Citi Trends, Inc. (NASDAQ:CTRN) Q1 2022 Earnings Conference Call May 24, 2022 9:00 AM ET Company Participants Nitza McKee - Senior Associate-ICR, LLC David Makuen - Chief Executive Officer Jason Moschner - Vice President, Finance and Principal Financial/Accounting Officer Conference Call Participants Dana Telsey - Telsey Advisory Group Jeremy Hamblin - Craig-Hallum Capital Group Chuck Grom - Gordon Haskett John Lawrence - Benchmark Operator Greetings, and welcome to the Citi Trends 1Q 2022 Earnings Conferen ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 29, 2022 Or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 000-51315 CITI TRENDS, INC. (Exact name of registrant as specified in its charter) Delaware 52-2150697 (State or other jurisdictio ...

Financial Data and Key Metrics Changes - For fiscal 2021, total sales reached $991.6 million, a 26.8% increase compared to fiscal 2019, with comparable sales up 22% [27] - Gross margin improved to 41.1%, an increase of 310 basis points over fiscal 2019 [27] - Operating income was $79.5 million, compared to $18.5 million in 2019, with operating margin expanding to 8% from 2.4% [27] - Earnings per diluted share increased by 390% to $6.91 compared to $1.41 in 2019 [27] - In Q4 2021, total sales were $241 million, growing by 14.2% compared to Q4 2019 [24] Business Line Data and Key Metrics Changes - The company opened 27 new stores and remodeled 25 during the year, launching the new CTx store format [7] - Comparable store sales increased by 14.8% during the holiday season compared to 2019 [24] - Average basket size increased due to higher unit retail selling prices and more units per transaction [25] Market Data and Key Metrics Changes - The company experienced a decline in traffic in January due to the Omicron variant but saw recovery in February and early March [10] - The company noted that 70% of its stores serve as primary neighborhood destinations for apparel and home needs [13] Company Strategy and Development Direction - The company aims to grow from 600 to 1,000 stores, with at least 150 remodels planned over the next three years [14] - Focus areas include expanding the customer base, optimizing product mix, reinvesting in infrastructure, and making a difference in communities [11] - The company plans to monetize its owned distribution centers to improve liquidity and support share repurchases [16][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation and uncertainties regarding consumer demand, particularly in Q1 2022 [20][32] - The company expects a total sales decrease of 25% to 30% in Q1 2022 compared to the previous year, with a projected EPS of $0.15 to $0.40 [33] - Management remains confident in the underlying health of the business and the effectiveness of transformation initiatives [34] Other Important Information - The company repurchased approximately 95,000 shares at a cost of $8.1 million in Q4, totaling close to 1.4 million shares for the year at a cost of $115 million [29] - Pam Edwards, the CFO, announced her retirement effective April 1, 2022 [36] Q&A Session Summary Question: Can you clarify the Q1 guidance regarding same-store sales and share count? - Management indicated a total sales decrease of 25% to 30% for Q1, equating to a 28% to 33% range for comparable store sales [40] Question: How do you expect gross margins to trend in Q1? - Management expects gross margins in the high-30s for Q1, with improvements anticipated in subsequent quarters [48] Question: How are you managing inventories in light of inflation? - Management expressed confidence in inventory management, aiming to maintain lower markdowns compared to previous years [44][45] Question: What is the expected cadence for store openings this year? - The company plans to open approximately 35 new stores, with a focus on remodeling existing locations [50] Question: How do you view the impact of stimulus on sales moving forward? - Management noted that the impact of stimulus will decrease significantly in Q2 through Q4, with new initiatives expected to drive sales [56] Question: What are the expectations for EBITDA recovery? - Management anticipates returning to double-digit EBITDA by 2024 as underlying conditions improve [70] Question: How will proceeds from the sale-leaseback transactions be utilized? - The board is actively considering share repurchases as part of the capital allocation strategy [71]

