JILL 10-K & 10-Q changes, risk factors and insider trading

The current domestic and international political environment, including volatile trade relations, conflicts in multiple locations, and the related disruption to shipping lanes (for exampleexample, in the RedMiddle SeaEast and surrounding areas) and civil unrest have resulted in uncertainty surrounding the future state of the global economy. There is uncertainty with respect to potential changes in trade regulations, sanctions and export controls, which increase volatility in the global economy and foreign currency exchange rates. This environment has affected and may continue to affect production and distribution lead times, increasing our costs and potentially affecting our ability to meet customer demand. If these disruptions persist, they may require us to modify our current sourcing practices, which may impact our product costs, and, if not mitigated, could have a material adverse effect on our business and results of operations.

We do not own or operate any manufacturing facilities and therefore depend upon independent, third-party suppliers for the manufacturing of all our merchandise, primarily through our use of buying agents. In Fiscal Year 2024,2025, approximately 81% of our products were sourced through agents and approximately 19% were sourced directly from suppliers and factories. Our merchandise is manufactured to our specifications primarily by factories outside of the United States. Some of the factors that might affect a supplier’s ability to ship orders of our merchandise in a timely manner or to meet our quality standards are outside of our control, including inclement weather, natural disasters, negative global climate patterns, political and financial instability, including the conflictconflicts or tensions in Ukraine and inEurope, the Middle East and the surroundingother regions, and related sanctions, legal and regulatory developments, strikes, health concerns regarding infectious diseases (such as the outbreak of COVID-19),diseases, and acts of terrorism. Inadequate labor conditions, health or safety issues in the factories where goods are produced can negatively impact the reputation of our brand. Late delivery of merchandise or delivery of merchandise that does not meet our quality standards could cause us to miss the delivery date requirements of our customers or delay timely delivery of merchandise to our stores for those items. These events could cause us to fail to meet customer expectations, cause our customers to cancel orders or cause us to be unable to deliver merchandise in sufficient quantities or of sufficient quality to our stores, which could result in lost sales.

War, terrorism, terror alerts, rumors or threats of war, acts of piracy, civil unrest or other violence and other unsettling geopolitical activity may negatively impact availability of merchandise and/or otherwise adversely impact our business.

In the event of war, terrorism, terror alerts, rumors or threats of war, civil unrest or other violence,violence and other unsettling geopolitical activity, our ability to obtain merchandise available for sale in our stores or on our websites may be negatively impacted. A substantial portion of our merchandise is imported from other countries, see “Interruptions in our third-party, foreign sourcing operations and the relationships with our suppliers and agents could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and increased our costs.” If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution and customer contact center and stores, as well as fulfilling catalog and website orders. In addition, our stores are located in public areas where large numbers of people typically gather. Terrorist attacks, terror alerts, rumors or threats of terrorist attacks or civil unrest involving public areas could cause people not to visit areas where our stores are located. Other types of violence in malls or in other public areas could lead to lower customer traffic in areas in which we operate stores. If any of these events were to occur, we may be required to suspend operations in some or all of our stores, which could have a material adverse effect on our business, financial condition and results of operations.

Our term loan credit agreement, dated as of AprilDecember 5,12, 20232025 (the “Term Loan Credit Agreement” and, such facility, the “Term Loan”), by and among the lenders party thereto from time to time and JefferiesCCP FinanceAgency, LLC, as administrative and as collateral agent, our Asset-Based Revolving credit agreement, dated as of December 1, 2023, by and among the Company, Jill Acquisition LLC, J.Jill Gift Card Solutions, Inc the other guarantors party thereto, the other lenders party thereto, and CIT Finance LLC, as the administrative agent and collateral agent. (as amended, the “ABL Credit Agreement” and, such facility, the “ABL Facility” and, together with the Term Loan, the “Credit Facilities” and, the agreements governing such facilities, the “Credit Agreements”), each contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness. A failure by us to comply with the covenants contained in our Credit Agreements could result in an event of default under each respective Credit Agreement, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding to be immediately due and payable and exercise other remedies as set forth in our Credit Agreements. If the indebtedness under our Credit Agreements were to be accelerated, our future financial condition could be materially adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.”

As of FebruaryJanuary 1,31, 2025,2026, we had $74.3$75.0 million aggregate principal amount of borrowings under the Credit Agreements. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our current or future debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. We cannot provide assurance that our business will be able to generate sufficient levels of cash or that future borrowings or other financings will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs. These financing risks, in addition to potential rising interest rates and changes in market conditions, if realized, could negatively impact our business, financial condition and results of operations. See Note 9. Debt to the audited consolidated financial statements included in this Annual Report for more information on our indebtedness.

We have a substantial amount of indebtedness under our Credit Agreements, and the scheduled maturity dates of our Credit Agreements are in close proximity to each other. Our Term Loan Credit Agreement will mature on MayDecember 8,12, 20282030 and our ABL Facility will mature on May 10, 2028 (or 180 days prior to the maturity date of the Company’s Term Loan Credit Agreement if the maturity date of such Term Loan Facility has not been extended to a date that is at least 180 days after the maturity date of the ABL Credit Agreement). As a result, we can make no assurance that we will be able to refinance these agreements on acceptable terms prior to their maturity dates. Market disruptions or other credit factors, such as rising inflation and higher interest rates, are expected to increase our cost of borrowing or adversely affect our ability to refinance our obligations as they become due.

