Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.26.1
Income Taxes
 12 Months Ended
Feb. 01, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is subject to federal, state and local corporate income taxes. The components of the provision for income taxes reflected on the statements of operations for fiscal 2026, 2025, and 2024 are set forth below (in thousands):
2026 2025 2024
Current taxes:
U.S. federal $ (212) $ 6,767  $ 6,898 
State and local 922  2,600  3,190 
Total current tax expense $ 710  $ 9,367  $ 10,088 
Deferred taxes:
U.S. federal $ 2,106  $ (3,498) $ (1,238)
State and local (216) (976) (888)
Total deferred tax (benefit) expense 1,890  (4,474) (2,126)
Total income tax expense $ 2,600  $ 4,893  $ 7,962 
A reconciliation of income taxes at the federal statutory corporate rate to the effective rate for fiscal 2026, 2025, and 2024 after the adoption of ASU 2023-09 is as follows (dollar amounts in thousands):
2026 2025 2024
U.S. Federal tax at statutory rate $ 1,399  21.0  % $ 3,454  21.0  % $ 6,683  21.0  %
State and local income taxes, net of federal effect(1)
512  7.7  % 1,078  6.6  % 1,632  5.1  %
Tax Credits:
R&D Tax Credit (233) (3.5) % (353) (2.2) % (1,131) (3.6) %
Non-taxable or non-deductible items:
Section 162(m) Limit on Compensation 262  3.9  % —  —  % 149  0.5  %
Share-based compensation 577  8.7  % 442  2.7  % 81  0.3  %
Penalties 10  0.1  % 316  1.9  % 8  —  %
Meals and Entertainment 21  0.3  % 30  0.2  % 24  0.1  %
Changes in unrecognized tax benefits 75  1.1  % (38) (0.2) % 452  1.4  %
Other (23) (0.3) % (36) (0.2) % 64  0.2  %
Total income tax expense $ 2,600  39.0  % $ 4,893  29.7  % $ 7,962  25.0  %
(1) The following states make up the majority of the tax effect in this category: Fiscal 2026—California, Florida, Maryland, Virginia, Illinois, Pennsylvania, New Jersey, and New York; Fiscal 2025—California, New Jersey, Pennsylvania, Illinois, Florida, New York, and Maryland; Fiscal 2024—California, New Jersey, Illinois, Pennsylvania, Florida, Maryland, and New York.
The following table presents income taxes paid, net of refunds received, disaggregated by jurisdiction (in thousands):
Jurisdiction 2026 2025 2024
U.S. Federal $ 7,343  $ 6,000  $ 1,108 
States 2,630  2,447  702 
Total $ 9,973  $ 8,447  $ 1,810 
Significant components of the Company's deferred tax assets are as follows (in thousands):
February 1, 2026 February 2, 2025
Deferred Income Tax Assets
Federal net operating loss carryforward $ 2,252  $ — 
State net operating loss carryforward 334  286 
Research and development credit carryforward 181  — 
Intangible assets 433  467 
Accrued liabilities 3,457  4,043 
Equity-based compensation 2,863  3,122 
Merchandise inventories 5,621  4,534 
Charitable contributions 13  — 
Research and development capitalization 2,091  4,183 
Operating lease liabilities 49,573  46,994 
Total Deferred Income Tax Assets 66,818  63,629 
Deferred Income Tax Liabilities
Operating lease right of use asset (42,057) (40,505)
Property and equipment (11,374) (7,847)
Total Deferred Tax Liabilities (53,431) (48,352)
Net Deferred Income Tax Asset $ 13,387  $ 15,277 
At February 1, 2026, the Company had $10.7 million of net operating loss carryforwards available for federal income tax purposes. At February 2, 2025, the Company did not have any net operating loss carryforwards available for federal income tax purposes. The Company has approximately $6.4 million and $4.8 million of state net operating loss carryforwards as of February 1, 2026 and February 2, 2025, respectively. The state net operating losses expire at various times between 2032 and 2040. The statute of limitations has expired for all tax years prior to 2022 for federal and state tax purposes. However, the net operating losses generated on the Company's federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.
As of February 1, 2026 and February 2, 2025, the Company did not record a valuation allowance against its net deferred tax assets, due to its assessment and conclusion that it is more likely than not that it would realize its net deferred tax assets.

A reconciliation of beginning and ending amounts of unrecognized tax benefits for fiscal 2026, 2025, and 2024 is as follows:
2026 2025 2024
Gross unrecognized tax benefit, beginning of period $ 375  $ 452  $ — 
Additions based on tax positions related to the current year 45  65  177 
Additions related to tax positions in prior year 1  —  275 
Settlements related to tax positions in a prior period —  —  — 
Decreases based on tax positions in a prior period —  (142) — 
Gross unrecognized tax benefit, end of period $ 421  $ 375  $ 452 

The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold. As of February 1, 2026 and February 2, 2025, the Company had unrecognized tax benefits of $0.4 million at each reporting date. The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months; however, the ultimate outcome of tax matters is uncertain and unforeseen results can occur. We had no material interest or penalties during fiscal 2026, 2025, and 2024. To the extent these unrecognized tax benefits are ultimately recognized, approximately $0.4 million will impact the Company’s effective tax rate. Our policy is to record interest and penalties directly related to uncertain tax positions as income tax expense in the statements of operations.

The Internal Revenue Service (IRS) has concluded the audit of the Company's fiscal 2019 federal income tax return as of February 4, 2024. During fiscal 2025, the Company filed amended federal and state income tax returns for fiscal 2022 and 2023 as a result of the IRS audit settlement. The amended returns did not have a material impact to the financial statements.

For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. For fiscal 2025 and 2024, due to the capitalization of research and development expenditures, the Company’s current federal taxable income increased by approximately $7.5 million and $9.0 million, respectively, with a corresponding increase in the Company’s deferred tax assets.

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA includes various changes to U.S. federal income tax law, including extensions of several expiring provisions from the Tax Cuts and Jobs Act of 2017. The OBBBA has multiple effective dates, with certain provisions effective in 2025. The OBBBA did not have a material impact on the Company’s effective tax rate for year ended February 1, 2026. The Company will continue to evaluate the impact of the new legislation on its consolidated financial statements as additional guidance is issued.