PART I FINANCIAL INFORMATION [Item 1 Financial Statements (unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(unaudited)) The unaudited consolidated financial statements highlight a significant increase in net income and a substantial decrease in cash due to stock repurchases [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$467.6 million** due to reduced cash, while liabilities increased and equity declined from **$163.6 million** to **$109.3 million** due to stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 30, 2021 | Jan 30, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $12,023 | $123,177 | | Inventory | $126,899 | $103,845 | | Total current assets | $193,776 | $244,442 | | Total assets | $467,569 | $494,593 | | **Liabilities & Equity** | | | | Total current liabilities | $192,916 | $182,845 | | Total liabilities | $358,309 | $330,959 | | Total stockholders' equity | $109,260 | $163,634 | | Total liabilities and stockholders' equity | $467,569 | $494,593 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2021 net sales increased **14.5%** to **$228.0 million**, with year-to-date net sales growing **41.3%** to **$750.6 million** and net income surging to **$52.4 million** Thirteen Weeks Ended Performance (in thousands, except per share data) | Metric | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net sales | $227,959 | $199,100 | | Income from operations | $11,577 | $9,340 | | Net income | $9,014 | $6,965 | | Diluted net income per common share | $1.03 | $0.67 | Thirty-Nine Weeks Ended Performance (in thousands, except per share data) | Metric | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net sales | $750,621 | $531,375 | | Income from operations | $66,940 | $8,234 | | Net income | $52,401 | $5,940 | | Diluted net income per common share | $5.71 | $0.57 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased to **$54.9 million**, while investing activities used **$56.1 million** and financing activities used **$109.9 million**, primarily for stock repurchases Cash Flow Summary for Thirty-Nine Weeks Ended (in thousands) | Activity | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,853 | $63,043 | | Net cash (used in) provided by investing activities | $(56,078) | $31,349 | | Net cash used in financing activities | $(109,929) | $(17,553) | | **Net (decrease) increase in cash** | **$(111,154)** | **$76,839** | | Cash and cash equivalents, end of period | $12,023 | $96,762 | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, COVID-19 impact, revenue disaggregation by category, significant stock repurchases, and an undrawn **$75 million** revolving credit facility - The company is a specialty value retailer with **600 stores** in **33 states** as of October 30, 2021, primarily serving African American and Latinx families[20](index=20&type=chunk) - The company has actively repurchased its stock, spending **$85.3 million** under its programs and an additional **$21.9 million** in a block repurchase during the first thirty-nine weeks of 2021. A new **$30 million** repurchase program was authorized on November 30, 2021[43](index=43&type=chunk)[44](index=44&type=chunk) Revenue Disaggregation by Merchandise Category (% of Net Sales) | Category | Thirteen Weeks Ended Oct 30, 2021 | Thirty-Nine Weeks Ended Oct 30, 2021 | | :--- | :---: | :---: | | Kids | 26% | 22% | | Women | 25% | 27% | | Men | 17% | 18% | | Beauty & Accessories | 17% | 17% | | Home & Lifestyle | 8% | 8% | | Footwear | 7% | 8% | - The company amended its revolving credit facility in April 2021, increasing the commitment to **$75 million** with a maturity date of April 15, 2026. There were no borrowings under the facility as of October 30, 2021[36](index=36&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant sales growth driven by comparable store sales and pandemic recovery, gross margin impacts, and strong liquidity despite substantial stock repurchases [Results of Operations](index=14&type=section&id=Results%20of%20Operations) Q3 2021 net sales increased **14.5%** to **$228.0 million** driven by comparable store sales, while year-to-date net sales grew **41.3%** to **$750.6 million** due to pandemic recovery - Q3 2021 net sales increased **14.5%** to **$228.0 million**, driven by a **13.1%** increase in comparable store sales[67](index=67&type=chunk) - The **13.1%** increase in Q3 comparable store sales was due to a **12%** increase in average basket size and a **1%** increase in customer transactions[68](index=68&type=chunk) - For the first thirty-nine weeks of 2021, net sales increased **41.3%** to **$750.6 million**, primarily due to the temporary closure of all stores in the first half of 2020[74](index=74&type=chunk) - Cost of sales as a percentage of sales for Q3 2021 increased to **59.7%** from **58.2%** YoY, mainly due to a **110 basis point** increase in freight costs[69](index=69&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by **$12.0 million** cash, **$35.5 million** investments, and an undrawn **$75 million** credit facility, despite significant cash usage for stock repurchases - Principal sources of liquidity include **$12.0 million** in cash, **$35.5 million** in short-term investments, and an undrawn **$75 million** revolving credit facility as of October 30, 