Quarterly Report for Quarter Ending May 2, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Except for specific historical information, many of the matters discussed in this Form 10-Q may express or imply projections of revenues or expenditures, statements of plans and objectives for future operations, growth or initiatives, statements of future economic performance, capital allocation expectations or statements regarding the outcome or impact of pending or threatened litigation. These, and similar statements, are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, concerning matters that involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from those expressed or implied by these statements. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. The words "believe," "anticipate," "project," "plan," "expect," "estimate," "objective," "forecast," "goal," "intend," "could," "will likely result," or "will continue" and similar words and expressions generally identify forward-looking statements, although not all forward-looking statements contain such language. The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in the forward-looking statements.

The factors that may result in actual results differing from such forward-looking information include, but are not limited to: uncertainties relating to general economic conditions, including inflation, energy and fuel costs, unemployment levels, and any deterioration whether caused by acts of war, terrorism, political or social unrest (including any resulting store closures, damage or loss of inventory) or other factors; changes in market interest rates and market levels of wages; the imposition of new taxes on imports, new tariffs and changes in existing tariff rates; the imposition of new trade restrictions and changes in existing trade restrictions; impact of natural disasters such as hurricanes; uncertainty and economic impact of pandemics, epidemics or other public health emergencies; transportation and distribution delays or interruptions; changes in freight rates; the Company's ability to attract and retain workers; the Company's ability to negotiate effectively the cost and purchase of merchandise; inventory risks due to shifts in market demand; the Company's ability to gauge fashion trends and changing consumer preferences; consumer confidence and changes in consumer spending patterns; competition within the industry; competition in our markets; the duration and extent of any economic stimulus programs; changes in product mix; interruptions in suppliers' businesses; risks related to cybersecurity, data privacy and intellectual property; temporary changes in demand due to weather patterns; seasonality of the Company's business; the results of pending or threatened litigation; delays and costs associated with building, opening, remodeling, assuming leases, and operating new stores; delays and costs associated with building, opening or expanding new or existing distribution centers; changes in regulator's requirements or stakeholder's expectations on environmental, social and sustainability related topics; challenges effectively managing the use of artificial intelligence; and strategic transactions that could negatively impact our liquidity, increase our expenses, or present significant distractions to management; and other factors described in the section titled "Item 1A. Risk Factors" and elsewhere in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2026 and in Part II, "Item 1A. Risk Factors" and elsewhere in the Company's Quarterly Reports on Form 10-Q and any amendments thereto and in the other documents the Company files with the SEC, including reports on Form 8-K.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. Except as may be required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements contained herein to reflect events or circumstances occurring after the date of this Form 10-Q or to reflect the occurrence of unanticipated events. Readers are advised, however, to read any further disclosures the Company may make on related subjects in its public disclosures or documents filed with the SEC, including reports on Form 8-K.

Executive Overview

We are the leading off-price value retailer of apparel, accessories and home trends primarily for Black families. Our high-quality and trend-right merchandise offerings at everyday low prices are designed to appeal to the fashion and trend preferences of value-conscious customers.

As of May 2, 2026, we operated 591 stores in urban, suburban and rural markets in 33 states.

Uncertainties and Challenges

General Economic Conditions

We are monitoring trends in general economic conditions, including on-going inflationary pressures, new and changing tariff programs and changes in consumer sentiment. We continue to monitor the impacts on our business of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, gas prices, consumer confidence, consumer perception of economic conditions, costs to source our merchandise and supply chain disruptions.

Seasonality and Weather Patterns

The nature of our business is seasonal. Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year. In addition, sales of clothing are directly impacted by the timing of the seasons to which the clothing relates. While we have expanded our product offerings to balance discretionary with non-discretionary products, traffic to our stores is still influenced by weather patterns to some extent.

Basis of Presentation

Net sales consist of store sales and layaway fees, net of returns by customers. Cost of sales consists of the cost of products we sell and associated freight costs. Depreciation is not considered a component of cost of sales and is included as a separate line item in the consolidated statements of operations. Selling, general and administrative expenses are comprised of store costs, including payroll and occupancy costs, corporate and distribution center costs and marketing costs.

The following discussion contains references to fiscal years 2026 and 2025, which represent fiscal years ending or ended on January 30, 2027 and January 31, 2026, respectively. Fiscal 2026 and fiscal 2025 have a 52-week accounting period. This discussion and analysis should be read with the unaudited condensed consolidated financial statements and the notes thereto contained in Part I, Item 1 of this Report.

Results of Operations

The following discussion of the Company's financial performance is based on the unaudited condensed consolidated financial statements set forth herein. Expenses and, to a greater extent, operating income, vary by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year as a result of the seasonality of our business and the current economic uncertainty.

Key Operating Statistics

We measure performance using key operating statistics. One of the main performance measures we use is comparable store sales growth. We define a comparable store as a store that has been open for at least 14 full consecutive months without closure for more than seven days within the same fiscal month. Remodeled and relocated stores are included in the comparable store sales results if the selling square footage is not changed significantly, the store is not closed for more than five days in any fiscal month and the store remains in the same trade area. We also use other operating statistics, most notably average sales per store, to measure our performance. As we typically occupy existing space in established shopping centers rather than sites built specifically for our stores, store square footage (and therefore sales per square foot) varies by store. We focus on overall store sales volume as the critical driver of profitability. In addition to sales, we measure cost of sales as a percentage of sales and store operating expenses, with a particular focus on labor, as a percentage of sales. These results translate into store level contribution, which we use to evaluate the overall performance of each individual store. Finally, we monitor corporate and distribution center expenses against budgeted amounts.

