Income Taxes

9 Months Ended

Oct. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended October 28, 2023 was 26.9% compared to 28.0% for the 13 weeks ended October 29, 2022. The effective income tax rate for the 39 weeks ended October 28, 2023 was 27.0% compared to 34.1% for the 39 weeks ended October 29, 2022. The decrease in the effective tax rate for the 13 weeks ended October 28, 2023 was primarily due to international tax provisions of the Tax Cuts and Jobs Act (the “Tax Act”), overall geographic mix of earnings in jurisdictions in which the Company operates, offset by non-deductible executive compensation. The decrease in the effective tax rate for the 39 weeks ended October 28, 2023 was primarily due to the Note Exchange in Fiscal 2022 as a portion of the inducement charge was not deductible and state legislative changes that occurred in Fiscal 2022.

The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognizes income tax liabilities related to unrecognized tax benefits in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Unrecognized tax benefits did not change significantly during the 13 weeks ended October 28, 2023. Over the next twelve months, the Company believes that it is reasonably possible that unrecognized tax benefits may decrease by approximately $1.1 million due to settlements, expiration of statute of limitations, or other changes in unrecognized tax benefits.