2021[80](index=80&type=chunk) - Cash used in financing activities was **$109.9 million** in the first thirty-nine weeks of 2021, primarily consisting of **$107.2 million** for common stock repurchases[85](index=85&type=chunk)[86](index=86&type=chunk) - Cash used in investing activities was **$56.1 million**, consisting of **$35.5 million** for purchases of short-term investment securities and **$20.8 million** for capital expenditures[84](index=84&type=chunk) - Management believes that existing sources of liquidity will be sufficient to fund operations for at least the next 12 months[87](index=87&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk have occurred during the thirty-nine weeks ended October 30, 2021, compared to prior disclosures - There have been no material changes in market risk during the thirty-nine weeks ended October 30, 2021[91](index=91&type=chunk) [Item 4. Controls and Procedures](index=17&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of October 30, 2021, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures are effective as of October 30, 2021[92](index=92&type=chunk) - No material changes to internal control over financial reporting occurred during the fiscal quarter[94](index=94&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=18&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but expects no material adverse effect on its financial condition or operations - The company is not aware of any pending or threatened legal proceedings that are expected to have a material adverse effect on its financial condition, operations, or liquidity[96](index=96&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have been made to the Risk Factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021[97](index=97&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=18&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **521,086** shares in Q3 2021 and authorized a new **$30 million** stock repurchase program on November 30, 2021 Share Repurchases in Q3 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | August 2021 | 67,233 | $77.59 | | September 2021 | 361,706 | $84.94 | | October 2021 | 92,147 | $74.77 | | **Total** | **521,086** | - | - On November 30, 2021, the board of directors approved a new stock repurchase program authorizing up to **$30 million** in share repurchases[99](index=99&type=chunk) [Item 6. Exhibits](index=19&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act[110](index=110&type=chunk)

Financial Data and Key Metrics Changes - Total sales for Q3 2021 reached $228 million, an increase of 14.5% compared to Q3 2020 and 24.5% compared to Q3 2019 [8][19] - Comparable store sales grew by 13.1% versus Q3 2020, building on a positive 6.3% from the previous year [8][19] - Gross margin improved to 40.3%, up 290 basis points from 37.4% in Q3 2019, driven by strong full-price selling and fewer markdowns [19][20] - Operating income increased to $11.6 million, a rise of $2.2 million compared to Q3 2020 and $13.2 million compared to Q3 2019 [20] - Net income was $9 million, compared to $7 million in Q3 2020 and an operating loss of $1.1 million in Q3 2019 [20] Business Line Data and Key Metrics Changes - Strong double-digit growth was observed across five of the six categories, including women's, men's, kids, beauty and accessories, and home and lifestyle [10] - Footwear was noted as lagging slightly due to supply chain disruptions, but momentum is improving as issues abate [32] Market Data and Key Metrics Changes - The company opened 11 new stores during the quarter, bringing the total store count to 600, with plans to end the year with approximately 611 stores [9] - Inventory at the end of the quarter increased by 10.9% compared to Q3 2020 but decreased by 6.3% compared to Q3 2019, reflecting improved inventory management [21] Company Strategy and Development Direction - The company is focused on four strategic priorities: growing the store fleet, optimizing product mix, reinvesting in the business, and making a difference in communities served [25][26] - Plans to open approximately 40 new stores and remodel 40 existing stores in fiscal 2022, reflecting the elevated CTX store upgrade [26] - The company aims for total sales growth of low to mid-single digits and at least low double-digit EPS growth in fiscal 2022 [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and highlighted strong inventory positioning for the holiday season [17][18] - The company raised its full-year 2021 sales outlook to a range of $1 billion to $1.15 billion and EPS guidance to $6.95 to $7.10, reflecting nearly 400% growth at the EPS midpoint compared to fiscal 2019 [23] Other Important Information - The company repurchased approximately 521,000 shares at a cost of $42.8 million in Q3, with a total of 1,273,000 shares repurchased for $107.2 million in