As of the fiscal year beginning February 2, 2025, weWe are no longer a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and canare no longer taketaking advantage of reduced disclosure requirements applicable to “smaller reporting companies,” which willcould requiremake additionalour costcommon stock less attractive to investors and resourcesmake init ordermore difficult to complycompare our performance with ourother reportingpublic obligations.companies.

We have 15,324,22214,865,040 outstanding shares of common stock as of FebruaryJanuary 1,31, 2025.2026. The number of outstanding shares of common stock includes 7,338,933 shares owned by TowerBrook, as defined under Rule 144 under the Securities Act, and eligible for sale in the public market subject to the requirements of Rule 144. The Company issued 3,572,664 shares of common stock following the exercise of 3,573,707 warrants (the “Warrants”) that were previously issued pursuant to a Warrant Agreement, dated as of October 2, 2020, by and between the Company and American Stock Transfer & Company LLC (the “Warrant Agreement”). The exercise price of the warrants was net share settled as specified in the Warrant Agreement. The total number of shares includes 3,317,488 shares of common stock following the exercise of 3,318,443 warrants by TowerBrook.

We depend largely upon our information technology systems for all aspects of our operations, including running our website, processing transactions, responding to customer inquiries, managing inventory, purchasing, selling and shipping goods on a timely basis and maintaining cost-efficient operations. Such systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches and natural disasters. Damage to or interruption of our information technology systems may require a significant investment to fix or replace the affected system, and we may suffer interruptions in our operations as a result. In addition, costs and interruptions associated with the implementation of new or upgraded systems and technology, such as our recently implemented OMS and POS systemsystems, or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.

Our goodwill and indefinite-lived intangible assets, which consist of goodwill from the controlling interest in the company held by JJill Holdings, Inc. and JJill Topco Holdings, LP, and our trade name, represented a significant portion of our total assets as of FebruaryJanuary 1,31, 2025.2026. Accounting rules require the evaluation of our goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such indicators are based on market conditions and the operational performance of our business. If in conducting an impairment evaluation we determine that the carrying value of an asset exceeded its fair value, we would be required to record a non-cash impairment charge for the difference between the carrying value and the fair value of the asset. If a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected.

Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results. Developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of tariffs on imported products, could have a material adverse effect on our business, results of operations and liquidity. In particular, the implementation of an increase to the corporate income tax rate for U.S. corporations could adversely impact our liquidity, business, financial condition and results of operations. Changes in tax laws result in uncertainty as to how tax laws will be applied to us and require us to perform computations that were not required previously. For example, the One Big Beautiful Bill Act enacted on July 4, 2025, introduced several changes to corporate taxation which may impact how our earnings are taxed.

We operate on a 52 or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year is generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. References in this Annual Report to “Fiscal Year 2025” refer to the fiscal year ended January 31, 2026, references to the “Fiscal Year 2024” refer to the fiscal year ended February 1, 2025,2025 and references to the “Fiscal Year 2023” refer to the fiscal year ended February 3, 2024 and references to “Fiscal Year 2022” refer to the fiscal year ended January 28, 2023.2024. Fiscal Years 20242025 and 20222024 are comprised of 52 weeks and Fiscal Year 2023 is comprised of 53 weeks.

J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease. The brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter. J.Jill offers a high touch customer experience through over 250256 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.

Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our retail stores (“Retail”) and through our website and catalog orders (“Direct”). Net sales also include shipping and handling fees collected from customers, and royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale or upon shipment if the sale is not immediately fulfilled, and Direct revenue is recognized upon shipment of merchandise to the customer.

Total company comparable sales include sales net salesof returns from our retail stores that have been open for more than 52 weeks and from our Direct channel. This measure highlights the performance of existing stores open during the period, while excluding the impact of new store openings and closures. When a store in the total company comparable store base is temporarily closed for four or more days within a fiscal week, the store is excluded from the comparable store base; if it is temporarily closed for three or fewer days within a fiscal week, the store is included within the comparable store base. Certain of our competitors and other retailers may calculate total company comparable sales differently than we do. Our comparable sales are based on a 52-week period. The total company comparable sales calculation shifts the weeks in the fiscal year containing the fifty-third week to align like-for-like. As a result, the reporting of our total company comparable sales may not be comparable to sales data made available by other companies.

Costs of goods sold (“COGS”) consists of the direct costs of sold merchandise, which include customs, taxes, tariffs, duties, commissions and inbound shipping costs, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory. COGS does not include distribution center costs and allocations of indirect costs, such as occupancy, depreciation, amortization, or labor and benefits. We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise. The Company’s COGS, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry.

The variability in COGS is due to raw materials, transportationtransportation, freight costs, and freight costs.tariffs. These costs fluctuate based on certain factors beyond our control, including labor conditions, inbound transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in U.S. dollars and, as a result, are not exposed to significant foreign currency exchange risk.

