INCOME TAXES

12 Months Ended

Jan. 31, 2024

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 9 — INCOME TAXES

The income tax provision is comprised of the following:

	Year Ended January 31,
	2024		2023		2022
	(In thousands)
Current
Federal	$	42,376	$	27,982	$	39,283
State and city		9,768		8,278		4,484
Foreign		9,971		14,647		5,991
		62,115		50,907		49,758
Deferred
Federal		6,469		(50,764)		17,090
State and city		878		(4,457)		2,116
Foreign		(3,603)		526		1,911
		3,744		(54,695)		21,117
Income tax expense (benefit)	$	65,859	$	(3,788)	$	70,875
Income (loss) before income taxes
United States	$	218,528	$	(106,086)	$	234,034
Non-United States		22,071		(32,084)		36,942
	$	240,599	$	(138,170)	$	270,976

Effective January 1, 2018, the Tax Cuts and Jobs Act (“TCJA”) subjects a U.S. parent company to current tax on its global intangible low-taxed income (“GILTI”). For fiscal 2024, the Company has elected to treat the tax effect of GILTI as a current period expense.

The significant components of the Company’s net deferred tax liabilities at January 31, 2024 and 2023 are summarized as follows:

	2024		2023
	(In thousands)
Deferred income tax assets:
Compensation	$	3,444	$	879
Inventory		13,756		12,197
Provision for bad debts and sales allowances		11,918		15,237
Supplemental employee retirement plan		792		688
Net operating loss		40,183		33,749
Operating lease liability		52,341		56,519
Foreign tax credit carryforward		5,594		3,865
Section 174 R&D amortization		1,016		478
Other		4,919		—
Gross deferred income tax assets		133,963		123,612
Less: valuation allowance		(39,140)		(33,087)
Net deferred income tax assets		94,823		90,525
Deferred income tax liabilities:
Depreciation and amortization		(15,821)		(6,268)
Intangibles		(51,071)		(48,760)
Operating lease asset		(46,546)		(50,995)
Accrued expenses		—		(57)
Prepaid expenses and other		(2,149)		(2,279)
Other		(2,724)		(560)
Total deferred income tax liabilities		(118,311)		(108,919)
Net deferred income tax liabilities	$	(23,488)	$	(18,394)

The Company intends to indefinitely reinvest substantially all of the undistributed earnings of its foreign subsidiaries. The total undistributed earnings of the Company’s foreign subsidiaries that are considered to be indefinitely reinvested were approximately $150 million as of January 31, 2024. Upon distribution of these earnings in the form of dividends or otherwise, the Company does not anticipate any material tax costs. As such, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of these undistributed foreign earnings.

On December 12, 2022, the Council of the European Union (“EU”) announced that EU member states reached an agreement to implement the minimum tax component of the Organization for Economic Co-operation and Development’s international tax reform initiative, known as Pillar Two. The Pillar Two Model Rules provide for a global minimum tax of 15% for multinational enterprise groups, and is expected to be effective for our fiscal year ending January 31, 2025. While the Company does not expect these rules to have a material impact on its effective tax rate or financial results, the Company continues to monitor evolving tax legislation in the jurisdictions in which it operates.

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements for the years ended January 31:

	2024		2023		2022
Provision for Federal income taxes at the statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of Federal tax benefit	3.7		(2.1)		2.0
Permanent differences	2.8		(2.1)		2.8
U.S. tax on foreign earnings	1.8		(6.0)		1.5
Foreign tax rate differential	1.0		1.2		—
Foreign tax credit	(2.9)		7.9		(3.4)
Valuation allowance	0.4		(3.1)		0.8
Goodwill impairment	—		(17.3)		—
Non-taxable capital gain	—		5.1		—
Other, net(1)	(0.4)		(1.9)		1.5
Actual provision for income taxes	27.4	%	2.7	%	26.2	%

(1) Prior year share-based payments have been reclassed to Other, net for presentation purposes.

The Company’s effective tax rate increased to 27.4% in fiscal 2024 compared to 2.7% in fiscal 2023. This increase in the Company’s effective tax rate is primarily the result of the Company’s charges related to goodwill impairment of $347.2 million which significantly decreased pretax book income in relation to its tax expense in fiscal 2023, as well as operating losses generated in certain foreign jurisdictions during fiscal 2024 that are not expected to be realized. The Company’s effective tax rate decreased to 2.7% in fiscal 2023 compared to 26.2% in fiscal 2022. This decrease in the Company’s effective tax rate is primarily the result of the Company’s charges related to goodwill impairment of $347.2 million which significantly decreased pretax book income in relation to its tax expense.

At January 31, 2024, the Company had state net operating loss carryforwards of $3.9 million, of which $2.1 million carryforward indefinitely and the remainder primarily expires in 2036 through 2041. In addition, the Company had foreign net operating loss carryforwards of $36.3 million, with most jurisdictions having indefinite carryforward periods. At January 31, 2024, the Company also has federal foreign tax credit carryforwards of $5.6 million, which expire in 2029 through 2034.

Valuation allowances represent deferred tax benefits where management is uncertain if the Company will have the ability to recognize those benefits in the future. During the year ended January 31, 2024, the Company recorded an increase to its valuation allowance of $6.0 million against its deferred tax assets, of which $1.7 million related to an increase in the Company’s deferred tax assets and related valuation allowance for excess foreign tax credits, $6.7 million related to a net increase in the Company’s deferred tax assets and related valuation allowance for standalone state tax losses and foreign retail losses and $2.4 million related to a decrease in the Company’s valuation allowance for foreign losses expected to be utilized.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

	2024		2023		2022
	(In thousands)
Balance at February 1,	$	3,582	$	2,442	$	2,293
Additions based on tax positions related to the current year		57		245		—
Additions for tax positions of prior years		1,015		895		595
Reductions for tax positions of prior years		(413)		—		—
Lapses of statutes of limitations		—		—		(446)
Balance at January 31,	$	4,241	$	3,582	$	2,442

The Company accounts for uncertain income tax positions in accordance with ASC 740 — Income Taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of January 31, 2024, there was an increase in the unrecognized tax position reserve of $0.7 million related to state, local and foreign income tax return filings.

The Company’s policy on classification is to include interest in interest and financing charges, net and penalties in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). The Company and certain of its subsidiaries are subject to U.S. federal income tax as well as the income tax of multiple state, local, and foreign jurisdictions.

Of the major jurisdictions, the Company and its subsidiaries are subject to examination in the United States and various foreign jurisdictions for fiscal year 2016 and forward. The Company is currently under audit examination by New York for fiscal years 2016 through 2018, France for fiscal years 2019 through 2021 and the Netherlands for fiscal year 2021. The Company believes that it is reasonably possible there will be a reduction in its unrecognized income tax benefits related to foreign exposures, prior to any annual increase, of $2.1 million during the next twelve months due to the expiration of applicable statues of limitations.