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

Additionally, state and local governments have proposed laws and regulations that, if enacted, would place additional restrictions on the manufacture, transfer, sale, purchase, acquisition, possession and use of firearms, ammunition and shooting-related products. For example, in response to mass shootings and other incidents in the United States, several states, such as California, Colorado, Connecticut, Florida, Illinois, Maryland, Minnesota, New Jersey, New York, Oregon, Virginia and Washington have enacted laws and regulations that limit access to and sale of certain firearms in ways more restrictive than federal laws. Other state or local governmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture, sale, purchase, possession or use of firearms and ammunition. In California, Connecticut and New York, mandatory screening of ammunition purchases is now required, as well as electronic recordkeeping that will be audited by the state. In addition, several states and the United States Congress have introduced microstamping legislation (that is, engraving the handgun’s serial number on the firing pin of new handguns) for certain firearms. Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products. For instance, we are actively monitoring Virginia HB 2117 which, if passed as currently drafted, would take effect July 1, 2026. This bill would prohibit future sales of certain firearms, firearm magazines and feeding devices in Virginia. Lastly, some states prohibit the sale of firearms without internal or external locking mechanisms, and several states are considering mandating certain design features on safety grounds, most of which would be applicable only to handguns. Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, acquisition, possession or use of firearms, ammunition and shooting-related products.

State, local, and federal laws and regulations relating to products that we sell may change, sometimes significantly, as a result of political, economic or social events. For instance, in November 2022, Oregon passed a ballot measure that bans firearms and magazines with a capacity of over ten rounds, and that, among other things, imposes complex permitting and training requirements for the purchases of firearms. On December 6, 2022, a state circuit court judge in Oregon temporarily blocked the enforcement of such legislation and later granted a permanent injunction on November 21, 2023. TheOn March 12, 2025, the Oregon Court of Appeals reversed the state Circuit Court judge’s permanent injunction, holding that the ballot measure was also being challenged in afact relatedfacially caseconstitutional inunder federalOregon's courtstate andconstitution. wasThe onOregon appealCourt toof Appeals ordered the Ninth Circuit Court of Appeals. However, duejudge to enter a declaratory judgment consistent with the recent rulingCourt of Appeals’ decision. The plaintiffs filed a similarpetition capacityfor restrictionreview case in California (Duncan vs. Bonta),before the Oregon federalSupreme courtCourt on April 14, 2025, preventing the Circuit Court judge from entering the declaratory judgment pending a decision of the Oregon Supreme Court on whether to grant the petition for review. On June 12, 2025, the Oregon Supreme Court granted the petition for review. We anticipate a decision in the case will likely be remandedrendered by the Oregon Supreme Court in late 2026. The permanent injunction entered by the Circuit Court Judge will continue to remain in effect pending the lowerdecision court.of the Oregon Supreme Court in this case.

Recently,We oncurrently Marchoperate 12,eight 2025,stores in the State of Oregon. If the Oregon Supreme Court upholds the Oregon Court of Appeals ruledMarch that12, 2025 order and the ballot measure is constitutional under Oregon's state constitution and gave the plaintiffs 35 daysallowed to appealtake the decision. As a result,effect, sales of firearms in Oregon may be halted or substantially diminished untilunless all permitting and training programs are fully developed by the state and/or law enforcement agencies.agencies at the time the ballot measure takes effect. If thatdelays werein toestablishing such permitting and training programs occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which couldwould have a substantialsignificantly impact on our sales and gross margin. AIt pendingis billstill inunclear thewhat Oregon House (HB 3075) seeks to delay the implementation of the permitting requirement until July 2026 and provides for certain exemptions (notably for law enforcement and military members). We currently operate eight stores inmeasures the State of Oregon.Oregon has undertaken thus far to set up the permitting and training infrastructure called for in the ballot measure.

We have incurred, and may incur in the future, costs from litigation involving products that we sell, particularly firearms and ammunition, which could adversely affect our net sales and profitability.

We mayhave incurbeen damages duesubject to lawsuits involving the products we sell, including lawsuits relating to firearms, ammunition, tree stands and archery equipment. We have incurred, and may incur lossesin duethe to lawsuits, including potential class actions, relating to our performance of background checks on firearms purchases and compliance with other sales laws as mandated by state and federal law. We may also incurfuture, losses from lawsuits relating to the improper use of firearms or ammunition sold by us, including lawsuits by municipalities or other organizations attempting to recover costs from manufacturers and retailers of firearms and ammunition. ForWe instance,may inalso Julyincur 2019,losses thedue estateto lawsuits, including potential class actions, relating to our performance of background checks on firearms purchases and familycompliance ofwith aother victimsales oflaws theas Routemandated 91by Harvest Festival shooting filed litigation against 16 defendants, including us, for wrongful deathstate and negligence.federal This litigation was dismissed in March of 2022, with a finding of no liability for the Company.law. Our insurance coverage, as well as the insurance provided by our vendors for certain products they sell to usus, may be inadequate to cover claims and liabilities related to products that we sell. In addition, claims or lawsuits related to products that we sell, or the unavailability of insurance for product liability claims, could result in the elimination of these products from our product line, thereby reducing net sales. If one or more successful claims against us are not covered by or exceed our insurance coverage, or if insurance coverage is no longer available, our available working capital may be impaired and our operating results could be materially adversely affected. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our profitability and on future premiums we would be required to pay on our insurance policies.