Selling, general and administrative (“SG&A”) expenses include all operating costs not included in COGS. These expenses consist primarily of all payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. These expenses also consist of marketing expense, including catalog production and mailing costs, warehousing, distribution and outbound shipping costs, customer service operations, consulting and software services, natural disaster related costs, professional services and other administrative costs. Additionally, our outbound shipping costs may fluctuate due to surcharges from shipping vendors based on demand for shipping services.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA Margin. Adjusted EBITDA, represents net income plus (less) depreciation and amortization, income tax provision, interest expense, interest expense -– related party, interest income, equity-based compensation expense, write-off of property and equipment, amortization of cloud-based software implementation costs, loss on extinguishment of debt, loss on debt refinancing, adjustment for exited retail stores, impairment of long-lived assets, gain/loss due to hurricane, and other non-recurring items, primarily consisting of non-ordinary course professional fees, non-employee share-based payments, CEO transition costs, severance expense and legal settlements and fees associated with certain non-recurring transactions and events. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results. Adjusted EBITDA margin represents, for any period, Adjusted EBITDA as a percentage of net sales.

Fiscal Year Ended January 31, 2026 compared to Fiscal Year Ended February 1, 20252025, which isboth comprised of 52-weeks52-weeks, compared toand Fiscal Year Ended February 3, 2024 which is comprised of 53-weeks and January 28, 2023 which is comprised of 52-weeks.53-weeks.

Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within Selling, general and administrative expenses. Adjusted EBITDA for fiscal year ended February 3, 2024 has been restated to include such adjustments to Net income, and no adjustment was made for fiscal year ended January 28, 2023 as the amount was immaterial.income.

Represents loss on the repayment of 2023 Term Loan Credit Agreement (the “2023 Term Loan Credit Agreement”) in December 2025, and the Priming Term Loan Credit Agreement (the “Priming Credit Agreement”) and the Subordinated Term Loan Credit Agreement (the “Subordinated Credit Agreement”). that were repaid in April 2023.

Represents (gain)/loss on write-off of property and equipment and inventory at one store location due to hurricane and insurance recovery received toin date.2024 and the gain on expected insurance recovery recognized in 2025.

Represents items management believes are not indicative of ongoing operating performance, including CEO transition costs, severance expense, non-ordinary course legal and professional fees, non-employee share-based payments, and legal settlements and fees.

53rd week. The Company’s fiscal year ends on the Saturday,Saturday inthat is closest to January or February, nearest to the last day of January,31, resulting in an additional week of results every five or six years. Fiscal Year 2023 contained 53-weeks of operations whereas the Fiscal Years 20242025 and 20222024 contained 52-weeks of operations. The 53rd week added approximately $7.9 million to net sales and $2.2 million to Adjusted EBITDA for Fiscal Year 2023.

Loss on extinguishment of debt. For Fiscal Year 2024, the Company recognized a loss on extinguishment of debt of $8.6 million related to the voluntary prepayment of a portion of the prior Term Loan Credit Agreement. No such loss was incurred by the Company during Fiscal Year 2023.2025.

Loss on debt refinancing. For Fiscal Year 2023,2025, the Company recognized a loss on debt refinancing of $12.7$3.1 million related to entering into aits new Term Loan Credit Agreement and the repayment of the Priming2023 Term Loan Credit Agreement andin theDecember Subordinated Credit Agreement.2025. No such loss was incurred by the Company during Fiscal Year 2024.

Fiscal Year Ended FebruaryJanuary 1,31, 2025 which is comprised of 52-weeks2026 compared to Fiscal Year Ended February 3,1, 2024 which is comprised of 53-weeks.2025.

Net sales for Fiscal Year 20242025 increaseddecreased $2.8$14.3 million or 0.5%,2.3%, to $610.9$596.5 million from $608.0$610.9 million for Fiscal Year 2023.2024. The increasedecrease in net sales was primarily due to total company comparable sales increasedecrease of 1.5%3.1%. The decrease in total company comparable sales was primarily driven by a decline in unit sales partially offset by thean lossincrease ofin the 53rdaverage weekunit includedretail in Fiscal Year 2023.price.

Gross profit for Fiscal Year 20242025 decreased $0.9$20.1 million, or 0.2%,4.7%, to $429.9$409.7 million from $430.8$429.9 million for Fiscal Year 2023.2024. The gross margin for Fiscal Year 20242025 was 70.4%68.7% compared to 70.8%70.4% for Fiscal Year 2023,2024. The decrease of gross margin in Fiscal Year 2025 was primarily driven by anhigher increase infull-price promotional activitiesrates, higher mix of markdown sales, and increased freighttariffs, costs.compared to Fiscal Year 2024.

Selling, general and administrative expenses for Fiscal Year 20242025 increased $8.8$5.1 million, or 2.6%,1.4%, to $353.4$358.5 million from $344.5$353.4 million for Fiscal Year 2023.2024. The increase is primarily driven by $3.0$3.6 million in professionalCEO transition costs, and severance-related expenses partially offset by a decrease in legal fees, $2.7$4.1 million inoccupancy stock-basedfees compensation,due $1.9to higher lease expenses, $2.5 million in shipping, $1.6$2.0 million in telecommunication,telecommunication $1.4primarily driven by application hosting expenses, a decrease of capitalized payroll of $1.0 million, a loss on right of use ("ROU") assets of $0.6 million in marketing and $1.2 millionincrease in compensationsales andtax benefits.assessment of $0.4 million. The increase was partially offset by a decrease of $1.6$8.0 million in depreciationcompensation and amortization,benefits $1.0and management incentive expense and the recognition of a $1.1 million ingain occupancy,for andhurricane-related aninsurance increase of $0.5 million in capitalized payroll related to the order management system implementation.claims.

