid model, we face an increased risk due to the potential interruptions to internal or external information technology infrastructure as well as ongoing threats and attempts to breach our security networks.
In addition, natural disasters, industrial accidents, acts of war or global international conflicts (such as the conflict in Ukraine or the Hamas-Israel war), and public health issues (such as pandemics or epidemics) could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
In addition, natural disasters, industrial accidents, acts of war or global international conflicts (such as the conflict in Ukraine or the conflict in the Middle East), and public health issues (such as pandemics or epidemics) have in the past and may in the future have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a 6 downturn in consumer confidence and spending.
Our failure to meet shifting stakeholder expectations could negatively impact our brand, image, reputation, credibility, and the willingness of our customers and suppliers to do business with us. In addition, developing and acting on ESG initiatives, including collecting, measuring and reporting related data, can be costly, difficult and time consuming.
Our failure to meet shifting stakeholder expectations could negatively impact our brand, image, reputation, credibility, and the willingness of our customers and suppliers to do business with us. In addition, complying with ESG-related rules and regulations, including collecting, measuring and reporting related data, can be costly, difficult and time consuming.
Public health crises, epidemics or pandemics, such as the COVID-19 pandemic have had, and could in the future have, a negative impact on the Company’s business and operations. Public health crises, epidemics or pandemics have had, and could in the future have, a negative impact on our business and operations, including Company sales and cash flow.
Public health crises, epidemics or pandemics have had, and could in the future have, a negative impact on our business and operations, including Company sales and cash flow.
We are dependent on the integrity, security and consistent operations of these systems and related back-up systems, software, tools (including encryption technology) and monitoring to provide security and oversight for processing, transmission, storage and the protection of such confidential information.
We are dependent on the integrity, security and consistent operations of these systems and related back-up systems, software, tools (including encryption technology) and monitoring to maintain reliable operations, provide 12 security and oversight for processing, transmission, storage and the protection of confidential information, and to recover from unexpected outages.
Estimated cash required to make interest payments for these debt obligations, net of the impact of our interest rate swap, amounts to approximately $63.1 million in the aggregate for the fiscal year ending February 1, 2025.
Estimated cash required to make interest payments for these debt obligations, net of the impact of our interest rate swap, amounts to approximately $70.1 million in the aggregate for the fiscal year ending January 31, 2026.
Risks Related to Ownership of Our Common Stock Our stock price has been and may continue to be volatile. The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate significantly. For example, in Fiscal 2023, our stock price fluctuated from a high of $239.94 to a low of $115.66.
Risks Related to Ownership of Our Common Stock Our stock price has been and may continue to be volatile. The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate significantly. For example, in Fiscal 2024, our stock price fluctuated from a high of $298.89 to a low of $174.64.
In addition, because higher net sales historically have occurred during the second half of the year, unseasonably warm weather during these months could have a disproportionately large effect on our business and materially adversely affect our financial condition and results of operations.
In addition, because higher net sales historically have occurred during the second half of the year, unseasonably warm weather during these months could have a disproportionately large effect on our business and materially adversely affect our financial condition and results of operations. 8 Public health crises, epidemics or pandemics have had, and could in the future have, a negative impact on the Company’s business and operations.
Further, our computer systems and the third-party systems of our vendors are also subject to damage or interruption from a number of non-criminal causes, including power outages; computer and telecommunications failures; computer viruses; and design or usage errors by our employees or contractors. Moreover, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Further, our computer systems and the third-party systems of our vendors are also subject to damage or interruption from a number of non-criminal causes, including power outages; computer and telecommunications failures; computer viruses; and design or usage errors by our employees or contractors.
As of February 3, 2024, our obligations include (i) $933.4 million, inclusive of original issue discount, under our $1,200.0 million senior secured term loan facility (Term Loan Facility) and (ii) $156.2 million under our 2.25% Convertible Notes due April 15, 2025 and $297.1 million under our 1.25% Convertible Notes due December 15, 2027 (collectively, our “Convertible Notes”).
As of February 1, 2025, our obligations include (i) $1,238.9 million, inclusive of original issue discount, under our senior secured term loan facility (Term Loan Facility) and (ii) $156.2 million under our 2.25% Convertible Notes due April 15, 2025 (our “2025 Convertible Notes”) and $297.1 million under our 1.25% Convertible Notes due December 15, 2027 (our “2027 Convertible Notes” and, together with our 2025 Convertible Notes, our “Convertible Notes”).
Many of our stores are strategically located in off-mall shopping areas known as “power centers.” Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales. Many of our stores are strategically located in off-mall shopping areas known as “power centers.” Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations. 7 A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales.
If we are not successful in selling our inventory, we may have to write down our inventory or sell it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material adverse effect on our financial condition and results of operations.
Customers are increasingly using technology and mobile devices to rapidly compare products and prices and to purchase products. Failure to effectively meet these changing expectations and demands may adversely impact our reputation and our financial results.
Customers are increasingly using technology and mobile devices to rapidly compare products and prices and to purchase products. Failure to effectively meet these changing expectations and demands may adversely impact our reputation and our financial results. We may be unable to meet evolving regulatory requirements and stakeholder expectations regarding environmental, social or governance (ESG) matters.
Additionally, acts of violence at, or threatened against, our stores, including active shooter situations, may, in addition to other operational impact, result in damage and restricted access to our stores and/or store closures for short or extended periods of time, all of which could materially adversely affect our financial performance.
Additionally, acts of violence at, or threatened against, our stores, including active shooter situations, may, in addition to other operational impact, result in damage and restricted access to our stores and/or store closures for short or extended periods of time, all of which could materially adversely affect our financial performance. 15 Compliance with increasingly rigorous privacy and data security regulations could be costly, affect or limit our business opportunities and how we collect and/or use data, and potentially subject us to fines and lawsuits.
For example, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on companies doing business in California. In addition, the SEC has adopted final rulemaking on climate change disclosures that could increase compliance burdens and associated regulatory costs and complexity.
For example, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on companies doing business in California and may increase our costs of compliance as a result.
Significant expenditures and commitment of time by management, employees and outside advisors may be involved in developing, implementing and overseeing policies, practices and internal controls related to ESG risk and performance, and we may undertake additional costs to control, assess and report on ESG metrics as the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand.
Significant expenditures and commitment of time by management, employees and outside advisors may be involved in developing, implementing and overseeing policies, practices and internal controls related to ESG risk and performance, and we may undertake additional costs to meet our reporting and compliance obligations related to ESG matters.
We also may face potential governmental enforcement actions or private litigation challenging our ESG and sustainability goals, or our disclosure of those goals and our metrics for measuring achievement of them, which may increase our costs of compliance, damage our reputation, or cause investors or consumers to lose confidence in us. 8 Extreme and/or unseasonable weather conditions caused by climate change or otherwise, or natural disasters, could have a significant adverse effect on our business.
We also may face stakeholder scrutiny, potential governmental enforcement actions or private litigation regarding our ESG initiatives and sustainability goals, or our disclosure of those goals and our metrics for measuring achievement of them, which may increase our costs of compliance, damage our reputation, or cause investors or consumers to lose confidence in us.
If we fail to enable the effective transfer of knowledge and facilitate smooth transitions for key personnel, the operating results and future growth for our business could be adversely affected, and the morale and productivity of the workforce could be disrupted.
If we fail to enable the effective transfer of knowledge and facilitate smooth transitions for key personnel, the operating results and future growth for our business could be adversely affected, and the morale and productivity of the workforce could be disrupted. 14 Legal, Regulatory, Compliance and Tax Risks Difficulty complying with existing and changing laws, rules, regulations and local codes could negatively affect our business operations and financial performance.
As laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our reputation or subject us to fines or other penalties. 16 Risk Related to Our Substantial Indebtedness and Corporate Structure Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.
As laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our reputation or subject us to fines or other penalties.
Our business is susceptible to risks associated with climate change, which may cause more frequent and extreme weather events.
Extreme and/or unseasonable weather conditions caused by climate change or otherwise, or natural disasters, could have a significant adverse effect on our business. Our business is susceptible to risks associated with climate change, which may cause more frequent and extreme weather events.
The Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
Legal, Regulatory, Compliance and Tax Risks Difficulty complying with existing and changing laws, rules, regulations and local codes could negatively affect our business operations and financial performance. We are subject to federal, state and local laws, rules and regulations in the operation of our business.
We are subject to federal, state and local laws, rules and regulations in the operation of our business.
Compliance with increasingly rigorous privacy and data security regulations could be costly, affect or limit our business opportunities and how we collect and/or use data, and potentially subject us to fines and lawsuits. As described above, the protection of customer, employee, vendor and Company data is critical to our business.
As described above, the protection of customer, employee, vendor and Company data is critical to our business.
Removed
Certain of these risks, such as risks arising from political volatility, may be enhanced in 2024 and other election years. We have also experienced inflationary pressure in our supply chain and with respect to raw materials and finished goods to a greater extent than we have in recent years due to current economic conditions.