Our retail-based business model is impacted by general economic and market conditions, such as elevated interest rates andrates, inflationary pressures,pressures and economic, market and financial uncertainties that may cause a decline in consumer spending, that may adversely affect our business, operations, liquidity, financial results and stock price.

DuringSince fiscal yearsyear 2024 and 20232023, we sawhave experienced decreased revenue and operated at a net loss as a result of elevated inflationarymacroeconomic pressures on our consumersconsumers’ discretionary spending, asincluding wellinflationary as,pressures, elevated interest rates and higher energy costs and fuel prices. As a retail business that depends on consumer discretionary spending, we may continue to be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of job losses, bankruptcies, higher consumer debt and interest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, fluctuations in home prices and other adverse conditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates, uncertainty due to potential national or international security concerns, adverse or unseasonal weather conditions and uncertainty related to any health crisis. If we are required to close a large portion of our stores or we experience an acceleration of reduced store traffic, in each case, whether as a result of a pandemic, evolving macroeconomic conditions or geopolitical events, or otherwise, we may need additional liquidity to maintain our operations depending on how long these events impact our operations. Such events could adversely impact our sales and/or causecould result in the temporarypermanent closure of some of our stores. Decreases in same store sales, customer traffic to our stores and e-commerce site or average ticket sales negatively affect our financial performance, and a prolonged period of depressed consumer spending could have a material adverse effect on our business. Promotional activities, vendor incentives, and decreased demand for consumer products could affect profitability and margins. In addition, adverse economic conditions may result in an increase in our operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities. Due to fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results to be expected in future periods. Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price.

The outdoor activities and sporting goods market is highly fragmented and competitive. Some of our competitors have a larger number of stores, and greater market presence (both brick and mortar and online), name recognition and financial, distribution, marketing and other resources than we have. Other competitors have recently announced strategic partnerships with retailers that will allow those competitors to enter our markets that they historically have not competed in. As a result of this competition, we may need to spend more on advertising and promotion than we anticipate. In addition, the ability of consumers to compare prices on a real-time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive pricing. If our competitors reduce their prices, we may have to reduce our prices in order to compete, which could harm our margins. Furthermore, some of our competitors may build new stores in or near our existing locations or in locations with high concentrations of our e-commerce business customers. As a result of this competition, we may need to spend more on advertising and promotion. Some of our mass merchandising competitors, such as Walmart,competitors do not currently compete in many of the product lines we offer. However, if these competitors were to begin offering a broader arrayassortment of competing products or partner with our competitors to offer such products, or if any of the other factors listed above occurred, our net sales could be reduced or our costs could be increased, resulting in reduced profitability.

Our business depends on our ability to effectively manage our inventory. We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes. We continue to experience elevated levels of inventory shrink relative to historical levels, which has adversely affected, and could continue to adversely affect, our results of operations and financial condition. Inventory shrink declined in fiscal year 2025 as a result of actions we have taken to reduce shrink, but inventory levels remain above historical norms, and there can be no assurance that shrink will not increase in future periods. To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, customer experience, and results of operations. In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-term assets.

Freight costs represent a significant portion of the cost of our products. We have experienced highly variable transportation and logistics costs over the last fourfive years. While moderating in fiscal year 2024,2025, we believe dynamic conditions may continue in future fiscal years. Freight rates on our products are affected by a myriad of factors, including the global economy, tariffs, petroleum prices, carrier labor relations, congestion at U.S. ports and ocean freight carrier capacity.

Political and economic uncertainty and unrest in foreign countries where our merchandise vendors are located and trade restrictions, including new tariffs and duties upon imports from these foreign countriescountries, could adversely affect our ability to source merchandise and operating results.

The new U.S. presidential administration has imposed additional tariffs, duties and trade restrictions on imports into the United States from Canada,numerous China and Mexico,countries, which could lead to increased expenses and delays in shipments. Foreign governments, including China and Canada, and trading blocs, such as the European Union, have responded by imposing or increasing tariffs, duties and trade restrictions on U.S. goods. Any trading conflict and related escalating governmental actions that result in additional tariffs, duties and trade restrictions could cause a disruption or delay of imports from foreign locations and likely increase the cost or reduce the supply of merchandise available to us which would adversely affect our operating results.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). Numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the CCPA imposes obligations on covered businesses regarding their processing of personal data and provides for fines and a private right of action for certain data breaches. Similar laws are being considered in several other states, as well as at the federal and local levels,level, and we expect more states to pass similar laws in the future. Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data. For example, some of our data processing practices have been and may in the future be subject to challenges or lawsuits under data privacy and communications laws, including for example under wiretapping laws. Our inability or failure to do so could result in adverse consequences, such as threats of class-action litigation alleging violations of wiretapping laws.

Our outfitters and personnel use generative artificial intelligence (“AI”) and/or automated decision-making technologies to perform their work, and the disclosure and use of personal data in generative AI technologies isare subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws and regulations regulating generativeAI AI.and/or automated decision-making technologies. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generativeAI AI,and/or automated decision-making technologies, it could make our business less efficient and result in competitive disadvantages.

Our expansionlong-term intostrategy includes opening new stores. If we open new stores, in particular in new, unfamiliar markets presentsto us, increased risks thatrelated to operating new stores may prevent us from being profitable in these newthose markets.