the first nine months of the year [22] - Two new independent directors were appointed to the Board, enhancing the company's commitment to diversity, equity, and inclusion [27] Q&A Session Summary Question: Insights on Q4 performance and category performance - Management indicated strong performance across most categories, with footwear lagging due to supply chain issues but showing improvement [32] Question: Staffing trends and wage increases - The company is addressing staffing challenges on a store-by-store basis, including wage adjustments where necessary, but reported little to no issues with labor during recent weekends [34] Question: Confidence in FY'22 growth - Management expressed confidence in achieving low to mid-single digit sales growth and low double-digit EPS growth in FY'22, driven by strong underlying business performance and the impact of CTX store upgrades [36][60] Question: CTX store performance and CapEx implications - CTX stores are showing improved conversion rates, and while CapEx for new and remodeled stores is slightly higher, the sales increases associated with these changes are expected to offset costs [41][42] Question: Customer health and regional performance - Management noted resilience in customer spending despite changes in unemployment benefits, with a positive outlook for consumer liquidity into 2022 [52] Question: Consistency in November sales performance - November sales were consistent, supported by improved inventory levels and early holiday product placements [55]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-51315 CITI TRENDS, INC. (Exact name of registrant as specified in its charter) Delaware 52-2150697 (State or other jurisdiction of (I.R.S. Employer incorporation o ...

Citi Trends, Inc. (NASDAQ:CTRN) Q2 2021 Earnings Conference Call August 24, 2021 9:00 AM ET Company Participants David Makuen - CEO Pamela Edwards - EVP, CFO Jason Moschner - VP of Finance Nitza McKee - IR, ICR Conference Call Participants Chuck Grom - Gordon Haskett Dana Telsey - Telsey Advisory Group Jeremy Hamblin - Craig-Hallum John Lawrence - The Benchmark Company Operator Greetings, And Welcome To The Citi Trends 2Q 2021 Earnings Conference Call. During the presentation, all participants will be in a ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-51315 CITI TRENDS, INC. (Exact name of registrant as specified in its charter) Delaware 52-2150697 (State or other jurisdiction of (I.R.S. Employer ...

Financial Data and Key Metrics Changes - Total sales increased by 146% compared to Q1 2020 and by 39% compared to Q1 2019, reaching $285 million [8][33] - Comparable store sales rose by 142% versus 2020 and by 35% compared to 2019, marking the seventh consecutive quarter of positive growth [8] - Earnings per share (EPS) was $3.23, a significant increase from a loss of $2 per share in Q1 2020 and from $0.65 in Q1 2019, representing a 397% increase [36] - Gross margin improved to 42.6%, up 1,530 basis points from 27.3% in Q1 2020 and 510 basis points from 2019 [34] Business Line Data and Key Metrics Changes - Strong performance was noted across all six categories: women's, men's, kids, accessories, home and lifestyle, and footwear, with particular strength in women's and men's apparel [9][19] - The home and lifestyle category experienced outsized growth, contributing to overall sales increases [19] Market Data and Key Metrics Changes - The federal government stimulus payments contributed to sales momentum, particularly in March and April [8] - Sales were strongest in March and April, benefiting from earlier Easter and gradual tax refund distributions [33] Company Strategy and Development Direction - The company plans to open at least 30 new stores and remodel approximately 20 stores this year, with a long-term goal of reaching 1,000 locations [13][42] - Strategic initiatives include optimizing product mix, reinvesting in infrastructure, and enhancing community engagement [12][27] - The launch of lab stores aims to test and enhance the customer experience, with plans to roll out the new Citi Trends Experience (CTX) in 2022 [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving full-year sales in the range of $970 million to $990 million, raising EPS guidance to $4.55 to $4.75 [39] - The company is confident in its growth strategies and expects to exceed $1 billion in sales sooner than originally anticipated [42] - Management acknowledged challenges such as freight and labor costs but remains focused on maintaining strong margins and operational efficiency [50][25] Other Important Information - The company repurchased approximately 537,500 shares at a cost of about $45.5 million during the quarter [37] - Nearly 80% of employees are African-American or Latinx, and 83% are female, highlighting the company's commitment to diversity and inclusion [28] Q&A