Added
Certain of these risks, such as risks arising from political volatility, may be enhanced in 2025 in light of the U.S. administration’s change in trade and tariff policies.
Removed
We may be unable to meet our environmental, social or governance (“ESG”) goals or otherwise meet the expectations of our stakeholders with respect to ESG matters.
Added
Moreover, the rapid evolution and increased adoption of artificial intelligence, Software as a Service (SaaS) and cloud technologies may intensify our cybersecurity risks.
Removed
Item 1B. Unresolved Staff Comments Not Applicable. 18
Added
Risk Related to Our Substantial Indebtedness and Corporate Structure Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.
Added
Our 2025 Convertible Notes are now convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of April 15, 2025.
Added
Our Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances and our 2025 Convertible Notes are now convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of April 15, 2025.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+9 added−8 removed1 unchanged
Biggest change“Security Awareness Month” activities also occur on an annual basis and include sessions with guest speakers, relevant communication, and additional educational opportunities related to security risks. • Incident Response Planning: The Company has established and maintains a written incident response plan that addresses the Company’s response to a cybersecurity incident, and such plan is tested periodically with tabletop exercises. • Communication and Coordination: The Company utilizes a cross-functional approach to address the risk from cybersecurity threats, involving senior management personnel from the technology, operations, legal, risk management, internal audit and other key business functions (the “cybersecurity team”), as well as members of the Company’s Board and the Audit Committee of the Board. • Insurance: The Company carries information security risk insurance that is designed to mitigate against certain potential losses arising from a cybersecurity incident.
Biggest changeManagement utilizes a cross-functional approach designed to address the risk from cybersecurity threats, involving senior management personnel from the technology, operations, legal, risk management, internal audit and other key business functions, as well as members of the Company’s Board and the Audit Committee of the Board.
The Audit Committee oversees the management of risks from cybersecurity threats, including the policies, processes, and practices that the Company’s management implements to address risks from cybersecurity threats.
The Audit Committee oversees 18 the management of risks from cybersecurity threats, including the policies, processes, and practices that the Company’s management implements to address risks from cybersecurity threats.
While the Board is ultimately responsible for risk oversight, the Audit Committee oversees the overall review of our policies and procedures with respect to risk assessment and risk management, and has oversight of information technology and security matters, which includes cybersecurity strategies and risks, as well as data privacy and data protection (“Information Security”).
While the Board is ultimately responsible for risk oversight, the Audit Committee oversees the overall review of our policies and procedures with respect to risk assessment and risk management, and has oversight of information technology and security matters, which includes cybersecurity strategies and risks, as well as data privacy and data protection (Information Security).
Item 1C. Cybersecurity Cybersecurity represents an important component of the Company’s overall cross-functional approach to risk management. Our cybersecurity practices are integrated into the Company’s enterprise risk management (“ERM”) approach, and cybersecurity risks are among the core enterprise risks identified for oversight by the Board through our annual ERM assessment.
Item 1C. Cybersecurity Risk Governance and Oversight Cybersecurity represents an important component of the Company’s overall cross-functional approach to risk management. Our cybersecurity practices are integrated into the Company’s enterprise risk management (ERM) approach, and cybersecurity risks are among the core enterprise risks identified for oversight by the Board through our annual ERM assessment.
On a quarterly basis, our Chief Information Officer reports to the Audit Committee on our Information Security program, including presentations and reports on cybersecurity risks, which address a wide range of topics including, for example, recent developments, security initiatives, vulnerability assessments, the threat environment, technological trends, and information security considerations arising with respect to the Company’s peers and vendors; recent cybersecurity-related developments; strategic activities; and the execution of our cybersecurity awareness training.
On a quarterly basis, our Chief Information Officer (CIO) and Chief Information Security Officer (CISO) report to the Audit Committee on our Information Security program, including presentations and reports on cybersecurity risks, which address a wide range of topics including, for example, recent developments, security initiatives, vulnerability assessments, the threat environment, technological trends, and information security considerations arising with respect to the Company’s peers and vendors; recent cybersecurity-related developments; strategic activities; and the execution of our cybersecurity awareness training.
The Chief Information Officer and cybersecurity team regularly meet to monitor the prevention, detection, mitigation and remediation of cybersecurity incidents, and the Chief Information Officer consults with executive management, including the CEO, to report such incidents to the Audit Committee and the Board and initiate a response to incidents when appropriate.
The CISO and cybersecurity team regularly meet to monitor the prevention, detection, mitigation and remediation of cybersecurity incidents, and the CISO consults with the CIO and executive management, including the Chief Executive Officer, to report such incidents to the Audit Committee and the Board and initiate a response to incidents when appropriate.
The Company’s Chief Information Officer, who has many years of relevant experience, with support from the other members of the cybersecurity team, is the member of the Company’s management that is principally responsible for overseeing the Company’s cybersecurity risk management program.
The Company’s CIO, with support from our CISO and the other members of the cybersecurity team , is the member of the Company’s management that is principally responsible for overseeing the Company’s cybersecurity risk management program.
To date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are likely to materially affect the Company, including its business strategy, results of operations, or financial condition; however, as further discussed in Item 1A, Risk Factors, if we are unable to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.
As further discussed in Item 1A, Risk Factors, if we are unable to protect our information systems against service interruption, misappropriation of data, breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.
To facilitate the success of this program, the cybersecurity team addresses cybersecurity threats and responds to cybersecurity incidents in accordance with the Company’s written incident response plan.
The CIO, in coordination with the CISO, works to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to cybersecurity incidents. To facilitate the success of this program, the cybersecurity team works to address cybersecurity threats and respond to cybersecurity incidents in accordance with the Company’s written incident response plan.
We believe our cybersecurity team has the appropriate expertise, background and depth of experience to manage risks arising from cybersecurity threats. The Company’s Chief Information Officer, in coordination with the cybersecurity team, works to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to cybersecurity incidents.
We believe our cybersecurity team, led by our CISO, has the appropriate expertise, background and depth of experience to manage risks arising from cybersecurity threats.
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Ongoing internal and external cybersecurity assessments are conducted, which include the evaluation of certain tools, procedures, and policies to measure the program’s overall maturity based on the National Institute of Standards and Technology Cybersecurity (“NIST”) Framework and annual compliance with the Payment Card Industry Data Security Standard to protect customer credit card data.
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Our CISO is a credentialed and industry-recognized security executive with over 20 years' experience in healthcare, government and the private sector implementing enterprise cybersecurity and privacy programs, building high performing teams, creating a risk-aware culture, managing cybersecurity incidents, and communicating cyber risks to boards of directors.
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Our cybersecurity program includes: • Vigilance: The Company maintains a cybersecurity threat operation that endeavors to detect, contain and respond to cybersecurity threats and incidents in a prompt and effective manner with the goal of minimizing disruptions to the business. • Partnerships: The Company has established partnerships with a number of third parties, including service providers, to identify and assess cybersecurity risks. • Systems Safeguards: The Company deploys technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, access controls and ongoing vulnerability assessments. • Third-Party Management: The Company maintains a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, such as vendors and service providers.
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He holds a Master degree in Computer Engineering and has obtained certifications, including Certified Information Security Manager and Certified Information Systems Security Professional. Prior to joining Burlington, the CISO served as the CISO at Hospital for Special Surgery for 6 years and as a CISO at NYC Health+Hospitals for 4 years.
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The Company performs due diligence on third parties that have access to our systems, data or facilities that house such systems or data.
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Our CISO reports to our CIO, who has more than 25 years of information technology leadership experience. Together our CIO and CISO have decades of leadership experience in information technology, cybersecurity and retail.
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Additionally, the Company generally requires those third parties that could introduce significant cybersecurity risk to us to agree by contract to manage their cybersecurity risks in specified ways. • Education: The Company provides periodic awareness training for personnel regarding cybersecurity best practices.
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Risk Management We have created a cybersecurity program that endeavors to prevent, detect, contain and respond to material risks from cybersecurity threats and incidents and integrate cybersecurity risk into our enterprise risk management framework and activities. Our program consists of policies and procedures for identification, assessment, remediation, response, and reporting of cybersecurity threats and incidents.
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Routine security bulletins are sent to personnel throughout the year to enhance awareness of responsibility regarding security risks and we conduct regular phishing exercises.
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The cybersecurity program is a part of our company’s ERM framework and activities. The cybersecurity program employs a risk-based approach and draws upon a combination of industry standard frameworks, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework and the Payment Card Industry Data Security Standard (PCI DSS).
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A key part of the Company’s strategy for managing risks from cybersecurity threats is the ongoing assessment and testing of the Company’s processes and practices through assessments, tabletop exercises and other exercises focused on evaluating effectiveness, including regular network and endpoint monitoring, vulnerability scanning and penetration testing.
