Income Taxes

9 Months Ended

Nov. 02, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Effective Tax Rate

During the three-month period ended November 2, 2024, the benefit from income taxes was not material. During the three-month period ended October 28, 2023, the benefit from income taxes was $0.4 million. During the nine-month periods ended November 2, 2024 and October 28, 2023, the provision for income taxes were $7.5 million and $8.4 million, respectively. The effective tax rates for the three- and nine-month periods ended November 2, 2024 were 2.1% and 28.0%, respectively. The effective tax rates for the three- and nine-month periods ended October 28, 2023 were 12.5% and 34.8%, respectively. The decrease in the effective tax rate for the three-month period ended November 2, 2024 as compared to the three-month period ended October 28, 2023 was primarily due to a decrease in the loss before benefit from income taxes for the three-month period ended November 2, 2024. The decrease in effective tax rate for the nine-month period ended November 2, 2024 as compared to the nine-month period ended October 28, 2023 was primarily due to a decrease in the amount of non-deductible compensation for covered employees relative to income before provision for income taxes for the nine-month period ended November 2, 2024.

Uncertain Tax Positions

The amount of income taxes we pay is subject to ongoing audits by taxing authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. As of the end of the third quarter of fiscal year 2024, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $2.6 million ($2.1 million, net of federal benefit). As of the end of fiscal year 2023, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $2.5 million ($2.1 million, net of federal benefit). Our effective tax rate will be affected by any portion of this liability we may recognize.

We believe that it is reasonably possible that $0.4 million ($0.3 million net of federal benefit) of our liability for unrecognized tax benefits, of which the associated interest and penalties are not material, may be recognized in the next 12 months due to the expiration of statutes of limitations.