Income Taxes

12 Months Ended

Feb. 03, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

A summary of the components of the provision for income taxes is as follows (in thousands):

	Fiscal Year Ended
	February 3, 2024 (53-weeks)		January 28, 2023 (52-weeks)		January 29, 2022 (52-weeks)
Federal:
Current	$	21,780	$	26,256	$	37,013
Deferred	2,644		5,888		7,142
	24,424		32,144		44,155
State:
Current	4,066		6,326		9,128
Deferred	1		437		296
	4,067		6,763		9,424
Provision for income taxes	$	28,491	$	38,907	$	53,579

A reconciliation of the statutory federal income tax rate to the effective tax rate as a percentage of income before provision for income taxes is as follows:

	Fiscal Year Ended
	February 3, 2024 (53-weeks)		January 28, 2023 (52-weeks)		January 29, 2022 (52-weeks)
Tax provision computed at the federal statutory rate	21.00	%	21.00	%	21.00	%
Effect of state income taxes, net of federal benefits	2.89		3.33		3.50
Excess tax benefits from stock-based compensation	(1.21)		(0.77)		(0.97)
Other, net	(1.07)		(0.26)		(0.02)
	21.61	%	23.30	%	23.51	%

Deferred income taxes on the consolidated balance sheets result from temporary differences between the amount of assets and liabilities recognized for financial reporting and income tax purposes. The components of the deferred income taxes, net, are as follows (in thousands):

	February 3, 2024 (53-weeks)		January 28, 2023 (52-weeks)
Rent	$	83,966	$	75,044
Inventories	3,065		3,581
Accruals	4,302		5,676
Stock-based compensation	2,804		2,595
Other	290		136
Total deferred tax assets	94,427		87,032
Rent	(80,352)		(70,418)
Accumulated depreciation and amortization	(13,052)		(13,067)
Prepaid expenses	(2,797)		(2,680)
Other	(9)		(5)
Total deferred tax liabilities	(96,210)		(86,170)
Deferred income taxes, net	$	(1,783)	$	862

Deferred tax assets represent items that will be used as a tax deduction or credit in future tax returns or are items of income that have not been recognized for financial statement purposes but were included in the current or prior tax returns for which we have already properly recorded the tax benefit in the consolidated statements of operations. At least quarterly, we assess the likelihood that the deferred tax assets balance will be recovered. We take into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of a realization of a deferred tax asset. To the extent recovery is not more likely than not, a valuation allowance is established against the deferred tax asset, increasing our income tax expense in the year such determination is made. We have determined that no such allowance is required in any period presented.

We apply the provisions of ASC Subtopic 740-10 in accounting for uncertainty in income taxes. In accordance with ASC Subtopic 740-10, we recognize a tax benefit associated with an uncertain tax position when, in our judgment based on technical merits, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.

We file income tax returns in the U.S. federal and various state jurisdictions. A number of years may elapse before a particular matter for which we have recorded a liability related to an unrecognized tax benefit is audited and finally resolved. Generally, we are not subject to changes in income taxes by the U.S. federal taxing jurisdiction for years prior to Fiscal 2021 or by most state taxing jurisdictions for years prior to Fiscal 2020. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe our liability for unrecognized tax benefits is adequate. Favorable settlement of an unrecognized tax benefit could be recognized as a reduction in our effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized tax benefit could increase the effective tax rate and may require the use of cash in the period of resolution. Our liability for unrecognized tax benefits is generally presented as non-current. However, if we anticipate paying cash within one year to settle an uncertain tax position, the liability is presented as current.

A reconciliation of the unrecognized tax benefit, excluding estimated interest and penalties, under ASC Subtopic 740-10 follows

(in thousands):

	February 3, 2024 (53-weeks)		January 28, 2023 (52-weeks)
Unrecognized tax benefits - beginning of year	$	372	$	455
Gross increases - tax positions in prior period	281		76
Gross decreases - tax positions in prior period	(23)		(48)
Lapse of statute of limitations	(114)		(111)
Unrecognized tax benefits - end of year	$	516	$	372

We classify interest and penalties recognized on unrecognized tax benefits as income tax expense. We have accrued interest and penalties in the amount of $0.1 million, $0.1 million and $0.1 million as of February 3, 2024, January 28, 2023 and January 29, 2022, respectively. During Fiscal 2024, Fiscal 2023 and Fiscal 2022, we recorded an expense of $4,000, and a benefit of $15,000 and $18,000, respectively, for the accrual of interest and penalties in the consolidated statement of operations.

Of the unrecognized tax benefits as of February 3, 2024 and January 28, 2023, $0.4 million and $0.3 million, respectively, if recognized, would affect our effective income tax rate.