Added
Our cybersecurity risk management approach and processes are designed to manage risks from cybersecurity threats associated with our use of third-party service providers, ranging from vendor cyber vetting to conducting security assessments and monitoring activities. We also operate an employee awareness and training program to help ensure all relevant associates are equipped to recognize and respond to potential threats.
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The Company also engages third parties to perform assessments on our cybersecurity measures, including information security maturity assessments and independent reviews of our information security control environment and operating effectiveness.
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Additionally, we leverage threat intelligence technologies to inform our response posture to potential emerging threats to our digital business infrastructure and systems. Furthermore, we engage with third-party cybersecurity consultants and technology vendors to assess our cybersecurity program and test our technical capabilities.
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The results of such assessments and reviews are 19 reported to the Company’s Chief Information Officer and Audit Committee, and the Company considers adjustments to its cybersecurity processes and practices as appropriate based on the information provided by the third-party assessments and reviews.
Added
The Company also carries information security risk insurance that is designed to mitigate against certain potential losses arising from a cybersecurity incident.
Added
To date, we have not identified any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease approximately 103,000 square feet of office space in New York City (east coast buying office), and 50,000 square feet of office space in Los Angeles, California (west coast buying office). As described in Item 1, Business, we currently operate multiple distribution centers and warehousing facilities.
Biggest changeWe lease approximately 103,000 square feet of office space in New York City (east coast buying office), and 50,000 square feet of office space in Los Angeles, California (west coast buying office).
Store leases generally provide for fixed monthly rental payments, plus the payment, in most cases, of real estate taxes and other charges with escalation clauses. In some locations, our store leases contain formulas providing for the payment of additional rent based on sales.
Store leases generally provide for fixed monthly rental payments, plus the payment, in most cases, of real estate taxes 19 and other charges with escalation clauses. In some locations, our store leases contain formulas providing for the payment of additional rent based on sales.
Item 2. Pr operties We own the land and/or buildings for 26 of our stores and have leases for 981 of our stores. Our new stores are generally leased for an initial term of ten years, the majority of which are subject to our option to renew such leases for several additional five-year periods.
Item 2. Pr operties We own the land and/or buildings for 23 of our stores and have leases for 1,085 of our stores. Our new stores are generally leased for an initial term of ten years, the majority of which are subject to our option to renew such leases for several additional five-year periods.
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During Fiscal 2024, we signed a lease for an additional approximately 68,000 square feet of space at the east coast buying office, which we expect to take possession of during Fiscal 2025. As described in Item 1, Business, we currently operate multiple distribution centers and warehousing facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLegal Proceedings In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property and other claims.
Biggest changeLegal Proceedings In the course of business, the Company is party to class or collective actions alleging violations of federal and state wage and hour and other labor statutes, representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings from time to time including, among others, commercial, product, employee, customer, intellectual property, privacy and other claims.
Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 16, "Commitments and Contingencies," to our Consolidated Financial Statements for further detail. Item 4. Mine Saf ety Disclosures Not applicable. 20 PART II
Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 14, "Commitments and Contingencies," to our Consolidated Financial Statements for further detail. Item 4. Mine Saf ety Disclosures Not applicable. 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeApparel Retailers Index $ 100.00 $ 110.85 $ 117.75 $ 127.23 $ 138.11 $ 156.55 22 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding our purchases of common stock during the three fiscal months ended February 3, 2024: Month Total Number of Shares Purchased Average Price Paid Per Share(1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) October 29, 2023 through November 25, 2023 76,490 $ 127.91 76,490 $ 708,186 November 26, 2023 through December 30, 2023 468,668 $ 173.04 468,668 $ 627,085 December 31, 2023 through February 3, 2024 60,153 $ 194.39 60,153 $ 615,393 Total 605,311 605,311 (1) Includes commissions for the shares repurchased under our publicly announced share repurchase programs.
Biggest changeApparel Retailers Index $ 100.00 $ 106.22 $ 114.78 $ 124.59 $ 141.23 $ 173.20 22 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding our purchases of common stock during the three fiscal months ended February 1, 2025: Month Total Number of Shares Purchased Average Price Paid Per Share(1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) November 3, 2024 through November 30, 2024 55,351 257.39 55,351 310,377 December 1, 2024 through January 4, 2024 116,885 289.93 116,885 276,488 January 5, 2024 through February 1, 2025 46,207 288.42 46,207 263,161 Total 218,443 218,443 (1) Includes commissions for the shares repurchased under our publicly announced share repurchase programs.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “BURL.” Holders As of March 2, 2024, we had one holder of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “BURL.” Holders As of March 1, 2025, we had one holder of record of our common stock.
The following graph compares the cumulative total stockholder return on our common stock from the closing prices as of the end of each fiscal year from February 2, 2019 through February 3, 2024, with the return on the Standard & Poor’s (S&P) 500 Index and the Dow Jones United States Apparel Retailers Index over the same period.
The following graph compares the cumulative total stockholder return on our common stock from the closing prices as of the end of each fiscal year from February 1, 2020 through February 1, 2025, with the return on the Standard & Poor’s (S&P) 500 Index and the Dow Jones United States Apparel Retailers Index over the same period.
For a further discussion of our share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Repurchase Program.”
(2) On August 15, 2023, our Board of Directors authorized the repurchase of up to $500 million of common stock, which is authorized to be executed through August 2025. For a further discussion of our share repurchase program, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Share Repurchase Program.”
Base Period Indexed Returns for Fiscal Years Ended Company / Index February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 Burlington Stores, Inc. $ 100.00 $ 126.53 $ 144.82 $ 133.99 $ 131.72 $ 114.46 S&P 500 Index $ 100.00 $ 119.18 $ 137.23 $ 163.75 $ 150.40 $ 183.21 Dow Jones U.S.
Base Period Indexed Returns for Fiscal Years Ended Company / Index February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 February 1, 2025 Burlington Stores, Inc. $ 100.00 $ 114.45 $ 105.90 $ 104.10 $ 90.46 $ 130.56 S&P 500 Index $ 100.00 $ 115.15 $ 137.40 $ 126.20 $ 153.73 $ 187.27 Dow Jones U.S.
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(2) On February 16, 2022, our Board of Directors authorized the repurchase of up to $500 million of common stock, which was authorized to be executed through February 2024. On August 15, 2023, our Board of Directors authorized the repurchase of up to an additional $500 million of common stock, which is authorized to be executed through August 2025.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur average interest rates and average balances related to our variable rate debt for Fiscal 2023 compared with Fiscal 2022 are summarized in the table below: Fiscal Year Ended February 3, January 28, 2024 2023 Average balance – ABL Line of Credit (in millions) $ — $ — Average interest rate – ABL Line of Credit — — Average balance – Term Loan Facility (in millions) (a) $ 942.5 $ 952.2 Average interest rate – Term Loan Facility 7.2% 4.0% (a) Excludes original issue discount Income tax expense Income tax expense was $126.1 million for Fiscal 2023 compared with $77.4 million for Fiscal 2022.
Biggest changeThe average balance on the Term Loan Facility, excluding the original issue discount, was $1,047.0 million and $942.5 million for the fiscal year ended February 1, 2025 and the fiscal year ended February 3, 2024, respectively. Income tax expense Income tax expense was $171.2 million for Fiscal 2024 compared with $126.1 million for Fiscal 2023.
Among other limitations, Adjusted Net Income does not reflect the following items, net of their tax effect: • net favorable lease costs; • losses on extinguishment of debt; • costs related to debt amendments; • impairment charges on long-lived assets; • amounts charged for certain litigation matters; and • other unusual or non-recurring expenses, losses, charges or gains.
Among other limitations, Adjusted Net Income does not reflect the following items, net of their tax effect: • net favorable lease costs; • losses on extinguishment of debt; • costs related to debt amendments; • impairment charges on long-lived assets; • amounts charged for certain litigation matters; and • other unusual, non-recurring expenses, losses, charges or gains.
Among other limitations, Adjusted EBIT does not reflect: • net interest expense; • net favorable lease costs; • losses on the extinguishment of debt; • costs related to debt issuances and amendments; • amounts charged for certain litigation matters; • impairment charges on long-lived assets; • income tax expense; and • other unusual or non-recurring expenses, losses, charges or gains.
Among other limitations, Adjusted EBIT does not reflect: • net interest expense; • net favorable lease costs; • losses on the extinguishment of debt; • costs related to debt issuances and amendments; • amounts charged for certain litigation matters; • impairment charges on long-lived assets; • income tax expense; and • other unusual, non-recurring expenses, losses, charges or gains.
In connection with certain corporate events or if we issue a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2025 Convertible Notes in connection with such corporate event or during the relevant redemption period for such 2025 Convertible Notes. 35 2027 Convertible Notes On September 12, 2023, we closed the issuance of approximately $297.1 million aggregate principal amount of our 2027 Convertible Notes pursuant to separate, privately negotiated exchange and subscription agreements with a limited number of holders of our 2025 Convertible Notes and certain investors, in each case pursuant to exemptions from registration under the Securities Act of 1933.