Impairment of long-lived assets for Fiscal Year 20242025 increaseddecreased by $0.6$0.1 million, or 308.5%11.4% to $0.8$0.7 million from $0.2$0.8 million for Fiscal Year 2023.2024. Our Fiscal Year 2025 results include $0.4 million of impairment charges for long-lived assets (leasehold improvements, and furniture, fixtures and equipment), and our Fiscal Year 2024 results include $0.5 million of impairment charges for long-lived assets (leasehold improvements, and furniture, fixtures and equipment), and our Fiscal Year 2023 results include $0.2 million of impairment charges for long-lived assets (leasehold improvements and furniture, fixtures and equipment).

For Fiscal Year 2024, the Company recognized a loss on extinguishment of debt of $8.6 million related to the voluntary prepayment of a portion of the 2023 Term Loan Credit Agreement. No such loss was incurred by the Company during Fiscal Year 2023.2025.

For Fiscal Year 2023,2025, the Company recognized a loss on debt refinancing of $12.7$3.1 million related to entering into a new Term Loan Credit Agreement and the repayment of the Priming2023 CreditTerm Agreement and the SubordinatedLoan Credit Agreement. No such loss was incurred by the Company during Fiscal Year 2024.

Interest expense consists primarily of interest expenseexpense, onincluding theamortization Termof Loanoriginal Creditissue Agreementdiscounts forand Fiscalcapitalized Yearfinancing 2024,fees and,and expenses, on the Company’s Termterm Loanloan Creditcredit Agreementagreements, andas Primingwell Credit Agreement prior to its repayment in full on April 5, 2023, for Fiscal Year 2023, andas amortization of deferred financing costs related to the Company’s asset-based revolving credit facility agreement (the “ABL Credit Agreement” and, such facility, the “ABL Facility”), for Fiscal Years 20242025 and 2023.2024.

The effective tax rate for Fiscal Year 20232024 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) state and local income taxes,taxes and (ii) executive compensation limitations, and (iii) valuation allowance changes.limitations.

Our primary sources of liquidity and capital resources are cash and cash equivalents generated from operating activities and availability under our ABL Facility, so long as certain conditions related to the maturity of the new Term Loan Credit Agreement are met. As of FebruaryJanuary 1,31, 2025,2026, we had $35.4$41.0 million in cash and cash equivalents and $35.7 million of total availability under our $40.0 million ABL Facility. In addition, through our shelf registration statement on file with the SEC or through private transactions, and depending on conditions prevailing in the public and private capital markets, we may from time to time issue equity securities in one or more series in one or more offerings.

On AprilDecember 5,12, 2023,2025, the Company and Jill Acquisition LLC (the “"Borrower”") entered into a new Term Loan Credit Agreement (the “2025 Term Loan Credit Agreement”), by and amongwith the lenders party thereto from time to time and JefferiesCCP FinanceAgency, LLC, as administrative agent and as collateral agent. The 2025 Term Loan Credit Agreement provides for a senior secured term loan facility in an aggregate principal amount of $175.0$75.0 million with a maturity date of MayDecember 8,12, 20282030 (the “2025 Term Loan Facility”). LoansAs of January 31, 2026, the outstanding principal balance under the 2025 Term Loan Credit Agreement bearwas interest$75.0 at the Borrower’s election at (1) Base Rate (as defined in the Term Loan Credit Agreement) plus 7.00% or (2) Adjusted Term SOFR (as defined in the Term Loan Credit Agreement) plus 8.00%, with Adjusted Term SOFR subject to a floor rate of 1.00%.million.

The Term Loan Facility wasis to be repaid in quarterly payments of $2.2$468,750 millionon fromthe Julylast 28,Business 2023Day toof each Fiscal Quarter of the Borrower, commencing with the Fiscal Quarter ending May 2, 2025,2026, until January 30 2027 and $3.3of million$187,500 fromcommencing Auguston the Fiscal Quarter ending May 1, 20252027 toand Aprileach 28,Fiscal 2028Quarter thereafter, with the balanceremaining aggregate principal amount of theInitial Term LoanLoans Facilitythen dueoutstanding uponto be paid on maturity on MayDecember 8,12, 2028. However, as a result of the voluntary payments mentioned below there will be no quarterly payments required until the remaining balance is paid in full on maturity date.2030. Additionally, the Term Loan Facility is subject to mandatory repayment, subject to certain exceptions, including (i) 100% of the net proceeds of any issuance or incurrence of debtindebtedness other than debt permitted in the Term Loan Credit Agreement, (ii) 100% of the net cash proceeds of certain asset sales/insurance proceeds, subject to reinvestment rights and certain other exceptions, and (iii) 95 days after the last day of the Fiscal Year, an annual payment ranging from 25%-75%, based on the First Lien Net Leverage Ratio, of the annual Excess Cash Flow (“ECF”), less certain voluntary prepayments made during the year, as defined in the Term Loan Credit Agreement.

