Income taxes

9 Months Ended

Oct. 30, 2021

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

	39 weeks ended
	October 30, 2021		October 31, 2020
Estimated annual effective tax rate before discrete items	22.1	%	19.5	%
Discrete items recognized	(15.5)	%	8.6	%
Effective tax rate recognized in statements of operations	6.6	%	28.1	%

During the 39 weeks ended October 30, 2021, the Company’s effective tax rate was lower than the US federal income tax rate primarily due to the reversal of the valuation allowance recorded against certain state deferred tax assets, as well as additional benefits realized from the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) and other permanent differences. In the first quarter of Fiscal 2021, the Company recorded a valuation allowance on certain state deferred tax assets based primarily on its three-year cumulative loss position. During the second quarter of Fiscal 2022, the Company evaluated evidence to consider the reversal of the valuation allowance on its state net deferred tax assets and determined that there was sufficient positive evidence to conclude that it is more likely than not its state deferred tax assets are realizable. In determining the likelihood of future realization of the state deferred tax assets, the Company considered both positive and negative evidence. As a result, the Company believed that the weight of the positive evidence, including the cumulative income position in the three most recent years as of July 31, 2021 and forecasts for a sustained level of future taxable income, was sufficient to overcome the weight of the negative evidence, and thus recorded a $49.8 million tax benefit to release the valuation allowance against the Company's state deferred tax assets in the second quarter of Fiscal 2022. The Company’s effective tax rate for the same period during the prior year was higher than the US federal income tax rate primarily due to the benefits from the CARES Act recognized as a discrete item during the 39 weeks ended October 31, 2020, partially offset by the unfavorable impact of a valuation allowance recorded against certain US and state deferred tax assets and the impairment of goodwill which was not deductible for tax purposes.

The CARES Act provided a technical correction to the Tax Cuts and Jobs Act (“TCJA”) allowing fiscal year tax filers with federal net operating losses arising in the 2017/2018 tax year to be carried back two years to tax years that had higher enacted tax rates resulting in a tax benefit of $73.8 million recognized as a discrete item during the 39 weeks ended October 31, 2020. The CARES Act also provided for net operating losses incurred in Fiscal 2021 to be carried back five years to tax years with higher enacted tax rates resulting in an anticipated tax benefit of $23.5 million during the 39 weeks ended October 31, 2020, with an additional benefit recognized in the third quarter of Fiscal 2022 of $12.4 million. In addition, as discussed above, the Company recorded a valuation allowance of $66.9 million against certain deferred tax assets during the 39 weeks ended October 31, 2020. The estimated annual effective tax rate excludes the effects of any discrete items that may be recognized in future periods.

As of October 30, 2021, there has been no material change in the amounts of unrecognized tax benefits, or the related accrued interest and penalties (where appropriate), in respect of uncertain tax positions identified and recorded as of January 30, 2021.