In connection with certain corporate events or if we issue a notice of redemption, it will, under certain circumstances, increase the 35 conversion rate for holders who elect to convert their 2025 Convertible Notes in connection with such corporate event or during the relevant redemption period for such 2025 Convertible Notes. 2027 Convertible Notes On September 12, 2023, we closed the issuance of approximately $297.1 million aggregate principal amount of our 2027 Convertible Notes pursuant to separate, privately negotiated exchange and subscription agreements with a limited number of holders of our 2025 Convertible Notes and certain investors, in each case pursuant to exemptions from registration under the Securities Act of 1933.
We define Adjusted EBITDA as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) costs related to debt amendments; (v) income tax expense; (vi) depreciation and amortization; (vii) net favorable lease costs; (viii) impairment charges; (ix) amounts related to certain litigation matters; and (x) other unusual or non-recurring expenses, losses, charges or gains We define Adjusted EBIT as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) costs related to debt amendments; (v) income tax expense; (vi) impairment charges; (vii) net favorable lease costs; (viii) amounts related to certain litigation matters; and (ix) other unusual or non-recurring expenses, losses, charges or gains.
We define Adjusted EBITDA as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) costs related to debt amendments; (v) income tax expense; (vi) depreciation and amortization; (vii) net favorable lease costs; (viii) impairment charges; (ix) amounts related to certain litigation matters; and (x) other unusual, non-recurring expenses, losses, charges or gains.
If we do not have sufficient cash flow to service interest and principal payment obligations on our outstanding indebtedness, and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected.
If we do not have sufficient cash flow to service interest payment and future principal payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations will be materially adversely affected.
Gross Margin . Gross margin is the difference between net sales and the cost of sales. Our cost of sales and gross margin may not be comparable to those of other entities, since some entities may include all of the costs related to their buying and distribution 29 functions, certain store-related costs and other costs, in cost of sales.
Gross Margin . Gross margin is the difference between net sales and the cost of sales. Our cost of sales and gross margin may not be comparable to those of other entities, since some entities may include all of the costs related to their buying and distribution functions, certain store-related costs and other costs, in cost of sales.
We have opportunities to expand our offerings in certain existing categories, such as ladies’ apparel, beauty, and home merchandise, and maintain the flexibility to introduce new categories as we expand our merchandising capabilities. • Expanding and Enhancing Our Retail Store Base.
We have opportunities to expand our offerings in certain existing categories, such as ladies’ and junior apparel, beauty, and home merchandise, and maintain the flexibility to introduce new categories as we expand our merchandising capabilities. • Expanding and Enhancing Our Retail Store Base.
On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, inventories, long-lived assets, intangible assets, goodwill, insurance reserves and income taxes.
On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, inventories, long-lived assets, intangible assets, goodwill, insurance reserves, leases, and income taxes.
If we were to experience adverse economic trends and/or if our efforts to counteract the impacts of these trends are not sufficiently effective, there could be a negative impact on our financial performance and position in future fiscal periods. Seasonality of Sales and Weather Conditions . Our business, like that of most retailers, is subject to seasonal influences.
If we were to experience adverse sales trends and if our efforts to counteract the impacts of these trends are not sufficiently effective, there could be a negative impact on our financial performance and position in future fiscal periods. Seasonality of Sales and Weather Conditions . Our business, like that of most retailers, is subject to seasonal influences.
Ongoing Initiatives for Fiscal 2024 We continue to focus on a number of ongoing initiatives aimed at increasing our overall profitability. These initiatives include, but are not limited to: • Driving Comparable Store Sales Growth. We strive to increase comparable store sales through the following initiatives: • More Effectively Chasing the Sales Trend.
Ongoing Initiatives for Fiscal 2025 We continue to focus on a number of ongoing initiatives aimed at increasing our overall profitability. These initiatives include, but are not limited to: • Driving Comparable Store Sales Growth. We strive to increase comparable store sales through the following initiatives: • More Effectively Chasing the Sales Trend.
As more fully described in Note 8 to our Consolidated Financial Statements, “Derivative Instruments and Hedging Activities,” we enter into interest rate derivative contracts to manage interest rate risks associated with our long term debt obligations.
As more fully described in Note 6 to our Consolidated Financial Statements, “Derivative Instruments and Hedging Activities,” we enter into interest rate derivative contracts to manage interest rate risks associated with our long term debt obligations.
Cash Flows for Fiscal 2022 Compared with Fiscal 2021 For a discussion of our cash flows for Fiscal 2022 compared to Fiscal 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Fiscal 2022 10-K.
Cash Flows for Fiscal 2023 Compared with Fiscal 2022 For a discussion of our cash flows for Fiscal 2023 compared to Fiscal 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Fiscal 2023 10-K.
We believe sales growth will drive fixed cost operating leverage. In addition, by more conservatively planning our comparable store sales growth, we are forcing even tighter expense control throughout all areas of our business. We believe that this should put us in a strong position to drive favorable operating leverage on any sales ahead of the plan.
In addition, by more conservatively planning our comparable store sales growth, we are forcing even tighter expense control throughout all areas of our business. We believe that this should put us in a strong position to drive favorable operating leverage on any sales ahead of the plan.
Performance for Fiscal Year Ended January 28, 2023 (Fiscal 2022) Compared with Fiscal Year Ended January 29, 2022 (Fiscal 2021) For a discussion related to Fiscal 2022 performance compared to Fiscal 2021 performance, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 (Fiscal 2022 10-K). 32 Liquidity and Capital Resources Our ability to satisfy interest and principal payment obligations on our outstanding debt will depend largely on our future performance which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control.
Performance for Fiscal Year Ended February 3, 2024 (Fiscal 2023) Compared with Fiscal Year Ended January 28, 2023 (Fiscal 2022) For a discussion related to Fiscal 2023 performance compared to Fiscal 2022 performance, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (Fiscal 2023 10-K). 32 Liquidity and Capital Resources Our ability to satisfy interest payment and future principal payment obligations on our outstanding debt will depend largely on our future performance which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control.
The table below depicts the change in our comparable store sales during Fiscal 2023, Fiscal 2022 and Fiscal 2021, all of which are calculated on a 52-week basis.
The table below depicts the change in our comparable store sales during Fiscal 2024, Fiscal 2023 and Fiscal 2022, all of which are calculated on a 52-week basis.
Thereafter, the 2027 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
Thereafter, the 2027 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of December 15, 2027.
Conversely, if inflation continues to decline next year, it could benefit our core customers who have been impacted by the higher cost of living since early 2022, and if economic growth slows, it could cause moderate and higher-income shoppers to become more value conscious. Both of these developments, if they occur, would be expected to improve our business.
Conversely, if inflation continues to decline, it could benefit our core customers who have been impacted by the higher cost of living since early 2022, and if economic growth slows, it could cause moderate and higher-income shoppers to become more value conscious. Either of these developments, if they occur, would be expected to improve our business.
Fiscal Year Ended Change in Comparable Store Sales February 3, 2024 4% January 28, 2023 -13% January 29, 2022 15% Various factors affect comparable store sales, including, but not limited to, weather conditions, current economic conditions, the timing of our releases of new merchandise and promotional events, the general retail sales environment, consumer preferences and buying trends, changes in sales mix among distribution channels, competition, and the success of marketing programs.
Fiscal Year Ended February 1, 2025 4% February 3, 2024 4% January 28, 2023 -13% 29 Various factors affect comparable store sales, including, but not limited to, weather conditions, current economic conditions, the timing of our releases of new merchandise and promotional events, the general retail sales environment, consumer preferences and buying trends, changes in sales mix among distribution channels, competition, and the success of marketing programs.
Refer to Note 7 to our Consolidated Financial Statements, “Long Term Debt,” for an overview of the terms and conditions of these instruments.
Refer to Note 5 to our Consolidated Financial Statements, “Long Term Debt,” for an overview of the terms and conditions of these instruments.
From and after April 15, 2023, we are able to redeem for cash all or any portion of the 2025 Convertible Notes, at our option, if the last reported sale price of the Company’s common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the principal aggregate amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
We are able to redeem for cash all or any portion of the 2025 Convertible Notes, at our option, if the last reported sale price of the Company’s common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the principal aggregate amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Loss on Extinguishment of Debt During Fiscal 2023, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes, whereby the holders exchanged $241.2 million in aggregate principal amount of 2025 Convertible Notes held by them for $255.0 million in aggregate principal amount of 2027 Convertible Notes, as well as $110.3 million in aggregate principal amount of 2025 Convertible Notes held by them for $133.3 million in cash.
During Fiscal 2023 we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes, whereby the holders exchanged $241.2 million in aggregate principal amount of 2025 Convertible Notes held by them for $255.0 million in aggregate principal amount of 2027 Convertible Notes, as well as $110.3 million in aggregate principal amount of 2025 Convertible Notes held by them for $133.3 million in cash.