The Term Loan Facility may be voluntarily prepaid after the one-year anniversary without premium or penalty but on or prior to the two-yearone-year anniversary, subject to a premium of 3.0%1.0% of the aggregate principal amount being prepaid, and after the two-year anniversary without premium.prepaid.

The CreditCompany’s Agreementscredit includefacilities contain customary negative and financial covenants, including covenantsrestrictions limiting the ability of the Company to, among other things, incuron additional indebtedness, create liens on assets, makeliens, investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enteraffiliate into transactions with affiliates,transactions, and make payments in respect ofon junior indebtedness. EachAs of theJanuary Term31, Loan Credit Agreement and2026, the ABLCompany Creditis Agreementin alsocompliance haswith certainall financialsuch covenantscovenants. (seeSee Note 9. Debt to the audited consolidated financial statements included in this Annual Report). for additional information.

Net cash provided by operating activities during Fiscal Year 20242025 increaseddecreased $1.7$22.9 million compared to Fiscal Year 2023.2024. The increasedecrease during Fiscal Year 20242025 was driven by higherlower net income of $3.3$11.6 million and changes in operating assets and liabilities of $5.1$9.8 million, partially offsetand by lower adjustments to reconcile net income to net cash from operations of $6.7$1.5 million. The higher change in operating assets and liabilities was driven by higherchanges in accrued expenses and other current liabilities of $7.4 million mainly due to lower interest expense and management incentive accruals and the settlement of prior-period tax and operating liabilities, lower cash inflows relating to timing of payments for accounts payable of $8.9$5.0 million, changeslargely inreflecting accruedhigher expensesmerchandising payables, prepaid and other current liabilitiesassets of $5.4$2.0 million mainly due to lower interest expense and management incentive accruals, andmillion, operating lease assets and liabilities of $3.3$1.3 million due mainlyprimarily to newlease leases.amortization, These increases were partially offset byand increased payments for inventories of $5.4$0.7 million mainly due to timing of the calendarreceipt shiftof timinggoods and thetariffs. strategyThese tochanges shipwere goods approximately one week early topartially offset delays related toby the re-routing of shipping lanes away from the Red Sea, timing of payments related to other noncurrent assets and liabilities of $5.1$5.9 million driven mainly by highercapitalized software-as-a-servicecloud-based software implementation expenditures related to the order management system,costs, and increase in accounts receivable of $2.0$0.7 million.

Net cash used in investing activities during Fiscal Year 20242025 was $17.8$18.9 million, an increase of $0.8$1.2 million as compared to Fiscal Year 2023,2024, representing purchases of property and equipment related investments in stores,stores offset by a decrease inand software and technology-relatedtechnology investments,related and capital projects at the Company’s distribution center.investments.

Net cash used in financing activities during Fiscal Year 20242025 increaseddecreased by $2.8$56.4 million as compared to theFiscal priorYear year.2024. The change was primarily driven by the proceeds from issuance of the Term Loan in the prior year offset by the principal repayments on the Priming2023 Term Loan and Subordinated Term Loan as compared to the principal repayments on the Term Loan in the current year,Loan, partially offset by the proceeds from the issuance of common stock.stock in Fiscal Year 2024, partially by share repurchase costs and higher dividends paid in Fiscal Year 2025.

During the fiscal year ended FebruaryJanuary 1,31, 2025,2026, the Company declared and paid dividends of $2.9$4.9 million to stockholders of the Company’s common stock. While dividends are generally recorded as a reduction to Retained earnings, since the Company has an accumulated deficit, dividends are recorded as a reduction to Additional paid-in capital. For the fiscal year ended February 3, 2024, no dividend was declared or paid.

On December 6, 2024, the Board approved a share repurchase program (the “Share Repurchase Program”), under which the Company is authorized to repurchase up to $25.0 million of the Company’s common stock over the next two years. Under the Share Repurchase Program, shares of the Company’s common stock may be purchased from time to time through open market or private transactions, block trades, or such other manner as the Company may determine, in accordance with applicable insider trading and other securities laws and regulations under the Exchange Act and share repurchase parameters determined by the Board. The timing and the number of shares repurchased are subject to the discretion of the Company and may be affected by market conditions and other factors. The Share Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time.

The Company had no short-term borrowings under the Company’s ABL Facility as of FebruaryJanuary 1,31, 2025.2026. The Company had outstanding letters of credit in the amount of $4.3 million and had a maximum additional borrowing capacity of $35.7 million as of FebruaryJanuary 1,31, 2025.2026.

The Company has a return policy where merchandise returns will be accepted within 9060 days of the original purchase date. At the time of sale, the Company records an estimated sales reserve for merchandise returns based on historical prior returns experience and expected future returns. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in Prepaid expenses and other current assets, and Accrued expenses and other current liabilities, respectively, in the consolidated balance sheets. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. These taxes are reported on a net basis and are thereby excluded from revenue. The Company revised its methodology for estimating the sales return reserve in the first quarter of Fiscal 2025. See Note 2. Summary of Significant Accounting Policies to our audited consolidated financial statements presented elsewhere in this Annual Report for additional information.