Session Summary Question: Thoughts on share repurchase program and store growth acceleration - Management indicated a broader definition of capital allocation, focusing on accelerating store growth and infrastructure investments [46][48] Question: Impact of freight and labor shortages on margins - Freight was not significantly impactful in Q1, but expected to deleverage margins by 170 to 190 basis points for the rest of the year [50] Question: Reasons for business acceleration compared to 2019 - Factors included improved product assortment, increased brand awareness, and returning customers [60] Question: Expectations for sales cadence throughout the year - Q2 is expected to moderate from Q1, with Q3 having more upside potential compared to Q4 [62] Question: Current distribution center capacity and growth plans - Current capacity is sufficient for 2-3 years, with plans for infrastructure improvements to support accelerated growth [65] Question: Impact of stimulus on Q1 performance and regional performance - Stimulus had a meaningful impact, but improved product assortment and customer capture are seen as more critical for future growth [71] Question: Inventory management and back-to-school planning - The company aims to maintain reasonable inventory levels while ensuring fresh trends to meet customer demand [77]

Part I [Business](index=4&type=section&id=Item%201.%20Business) Citi Trends is a specialty value retailer operating 585 stores in 33 states, targeting African American and Latinx families with trend-right merchandise at low prices - The company operates **585 stores** in 33 states as of January 30, 2021, and believes it has the potential to grow its store base to **1,000 stores** over time[8](index=8&type=chunk)[17](index=17&type=chunk) - The company's target customers are primarily African American and Latinx families with an average annual household income of approximately **$40,000**[8](index=8&type=chunk)[11](index=11&type=chunk) Percentage of Net Sales by Merchandise Category (Citi) | Citis | Fiscal Year 2020 | Fiscal Year 2019 | Fiscal Year 2018 | | :--- | :--- | :--- | :--- | | Ladies | 26% | 26% | 27% | | Kids | 23% | 23% | 24% | | Mens | 18% | 16% | 17% | | Accessories & Beauty | 16% | 17% | 15% | | Home & Lifestyle | 9% | 7% | 7% | | Footwear | 8% | 11% | 10% | - The company's growth strategy focuses on four key areas: growing the store fleet, optimizing the product mix, investing in infrastructure for buying, moving, and selling goods, and making a difference in the communities it serves[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - As of January 31, 2021, approximately **80%** of the company's associates identify as African American or Latinx, and **83%** of employees are female[14](index=14&type=chunk)[35](index=35&type=chunk)[50](index=50&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, fashion trend shifts, intense competition, economic downturns, and supply chain disruptions - The COVID-19 pandemic poses a significant risk, with potential impacts on store operations, consumer spending, and the global economy. The full extent of the impact remains uncertain[58](index=58&type=chunk)[59](index=59&type=chunk) - The company's success is highly dependent on its ability to anticipate and respond to rapidly changing fashion trends. Failure to do so could lead to lower demand, excess inventory, and higher markdowns[60](index=60&type=chunk) - The company does not sell products online, which could adversely affect sales as the retail industry experiences a continued shift towards e-commerce[66](index=66&type=chunk) - A significant portion of merchandise is imported, exposing the company to risks from trade restrictions, tariffs (especially with China), and political or labor instability in manufacturing countries[84](index=84&type=chunk)[85](index=85&type=chunk) - The business is seasonal, with sales and earnings significantly higher in the first and fourth quarters. Adverse events during these periods have a disproportionately large effect on financial results[67](index=67&type=chunk)[68](index=68&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - None[115](index=115&type=chunk) [Properties](index=24&type=section&id=Item%202.%20Properties) As of January 30, 2021, the company operated 585 leased stores and owns its corporate headquarters and two distribution centers - The company operated **585 stores** in 33 states as of January 30, 2021. The states with the highest number of stores are Georgia (**64**), Texas (**57**), and Florida (**52**)[117](index=117&type=chunk)[118](index=118&type=chunk) - The company owns its **70,000 sq. ft.** headquarters in Savannah, GA, a **550,000 sq. ft.** distribution center in Darlington, SC, and a **565,000 sq. ft.