We did not have any borrowings during Fiscal 2023. 2025 Convertible Notes On April 16, 2020, we issued $805.0 million of 2025 Convertible Notes.
We did not have any borrowings during Fiscal 2024. 2025 Convertible Notes On April 16, 2020, we issued $805.0 million of 2025 Convertible Notes.
A 1% change in the dollar amount of retail markdowns would have resulted in an increase in markdown dollars, at cost, of approximately $2.9 million for Fiscal 2023. Estimates are used to record inventory shortage at retail stores between physical inventories. Actual physical inventories are conducted at least annually to calculate actual shortage.
A 1% change in the dollar amount of retail markdowns would have resulted in an increase in markdown dollars, at cost, of approximately $2.5 million for Fiscal 2024. Estimates are used to record inventory shortage at retail stores between physical inventories. Actual physical inventories are conducted at least annually to calculate actual shortage.
Upon conversion, we will pay cash up to the aggregate principal amount of 2027 Convertible Notes being converted, and pay (and deliver, if applicable) cash, shares of our common stock or a combination thereof, at its election, in respect of the remainder (if any) of our conversion obligation in excess of such aggregate principal amount.
Upon conversion, we will pay cash for the aggregate principal amount of 2027 Convertible Notes being converted, and pay (and deliver, if applicable) cash, shares of our common stock or a combination thereof, at our election, in respect of the remainder (if any) of our conversion obligation in excess of such aggregate principal amount.
In addition, natural disasters, public health issues, industrial accidents and acts of war or conflicts in various parts of the world (such as the conflict in Ukraine or the Hamas-Israel war), could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
In addition, natural disasters, public health issues, industrial accidents and acts of war or conflicts in various parts of the world (such as the conflict in the Middle East), could have the effect of disrupting supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn in consumer confidence and spending.
Beginning in Fiscal 2024, we expect to average about 100 net new stores per year through Fiscal 2028, for a total of 500 net new stores over the five-year period. • Enhancing the Store Experience.
We expect to average about 100 net new stores per year, for a total of 500 net new stores over the five-year period from Fiscal 2024 through Fiscal 2028. • Enhancing the Store Experience.
General We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1007 stores as of February 3, 2024 in 46 states, Washington D.C. and Puerto Rico.
General We are a nationally recognized off-price retailer of high-quality, branded merchandise at everyday low prices. We opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have expanded our store base to 1,108 stores as of February 1, 2025 in 46 states, Washington D.C. and Puerto Rico.
We believe that cash generated from operations, along with our existing cash and our ABL Line of Credit, will be sufficient to fund our expected cash flow requirements and planned capital expenditures for at least the next twelve months as well as the foreseeable future.
We believe that cash generated from operations, along with our existing cash and our ABL Line of Credit, will be sufficient to fund our expected cash flow requirements for at least the next twelve months as well as the foreseeable future, including planned capital expenditures and repayment of the 2025 Convertible Notes.
We define Adjusted Net Income as net income, exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) loss on extinguishment of debt; (iii) costs related to debt amendments; (iv) impairment charges; (v) amounts related to certain litigation matters; and (vi) other unusual or non-recurring expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.
Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT : Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT are non-GAAP financial measures of our performance. 26 We define Adjusted Net Income as net income, exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) loss on extinguishment of debt; (iii) costs related to debt amendments; (iv) impairment charges; (v) amounts related to certain litigation matters; and (vi) other unusual, non-recurring expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.
The total Topic No. 740 liability was $10.1 million, inclusive of $7.0 million of interest and penalties included in our total Topic No. 740 liability neither of which is presented in the table above as we are not certain if and when these payments would be required.
The total Topic No. 740 liability was $8.1 million, inclusive of $5.8 million of interest and penalties, neither of which is presented in the table above as we are not certain if and when these payments would be required.
An increase in workers’ compensation claims by employees, health insurance claims by employees or general liability claims may result in a corresponding increase in our costs related to these claims. Insurance reserves amounted to $94.8 million and $86.2 million at February 3, 2024 and January 28, 2023, respectively.
An increase in workers’ compensation claims by employees, health insurance claims by employees or general liability claims may result in a corresponding increase in our costs related to these claims. Insurance reserves amounted to $102.8 million and $94.8 million at February 1, 2025 and February 3, 2024, respectively.
Refer to the section below entitled “Results of Operations” for further explanation. 27 The following table shows our reconciliation of net income to Adjusted Net Income for Fiscal 2023, Fiscal 2022 and Fiscal 2021: (unaudited) (in thousands) Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 (53 Weeks) Reconciliation of net income to Adjusted Net Income: Net income $ 339,649 $ 230,123 $ 408,839 Net favorable lease costs (a) 15,263 18,591 21,914 Loss on extinguishment of debt (b) 38,274 14,657 156,020 Costs related to debt amendments (c) 97 — 3,419 Impairment charges - long-lived assets 6,367 21,402 7,748 Litigation matters (d) 1,500 10,500 — Tax effect (e) (7,770 ) (14,503 ) (24,741 ) Adjusted Net Income $ 393,380 $ 280,770 $ 573,199 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction).
Refer to the section below entitled “Results of Operations” for further explanation. 27 The following table shows our reconciliation of net income to Adjusted Net Income for Fiscal 2024, Fiscal 2023 and Fiscal 2022: (in thousands) Fiscal Year Ended February 1, February 3, January 28, 2025 2024 2023 (53 Weeks) Reconciliation of net income to Adjusted Net Income: Net income $ 503,639 $ 339,649 $ 230,123 Net favorable lease costs (a) 11,189 15,263 18,591 Loss on extinguishment of debt (b) 1,412 38,274 14,657 Costs related to debt amendments (c) 4,553 97 — Impairment charges - long-lived assets 12,921 6,367 21,402 Litigation matters (d) 2,525 1,500 10,500 Tax effect (e) (8,298 ) (7,770 ) (14,503 ) Adjusted Net Income $ 527,941 $ 393,380 $ 280,770 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction).
During the first quarter of Fiscal 2021, the Company made an irrevocable settlement election for any conversions of the 2025 Convertible Notes. Upon conversion, we will pay cash for the principal amount. For any excess above principal, we will deliver shares of its common stock. We were not permitted to redeem the 2025 Convertible Notes prior to April 15, 2023.
During the first quarter of Fiscal 2021, the Company made an irrevocable settlement election for any conversions of the 2025 Convertible Notes. Upon conversion, we will pay cash for the principal amount. For any excess above principal, we will deliver shares of its common stock.
Percentage of Net Sales Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 Net sales 100.0 % 100.0 % 100.0 % Other revenue 0.2 0.2 0.2 Total revenue 100.2 100.2 100.2 Cost of sales 57.5 59.6 58.4 Selling, general and administrative expenses 33.9 33.1 30.8 Costs related to debt amendments 0.0 — 0.0 Depreciation and amortization 3.2 3.1 2.7 Impairment charges - long-lived assets 0.1 0.2 0.1 Other income - net (0.4 ) (0.3 ) (0.1 ) Loss on extinguishment of debt 0.4 0.2 1.7 Interest expense 0.8 0.8 0.7 Total costs and expenses 95.5 96.7 94.3 Income before income tax expense 4.7 3.5 5.9 Income tax expense 1.3 0.9 1.5 Net income 3.4 % 2.6 % 4.4 % 30 Performance for Fiscal Year Ended February 3, 2024 (Fiscal 2023) Compared with Fiscal Year Ended January 28, 2023 (Fiscal 2022) Net sales Net sales improved $1,024.4 million, or 11.8%, to $9,709.0 million, primarily driven by 80 net new stores since the end of Fiscal 2022, an increase of 4% in comparable store sales during Fiscal 2023, and additional sales of $138.0 million from the 53rd week in Fiscal 2023.
Percentage of Net Sales Fiscal Year Ended February 1, February 3, January 28, 2025 2024 2023 Net sales 100.0 % 100.0 % 100.0 % Other revenue 0.2 0.2 0.2 Total revenue 100.2 100.2 100.2 Cost of sales 56.8 57.5 59.6 Selling, general and administrative expenses 33.4 33.9 33.1 Costs related to debt amendments 0.0 0.0 — Depreciation and amortization 3.3 3.2 3.1 Impairment charges - long-lived assets 0.1 0.1 0.2 Other income - net (0.5 ) (0.4 ) (0.3 ) Loss on extinguishment of debt 0.0 0.4 0.2 Interest expense 0.7 0.8 0.8 Total costs and expenses 93.8 95.5 96.7 Income before income tax expense 6.4 4.7 3.5 Income tax expense 1.6 1.3 0.9 Net income 4.8 % 3.4 % 2.6 % Performance for Fiscal Year Ended February 1, 2025 (Fiscal 2024) Compared with Fiscal Year Ended February 3, 2024 (Fiscal 2023) Net sales Net sales improved $907.8 million, or 9.3%, to $10,616.7 million, primarily driven by 101 net new stores since the end of Fiscal 2023 and an increase of 4% in comparable store sales during Fiscal 2024.