The Company sells gift cards without expiration dates to customers. The Company does not charge administrative fees on unused gift cards. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift cards that will ultimately not be redeemed ("gift card breakage") andthat willis not required to be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

During Fiscal Year 2024,2025, we assessed the carrying values of right-of-use assets and property and equipment as described above. During Fiscal Year 2025, the Company recorded noncash impairment charges of $0.4 million related to leasehold improvements at certain store locations driven by the actual performance at these locations and $0.3 million related to a right-of-use assets at certain store locations. During Fiscal Year 2024, the Company recorded noncash impairment charges of $0.5 million related to leasehold improvements at certain store locations driven by the actual performance at these locations and $0.3 million related to a right-of-use asset driven by revised sublease assumptions of one floor of the corporate headquarters located in Quincy, Massachusetts that was vacated in July 2019. During Fiscal Year 2023, the Company recorded impairment charges of $0.2 million related to leasehold improvements at certain store locations driven by the actual performance at these locations. During Fiscal Year 2022, the Company recorded impairment charges of $0.6 million related primarily to a right-of-use asset relating to revised sublease assumptions of one floor of the corporate headquarters located in Quincy, Massachusetts that was vacated in July 2019 and $0.8 million due to the Company’s revised outlook on future cash flows at certain store locations.

Overall Economic Trends. Consumer purchases of clothing and other merchandise generally decline during recessionary periods and other periods when disposable income is adversely affected, and consequently our results of operations may be affected by general economic conditions. For example, reduced consumer confidence, lower availability, inflationary pressures and higher cost of consumer credit may reduce demand for our merchandise and may limit our ability to increase or sustain prices. The growth rate of the market could be affected by macroeconomic conditions in the United States and abroad. Additionally, the occurrence or reoccurrence of any significant pandemic, regional conflicts, or other geopolitical disruptions, or a prolonged shutdown of the United States government,government could impact our sales and business operations.

Tariffs. The imposition of tariffs (including U.S. tariffs imposed or threatened to be imposed on a number of countries and any tariffs imposed by such countries) have impacted and could continue to impact our supply chain resulting in increased input costs, including the cost of certain raw materials and packaging. DuringIn the thirteen weeks ended May 2,February 2026, the U.S. Supreme Court ruled that many of the tariffs previously imposed under the International Emergency Economic Powers Act were invalid. Following the Supreme Court ruling, the Court of International Trade issued an order directing Customs and Border Protection (“CBP”) to begin paying refunds for tariffs enacted under the International Emergency Economic Powers Act (“IEEPA”) immediately. The CBP developed a new system to process IEEPA tariff refunds and has commenced a phased rollout of refunds. Subsequent to year-end, the Company submitted refund claims to CBP related to tariffs previously paid under the IEEPA. These claims were submitted following court rulings that invalidated certain IEEPA tariffs and directed CBP to implement a refund process. During the thirteen weeks ended August 1, 2026, the Company began receiving refunds and recognized recoveries prospectively as they became realizable. The ultimate availability, timing,amount and amounttiming of any potentialadditional refunds of such tariffs remain highly uncertain and are subject to furtherthe legal, regulatory, andongoing administrative developments.implementation Inof addition,the refund process by the CBP. The refunds were recognized as a reduction of cost of goods sold in the Company's condensed consolidated statements of operations. Additionally, a portion of tariff recoveries is recorded within accrued liabilities. Further, in July 2026, the U.S. Administrationadministration initiatedannounced newplans to implement additional tariffs andunder maySection impose301 additional tariffs. As a result, there remains significant uncertainty regardingof the durationTrade and scopeAct of existing and future tariffs and the impact of such tariffs will continue to vary, including based on where inputs are sourced from and shipped to. In addition, any supply chain constraints, inflationary impacts or reduced consumer demand for our products as a result of such tariffs or ongoing macroeconomic uncertainty have impacted1974 and could continuetake action to impactimplement ouradditional results.tariffs in the future. We will continue to evaluate the nature and extent of the impact of these tariffs on our business, to identify actions to potentially mitigate, where possible, any unfavorable impacts on our business and to monitor the regulatory and administrative developments around the potential refund of tariffs previously paid and assess their impact on our future results.

Risks Associated with Ongoing Conflicts. Ongoing or escalating geopolitical tensions and military activity, including conflicts involving the Middle East, Iran, Ukraine, and Venezuela,Ukraine, may adversely affect the Company’s business, financial condition, and results of operations. Heightened geopolitical instability in the Middle East has contributed to uncertainty in global economic and financial conditions, including potential constraints affecting key shipping routes such as the Strait of Hormuz, and increased volatility in energy, fuel, and transportation markets, as well as contributing to volatility in labor, financial, and commodity markets. These developments may disrupt global supply chains, including the availability and cost of fuel, energy, transportation, and other critical materials, which would have an adverse effect on our results of operations. Disruptions to fuel and energy supply, including as a result of government‑imposed restrictions, sanctions, export controls, or other regulatory actions, could materially increase the Company’s operating costs or require the temporary suspension or shutdown of certain mining operations where reliable access to fuel or power is essential to safe and continuous operations. Heightened geopolitical tensions may also increase cybersecurity risks, including threats to energy infrastructure, logistics providers, financial systems, and other third‑party service providers.

