XML 31 R20.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2021

Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2020 Annual Report”) for the fiscal year ended January 30, 2021 (“Fiscal Year 2020”) in preparing these unaudited interim condensed consolidated financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of January 30, 2021 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended July 31, 2021 are not necessarily indicative of future results or results to be expected for the full year ending January 29, 2022 (“Fiscal Year 2021”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2020 Annual Report.

Prior year shares and per share amounts on the condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of shareholders’ equity have been restated to reflect the reverse stock split on November 9, 2020.

Going Concern

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern,” we are required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the financial statements. As discussed in our Annual Report on Form 10-K for the Fiscal Year ended January 30, 2021 (“2021 Form 10-K”), during 2020 our revenues, results of operations, cash flows and financing arrangements were materially adversely impacted by the COVID-19 pandemic. As a result, despite the fact that conditions had significantly improved by April 12, 2021 and that we had taken substantial actions to improve our liquidity and financial performance, due to remaining risks and uncertainties relating to the future impacts of COVID-19, we concluded at the time that our liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months.

In response to the impacts of COVID-19, we immediately took actions to improve our liquidity and financial flexibility by restructuring our debt with an extended maturity. We also took actions to reduce expenses, and, to maximize cash on hand, we continue to closely manage working capital (primarily inventory levels) and capital expenditures. Additionally, on August 27, 2021 we made a $25 million debt payment, which was generated by operating cash flows, in order to avoid additional fees and interest that would have commenced if the payment was not made (see Note 13).

While the Company and the retail industry in general have recovered significantly and current projections are favorable, we still could experience potential negative COVID-19 impacts including, but not limited to, additional charges from potential adjustments to the carrying amount of our inventory, goodwill, intangible assets, right-of-use assets, and long-lived assets as well as additional store closures. Actual results may differ materially from the Company’s current estimates as considerable risk remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, the possibility of a resurgence of COVID-19, and emergence of severe variants, with its potential for future business disruption and the related impacts on the U.S. economy. If one or more of these risks materialize, we believe it is still possible that our current liquidity and capital could be impacted and may not be sufficient to finance our continued operations for at least the next year. These risks raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements have been issued.

Cost of Goods Sold

Cost of goods sold (“COGS”) consist of all costs of sold merchandise (net of purchase discounts and vendor allowances). These costs include:

•

Direct costs of purchased merchandise;

•

Adjustments to the carrying value of inventory related to realizability and shrinkage; and

•

Inbound freight to our distribution center.

Our COGS and Gross margin may not be comparable to other entities. Some entities, like us, exclude costs related to shipping products to their customers, as well as costs of their distribution network, buying function, store occupancy costs and depreciation and amortization expenses from COGS and include them in Selling, general and administrative expenses, whereas other entities include these costs in their COGS.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of:

•

Payroll and payroll-related expenses;

•

Store Occupancy expenses related to stores, distribution center and our headquarters location, including utilities;

•

Depreciation of property and equipment and amortization of intangibles;

•

Advertising expenses: print, digital and social media advertising and catalog production and distribution;

•

Information technology and communication costs;

•

Freight associated with shipping products to customers;

•

Insurance costs; and

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods. As an emerging growth company, the Company has elected to adopt the pronouncement following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on the condensed consolidated financial statements. The Company plans to adopt the pronouncement in Fiscal Year 2022.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform”, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The guidance is currently effective and may be applied prospectively at any point through December 31, 2022. The Company is assessing what impact this guidance will have on the Company’s condensed consolidated financial statements.