(d) Represents amounts charged for certain litigation matters. (e) Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, adjusted for the tax effect for the impact of items (a) through (d).
(e) Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, adjusted for the tax effect for the impact of items (a) through (d).
During the first quarter of Fiscal 2022, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $64.6 million in aggregate principal amount of 2025 Convertible Notes held by them for $78.2 million in cash.
During the first quarter of Fiscal 2023, we entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $110.3 million in aggregate principal amount of 2025 Convertible Notes held by them for $133.3 million in cash.
Consumer confidence is also affected by the domestic and international political situation. Our financial condition and operations could be impacted by changes in government regulations in areas including, but not limited to, taxes and healthcare. Ongoing international trade and tariff negotiations could have a direct impact on our income and an indirect impact on consumer prices.
Consumer confidence is also affected by the domestic and international political situation. Our financial condition and operations could be impacted by changes in government regulations, initiatives or programs in areas including, but not limited to, trade and tariffs, taxes, healthcare, and immigration. In addition, trade and tariff regulations could have an indirect impact on consumer prices.
The table above excludes our irrevocable letters of credit guaranteeing payment and performance under certain leases, insurance contracts, debt agreements, merchandising agreements and utility agreements in the amount of $75.8 million as of February 3, 2024. As of February 3, 2024, insurance reserves amounted to $94.8 million.
The table above excludes our irrevocable letters of credit guaranteeing payment and performance under certain leases, insurance contracts, debt agreements, merchandising agreements and utility agreements in the amount of $52.5 million as of February 1, 2025. As of February 1, 2025, insurance reserves amounted to $102.8 million.
Debt and Hedging As of February 3, 2024, our obligations, inclusive of original issue discount, include $933.4 million under our Term Loan Facility, $453.2 million of 2025 Convertible Notes and 2027 Convertible Notes, and no outstanding borrowings on our ABL Line of Credit. Our debt obligations also include $29.1 million of finance lease obligations as of February 3, 2024.
Debt and Hedging As of February 1, 2025, our obligations, inclusive of original issue discount, include $1,238.9 million under our Term Loan Facility, $453.2 million of Convertible Notes and no outstanding borrowings on our ABL Line of Credit. Our debt obligations also include $25.0 million of finance lease obligations as of February 1, 2025.
Cost of sales Cost of sales as a percentage of net sales decreased to 57.5% during Fiscal 2023, primarily driven by higher merchandise margins and improved freight costs. On a dollar basis, cost of sales increased $412.3 million, or 8.0%, primarily driven by our overall increase in sales.
Cost of sales Cost of sales as a percentage of net sales decreased to 56.8% during Fiscal 2024, compared with 57.5% during Fiscal 2023, primarily driven by higher merchandise margins and improved freight costs. On a dollar basis, cost of sales increased $441.2 million, or 7.9%, primarily driven by our overall increase in sales.
We exchanged approximately $241.2 million in aggregate principal amount of the 2025 Convertible Notes for approximately $255.0 million in aggregate principal amount of the 2027 Convertible Notes. These exchanges resulted in aggregate pre-tax debt extinguishment charges of $13.6 million. We also issued approximately $42.1 million in aggregate principal amount of 2027 Convertible Notes in a private placement to certain investors.
We exchanged approximately $241.2 million in aggregate principal amount of the 2025 Convertible Notes for approximately $255.0 million in aggregate principal amount of the 2027 Convertible Notes. We also issued approximately $42.1 million in aggregate principal amount of 2027 Convertible Notes in a private placement to certain investors.
Adjusted EBITDA is further adjusted for cash requirements for replacement of assets. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will likely have to be replaced in the future During Fiscal 2023, Adjusted EBIT improved $150.7 million to $581.0 million. During Fiscal 2023, Adjusted EBITDA improved $187.4 million to $888.1 million.
Adjusted EBITDA is further adjusted for cash requirements for replacement of assets. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will likely have to be replaced in the future 28 During Fiscal 2024, Adjusted EBIT improved $164.4 million to $745.4 million. During Fiscal 2024, Adjusted EBITDA improved $204.9 million to $1,093.0 million.
However, future 31 impairment charges could be required if we do not achieve our current revenue or cash flow projections for each store. Refer to Note 6, “Impairment Charges,” for further discussion. Other income, net Other income, net improved $14.0 million to $40.9 million during Fiscal 2023.
However, future impairment charges could be required if we do not achieve our current revenue or cash flow projections for each store. Refer to Note 4, “Impairment Charges,” for further discussion. Other income, net Other income, net improved $7.3 million to $48.2 million during Fiscal 2024.
During Fiscal 2023, Adjusted Net Income improved $112.6 million to $393.4 million. This increase was primarily driven by higher sales and increased gross margin rate.
During Fiscal 2024, Adjusted Net Income improved $134.6 million to $527.9 million. This increase was primarily driven by higher sales and increased gross margin rate.
The increase in income tax expense and tax rate is due to higher pre-tax income and the disallowance of certain debt extinguishment costs related to the partial repurchase of the 2025 Convertible Notes during Fiscal 2023. Net income We earned net income of $339.6 million during Fiscal 2023 compared with net income of $230.1 million for Fiscal 2022.
The higher tax rate in the prior period is primarily attributable to the disallowance of certain debt extinguishment costs related to the partial repurchase of the 2025 Convertible Notes in Fiscal 2023. Net income We earned net income of $503.6 million during Fiscal 2024 compared with net income of $339.6 million for Fiscal 2023.
These exchanges resulted in aggregate pre-tax debt extinguishment charges of $14.7 million. Refer to Note 7, “Long Term Debt,” for further discussion regarding our debt transactions. Interest expense Interest expense increased $11.9 million to $78.4 million.
These exchanges resulted in aggregate pre-tax debt extinguishment charges of $38.3 million. Refer to Note 5, “Long Term Debt,” for further discussion regarding our debt transactions. Interest expense Interest expense decreased $8.9 million to $69.5 million.
Key performance and non-GAAP measures used by management include net income, Adjusted Net Income, Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin, inventory, store payroll and liquidity. 26 Net income . We earned net income of $339.6 million during Fiscal 2023 compared with $230.1 million during Fiscal 2022.
Key performance and non-GAAP measures used by management include net income, Adjusted Net Income, Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin, inventory and liquidity. Net income . We earned net income of $503.6 million during Fiscal 2024 compared with $339.6 million during Fiscal 2023. This increase was primarily driven by higher sales and increased gross margin rate.
Refer to the section below entitled “Results of Operations” for further explanation. 28 The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for Fiscal 2023, Fiscal 2022 and Fiscal 2021: (unaudited) (in thousands) Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 (53 Weeks) Reconciliation of net income to Adjusted EBIT and Adjusted EBITDA Net income $ 339,649 $ 230,123 $ 408,839 Interest expense 78,399 66,474 67,502 Interest income (24,633 ) (8,799 ) (189 ) Net favorable lease costs (a) 15,263 18,591 21,914 Loss on extinguishment of debt (b) 38,274 14,657 156,020 Costs related to debt amendments (c) 97 — 3,419 Impairment charges - long-lived assets 6,367 21,402 7,748 Litigation matters (d) 1,500 10,500 — Income tax expense 126,124 77,386 136,459 Adjusted EBIT 581,040 430,334 801,712 Depreciation and amortization 307,064 270,398 249,217 Adjusted EBITDA $ 888,104 $ 700,732 $ 1,050,929 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the Merger Transaction.
The following table shows our reconciliation of net income to Adjusted EBIT and Adjusted EBITDA for Fiscal 2024, Fiscal 2023 and Fiscal 2022: (unaudited) Fiscal Year Ended February 1, February 3, January 28, 2025 2024 2023 (53 Weeks) Reconciliation of net income to Adjusted EBIT and Adjusted EBITDA Net income $ 503,639 $ 339,649 $ 230,123 Interest expense 69,522 78,399 66,474 Interest income (31,519 ) (24,633 ) (8,799 ) Net favorable lease costs (a) 11,189 15,263 18,591 Loss on extinguishment of debt (b) 1,412 38,274 14,657 Costs related to debt amendments (c) 4,553 97 — Impairment charges - long-lived assets 12,921 6,367 21,402 Litigation matters (d) 2,525 1,500 10,500 Income tax expense 171,175 126,124 77,386 Adjusted EBIT 745,417 581,040 430,334 Depreciation and amortization 347,575 307,064 270,398 Adjusted EBITDA $ 1,092,992 $ 888,104 $ 700,732 (a) Net favorable lease costs represent the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the Merger Transaction.
We believe that this enables us to obtain better terms with our suppliers, which we expect will help offset any rising costs of goods.