Thirteen weeks ended MayAugust 2,1, 2026 Compared to Thirteen weeks ended MayAugust 3,2, 2025

Net sales for the thirteen weeks ended MayAugust 2,1, 2026 decreasedincreased $9.2$0.8 million, or 6.0%,0.5%, to $144.4$154.8 million from $153.6$154.0 million for the thirteen weeks ended MayAugust 3,2, 2025. At the end of those same periods, we operated 255 and 249247 retail stores, respectively. The decreaseincrease in net sales was primarily due to aan decreaseincrease in total company comparable sales of 8.7%, the decrease was primarily driven by a decline in unit sales partially offset by an increase in the average unit retail price0.5% compared to the thirteen weeks ended MayAugust 3,2, 2025. The increase was primarily driven by an increase in full price mix and a decrease in promotional activities compared to the thirteen weeks ended August 2, 2025.

Retail contributed 54.4%52.9% of our net sales in the thirteen weeks ended MayAugust 2,1, 2026 and 53.3%53.6% in the thirteen weeks ended MayAugust 3,2, 2025. Our Direct channel contributed 45.6%47.1% of our net sales in the thirteen weeks ended MayAugust 2,1, 2026 and 46.7%46.4% in the thirteen weeks ended MayAugust 3,2, 2025.

Gross profit for the thirteen weeks ended MayAugust 2,1, 2026 decreasedincreased $11.7$13.6 million, or 10.6%,12.9%, to $98.7$119.0 million from $110.4$105.4 million for the thirteen weeks ended MayAugust 3,2, 2025. The gross margin for the thirteen weeks ended MayAugust 2,1, 2026 was 68.3%76.8% compared to 71.8%68.4% for the thirteen weeks ended MayAugust 3,2, 2025. The decreaseincrease in gross profit and gross margin for the thirteen weeks ended MayAugust 2,1, 2026 was primarily driven by highera full-price promotional rates, higherlower mix of markdown sales, lower full-price promotional rates, and increaseddecreased expense, including the recognition of refunds related to tariffs previously paid, compared to the thirteen weeks ended MayAugust 3,2, 2025.

SG&A expenses for the thirteen weeks ended MayAugust 2,1, 2026 decreasedincreased $1.4$6.1 million, or 1.5%,6.9%, to $89.7$94.6 million from $91.1$88.6 million for the thirteen weeks ended MayAugust 3,2, 2025. The decreaseincrease was primarily driven by $2.0a $2.2 million decreaseincrease in consultingcompensation, benefits and professionalmanagement fees,incentive thatexpense, is primarily due to the cancelation of the Elm Street Consulting Agreement during the second quarter of 2025, and $1.5$1.8 million in marketing expenses.expenses, These$0.9 decreasesmillion wererelated partiallyto offsetincreased byoccupancy expenses, and a $1.2 million increase inacross sellingoutbound expenses and an aggregated $0.9 million increase acrossshipping, hosting, recruiting, supplies, and compensationsupplies and benefitsrelated expenses.

As a percentage of net sales, SG&A expenses were 62.1%61.1% for the thirteen weeks ended MayAugust 2,1, 2026 and 59.3%57.5% for the thirteen weeks ended MayAugust 3,2, 2025.

Interest expense was $1.9 million and $2.8$2.7 million for the thirteen weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively. The decrease was due to a lower interestdebt ratebalance for the thirteen weeks ended MayAugust 2,1, 2026 as a result of the debt refinancing that took place in December 2025.2026.

For the thirteen weeks ended MayAugust 1, 2026 and August 2, 2026,2025, the Company earned interest on cash of $0.3$1.1 million and $0.5 million, compared to $0.4 million for the thirteen weeks ended May 3, 2025.respectively. The decreaseincrease was primarily dueattributable to lower interest ratereceived forin theconnection thirteenwith weekstariff endedrecoveries Mayof 2,$0.6 2026.million.

The Company’s income tax provision was $2.5$6.7 million for the thirteen weeks ended MayAugust 2,1, 2026 compared to $5.0$4.0 million for the thirteen weeks ended MayAugust 3,2, 2025, while our effective tax rates for the same periods were 35.2%28.6% and 29.8%,27.7%, respectively. The effective tax rate during the thirteen weeks ended MayAugust 2,1, 2026 is higher primarily due to the impact of state and local income taxes, stock compensation shortfalls and executive compensation limitations.

Our primary sources of liquidity and capital resources are cash and cash equivalents generated from operating activities and availability under our ABL Facility, so long as certain conditions related to the maturity of the 2025 Term Loan Credit Agreement are met. As of MayAugust 2,1, 2026, we had $36.3$76.9 million in cash and $35.7 million of total availability under our ABL Facility. In addition, through our shelf registration statement on file with the SEC or through private transactions, and depending on conditions prevailing in the public and private capital markets, we may from time to time issue equity securities in one or more series in one or more offerings.