Part of our long-term strategy is to continue to expand by opening new storesstores. andIn inthe recent years,past, some of our new stores have not initially generated four-wall Adjusted EBITDA margins and returns on invested capital that we have historically experienced. Opening new stores presents increased risks, especially when we expand into new markets. For instance, in new markets, we will have less familiarity with local customer preferences and may encounter difficulties in attracting customers due to a reduced level of customer familiarity with our brand. Other factors that may impact our ability to open or acquire stores in new markets and operate them profitably, many of which are beyond our control, include:

Our e-commerce business is an important element of our brand and relationship with our customers, and we expect it to continue to grow. Our website operates on a cloud platform with autoscaling capability, designed to significantly increasingincrease capacity and efficiency. E-commerce continues to be a rapidly growing sales channel for our business and an increasing source of competition in our industry. If we are unable to continue to successfully develop and maintain our omni-channel platform, we may not be able to compete effectively and our sales and profitability may be adversely affected. Our future success could also be adversely affected if we are unable to identify and capitalize on retail trends, including various technology, e-commerce and other process efficiencies to gain market share and better service our customers.

In addition, many of our competitors already have e-commerce businesses that are substantially larger and more developed than ours, which places us at a competitive disadvantage. There are also regulatory restrictions on the online sale of a portion of our product offerings, such as ammunition, certain cutlery, firearms, propane and reloading powder. If we are unable to expand our e-commerce business, our growth plans may suffersuffer, and the price of our common stock could decline.

We are also vulnerable to additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other technical failures, security incidents, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities. Our actual or perceived failure to successfully respond to these risks and uncertainties could reduce our e-commerce same store sales, increase our costs, diminish our growth prospects and damage our brand, which could negatively impact our results of operations and stock price.

These threats include but are not limited to social-engineering attacks (including through deep fakes, which may be increasingly difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI (such as using AI to develop malicious code or launch sophisticated phishing attempts), telecommunications failures, and other similar threats. In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Remote work has increased risks to our information technology systems and data, as more of our outfitters utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We have not been, and may not in the future, be able to detect and/or remediate all such vulnerabilities or on a timely basis. For example, we have presently identified high and critical vulnerabilities in certain of our legacy information systems.systems, including end-of-life systems that are difficult to patch, for which remediation options may be constrained despite the implementation of mitigating controls (including ring fencing). There can be no assurance that the vulnerability mitigation measures we have taken will be effective against thesuch identified vulnerabilities. Further, we have experienced (and may in the future experience) delays in developing and deploying remedial measures designed to address any such identified vulnerabilities, which could be exploited and result in a security incident.

Any of the previously identified or similar threats couldhave causecaused, and may in the future cause, a security incident or other interruption that couldhas resultresulted, and may in the future result, in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our products and services.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that revealsreveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive data of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our outfitters’, personnel’s, or vendors’ use of generative AI technologies.

Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operation of our computer hardware and software systems. We use third-party management information systems to track inventory information at the store level, communicate customer information and aggregate daily sales, margin and promotional information. These systems are vulnerable to damage or interruption from natural disasters, power loss, computer system failures, telecommunications failures, misappropriation and similar events, including those addressed in “Risks Related to Our Business Strategy—If our information technology systems, or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences.consequences”, any of which could disrupt our operations and result in reduced sales. Furthermore, we centralize most of our computer systems in our support and distribution centers and it is possible that an event, natural disaster, or other interruption at either office could materially and adversely affect the performance of our company and the ability of each of our stores to operate efficiently.

Over time, we expect to expand the size of our retail store network in new and existing markets. As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth. We cannotmay assure you that we willnot be able to retain the personnel or make the changes in our systems that may be required to support our growth. Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results. In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expendituresexpenditure and other increased costs that could also have a material adverse impact on our operating results.

We have been increasing our utilization of machine learning and other types of AI (collectively, “AI/ML”) in our business and we anticipate that as technology advances, we maywill continue to expand our application of AI/ML, including generative AI. AI/ML may become more important to our operations over time as we increase reliance on AI/ML throughout our operations and administration. The rapid evolution of AI/ML technology and potential regulation of AI/ML may require that we expend significant resources to develop, test and maintain our implementation of AI/ML. Our competitors may incorporate AI/ML into their businesses faster or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, if the information generated through our use of AI/ML is or is deemed to be deficient, inaccurate or biased, our business, financial condition, and results of operations may be adversely affected.

Our existing debt obligations are variable rate obligations with interest and related payments that vary with the movement of certain indices, and in the future, we may incur additional indebtedness in connection with the entry into new credit facilities or the financing of any acquisition. If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations under our revolving credit facility and term loan facility. This increased cost could make the financing of any acquisition more costly, as well as lower our current period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. All of our debt outstanding under our credit agreement as of FebruaryJanuary 1,31, 20252026 bears interest at a floating rate that uses the Secured Overnight Financing Rate ("“SOFR"”) as the applicable reference rate to calculate the interest. Due to increased federal reserve rates weWe experienced elevated interest rates in fiscal years 2022,2023, 20232024 and 20242025 and anticipate that interest rates will remain elevated during fiscal year 2025.2026.

establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.

The price of our common stock is volatile and may fluctuate significantly. During our fiscal year ended FebruaryJanuary 1,31, 2025,2026, the closing price of our stock ranged from a high of $4.18$4.16 per share to a low of $1.82$0.95 per share. Volatility in the market price of our common stock may prevent our stockholders from being able to sell their common stock at or above the prices they paid for their common stock. The market price for our common stock could fluctuate significantly for various reasons, including, among other things, our operating and financial performance; conditions that impact demand for our products; the public’s reaction to our press releases or other public announcements; changes in earnings estimates or recommendations by securities analysts; market and industry perception of our success, or lack thereof, in pursuing our growth strategy; strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; actual or anticipated changes in federal and state government regulation, including regulations related to the sale of firearms and ammunition; sales of common stock by us or members of our management team; and changes in general market, economic and political conditions in the United States, including those resulting from natural disasters, health crises or pandemics, terrorist attacks, acts of war and responses to such events.