We believe that this enables us to obtain better terms with our suppliers, which we expect will help offset any rising costs of goods. Key Performance and Non-GAAP Measures We consider numerous factors in assessing our performance.
Capital Expenditures For Fiscal 2023, capital expenditures, net of $14.6 million of landlord allowances, amounted to $522.5 million (inclusive of accrued capital expenditures). These capital expenditures include approximately $291.0 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
Capital Expenditures For Fiscal 2024, capital expenditures, net of $28.9 million of landlord allowances, amounted to $843.9 million (inclusive of accrued capital expenditures). These capital expenditures include approximately $334.9 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
We estimate that we will spend approximately $750 million, net of approximately $40 million of landlord allowances, in capital expenditures during Fiscal 2024, including approximately $340 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
We incurred capital expenditures of $522.5 million (inclusive of accrued capital expenditures), net of approximately $14.6 million of landlord allowances, during Fiscal 2023. 33 We estimate that we will spend approximately $950 million, net of approximately $55 million of landlord allowances, in capital expenditures during Fiscal 2025, including approximately $390 million, net of the previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store expenditures).
During Fiscal 2023, we repurchased 1,354,031 shares of common stock for $231.9 million under our share repurchase program. We are authorized to repurchase shares of our outstanding common stock from time to time on the open market or in privately negotiated transactions under our repurchase program.
As of February 1, 2025, we had $263.2 million remaining under our share repurchase authorization. We are authorized to repurchase shares of our outstanding common stock from time to time on the open market or in privately negotiated transactions under our repurchase program.
(2) Represents interest payments on (i) the outstanding balance of the Term Loan Facility, with an interest rate of 7.4% as of January 28, 2023; (ii) $450.0 million interest rate swap with a SOFR rate of 2.16%; (iii) the outstanding balance of the 2025 Convertible Notes, with an interest rate of 2.25%; and (iv) the outstanding balance of the 2027 Convertible Notes, with an interest rate of 1.25%.
(2) Represents interest payments on (i) the outstanding balance of the Term Loan Facility with an interest rate of 6.1%; (ii) $800.0 million interest rate swap; (iii) the outstanding balance of the 2025 Convertible Notes; and (iv) the outstanding balance of the 2027 Convertible Notes. (3) Finance lease obligations include future interest payments.
We believe that our transportation initiatives will lead to lower freight costs compared to recent levels, and that our efficiency and labor productivity initiatives will result in lower supply chain costs over the next several years. We also believe there are longer-term supply chain opportunities through investments in automation. • Challenging Expenses to Drive Operating Leverage.
Our transportation initiatives have led to lower freight costs compared to recent levels, and we believe our efficiency and labor productivity initiatives will continue to result in lower supply chain costs over the next several years.
Net cash provided by operating activities amounted to $868.7 million and $596.4 million during Fiscal 2023 and Fiscal 2022, respectively. The increase in our operating cash flows was primarily driven by higher sales and margin in Fiscal 2023, as well as changes in working capital.
Net cash provided by operating activities amounted to $863.4 million and $868.7 million during Fiscal 2024 and Fiscal 2023, respectively. The decrease in our operating cash flows was primarily driven by changes in working capital, partially offset by improved net income. Net cash used in investing activities was $882.3 million and $503.7 million during Fiscal 2024 and Fiscal 2023, respectively.
On August 15, 2023, our Board of Directors authorized the repurchase of up to an additional $500 million of common stock, which is authorized to be executed through August 2025. As of the end of Fiscal 2023, we had $500.0 million remaining under this share repurchase authorization.
Share Repurchase Program On August 15, 2023, our Board of Directors authorized the repurchase of up to $500 million of common stock, which is authorized to be executed through August 2025. During Fiscal 2024, we repurchased 1,013,561 shares of common stock for $241.9 million under our share repurchase program.
The effective tax rate was 27.1% related to pretax income of $465.8 million for Fiscal 2023, and 25.2% related to pretax income of $307.5 million for Fiscal 2022.
The effective tax rate was 25.4% related to pretax income of $674.8 million for Fiscal 2024, and 27.1% related to pretax income of $465.8 million for Fiscal 2023. The increase in income tax expense is primarily due to higher pre-tax income.
There can be no assurance that we will be able to offset inflationary pressure in the future by increasing prices or through other means, or that our business will not be negatively affected by continued inflation in the future. Key Performance and Non-GAAP Measures We consider numerous factors in assessing our performance.
Certain of the general factors that may cause such fluctuations are discussed in Item 1A, Risk Factors and elsewhere in this Annual Report. 38 Inflation There can be no assurance that we will be able to offset inflationary pressure in the future by increasing prices or through other means, or that our business will not be negatively affected by continued inflation in the future.
There can be no assurance that we will be able to offset inflationary pressure in the future, or that our business will not be negatively affected by continued inflation in the future. We may not be able to adequately increase our prices over time to offset increased costs, whether due to inflation or otherwise.
We may not be able to adequately increase our prices over time to offset increased costs, whether due to inflation or otherwise.
Gross margin as a percentage of net sales expanded to 42.5% during Fiscal 2023, compared with 40.4% during Fiscal 2022, driven primarily by higher merchandise margins and improved freight costs. Product sourcing costs, which are included in selling, general and administrative expenses, increased approximately 20 basis points as a percentage of net sales. Inventory .
Gross margin as a percentage of net sales expanded to 43.2% during Fiscal 2024, compared with 42.5% during Fiscal 2023, driven primarily by higher merchandise margins and improved freight costs.
This increase was primarily driven by higher sales and increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation. Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT : Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT are non-GAAP financial measures of our performance.
These increases were primarily driven by higher sales and increased gross margin rate. Refer to the section below entitled “Results of Operations” for further explanation.
Depreciation and amortization Depreciation and amortization expense amounted to $307.1 million during Fiscal 2023, compared with $270.4 million during Fiscal 2022. The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores, our supply chain investments, and costs incurred during the 53rd week of Fiscal 2023.
The increase in depreciation and amortization expense was primarily driven by capital expenditures related to new and non-comparable stores and our supply chain investments. 31 Impairment charges—long-lived assets Impairment charges related to long-lived assets were $12.9 million and $6.4 million during Fiscal 2024 and Fiscal 2023, respectively.
Thereafter, the 2025 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
These exchanges resulted in aggregate pre-tax debt extinguishment charges of $24.6 million. The 2025 Convertible Notes are convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of April 15, 2025.
The increase was driven by a higher interest rate on the unhedged portion of the term loan, as well as costs incurred during the 53rd week, partially offset by a lower average balance of 2025 Convertible Notes and a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished.
Additionally, we had a lower average balance of 2025 Convertible Notes, and a lower interest rate on the 2027 Convertible Notes compared to the 2025 Convertible Notes that were extinguished, partially offset by a higher average balance due to the September 2024 extension and upsize of the Term Loan Facility during the third quarter of Fiscal 2024.
Reserve inventory includes all inventory that is being stored for release either later in the season, or in a subsequent season. We intend to use our reserve merchandise to effectively chase sales trends. In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and inventory levels within our stores.
We intend to use our reserve merchandise to effectively chase sales trends. Reserve inventory was 46% of total inventory at the end of Fiscal 2024 compared to 39% at the end Fiscal 2023. In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and inventory levels within our stores.
During the fiscal year ending February 1, 2025 (Fiscal 2024), we plan to open approximately 100 net new stores. Fiscal Year Ended Our fiscal year ends on the Saturday closest to January 31. We report fiscal years under a 52/53-week format and as a result, certain fiscal years will contain 53 weeks.
We report fiscal years under a 52/53-week format and as a result, certain fiscal years will contain 53 weeks. Fiscal 2024 included 52 weeks, the fiscal year ended February 3, 2024 (Fiscal 2023) included 53 weeks, and the fiscal year ended January 28, 2023 (Fiscal 2022) included 52 weeks. Fiscal 2025 will have 52 weeks.
In addition, we estimate that we will spend approximately $210 33 million to support our supply chain initiatives, with the remaining capital used to support our information technology and other business initiatives.
In addition, we estimate that we will spend approximately $460 million to support our supply chain initiatives, largely related to a purchase agreement for the Cactus Ave. distribution center in Riverside, California, which was negotiated during Fiscal 2024. The remaining capital will be used to support our information technology and other business initiatives.
ABL Line of Credit On June 26, 2023, we entered into an amendment to the credit agreement governing our ABL Line of Credit, which increased the sublimit for letters of credit thereunder from $150 million to $250 million.
On June 26, 2023, BCFWC entered into a Fifth Amendment to the Second Amended and Restated Credit Agreement, which increased the sublimit for letters of credit thereunder from $150 million to $250 million. The letter of credit sublimit was subsequently reduced to $200 million. At February 1, 2025, we had $827.0 million available under the ABL Line of Credit.