** distribution center in Roland, OK[120](index=120&type=chunk) [Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to its business but is not aware of any pending or threatened litigation expected to have a material adverse effect on its financial condition, results of operations, or liquidity - The company is not aware of any legal proceedings that are expected to have a material adverse effect on its financial condition or operations[121](index=121&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[122](index=122&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ, suspended dividends due to COVID-19, and initiated two **$30.0 million** stock repurchase programs - The company suspended future cash dividends on April 28, 2020, to preserve financial flexibility amid the COVID-19 pandemic[126](index=126&type=chunk) - The Board of Directors approved two **$30.0 million** stock repurchase programs in March and December 2020. Repurchases were temporarily suspended but reinstated in September 2020[127](index=127&type=chunk)[128](index=128&type=chunk) Share Repurchases in Q4 Fiscal 2020 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | November (11/1/20 - 11/28/20) | 169,120 | 30.32 | | December (11/29/20 - 1/2/21) | 103,882 | 44.21 | | January (1/3/21 - 1/30/21) | 121,902 | 57.41 | | **Total** | **394,904** | N/A | [Selected Financial Data](index=27&type=section&id=Item%206.%20Selected%20Financial%20Data) The company has omitted the selected financial data previously required by Item 301 of Regulation S-K, in reliance on SEC Release No. 33-10890 - Selected financial data has been omitted in reliance on a recent SEC rule change[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2020 saw **net sales increase 0.2% to $783.3 million** and **net income rise to $24.0 million**, driven by improved gross margin and strong liquidity with **$123.2 million cash** Fiscal Year 2020 vs. 2019 Operating Results (in millions) | Metric | Fiscal Year 2020 | Fiscal Year 2019 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $783.3 | $781.9 | +0.2% | | Gross Profit* | $311.7 | $297.2 | +4.9% | | Income from Operations | $31.9 | $18.5 | +72.2% | | Net Income | $24.0 | $16.5 | +45.3% | | Comparable Store Sales | (2.1)% | (0.1)% | -2.0 p.p. | *Gross Profit calculated as Net Sales - Cost of Sales. - Despite stores being closed for approximately **16%** of total available days due to the pandemic, net sales increased **0.2%** for fiscal 2020. Strong performance after reopening, particularly a **16.7%** increase in comparable store sales in Q4, drove results[146](index=146&type=chunk) - Cost of sales as a percentage of net sales decreased by **180 basis points**, from **62.0%** in 2019 to **60.2%** in 2020, due to a **140 basis point** improvement in core merchandise margin and a **40 basis point** improvement in shrinkage[146](index=146&type=chunk) - The company ended fiscal 2020 with **$123.2 million** in cash and cash equivalents and no borrowings on its revolving credit facility, demonstrating strong liquidity[151](index=151&type=chunk)[153](index=153&type=chunk) Cash Flow Summary (in millions) | Cash Flow Activity | Fiscal Year 2020 | Fiscal Year 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $110.9 | $42.6 | | Net cash provided by (used in) investing activities | $26.7 | $(7.6) | | Net cash used in financing activities | $(34.3) | $(32.9) | [Quantitative and Qualitative Disclosure About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company's market risk exposure is primarily to interest rate changes on investments, with no direct foreign currency risk as all products are sourced in U.S. Dollars - The company's primary market risk exposure is to interest rate changes on its investments, which is not considered material[173](index=173&type=chunk) - All products are sourced in U.S. Dollars, so there is no direct foreign currency exchange rate risk. However, currency fluctuations can indirectly impact purchasing power with vendors[174](index=174&type=chunk) [Financial Statements and Supplementary Data](index=37&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2019-2021, including balance sheets, income statements, cash flows, and equity statements [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=37&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[176](index=176&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of January 30, 2021, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year[177](index=177&type=chunk) - No material changes were made to the internal control over financial reporting during the fourth quarter of 2020[178](index=178&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=38&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item, including details on directors, executive officers, and corporate governance, is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's definitive proxy statement[181](index=181&type=chunk) [Executive