We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2024,2025, 20232024 and 20222023 ended on January 31, 2026, February 1, 2025,2025 and February 3, 2024 and January 28, 2023,2024, respectively. Each of fiscal years 20242025 and 20222024 contained 52 weeks of operation and fiscal year 2023 contained 53 weeks of operations.

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net (loss) income plus interest expense, income tax expense (benefit) expense,, depreciation and amortization, stock-based compensation expense, executive transition and severance costscosts, relatedimpairment to directorcosts, and officer transitions, andother expenses that we do not believe are indicative of our ongoing expenses.

Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform. When measuring revenue generated from our stores, we review our same store sales as well as the performance of our stores that have not operated for a sufficient amount of time and include each in same store sales. We include net sales from a store in same store sales on the first day of the 13th full fiscal month following the store’s grand opening or acquisition by us. We exclude sales from stores that were closed during the period from our same store sales calculation. We include net sales from e-commerce in our calculation of same store sales. For fiscal years consisting of 53 weeks, we exclude net sales during the identified non-comparable53rd week from our calculation of same store sales. For the fiscal year 2024 same store sales comparison to fiscal year 2023, we have excluded sales from the first week of fiscal year 2023. For the fiscal year 2023 same store sales comparison to fiscal year 2022, we have excluded the 53rd week from fiscal year 2023. Some of our competitors and other retailers may calculate same store sales differently than we do. As a result, data regarding our same store sales may not be comparable to similar data made available by other retailers.

Recently,We oncurrently Marchoperate 12,eight 2025,stores in the State of Oregon. If the Oregon Supreme Court upholds the Oregon Court of Appeals ruledMarch that12, 2025 order and the ballot measure is constitutional under Oregon's state constitution and gave the plaintiffs 35 daysallowed to appealtake the decision. As a result,effect, sales of firearms in Oregon may be halted or substantially diminished untilunless all permitting and training programs are fully developed by the state and/or law enforcement agencies.agencies at the time the ballot measure takes effect. If thatdelays werein toestablishing such permitting and training programs occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which couldwould have a substantialsignificantly impact on our sales and gross margin. It is still unclear what measures the State of Oregon has undertaken thus far to set up the permitting and training infrastructure called for in the ballot measure.

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear,fishing, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Our ability to properly manage our inventory can also impact our gross margin. We focus our buying on core items, high-turning products and seasonally relevant merchandise, particularly in ammunition, fishing, camping and personal protection, as these are areas where customer demand is more predictable and where having products in stock matters most to our customers. Successful inventory management ensures we have sufficient high margin products in stock at all times to meet customer demand, while overstocking of items couldcan lead to markdowns in order to help a product sell. DuringThis is especially true with respect to our more in demand inventory, with approximately 40% of our products accounting for approximately 80% of our net sales. We ended fiscal year 2023,2025 wewith commenced$29.1 anmillion effort to reduce ourless inventory andthan initiated various strategic promotional efforts as part of this plan, which impacted our gross margins during fiscal year 2023. Atat the end of fiscal year 2023, we completed our inventory reduction plan. During fiscal year 2024, elevatedan inflation8.5% continued to adversely impact our gross margins.decrease. We believe thatthis thereflects overallour disciplined inventory management and positions us well to support growth ofin our businesskey cancategories alsowhile helpcontinuing to improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. If we see significant declines in sales or increases in overstocked inventory, we may experience a decline in gross margins as we use promotions to drive trafficproductivity and reduceinventory inventory.turns.

Income from operations is gross profit less selling, generalgeneral, and administrative expenses. We use income from operations as an indicator of the productivity of our business and our ability to manage selling, generalgeneral, and administrative expenses.

We define Adjusted EBITDA as net (loss) income plus interest expense (benefit),expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, executive transition and severance costscosts, relatedimpairment to director and officer transitions,costs, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses. We define Adjusted EBITDA margin asas, for any period, the Adjusted EBITDA divided by net sales. In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. See “—Non-GAAP Financial Measures."

Our Fishing department saw a net sales increase of $8.6 million during fiscal year 2024 compared to fiscal year 2023, primarily driven by our reset of fishing inventory. Our Hunting and Shooting,Shooting Sports, Apparel, Footwear, Camping and Optics, Electronics, Accessories and Other departments saw decreases in net sales of $51.5 million, $23.6 million, $18.2 million, $4.1 million and $1.4 million, respectively, for fiscal year 2024 compared to fiscal year 2023. These decreases were primarily driven by the continued impact of consumer inflationary pressures and recessionary concerns on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations in fiscal year 2024. Within our Hunting and Shooting Sports department, sales from our firearms and ammunition categories decreased by $14.5 million and $22.2 million, or 4.8% and 11.0%, respectively, for fiscal year 2024 compared to fiscal year 2023. These decreases were primarily driven by consumer inflationary pressures on discretionary spending and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations for fiscal year 2024.

Our Fishing department saw increased same store sales of 6.2% during fiscal year 2024 as compared to fiscal year 2023. Our Apparel, Footwear, Hunting and Shooting,Shooting Sports, Camping, and Optics, ElectronicsElectronics, Accessories and Other departments saw decreased same store sales of 21.3%, 19.7%, 7.8%, 3.4%, and 2.4%, respectively. Firearms and ammunition same store sales, included within our Hunting and Shooting Sports department, decreased by 7.3% and 12.6%, respectively, for fiscal year 2024 compared to fiscal year 2023. As fiscal year 2023 contained 53 weeks of operations, we have excluded net sales during the first week of fiscal year 2023 from our calculation of same store sales.

Net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters because of the openings of hunting seasons across the country and consumer holiday buying patterns. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern. On average, over the last three fiscal years, we have generated approximately 26.4%27.0% and 28.0%28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season. We anticipate our net sales will continue to reflect this seasonal pattern. However, Spring hunting, Father's Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.

As of FebruaryJanuary 1,31, 2025,2026, we had cash and cash equivalents of $2.8$1.7 million and working capital, consisting of current assets less current liabilities, of $82.0$88.7 million. We also had $128.3$106.1 million available for borrowing under our senior secured revolving credit facility and our term loan facility as of FebruaryJanuary 1,31, 2025,2026, calculated based upon certainon borrowing base restrictions for each of the revolving credit facility and term loan facility. Our $20 million availability under our term loan was scheduled to expire on April 30, 2025 and we recently extended the expiration to July 31, 2025.

Our primary cash requirements are for seasonal working capital needs, capital expenditures related to ongoing operational needs and new system investments. For both the short-term and the long-term, our primary sources of cash are borrowings under our senior secured revolving credit facility and operating cash flows. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities and meet our cash requirements for at least the next twelve months and beyond. With only oneno new storestores planned for fiscal year 2025,2026, we intend to prioritize the repayment of outstanding debt with any excess cash flow.

Operating Lease Obligations. Operating leaseLease commitments consist principally of leases for our retail stores, corporate office and distribution center.center and equipment at our retail locations. Our leases often include options which allow us to extend the terms beyond the initial lease term. For fiscal year 2025,2026, our expected operating and finance lease payments will be $73.4$76.0 million and our total committed operating and finance lease payments are $460.8$421.5 million as of FebruaryJanuary 1,31, 2025.2026. Other operating lease obligations consist of distribution center equipment. See Note 5 to our Consolidated Financial Statements for further discussion on our leases.

Capital Expenditures. For fiscal year 2024,2025, we incurred approximately $14.6$19.5 million in capital expendituresexpenditures, net of tenant allowances, primarily related to strategic technological investments and general store maintenance. We expect capital expenditures net of tenant allowances,allowances to be between $20 million and $25 million for fiscal year 20252026, primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Principal and Interest Payments. We maintain a $350.0 million revolving credit facility and a $45.0 million term loan facility. As of FebruaryJanuary 1,31, 2025,2026, $88.3$57.9 million was outstanding under the revolving credit facility and $25.0$44.1 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility and our term loan facility after FebruaryJanuary 1,31, 2025,2026, our interest payments would be approximately $7.7$7.4 million for fiscal year 2025, in each case,2026 based on the interest rate as of FebruaryJanuary 1,31, 2025.2026. As of FebruaryJanuary 1,31, 2025,2026, our weighted average interest rate on the amounts outstanding under our revolving credit facility and our term loan facility was 6.78%.7.15%. See “—Indebtedness” below for additional information regarding our revolving credit facility and term loan facility, including the interest rate applicable to any borrowing under such facilities.

Net cash provided by operating activities was $34.1$31.3 million for fiscal year 2024,2025, compared to net cash provided by operating activities of $52.3$34.1 million for fiscal year 2023,2024, a change of approximately $18.2$2.8 million. The decrease in our cash flows provided by operating activities was primarily thedriven resultby timing of ourreceipts inventoryof reduction plan implemented during fiscal year 2023.inventory.

Net cash used in investing activities was $22.4 million for fiscal year 2025 compared to $14.5 million for fiscal year 2024 compared to $79.9 million for fiscal year 2023.2024. For fiscal year 2024,2025, we incurred capital expenditures in connection with opening a new store, strategic technological investments, and store fleet maintenance. Our cash flows used in investing activities in fiscal year 2024 primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. Our cash flows used in investing activities in fiscal year 2023 primarily related to costs incurred in connection with opening new stores and the refurbishment of existing stores.

Net cash used in financing activities was $10.1 million for fiscal year 2025 compared to net cash used in financing activities of $20.0 million for fiscal year 2024 compared to net cash provided by financing activities of $28.4 million for fiscal year 2023,2024, a changedecrease of approximately $48.4$9.9 million. The increase in cash used in financing activities was primarily driven by our reduction of borrowings under our revolving credit and term loan facilities.

We maintain a $350.0 million revolving credit facility, with $88.3$57.9 million outstanding as of FebruaryJanuary 1,31, 2025.2026, and have an outstanding term loan with $44.1 million outstanding as of January 31, 2026. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National AssociationAssociation. (“WellsOur Fargo”).term Weloan additionallyis enteredgoverned intoby aan ABL term loan credit facility on July 30, 2024agreement with anPLC aggregateAgent, principalLLC, amountas availableadministrative ofand $45.0collateral million,agent for various lenders affiliated with $25.0Pathlight millionCapital. outstandingAvailable as of February 1, 2025. Borrowingsborrowings under our revolving credit facility and term loan facility are subject to a borrowing base calculation. As of FebruaryJanuary 1,31, 2025,2026, we had an aggregate amount of $128.3$106.1 million available for borrowing under our revolving credit facility and our term loan facility, calculated based upon certain borrowing base restrictions, and $2.0$3.0 million in stand-by commercial letters of credit. Our $20 million availability under our term loan was scheduled to expire on April 30, 2025 and we recently extended the expiration to July 31, 2025.

Our revolving credit facility and term loan facility each require us to maintain a minimum availability at all times of not less than the greater of $30.0 million and 10% of the gross borrowing base. In addition, the credit agreements governing each of our revolving credit facility and our term loan facility contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The revolving credit facility and term loan facility also contain customary events of default, including defaults triggered by defaults under the other facility. As of FebruaryJanuary 1,31, 2025,2026, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.

Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method. We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience. We also adjust inventory for obsolete or slow-moving inventory based on inventory productivity reports and by specific identification of obsolete or slow-moving inventory. Had our estimated inventory reserves been lower or higher by 10% as of FebruaryJanuary 1,31, 2025,2026, our cost of sales would have been correspondingly lower or higher by approximately $0.5 million.

ValuationImpairment of Long-Lived Assets

Our business continues to face widespread macroeconomic uncertainties, including the impact of changes to international trade policies and increased tariff rates, inflation, elevated interest rates, elevated fuel prices, recession risks and rising global political tensions. We continue to monitor the potential impact of these broader consumer spending pressures on our business. While we cannot predict the ultimate impact of such uncertainties on our financial results for fiscal year 2026 and beyond, we believe these factors couldhave affected and may continue to affect our sales in fiscal year 2026. We remain measured in our outlook for the year.

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross profit, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs and executive retention costs.

macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraineinternational conflictconflicts and rising global political tensions;

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly fishing, improving our seasonal inventory efficiency, strategic buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Successful inventory management ensures we have sufficient high margin products in stock to meet customer demand, while overstocking of items can lead to aggressive markdowns in order to help a product sell. We ended our second fiscal first quarter of 2026 with $25.1$44.5 million less inventory than at the end of the second fiscal first quarter of 2025, a 6.1%10.0% decrease. We believe this reflects our disciplined inventory management and positions us well to support growth in our key categories while continuing to improve productivity and inventory turns.

Thirteen Weeks Ended MayAugust 2,1, 2026 Compared to Thirteen Weeks Ended MayAugust 3,2, 2025

Net Sales and Same Store Sales. Net sales increased by $7.0$1.7 million, or 2.8%,0.6%, to $256.1$295.6 million during the 13 weeks ended MayAugust 2,1, 2026 compared to $249.1$293.9 million in the corresponding period of fiscal year 2025. Our net sales increased primarily due to sales growth in our Hunting and Shooting Sports and Fishing departments.department. Hunting and Shooting Sports increases were led by firearms, ammunition, and less-lethal personal protection, partially aided by external event-driven demand. Fishing increases were driven by seasonal demands as customers prepared for the spring fishing season. These increases were partially offset by decreases in net sales across other departments, reflecting continued pressure on the U.S. consumer and adrought strategicconditions pullin downthe ofwestern inventoryUnited to align our complementary categories with our core pursuits.States. E-commerce driven sales comprised approximately 23%19% of total sales for the 13 weeks ended MayAugust 2,1, 2026. Same store sales increasedremained by 2.1%flat during the 13 weeks ended MayAugust 2,1, 2026 compared to the corresponding 13 weeks ended May 3, 2025, primarily as a resultperiod of thefiscal factorsyear discussed above that impacted net sales.2025.

Our Hunting and Shooting Sports and FishingOptics, Electronics, Accessories and Other departments saw net sales increases of $11.7$11.1 million and $1.8$0.1 million, respectively, during the 13 weeks ended MayAugust 2,1, 2026 compared to the corresponding period of fiscal year 2025 primarily driven by increases in firearms, ammunition, and less-lethal personal protection, with some additional event-driven demand. Our Camping, Footwear, Apparel and Optics, Electronics, Accessories and OtherFishing departments saw net sales decreases of $2.9$4.4 million, $2.4 million, $1.6 million, $1.3 million and $0.8$1.0 million, respectively, during the 13 weeks ended MayAugust 2,1, 2026 compared to the corresponding period of fiscal year 2025. These decreases reflect continued pressure on the U.S. consumer and adrought strategicconditions pullin downthe ofwestern inventoryUnited to align our complementary categories with our core pursuits.States. Within our Hunting and Shooting Sports department, sales from our ammunitionfirearm and firearmammunition categories increased by $5.4$5.2 million and $3.9 million, or 12.8%8.7% and 5.4%,9.9%, respectively, for the firstsecond quarter of fiscal year 2026 compared to the corresponding fiscal period of 2025. The increase in these categories was primarily due to our change to every day low pricing in key product groups within the ammunition category, our bulk unit ammunition strategy, and improved in-stocks on core products.products and event-driven demand.

With respect to same store sales, during the 13 weeks ended MayAugust 2,1, 2026, our Hunting and Shooting Sports and FishingOptics, Electronics, Accessories and Other departments saw increases of 6.3%6.7% and 5.7%,1.0%, respectively, compared to the corresponding period of fiscal year 2025. Our Footwear, Camping, Footwear, Apparel and Optics, Electronics, Accessories and OtherFishing departments saw same store sales decreases of 14.0%,13.8%, 12.3%,10.7%, 9.3%8.9% and 1.8%,2.0%, respectively, during the 13 weeks ended MayAugust 2,1, 2026 compared to the corresponding period of fiscal year 2025. These changes were primarily driven by the items noted above for net sales. As of MayAugust 2,1, 2026, 146 stores were included in our same store sales calculation.

Gross Profit. Gross profit increased by $0.2$2.1 million, or 0.2%,2.2%, to $75.8$96.0 million during the 13 weeks ended MayAugust 2,1, 2026 compared to $75.6$93.9 million for the corresponding period of fiscal year 2025. As a percentage of net sales, gross profit decreasedincreased to 29.6%32.5% during the 13 weeks ended MayAugust 2,1, 2026, compared to 30.4%32.0% for the corresponding period of fiscal year 2025 primarily driven by reduced freight from improved inventory management and a one-time tariff benefit, partially offset by category mix and lower sales in higher margin categories.shift.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses slightly decreased by $1.4 million, or 1.4%, to $93.9$97.1 million during the 13 weeks ended MayAugust 2,1, 2026, compared to $95.3$97.2 million for the corresponding period of fiscal year 2025.2025, Thisdriven decrease was primarily the result ofby a decrease in depreciation expense, which was offset by increases in payroll expense of $1.4 million as we emphasize disciplined cost control and decreased depreciation expense of $1.2 million during the 13 weeks ended May 2, 2026.rent. As a percentage of net sales, selling, general, and administrative expenses decreased to 36.7%32.9% of net sales in the firstsecond quarter of fiscal year 2026, compared to 38.2%33.1% of net sales in the firstsecond quarter of fiscal year 2025, as a result of the factors noted above.2025.

Interest Expense. Interest expense decreased by $0.3$0.5 million, or 11.7 %,12.3%, to $2.6$3.3 million during the 13 weeks ended MayAugust 2,1, 2026, compared to $3.0$3.8 million for the corresponding period of fiscal year 2025. The decrease in interest expense was primarily driven by reduced debt during the firstsecond quarter of fiscal year 2026 compared to the corresponding period of fiscal year 2025.

Income Taxes. We recognized income tax expense of $1.0$0.0 million during the 13 weeks ended MayAugust 2,1, 2026 compared to an income tax benefitexpense of $1.3$0.1 million during the corresponding period of fiscal year 2025. Our effective tax rates during the 13 weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025 were -5.0%0.2% and 5.9%,-1.4%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters because of the openings of hunting seasons across the country and consumer holiday buying patterns. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern. On average, over the last three fiscal years, we have generated approximately 27.0% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season. We anticipate our net sales will continue to reflect this seasonal pattern. However, Spring hunting, Father’s Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.

As of MayAugust 2,1, 2026, we had cash and cash equivalents of $2.1$2.0 million and working capital, consisting of current assets less current liabilities, of $61.9$60.9 million. We also had $114.6$103.0 million available for borrowing under our senior secured revolving credit facility as of MayAugust 2,1, 2026, calculated based upon borrowing base restrictions under our revolving credit facility.

Lease Obligations. Lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term. As of MayAugust 2,1, 2026, our expected operating and finance lease payments for the remainder of fiscal year fiscal year 2026 are $57.6$38.6 million and $0.3$0.2 million, respectively. Our total committed operating and finance lease payments are $416.1$398.6 million. Other operating lease obligations consist of distribution center equipment. See Note 6, “Leases” to our unaudited condensed consolidated financial statements included in this 10-Q.

Capital Expenditures. During the 1326 weeks ended MayAugust 2,1, 2026, we incurred approximately $4.2$7.7 million in capital expenditures, net of tenant allowances, primarily related to strategic technological investments and general store maintenance. We expect capital expenditures net of tenant allowances to be between $20 million and $25 million for fiscal year 2026 (inclusive of amounts spent during the 1326 weeks ended MayAugust 2,1, 2026) primarily related to strategic technological investments, such as store scheduling tools and loyalty program technology, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Principal and Interest Payments. We maintain a $350.0$315.0 million revolving credit facility and a $45.0 million term loan facility. As of MayAugust 2,1, 2026, $118.9$138.7 million was outstanding under the revolving credit facility and $45.0 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility after MayAugust 2,1, 2026, our interest payments would be approximately $8.3$6.2 million for the remainder of fiscal year 2026, based on the interest rate as of MayAugust 2,1, 2026. As of MayAugust 2,1, 2026, our weighted average interest rate on the amounts outstanding under our revolving credit facility and term loan facility was 6.74%.6.76%. See below under “Indebtedness” for additional information regarding our revolving credit facility and term loan facility, including the interest rates applicable to any borrowing under such facilities.

Net cash used in operating activities was $55.4$67.4 million for the 1326 weeks ended MayAugust 2,1, 2026, compared to net cash used in operating activities of $60.2$86.8 million for the corresponding period of fiscal year 2025, a decrease of approximately $4.8$19.4 million. The decrease in our cash flows used in operating activities was primarily driven by the timing ofreduced inventory purchases and the resulting payments related to accounts payable during the 1326 weeks ended MayAugust 2,1, 2026 compared to the corresponding period of fiscal year 2025.

Net cash used in investing activities was $4.2$7.7 million for the 1326 weeks ended MayAugust 2,1, 2026, compared to net cash used in investing activities of $3.8$11.2 million for the corresponding period of fiscal year 2025, ana increasedecrease of approximately $0.4$3.5 million, which was primarily driven by increaseddecreased capital expenditures related to the timing of technical investments and fleetno maintenancenew store openings during the 1326 weeks ended MayAugust 2,1, 2026 compared to the corresponding period of fiscal year 2025.

Net cash provided by financing activities was $60.0$75.5 million for the 1326 weeks ended MayAugust 2,1, 2026, compared to net cash provided by financing activities of $64.8$96.9 million for the corresponding period of fiscal year 2025, a decrease of approximately $4.8$21.5 million. The decrease in cash provided by financing activities was primarily the result of lower borrowings on our revolving credit facility.

We maintain a $350.0$315.0 million revolving credit facility, with $118.9$138.7 million outstanding as of MayAugust 2,1, 2026. Our revolving credit facility (the “Revolving Line of Credit”) is governed by an amended and restated credit agreement (as amended, the “Amended Credit Agreement”) with Sportsman’s Warehouse, Inc. (“SWI”), a consortiumwholly owned subsidiary of banksHoldings, ledas bylead borrower, Holdings, and other subsidiaries of Holdings, each as borrowers, and Wells Fargo Bank, National Association (“Wells Fargo”)., as administrative agent, collateral agent, swing line lender, letter of credit issuer and lender, with a consortium of banks led by Wells Fargo. Our $45.0 million term loan facility (the “Term Loan Facility”) is governed by an ABL term loan credit agreement (as amended, the “A&R Term Loan Agreement”) with SWI, as lead borrower, Holdings, as guarantor, and other subsidiaries of Holdings, each as borrowers, and PLC Agent,Agent LLC, as administrative and collateral agent for various lenders affiliated with Pathlight Capital. Available borrowings under our revolving credit facility are subject to a borrowing base calculation.lenders. As of MayAugust 2,1, 2026, we had an aggregate amount of $114.6$103.0 million available for borrowing under our revolving credit facility, calculated based upon certain borrowing base restrictions, and $3.0$5.4 million in stand-by commercial letters of credit. We have $45.0 million of term loans outstanding and no remaining amounts available for borrowing under our term loan facility.

The Revolving Line of Credit has a maturity of June 18, 2031. Borrowings under the revolvingRevolving creditLine facilityof Credit bear interest based on either the base rate or Term SOFR (as defined byin the creditAmended agreementCredit governing the revolving credit facilityAgreement), at our option, in each case plus an applicable margin. The base rate is the greatest of (1) the floor rate (as defined in the creditAmended agreementCredit Agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the applicableAmended creditCredit agreementAgreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the applicableAmended creditCredit agreementAgreement) plus 1.00%. The applicable margin for loans under the revolvingRevolving creditLine facility,of Credit, which varies based on the average daily availability, ranges from 0.25%0.75% to 0.50%1.00% per year for base rate loans and from 1.35%1.75% to 1.60%2.00% per year for Term SOFR loans. We are required to pay a commitment fee for the unused portion of the revolvingRevolving creditLine facility,of Credit, which will range from 0.20%0.25% to 0.225%0.30% per annum, depending on the average daily availability under the revolvingRevolving creditLine facility.of Credit. The weighted average interest rate on the amounts outstanding under the Revolving Line of Credit as of August 1, 2026 and January 31, 2026 was 5.56% and 5.09%, respectively.

The A&R Term Loan Agreement has a stated maturity date of June 18, 2031. Borrowings under the termA&R loanTerm facilityLoan Agreement bear interest at a rate equal to (i) a specified term secured overnight financing rate (“SOFR”), plus (ii) 0.10% as a SOFR adjustment, plus (iii) the applicable margin as specified in the termA&R loan.Term Loan Agreement. The applicable margin means either 3.50%4.00% or 6.50%7.00% depending on the type of term loan. Under the termA&R loan,Term Loan Agreement, loans may be required to be converted to base rate loans and in such case, the applicable margin rate will increase by 1.0%.

Each of the subsidiaries of Holdings is a borrower under the revolvingRevolving creditLine facilityof Credit and the termTerm loanLoan facility,Facility, and all obligations under the revolvingRevolving creditLine facilityof Credit and the termTerm loanLoan facilityFacility are guaranteed by Holdings. All of the obligations under the revolvingRevolving creditLine facilityof Credit and the termTerm loanLoan facilityFacility are secured by a lien on substantially all of Holdings’ tangible and intangible working capital assets and the tangible and intangible working capital assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries. The lien securing the obligations under the revolvingRevolving creditLine facilityof Credit is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. The lien securing the obligations under the termTerm loanLoan facilityFacility is a first priority lien as to equipment, fixtures, intellectual property and equity interests.

WeSWI and the other borrowers may be required to make mandatory prepayments under the revolvingRevolving creditLine facilityof Credit and the termTerm loanLoan facilityFacility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.

OurThe revolvingAmended creditCredit facilityAgreement and termA&R loanTerm facilityLoan Agreement each require us to maintain a minimum availability at all times of not less than the greater of $30.0 million and 10% of the gross borrowing base. In addition, the creditAmended agreementsCredit governing each of our revolving credit facilityAgreement and ourA&R termTerm loanLoan facilityAgreement contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The revolvingAmended creditCredit facilityAgreement and termA&R loanTerm facilityLoan Agreement also contain customary events of default, including defaults triggered by defaults under the other facility. As of MayAugust 2,1, 2026, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.

In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net loss plus interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, management transition costs andcosts, executive retention costs.costs and legal accrual. Net income (loss) is the most comparable GAAP financial measure to Adjusted EBITDA. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.