Executive Summary Store Openings, Closings and Relocations During Fiscal 2023, we opened 104 new stores, inclusive of 13 relocations, and closed 11 stores, exclusive of the aforementioned relocations, bringing our store count as of February 3, 2024 to 1007 stores. We continue to pursue our growth plans and invest in capital projects that meet our financial requirements.
Executive Summary Store Openings, Closings and Relocations During the fiscal year ended February 1, 2025 (Fiscal 2024), we opened 147 new stores, inclusive of 31 relocations, and closed 15 stores, exclusive of the aforementioned relocations, bringing our store count as of February 1, 2025 to 1,108 stores.
The fundamental change repurchase price will be 100% of the aggregate principal amount of the 2027 Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Hedging On June 24, 2021, the Company terminated its previous interest rate swap and entered into a new interest rate swap.
The fundamental change repurchase price will be 100% of the aggregate principal amount of the 2027 Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Hedging We have interest rate swaps which hedge $800.0 million of variable rate exposure under our Term Loan Facility.
The table above excludes estimated commitments for services to be used in our business of up to approximately $165 million over the next five years. (6) Represents severance payments in the normal course of business that are included in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income.
(6) Represents severance payments in the normal course of business that are included in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income. The table above excludes ASC Topic No. 740 “Income Taxes” (Topic No. 740) liabilities which represent uncertain tax positions related to temporary differences.
As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by tender offer, by exchange transaction or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity and other factors and may be commenced or suspended at any time.
Such repurchases, if any, will depend on prevailing market conditions, our liquidity and other factors and may be commenced or suspended at any time. The amounts involved and total consideration paid may be material. From time to time, we evaluate options to opportunistically increase, refinance or extend our debt.
We are currently determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures. 38 Fluctuations in Operating Results We expect that our revenues and operating results may fluctuate from fiscal quarter to fiscal quarter or over the longer term.
Recent Accounting Pronouncements Refer to Note 2, “Recent Accounting Pronouncements,” of our Consolidated Financial Statements for a discussion of recent accounting pronouncements and their impact on our Consolidated Financial Statements. Fluctuations in Operating Results We expect that our revenues and operating results may fluctuate from fiscal quarter to fiscal quarter or over the longer term.
Due to the impact of the COVID-19 pandemic in Fiscal 2020, we are using Fiscal 2019 as the comparable previous year period when calculating comparable store sales for Fiscal 2021. The method of calculating comparable store sales varies across the retail industry. As a result, our definition of comparable store sales may differ from other retailers.
Comparable store sales measure performance of a store during the current reporting period against the performance of the same store in the corresponding period of a prior year. The method of calculating comparable store sales varies across the retail industry. As a result, our definition of comparable store sales may differ from other retailers.
These expenses are recorded in the line item “Selling, general and administrative expenses” in our Consolidated Statements of Income.
The acquisition of these leases resulted in $15.7 million and $18.4 million of pre-opening costs that are recorded in the line item, “Selling, general and administrative expenses” in our Consolidated Statements of Income during Fiscal 2024 and Fiscal 2023, respectively.
However, there can be no assurance that we would be able to offset potential declines in our comparable store sales with savings initiatives in the event that the economy declines.
However, there can be no assurance that we would be able to offset declines in our comparable store sales with savings initiatives. As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by tender offer, by exchange transaction or otherwise.
In addition, we made capital expenditures of $116.4 million to support our supply chain initiatives, with the remaining capital to support information technology and other business initiatives. We incurred capital expenditures of $427.0 million (inclusive of accrued capital expenditures), net of approximately $23.1 million of landlord allowances, during Fiscal 2022.
In addition, we made capital expenditures of $384.8 million to support our supply chain initiatives, largely related to the purchase of the distribution center in Ellabell, Georgia, with the remaining capital to support information technology and other business initiatives.
Store payroll as a percentage of net sales was 8.2% and 8.0% during Fiscal 2023 and Fiscal 2022, respectively. Liquidity. Liquidity measures our ability to generate cash. Management measures liquidity through cash flow, which is the measure of cash generated from or used in operating, financing, and investing activities.
By appropriately managing our inventories, we believe we will be better able to deliver a continual flow of fresh merchandise to our customers. Liquidity. Liquidity measures our ability to generate cash. Management measures liquidity through cash flow, which is the measure of cash generated from or used in operating, financing, and investing activities.
Cash and cash equivalents, including restricted cash and cash equivalents, increased $46.2 million during Fiscal 2023, compared with a decrease of $218.5 million during Fiscal 2022. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation.
Cash and cash equivalents increased $69.3 million during Fiscal 2024, compared with an increase of $46.2 million during Fiscal 2023. Refer to the section below entitled “Liquidity and Capital Resources” for further explanation. 30 Results of Operations The following table sets forth certain items in the Consolidated Statements of Income as a percentage of net sales for the periods indicated.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+2 added−3 removed2 unchanged
Biggest changeAdditionally, during Fiscal 2023, we amended the Term Loan Credit Agreement changing from Adjusted LIBOR Rate to the Adjusted Term SOFR Rate. We manage our interest rate risk through the use of interest rate derivative contracts. For our floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.
Biggest changeWe manage our interest rate risk through the use of interest rate derivative contracts. For our floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.
Refer to Note 8, “Derivative Instruments and Hedging Activities,” for further discussion regarding our derivative transactions. We have unlimited interest rate risk related to borrowings on our variable rate debt in excess of the notional principal amount of our interest rate swap contract. 39 At February 3, 2024, we had $937.4 million of floating-rate debt, exclusive of original issue discount.
Refer to Note 6, “Derivative Instruments and Hedging Activities,” for further discussion regarding our derivative transactions. We have unlimited interest rate risk related to borrowings on our variable rate debt in excess of the notional principal amount of our interest rate swap contract. At February 1, 2025, we had $1,246.9 million of floating-rate debt, exclusive of original issue discount.
Based on $937.4 million outstanding as floating-rate debt, a one percentage point interest rate increase or decrease as of February 3, 2024 ( after considering our interest rate swap contract and assuming current borrowing level remains constant), would cause an increase or decrease, respectively, to cash interest expense of $4.9 million per year.
Based on this, a one percentage point interest rate increase or decrease as of February 1, 2025 ( after considering our interest rate swap contract and assuming current borrowing level remains constant), would cause an increase or decrease, respectively, to cash interest expense of $4.4 million per year.
Our ability to satisfy our interest payment obligations on our outstanding debt will depend largely on our future performance, which, in turn, is in part subject to prevailing economic conditions and to financial, business and other factors beyond our control.
These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions. 39 Our ability to satisfy our interest payment obligations on our outstanding debt will depend largely on our future performance, which, in turn, is in part subject to prevailing economic conditions and to financial, business and other factors beyond our control.
This sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions.
This sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods.
Removed
The interest rate of our Term Loan Facility is also dependent on the prime rate, and the federal funds rate as further discussed in Note 7 to our Consolidated Financial Statements, “Long Term Debt.” During Fiscal 2022, an amendment to the ABL Line of Credit replaced the LIBOR-based interest rate benchmark provisions with interest rate benchmark provisions based on a term secured overnight financing rate (SOFR) or a daily SOFR rate (in the case of daily SOFR, available for borrowings up to $100 million, or up to the full amount of the commitments if the term SOFR rate is not available).
Added
The interest rate of our Term Loan Facility is also dependent on the prime rate, and the federal funds rate as further discussed in Note 5 to our Consolidated Financial Statements, “Long Term Debt.” On September 24, 2024, the Company entered into an amendment to the Credit Agreement dated as of February 24, 2011, which among other things, (i) refinanced the outstanding $933 million principal amount of term B-6 loans with term B-7 loans in an aggregate principal amount of $1,250 million, which includes incremental term loans in an aggregate principal amount of $317 million, (ii) extended the maturity date from June 24, 2028 to September 24, 2031, and (iii) reduced the interest rate margins applicable to the Company’s term loan facility from 1.00% to 0.75%, in the case of prime rate loans, and from 2.00% to 1.75%, in the case of SOFR loans, with a 0.00% SOFR floor, and removing the SOFR adjustment.
Removed
On June 24, 2021, we terminated our previous interest rate swap and entered into a new interest rate swap. The new interest rate swap, which hedges $450.0 million of variable rate exposure under our Term Loan Facility, is designated as a cash flow hedge and expires on June 24, 2028.
Added
On September 27, 2024, the Company terminated the previous $450 million interest rate swap, and entered into a new interest rate swap in the notional amount of $500 million with a blended interest rate of 2.83%. On this same date, the Company also entered into a new interest rate swap for $300 million with an interest rate of 3.37%.
Removed
During the second quarter of Fiscal 2023, we amended our interest rate swap to be based on SOFR rather than LIBOR, which resulted in an updated swap rate of 2.16%. This amendment was covered under the guidance in ASU 2020-04, Reference Rate Reform ("ASC 848") and did not impact the hedge accounting relationship.

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