Thirteen Weeks Ended May 2, 2026 and May 3, 2025

Net Sales. Net sales increased $29.2 million, or 14.4%, to $230.9 million in the first quarter of 2026 from $201.7 million in the first quarter of 2025. The increase in sales was due to a 13.9% increase in comparable store sales, as well as an increase of $1.5 million from net store opening and closing activity.

Cost of Sales (exclusive of depreciation). Cost of sales (exclusive of depreciation) increased $16.7 million, or 13.7%, to $138.6 million in the first quarter of 2026 from $121.9 million in the first quarter of 2025. Cost of sales as a percentage of sales decreased to 60.0% in the first quarter of 2026 from 60.4% in the first quarter of 2025. The change was due to lower shrink expense, partially offset by fuel surcharges in freight.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $4.8 million, or 6.5%, to $79.7 million in the first quarter of 2026 from $74.9 million in the first quarter of 2025. The increase was primarily due to an increase in store and corporate expenses and incentive compensation accrual, partially offset by lower distribution center expenses. As a percentage of sales, selling, general and administrative expenses decreased to 34.5% in the first quarter of 2026 from 37.1% in the first quarter of 2025.

Depreciation. Depreciation expense increased $0.7 million, or 16.9%, to $5.1 million in the first quarter of 2026 from $4.4 million in the first quarter of 2025.

Income Tax Benefit/Expense. There was $0.2 million income tax expense in the first quarter of 2026 and there was no income tax expense in the first quarter of 2025. We used the annual effective tax rate to determine income tax expense based upon interim period results.

Net Income. Net income was $7.8 million in the first quarter of 2026 compared to net income of $0.9 million in the first quarter of 2025 due to the factors discussed above.

Liquidity and Capital Resources

Capital Allocation

Our capital allocation strategy is to maintain adequate liquidity to prioritize investments in opportunities to profitably grow our business and maintain current operations, then to return excess cash to shareholders through our share repurchase programs. Our quarter-end cash and cash equivalents balance was $81.1 million compared to $41.6 million at the end of the first quarter of 2025. Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.

Our principal sources of liquidity consist of: (i) cash and cash equivalents on hand; (ii) short-term trade credit arising from customary payment terms and trade practices with our vendors; (iii) cash generated from operations on an ongoing basis; and (iv) a revolving credit facility with a $75 million credit commitment.

Inventory

Our quarter-end inventory balance was $115.2 million, compared with $109.9 million at the end of the first quarter of 2025. The increase was primarily related to increased sales volume.

Capital Expenditures

Capital expenditures in the first quarter of 2026 were $5.8 million, an increase of $3.7 million from the first quarter of 2025, as we invested in more existing store remodels. We anticipate capital expenditures in fiscal 2026 in the range of $35 million to $40 million, primarily for opening approximately 25 new stores and remodeling approximately 50 stores.

Share Repurchases

No shares were repurchased in the first quarter of fiscal 2026. In the first quarter of fiscal 2025, we returned $6.3 million to shareholders through share repurchases.

Revolving Credit Facility

We have a revolving credit facility that matures in April 2030 and provides a $75 million credit commitment and a $25 million uncommitted "accordion" feature. Additional details of the credit facility are in Note 4 to the Financial Statements. At the end of the first quarter of 2026, we had no borrowings under the credit facility and $2.2 million in letters of credit outstanding.

Cash Flows

Cash Flows From Operating Activities. Net cash provided by operating activities was $20.9 million in the first quarter of 2026 compared to cash used of $11.0 million in the first quarter of 2025. Sources of cash in the first quarter of 2026 resulted from net income adjusted for non-cash expenses totaling $26.3 million (compared to a net income adjusted for non-cash items of $18.5 million in the first quarter of 2025), and an increase of $12.6 million in accounts payable (compared to a decrease of $21.9 million in the first quarter of 2025).

Significant uses of cash during the first quarter of 2026 included (1) a decrease of $11.3 million in accrued expenses and other long-term liabilities (compared to a decrease of $19.4 million in the first quarter of 2025) and (2) an increase of $3.8 million in prepaid and other current assets (compared to an increase of $3.5 million in the first quarter of 2025).

Cash Flows From Investing Activities. Cash used in investing activities was $5.8 million in the first quarter of 2026 compared to $2.1 million in the first quarter of 2025. Cash used in the first quarter of 2026 and 2025 consisted of purchases of property and equipment.

Cash Flows From Financing Activities. Cash used in financing activities was $0.0 million in the first quarter of 2026 compared to $6.4 million in the first quarter of 2025. Cash used in first quarter of 2025 included $6.3 million for share repurchases and $0.1 million to settle withholding taxes on the vesting of restricted stock.

Cash Requirements and Commitments

Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our infrastructure; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs. We may also use cash to fund any share repurchases, make any required debt payments and satisfy other contractual obligations. Historically, we have met these cash requirements using cash flow from operations and short-term trade credit. As of May 2, 2026, our contractual commitments for operating leases totaled $226.5 million (with $64.3 million due within 12 months). See Note 10 to the Financial Statements for more information regarding lease commitments.

Critical Accounting Policies

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

There have been no material changes to the Critical Accounting Policies outlined in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.

​

​