Compensation](index=38&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item, concerning executive compensation, is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's definitive proxy statement[182](index=182&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=38&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item, regarding security ownership and equity compensation plans, is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's definitive proxy statement[183](index=183&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=38&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item, covering related party transactions and director independence, is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's definitive proxy statement[184](index=184&type=chunk) [Principal Accounting Fees and Services](index=38&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item, detailing fees paid to the principal accountant, is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's definitive proxy statement[185](index=185&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=39&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed with the Form 10-K, including financial statements, schedules, and corporate governance documents - This section provides an index of all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications[188](index=188&type=chunk)[189](index=189&type=chunk) [Form 10-K Summary](index=42&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is noted as "None," indicating no summary is provided in this section of the report - None[207](index=207&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=46&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting, noting lease accounting as a critical audit matter - KPMG LLP provided an unqualified (clean) opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting[219](index=219&type=chunk)[229](index=229&type=chunk) - A critical audit matter was identified related to the accounting for operating lease renewals and modifications, which increased in volume and complexity during fiscal 2020[222](index=222&type=chunk)[224](index=224&type=chunk) - The report notes the company changed its method of accounting for leases as of February 3, 2019, due to the adoption of the new lease accounting standard (Topic 842)[220](index=220&type=chunk) [Consolidated Financial Statements](index=50&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show **total assets of $494.6 million**, **net sales of $783.3 million**, and **net income of $24.0 million** for fiscal 2020 Consolidated Balance Sheet (in millions) | | Jan 30, 2021 | Feb 1, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $244.4 | $201.2 | | **Total Assets** | **$494.6** | **$459.1** | | **Total Current Liabilities** | $182.8 | $150.9 | | **Total Liabilities** | $331.0 | $288.1 | | **Total Stockholders' Equity** | **$163.6** | **$171.0** | Consolidated Statement of Operations (in millions, except EPS) | | Fiscal Year 2020 | Fiscal Year 2019 | Fiscal Year 2018 | | :--- | :--- | :--- | :--- | | Net Sales | $783.3 | $781.9 | $769.6 | | Income from Operations | $31.9 | $18.5 | $25.1 | | **Net Income** | **$24.0** | **$16.5** | **$21.4** | | **Diluted EPS** | **$2.32** | **$1.41** | **$1.64** | Consolidated Statement of Cash Flows (in millions) | | Fiscal Year 2020 | Fiscal Year 2019 | Fiscal Year 2018 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $110.9 | $42.6 | $30.4 | | Net Cash from Investing Activities | $26.7 | $(7.6) | $(15.3) | | Net Cash from Financing Activities | $(34.3) | $(32.9) | $(45.7) | | **Net Change in Cash** | **$103.3** | **$2.1** | **$(30.6)** | | **Cash at End of Year** | **$123.2** | **$19.9** | **$17.9** | [Notes to Consolidated Financial Statements](index=54&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including revenue recognition and lease accounting, with total lease cost of **$60.1 million** in fiscal 2020 and **$209.7 million** in future minimum lease payments - The company adopted the new lease accounting standard (ASU 2016-02) on February 3, 2019, resulting in the initial recognition of operating lease right-of-use assets of **$133.6 million** and lease liabilities of **$141.0 million**[278](index=278&type=chunk) Total Lease Cost (in millions) | Component | Fiscal 2020 | Fiscal 2019 | | :--- | :--- | :--- | | Operating lease cost | $50.4 | $51.2 | | Variable lease cost | $8.2 | $5.8 | | Short term lease cost | $1.5 | $1.1 | | **Total lease cost** | **$60.1** | **$58.1** | - In response to COVID-19, the company negotiated rent concessions, recognizing rent abatement credits of approximately **$1.0 million** in fiscal 2020[303](index=303&type=chunk) - The company repurchased common stock at an aggregate cost of **$32.9 million** in fiscal 2020 and **$28.4 million** in fiscal 2019[157](index=157&type=chunk)