The 2025 Term Loan Facility is to be repaid in quarterly payments of approximately $0.5 million on the last business day of each fiscal quarter of the borrower, commencing with the fiscal quarter ended May 2, 2026, until January 30, 2027 and of approximately $0.2 million commencing on the fiscal quarter ending May 1, 2027 and each fiscal quarter thereafter, with the remaining aggregate principal amount of Initial Term Loans (as defined in the 2025 Term Loan Credit Agreement) then outstanding to be paid on maturity on December 12, 2030. Additionally, the 2025 Term Loan Facility is subject to mandatory repayment, subject to certain exceptions, including (i) 100% of the net proceeds of any issuance or incurrence of indebtedness other than debt permitted in the 2025 Term Loan Credit Agreement, (ii) 100% of the net cash proceeds of certain asset sales/insurance proceeds, subject to reinvestment rights and certain other exceptions, and (iii) an annual payment ranging from 25%-75%, based on the First Lien Net Leverage Ratio, of the annual Excess Cash Flow, less certain voluntary prepayments made during the year, as defined in the 2025 Term Loan Credit Agreement.

There were no short-term borrowings outstanding under the Company’s ABL Facility as of MayAugust 2,1, 2026 and January 31, 2026.2026 At MayAugust 2,1, 2026 and January 31, 2026, the Company had outstanding letters of credit in the amount of $4.3 million and had a maximum additional borrowing capacity of $35.7 million.

As of MayAugust 2,1, 2026, the Company iswas in compliance with all covenants contained in its outstanding debt arrangements.

Net cash provided by operating activities decreasedincreased by $3.6$23.3 million during the thirteentwenty-six weeks ended MayAugust 2,1, 2026 compared to the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The decreaseincrease during the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was driven by a decreasechanges in netoperating incomeassets and liabilities of $7.0$25.0 million, offset by adjustments to reconcile net income of $1.7$1.0 million and changesa decrease in operatingnet assets and liabilitiesincome of $1.7$0.7 million. The change in operating assets and liabilities was driven primarily by decreasedan paymentsincrease for inventory of $5.4 million, due to the timing of receipt of goods and tariffs,in accrued expenses and other current liabilities of $0.9$16.0 million, which includes liabilities to vendors resulting from tariff recoveries, decreased payments for inventory of $11.4 million, an increase in prepaid expenses and other current assets of $8.2 million, and increases in operating leaseleases assets and liabilities of $0.8 million due primarily to lease amortization, and accounts receivable of $0.2$0.9 million. The change in operating assets and liabilities was offset by lower cash inflows relating to timing of payments for accounts payable of $6.2$10.4 million, largely reflecting higher merchandising payables, prepaid expenses and other current assets of $0.9 million, andthe timing of payments relating to other noncurrent assets of $0.4$1.0 million, and a decrease in accounts receivable of $0.1 million.

Net cash provided by operating activities during the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was $1.7$48.0 million. Key elements of cash provided by operating activities were (i) net income of $4.7$21.5 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $7.6$15.7 million, primarily driven by depreciation and amortization, and equity-based compensation, and changes in deferred taxes, and (iii) uses of cash totaling $10.6$10.8 million for net operating assets and liabilities.

Net cash provided by operating activities during the thirteentwenty-six weeks ended MayAugust 3,2, 2025 was $5.3$24.7 million. Key elements of cash provided by operating activities were (i) net income of $11.7$22.2 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $5.9$16.7 million, primarily driven by depreciation and amortization, andloss on extinguishment of debt, equity-based compensation, and (iii) uses of cash totaling $12.3$14.2 million for net operating assets and liabilities.

Net cash used in investing activities during the thirteentwenty-six weeks ended MayAugust 2,1, 2026 and theAugust thirteen weeks ended May 3,2, 2025 was $2.8$5.0 million and $2.7$5.5 million, respectively, representing purchases of property and equipment related investments in stores and software and technology related investments.

Net cash used in financing activities was $3.6$7.0 million for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 compared to $6.8$9.1 million for the thirteentwenty-six weeks ended MayAugust 3,2, 2025. Net cash used in financing activities for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 consisted primarily of the quarterly cash dividend paid to shareholders, share repurchase costs, net of commission and fees, surrender of shares to pay withholding taxes, and principal repayments on the 2025 Term Loan. Net cash used in financing activities for the thirteentwenty-six weeks ended MayAugust 3,2, 2025 primarily consisted primarily of share repurchase costs, net of commission and fees, surrender of shares to pay withholding taxes, and quarterly cash dividend paid to shareholders.

During the thirteen weeks ended MayAugust 2,1, 2026, the Board declared a quarterly cash dividend payment of $0.09 per share of common stock (the “Dividend”). The Dividend was payable on AprilJuly 28,8, 2026 to stockholders of record of issued and outstanding shares of the Company’s common stock as of AprilJune 14,24, 2026. During the thirteen and twenty-six weeks ended MayAugust 2,1, 2026, the Company paid $1.3$1.4 million and $2.7 million, respectively, in dividends. While dividends are generally recorded as a reduction to Retained earnings, since the Company has an accumulated deficit, dividends are recorded as a reduction to Additional paid-in capital.

Subsequent to MayAugust 2,1, 2026, on JuneSeptember 3,2, 2026, the Board declared a quarterly cash dividend of $0.09 per share, payable on JulyOctober 8,7, 2026 to stockholders of record of issued and outstanding shares of the Company’s common stock as of JuneSeptember 24,23, 2026.

The Company’s contractual obligations consist primarily of debt obligations, interest payments, operating leases, and purchase orders for merchandise inventory, and cloud computing related agreements. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs.