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

If we are unable to successfully implement our long-term strategic plans and growth strategies, including Project Restoration,Sunshine, our future operating results could suffer.

The success of our long-term strategic plan and growth strategies, including Project Restoration,Sunshine, alone or collectively, will depend on various factors, including the appeal of our product designs, retail presentation to consumers, effectiveness of our marketing initiatives, realignment of our digital platforms and strategies, expense-saving initiatives, competitive conditions, and economic conditions. Project RestorationSunshine represents our businesscomprehensive strategy to revitalizestrengthen our consumer,market brand,position product,by andtapping channel components for both Vera Bradley and Pura Vida brands in order to serveinto our customers,brand’s growstrong ouremotional revenues,connection andwith increase our profitability.consumers. There is no assurance that we will be able to successfully implement our strategic plan and growth strategies. If we are unsuccessful in implementing some or all of our strategies or initiatives, our future operating results could be adversely impacted.

We currently sell our Vera Bradley-branded products into two segments: Direct to consumers through Vera Bradley full-line and outlet stores in the United States, the Vera Bradley websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com), typically the Vera Bradley annual outlet sale in Fort Wayne, Indiana as well as direct to consumer marketplaces; and through our Vera Bradley Indirect wholesale business which consists of sales to specialty retail locations, department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand. We currently sell Pura Vida-branded products direct to consumers through our e-commerce website (puravidabracelets.com), through wholesale retailers, and through our seven retail stores. These channels are sometimes in direct competition and sales through these channels may not be incremental to total sales. If our omni-channel distribution model is unsuccessful, our business, financial condition, and results of operations could be materially adversely affected.

Our long-term future growth prospects include our ability to successfully open new stores and operate new and current Vera Bradley and Pura Vida stores. In recent years, however, Vera Bradley comparable store sales have declined. Consequently, the rate at which we have opened new stores has slowed. We have closed a total of 7991 underperforming full-line stores and fourfive underperforming outlet stores since the beginning of fiscal 2015 and forecast that we will close additional underperforming full-line stores. We planwill toopportunistically openevaluate twonew additionalstore Veralocations Bradleyif storeswe duringcan fiscalobtain 2026.favorable locations and rental agreements. We will continue to evaluate our plans for store openings in future years in light of demand and store performance.

Our business depends on a strong brands.brand. If we are unable to execute our marketing strategies, intended to enhance our brands,brand, then revenues and our results of operations could be adversely impacted.

We believe that the brand images that we have developed have contributed significantly to the success of our business. We also believe that enhancing the Vera Bradley and Pura Vida brandsbrand through our marketing strategies is critical to maintaining and expanding our customer base. Enhancing our brandsbrand and implementing our marketing strategies may require us to make substantial investments in areas such as product design, store operations, store design, community relations, and marketing. These investments might not succeed. If we are unable to successfully execute our brand strategies, our results of operations could be adversely impacted.

We have closed a total of 7991 underperforming full-line stores and fourfive underperforming outlet stores since the beginning of fiscal 2015 and forecast that we will close additional underperforming stores. We could, in the future, decide to close additional stores beyond those currently forecasted that are producing losses or that are not as profitable as we expect. If we decide to close any stores before the expiration of their lease terms, we may incur payments to landlords to terminate or “buy out” the remaining term of the lease. We also may incur costs related to the employees at such stores, whether or not we terminate the leases early. Upon any such closure, the closing costs, including fixed assets and inventory write-downs, could adversely affect our results of operations and our cash on hand.

In our Vera Bradley Indirect business and Pura Vida wholesale business, we compete with numerous manufacturers, importers, and distributors of handbags, accessories, and other products for the limited space available for the display of such products to the consumer. In our Vera Bradley Direct business and Pura Vida e-commerce and retail store business, we compete against other gift and specialty retailers, department stores, catalog retailers, and Internet businesses that engage in the retail sale of similar products. Moreover, the general availability of contract manufacturing allows new entrants easy access to the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business.

Distribution operations for Vera Bradley-branded products are currently concentrated in a single, company-owned distribution center in Roanoke, Indiana. Pura Vida-branded products are primarily distributed from one third-party distribution center in Tijuana, Mexico.

We source our Vera Bradley raw materials primarily from various suppliers in Asia, with the majority of non-cotton based products coming from China and South Korea. Our cotton-based products are sourced from areas outside of China. For Vera Bradley, weWe outsource the production of a significant majority of our products to companies in Asia. Pura Vida components are primarily sourced from Asia and outsource the production of products primarily to El Salvador. We are subject to the risks inherent in global sourcing and manufacturing, including, but not limited to:

A significant majority of our Vera Bradley and Pura Vida products are currently manufactured for us in Asia and Central America, respectively.Asia. The United States and the countries in which our products are produced have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations or may adversely adjust prevailing quotas, duties, or tariffs. Countries impose, modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, which include embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us or could require us to modify our supply chain organization or other current business practices, any of which could harm our results of operations.

We currently rely on independent transportation service providers for substantially all of our product shipments. Our utilization of these delivery services, or those of any other shipping companies that we may elect to use, is subject to risks, including increases in fuel prices, which would increase our shipping costs, employee strikes, labor shortages, health emergencies, and inclement weather, which may impact a shipping company’s ability to provide delivery services sufficient to meet our shipping needs.

We operate e-commerce stores at www.verabradley.com, outlet.verabradley.com, and international.verabradley.com, and www.puravidabracelets.com.international.verabradley.com. Expanding our e-commerce business is one of the key objectives of our business strategy. Our e-commerce operations are subject to numerous risks, including unanticipated operating problems, reliance on third-party computer hardware and software providers, system failures, and the need to invest in additional computer systems. Specific risks include: (i) diversion of sales from our stores; (ii) rapid technological change; (iii) liability for e-commerce content; and (iv) risks related to the failure of the computer systems that operate the websites and their related support systems, including from computer viruses, telecommunication failures, and electronic break-ins and similar disruptions. Internet operations involve risks which may be beyond our control that could have a direct material adverse effect on our operating results, including: (i) price competition involving the items we intend to sell; (ii) the level of merchandise returns we experience; (iii) governmental regulation; (iv) e-commerce security breaches involving unauthorized access to our systems and/or customer information; (v) credit card fraud; (vi) adverse changes in the terms, policies, algorithms, fees, or service levels of marketplaces or other third-party digital platforms on which we sell or advertise; and (vivii) competition and general economic conditions specific to the Internet, e-commerce, and the accessories industry. If we are unable to effectively address these risks and any other risks that we face in connection with our Internet operations, our business, financial condition, results of operations, and/or cash flows could be materially adversely affected.

Quarterly, we assess whether events or changes in circumstances have occurred that indicate the carrying value of long-lived asset groups may not be recoverable. If we determine that the carrying value of long-lived asset groups are not recoverable, we will be required to record impairment charges relating to those assets. For example, our assessments during fiscal years 20252026 and 20232025 indicated that operating losses or insufficient operating income existed at certain retail stores, with a projection that the operating losses or insufficient operating income for those locations would continue. As such, we recorded non-cash charges of $2.6$1.0 million and $0.8$2.4 million during fiscal years 20252026 and 2023,2025, respectively, within selling, general, and administrative expenses in the consolidated statements of operations to write down the carrying values of these stores' long-lived asset groups to their estimated fair values. We also recorded $0.6 million of a non-cash impairment charge relating to a corporate right-of-use asset in fiscal 2023. We recorded no long-lived asset impairments in fiscal 2024.

Robert Hall, Barbara Bradley Baekgaard, Joan Hall (Mr. Hall’s wife and Ms. Bradley Baekgaard’s daughter), Patricia R. Miller, and P. Michael Miller, directly or indirectly, beneficially own and have the ability to exercise voting control over, in the aggregate, 21.2%21.1% of our outstanding shares of common stock as of FebruaryJanuary 1,31, 2025. Fund 1 Investments, LLC beneficially owns and has the ability to exercise voting control over, in the aggregate, 10% of our outstanding shares of common stock as of February 1, 2025.2026. As a result, these shareholders are able to exercise significant influence over all matters requiring shareholder approval, including the election of directors, any amendments to our second amended and restated articles of incorporation, and significant corporate transactions. This concentrated ownership of outstanding common stock may diminish an investor's ability to influence corporate matters, and the interests of these shareholders may not coincide with our interests or interests of investors. As a result, we may take actions that investors do not believe to be in our interests or their interests and that could depress our stock price. In addition, this significant concentration of stock ownership may adversely affect the trading price of our common stock should investors perceive disadvantages in owning shares of common stock in a company that has such concentrated ownership.

We have been subject to shareholder activism and may be subject to such activism in the future, which could result in substantial costs and divert management’s and our Board of Directors’ (“Board”) attention and resources from our business. For example, on December 30, 2024, Fund 1 Investments, LLC delivered a letter to our Board calling for a the commencement of a strategic alternatives process.

A pandemic (COVID-19) in the past resulted in travel restrictions both domestically and internationally, community and self-quarantines, certain factory closures or reduced operations, as well as mall closures and reduced mall operating hours. This could happen in the future as well. Due to the past pandemic we experienced significantly reduced traffic, demand, and sales. This could recur in the future. Future pandemic-related mandates from governments and public health officials may necessitate additional closures to some, or all, of our retail stores, the stores of our Indirect segment partners and Pura Vida wholesale retailers,partners, or otherwise detrimentally impact aspects of our operations, as COVID-19 did in the past. Pandemics may reduce consumers' willingness and ability to travel to major cities and vacation destinations in which some of our stores are located.

Our performance depends largely on the efforts and abilities of our senior management and product development teams. These executives and design associates have substantial experience in our business and have made significant contributions to our growth and success. Although we have entered into an employment agreement with our Chief Executive Officer, we may not be able to retain herhis services or those of other key individuals in the future. The unexpected loss of services of key employees could have adverse impacts on our business and results of operations. We may also need to attract and retain additional qualified employees and develop, train, and manage an increasing number of management-level, sales, and other employees. Competition for qualified employees is intense. We may not be able to attract and retain employees as needed in the future.

•timing of sales to Vera Bradley and Pura Vida wholesale retailers; and

•We continuedpartnered anotherwith yearAnthropologie offor exclusive product collaborations with iconic brands such as Disney, Wicked, and Peanuts, which align with our target customers and expand our customer reach.

•We continued to strengthen and rationalize our store base. We are continuing to look for opportunities to improve the full-line profitability of our full-line store portfolio by re-balancing our existing fleet through select closures along with identifying future market opportunities. We will continue to focus on our highest-potential stores by enhancing the customer experience. In fiscal 2025,2026, we closed fivetwelve underperforming full-line stores and one outlet store, and opened onetwo full-line store and seven outlet stores, ending the fiscal year with 3929 full-line and 8786 outlet locations.

Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts. Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and outlet storesstores, and the Vera Bradleyour websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com)., Thereand were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for fiscal year 2023 as it was cancelled duedirect to theconsumer COVID-19 pandemic.marketplaces. Revenues for the VB Indirect segment reflect sales of Vera Bradley-branded products to specialty retail partners; department stores; national accounts; third-party e-commerce sites; and third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand. Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida website (www.puravidabracelets.com), through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida retail stores.agreements.

Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our Vera Bradley e-commerce operations. Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months. Remodeled stores are included in both comparable sales and comparable store sales unless the store was closed for more than one week of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage. Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies. Non-comparable sales include sales from stores not included in comparable sales or comparable store sales.

Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound and outbound freight costs incurred, and inventory adjustments including adjustments described in Note 16 to the Notes to the Consolidated Financial Statements herein.adjustments. The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.

•VB Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers; and Advertising, marketing, and product development expenses include employee compensation, media costs, creative production expenses, marketing agency fees, new product design costs, public relations expenses, and market research expenses. A portion of our advertising expenses may be reimbursed by Indirect retailers, and such amount is classified as other income. Administrative expenses include employee compensation for corporate functions, corporate headquarters occupancy costs, consulting and software expenses, and charitable donations, as well as severance charges and consulting fees associated with cost savings initiatives disclosed in Note 1614 to the Notes to the Consolidated Financial Statements herein.

During fiscal 2025,2026, the Company continued the implementation of targeted cost reductions. Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. Refer to Note 1614 to the Notes to the Consolidated Financial Statements herein for additional information regarding charges for cost savings initiatives and remaining liabilities, as well as other charges not comparable with the prior year.

To mitigate some of these inflationary and supply chain pressures, we implemented strategic price increases across both of our brands in late fiscal 2022 through fiscal 2024.2024, as well as in fiscal 2026. We will continue to monitor our pricing as it relates to the current macroeconomic trends. In addition, in fiscal 2023 through fiscal 2025,2026, we implemented targeted cost reductions across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. We will continue to review our expense structure in future years for additional cost reduction opportunities.

(1)The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to January 31. Fiscal years 20252026 and 20232025 consisted of 52 weeks. Fiscal year 2024 consisted of 53 weeks. The extra week in fiscal 2024 contributed approximately $6.0$4.9 million in net revenues and added an estimated $0.01 to diluted net income per share in fiscal 2024. By segment, the extra week contributed net revenues of approximately $2.8 million to Direct,Direct and $2.1 million to Indirect, and $1.1 million to Pura Vida in fiscal 2024.Indirect.

(2)Impairment charges, related primarily to underperforming stores, totaled $2.6$1.0 million, and $1.4$2.4 million during the fiscal years ended January 31, 2026, and February 1, 2025, and January 28, 2023, respectively. There were no store impairment charges in fiscal 2024.

For fiscal 2025, net revenues decreased $98.8$64.9 million, or 21.0%,16.9%, to $372.0$318.8 million, from $470.8$383.7 million for fiscal 2024. Fiscal 2024 net revenues also include approximately $6.0 million attributable to the extra week in fiscal 2024.

For fiscal 2025, gross profit decreased $69.6$45.2 million, or 27.1%,22.1%, to $187.8$158.8 million, from $256.4$204.0 million for fiscal 2024. As a percentage of net revenues, gross profit decreased to 50.2%49.8% for fiscal 2025, from 54.5%53.2% for fiscal 2024. The decrease in consolidated gross profit as a percentage of net revenues for the fiscal year was driven by increased outbound freight costs, sales channel mix, and reduced margins for indirect liquidation sales, and inventory adjustments related to excess inventory in the Pura Vida segment.sales.

For fiscal 2025, SG&A expenses decreased $17.7$4.8 million, or 7.3%,2.5%, to $223.8$188.5 million, from $241.5$193.3 million for fiscal 2024. As a percentage of net revenues, SG&A expenses were 60.2%59.1% and 51.3%50.4% for fiscal 2025 and fiscal 2024, respectively. SG&A expenses related to Vera Bradley and corporate unallocated were $186.9 million compared to $192.1 million in the comparable prior-year period. SG&A expenses related to Pura Vida were $36.9 million compared to $49.4 million in the comparable prior-year period. The decrease in consolidated SG&A expenses for fiscal 2025 was primarily due to a decrease in employee-related expenses of $13.4$12.1 million due to a reduction in headcount and incentive compensation; aand $2.6 million decrease indecreased selling expenses due to decreased sales; decreased advertising of $2.5$2.0 million, primarily related to Pura Vida variable advertisingmillion due to decreased sales, partially offset by Vera Bradley advertising largely related to Project Restoration; a $1.6 million decrease in intangible asset amortization; and $0.2 million in other net expense reductions. These decreases were partially offset by an increase of $2.6$6.8 million forin advertising expenses, and $2.4 million of property, plant, and equipment impairmentcharges chargesrecorded in thefiscal current2025, year.and $0.1 million in net other expenses.

For fiscal 2025, net other income totaleddecreased $0.1 million, or 7.5%, to $0.8 million, from $0.9 million,million consistentfor withfiscal the prior year.2024.

The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the thirteen and twenty-six weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, and our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. The results of operations for the thirteen and twenty-six weeks ended MayAugust 2,1, 2026, are not necessarily indicative of the results to be expected for the full fiscal year.

In June 2025, the Company announced the departure of its former Chief Executive Officer (“CEO”), Jacqueline Ardrey. In March 2026, Board member Ian Bickley was appointed permanent CEOChairman and Chief Executive ChairmanOfficer after serving as our Interim CEO since July 2025. Martin Layding was named Chief Financial Officer in June 2025 and was promoted to also serve as the Chief Operating Officer in March 2026.

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

For the thirteen weeks ended MayAugust 2,1, 2026, net revenues increased $4.0$0.8 million, or 7.8%,1.1%, to $55.7$71.6 million, from $51.7$70.9 million in the comparable prior-year period.

Indirect.Direct. For the thirteen weeks ended MayAugust 2,1, 2026, net revenues in the IndirectDirect segment increased $2.3$4.9 million, or 26.6%,8.0%, to $10.8$65.4 million, from $8.6$60.5 million in the comparable prior-year period. TheVera Bradley comparable sales increased 9.2%, which includes a 4.1% increase wasin primarilycomparable duestore tosales improvementas well as an increase in specialty and department stores, while cut-to-ordere-commerce sales enabledof continued growth across key accounts.16.2%.

For the thirteen weeks ended MayAugust 2,1, 2026, gross profit increased $6.0$7.3 million, or 26.6%,20.6%, to $28.8$42.8 million, from $22.8$35.5 million in the comparable prior-year period. As a percentage of net revenues, gross profit increased to 51.8%59.8% for the thirteen weeks ended MayAugust 2,1, 2026, from 44.1%50.1% in the comparable prior-year period. The year over yearyear-over-year margin rate improvement was primarily driven by favorabletariff salesrefunds mixof and$7.7 lowermillion freightpartially andoffset dutyby costsmargin in the current year period, as well as reduction in costs relatedpressure to inventorysell write-offsthrough associatedProject withRestoration the sale of Pura Vida, purchase order cancellation fees, and professional fees in the prior-year period.product.

For the thirteen weeks ended MayAugust 2,1, 2026, SG&A expenses decreased $6.7$1.7 million, or 16.4%,4.2%, to $34.1$38.7 million, from $40.8$40.4 million in the comparable prior-year period. As a percentage of net revenues, SG&A expenses decreased to 61.3%54.1% for the thirteen weeks ended MayAugust 2,1, 2026, from 79.0%57.1% in the comparable prior-year period. For the thirteen weeks ended MayAugust 2,1, 2026, consolidated SG&A expenses decreased primarily due to a $2.9$4.0 million reduction in advertising costs,costs driven by cost optimization effortsefforts, including the reduction and phasing of advertising spendspend. throughoutThis thedecrease year; a $1.3 million reduction in building expenses resulting from store closures and favorable lease negotiations; $1.0 property, plant, & equipment charges in the prior-year period that did not recur in the current year period; a $0.7 million reduction in employee-related costs, including reduced headcount,was partially offset by an$1.1 increasemillion in higher employee-related costs, primarily reflecting increased variable compensation;compensation, anet $0.3of lower severance costs, as well as $0.7 million reductionin inhigher professional fees; and a $0.5 million reduction in net other expenses.

For the thirteen weeks ended MayAugust 2,1, 2026, net other income increaseddecreased $0.4$0.3 million to $0.6$0.1 million, from $0.2$0.4 million in the comparable prior-year period. The increasedecrease in net other income was primarily due to prior-year income from the TSA resulting from the sale of Creative Genius.

For the thirteentwenty-six weeks ended MayAugust 2,1, 2026, operating loss from continuing operations decreased $13.3$22.0 million, or 74.0%,97.9%, to $(4.60.5) million, from $(17.922.4) million in the comparable prior-year period. As a percentage of net revenues, operating loss from continuing operations was (8.30.3)% and (34.618.3)% for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively. Operating loss from continuing operations decreased due to the factors described above.

Indirect.Direct. For the thirteentwenty-six weeks ended MayAugust 2,1, 2026, operating income in the IndirectDirect segment increased $2.0$16.0 million, or 102.5%,420.9%, to $4.0$19.8 millionmillion, from $2.0$3.8 million in the comparable prior-year period. As a percentage of IndirectDirect segment net revenues, operating income in the IndirectDirect segment was 37.0%18.0% and 23.1%3.7% for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively. The increase in operating income as a percentage of IndirectDirect segment net revenues was primarily due to anthe increasetariff inrefund grossdiscussed margin as a percentage of net revenuesearlier, as well as improved leverage of SG&A expenses.expense leverage.

Unallocated. For the thirteentwenty-six weeks ended MayAugust 2,1, 2026, unallocated expenses decreased $2.5$3.2 million, or 17.7%,10.4%, to $11.8$27.2 million from $14.3$30.4 million in the comparable prior-year period. The decrease in unallocated expenses was primarily due to a $1.0 million decrease in advertising expenses, a $0.5$2.8 million reduction in professionaladvertising fees,costs driven by cost optimization efforts, including the reduction and aphasing $0.4of advertising spend throughout the year, and $0.5 million reduction in employee-relatedlower costs,other expenses, net of other income, partially offset by a $0.6$0.1 million increase in nethigher otheremployee-related expenses.costs.

Interest (Expense) Income,Expense, Net

For the thirteentwenty-six weeks ended MayAugust 2,1, 2026, interest expenseincome increased $0.1$0.3 million, to $0.2 million from $(0.1) million from interest income of $4.0 thousand in the comparable prior-year period.

The effective tax rate for the thirteentwenty-six weeks ended MayAugust 2,1, 2026, was (2.46.2)%, compared to (2.31.7)% for the thirteentwenty-six weeks ended MayAugust 3,2, 2025. See Note 7 "Income Taxes" of the Notes to the Condensed Consolidated Financial Statements for additional information about the Company's interim provision for income taxes.

For the thirteentwenty-six weeks ended MayAugust 2,1, 2026, there was a net loss from continuing operations of $(4.80.3) million, a $13.5$22.6 million decrease, from $(18.323.0) million in the comparable prior-year period due to the factors described above.

Our primary sources of liquidity are cash on hand and cash equivalents, as well as cash flow from operations. We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”). Availability under the Credit Agreement is driven by a borrowing base comprised primarily of eligible accounts receivable and inventory, each subject to advance rates, eligibility criteria, and applicable reserves. As a result, borrowing capacity may fluctuate based on the level and quality of receivables and the composition and valuation of inventory. There was no debt outstanding under the Credit Agreement as of MayAugust 2,1, 2026. The Company also owns two real estate properties that are unencumbered, which provide additional financial flexibility and may serve as a potential source of liquidity or collateral if needed. Historically, our primary cash needs have been for merchandise inventories; payroll; store rent; capital expenditures associated with operational equipment, buildings, information technology, and opening new stores; and share repurchases. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts receivable, accounts payable, and other current liabilities.

Net Cash Provided by (Used in) Operating Activities

Net cash provided by (used in) operating activities consists primarily of net income (loss) adjusted for non-cash items, including depreciation, amortization, impairment charges, deferred taxes, and stock-based compensation and the loss on sale of business; and the effect of changes in assets and liabilities.

Net cash provided by (used in) operating activities for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 was $5.3$17.7 million, compared to $17.9$(23.3) million for the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The decreaseincrease in cash usedprovided inby operating activities was primarily attributable to a net loss of $(4.80.3) million, a $28.6$22.6 million improvement,improvement fromin net loss compared to the comparable prior-year period, net ofexcluding the $15.2 million loss on the sale of a business recognized in the prior-year period. Operating cash flows also benefited from continued inventory management initiatives, which resulted in a $2.9$6.7 million source of cash from inventories during the current year period compared to a $7.4$4.9 million use of cash in the prior-year period and cash collected in payment of accounts receivable which resulted in a $4.3 million source of cash during the current year period compared to a $4.0 million use of cash in the prior-year period. These favorable impacts were partially offset by changes in cash paid for accounts payable and accrued liabilities, which representedresulted in a $5.2$1.7 million netuse of cash during the current year period compared to a $2.8 million use of cash in the currentprior-year year period, primarily attributable to the timing of payments at the end of fiscal 2026.period.

Net cash used in investing activities was $0.3 million for the thirteen weeks ended May 2, 2026, compared to $1.0 million for the thirteentwenty-six weeks ended MayAugust 3,1, 2026, compared to $1.6 million for the twenty-six weeks ended August 2, 2025. The decrease in cash used in investing activities was primarily attributable to a decrease in property, plant, and equipment spending of $1.6 million in the current year period, partially offset by $0.9$1.0 million proceeds from the sale of Pura Vida recognized in the prior-year period.

Net Cash UsedProvided inby Financing Activities

Net cash used in financing activities was $0.4$0.9 million for the thirteentwenty-six weeks ended MayAugust 2,1, 2026, compared to $0.2net cash provided by financing activities of $9.8 million for the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The increasedecrease in cash (used in) provided by financing activities was primarily attributable to highera tax$10 withholdingmillion paymentsABL relateddraw toin equitythe compensation.prior-year.

As of MayAugust 2,1, 2026 and January 31, 2026, the Company had no borrowings outstanding and availability of $68.0$54.3 million and $58.6 million, respectively, under the Credit Agreement, subject to the borrowing base provisions of the facility.

As of MayAugust 2,1, 2026, there were no material changes outside the ordinary course of business to material cash requirements, as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.

Certain accounting policies and estimates of the Company are considered critical, as these policies and estimates are the most important to the depiction of the Company’s consolidated financial statements and require significant, difficult, or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026. There were no significant changes to any of the critical accounting policies and estimates described in the Annual Report as of MayAugust 2,1, 2026.