ULTA BEAUTY, INC., 10-Q filed on 8/27/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
6 Months Ended
Aug. 01, 2020
Aug. 24, 2020
Document And Entity Information    
Entity Registrant Name Ulta Beauty, Inc.  
Document Quarterly Report true  
Document Transition Report false  
Entity Central Index Key 0001403568  
Document Type 10-Q  
Document Period End Date Aug. 01, 2020  
Amendment Flag false  
Current Fiscal Year End Date --01-30  
Entity File Number 001-33764  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 38-4022268  
Entity Address, Address Line One 1000 Remington Blvd.  
Entity Address, Address Line Two Suite 120  
Entity Address, City or Town Bolingbrook  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60440  
City Area Code 630  
Local Phone Number 410-4800  
Title of 12(b) Security Common Stock  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   56,323,104
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Trading Symbol ULTA  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Aug. 01, 2020
Feb. 01, 2020
Aug. 03, 2019
Current assets:      
Cash and cash equivalents $ 1,157,318 $ 392,325 $ 177,398
Short-term investments   110,000 150,000
Receivables, net 127,992 139,337 107,263
Merchandise inventories, net 1,368,543 1,293,701 1,315,999
Prepaid expenses and other current assets 102,713 103,567 131,171
Prepaid income taxes 42,622 16,387 38,769
Total current assets 2,799,188 2,055,317 1,920,600
Property and equipment, net 1,077,825 1,205,524 1,219,948
Operating lease assets 1,548,239 1,537,565 1,499,556
Goodwill 10,870 10,870 10,870
Other intangible assets, net 2,927 3,391 3,854
Deferred compensation plan assets 28,789 27,849 24,665
Other long-term assets 29,283 23,356 30,882
Total assets 5,497,121 4,863,872 4,710,375
Current liabilities:      
Accounts payable 398,011 414,009 450,117
Accrued liabilities 201,754 246,088 224,202
Deferred revenue 216,545 237,535 182,354
Current operating lease liabilities 245,019 239,629 208,261
Total current liabilities 1,061,329 1,137,261 1,064,934
Non-current operating lease liabilities 1,718,549 1,698,718 1,683,743
Long-term debt 800,000    
Deferred income taxes 94,272 89,367 86,598
Other long-term liabilities 52,178 36,432 35,649
Total liabilities 3,726,328 2,961,778 2,870,924
Commitments and contingencies (Note 7)
Stockholders' equity:      
Common stock, $0.01 par value, 400,000 shares authorized; 57,014, 57,285 and 58,485 shares issued; 56,323, 56,609 and 57,810 shares outstanding; at August 1, 2020 (unaudited), February 1, 2020, and August 3, 2019 (unaudited), respectively 570 573 585
Treasury stock-common, at cost (37,513) (34,448) (34,180)
Additional paid-in capital 822,664 807,492 794,368
Retained earnings 985,042 1,128,477 1,078,678
Accumulated other comprehensive income 30    
Total stockholders' equity 1,770,793 1,902,094 1,839,451
Total liabilities and stockholders' equity $ 5,497,121 $ 4,863,872 $ 4,710,375
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Thousands
Aug. 01, 2020
Feb. 01, 2020
Aug. 03, 2019
Consolidated Balance Sheets      
Common stock, par value $ 0.01 $ 0.01 $ 0.01
Common stock, shares authorized 400,000 400,000 400,000
Common stock, shares issued 57,014 57,285 58,485
Common stock, shares outstanding 56,323 56,609 57,810
v3.20.2
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Consolidated Statements of Operations        
Net sales $ 1,228,009 $ 1,666,607 $ 2,401,219 $ 3,409,636
Cost of sales 899,002 1,060,708 1,768,607 2,158,890
Gross profit 329,007 605,899 632,612 1,250,746
Selling, general and administrative expenses 271,587 392,843 652,499 795,976
Impairment charges, store closures and other costs 40,758   60,300  
Pre-opening expenses 3,907 5,038 8,542 9,212
Operating income (loss) 12,755 208,018 (88,729) 445,558
Interest expense (income), net 2,617 (1,671) 3,889 (3,717)
Income (loss) before income taxes 10,138 209,689 (92,618) 449,275
Income tax expense (benefit) 2,086 48,431 (22,161) 95,796
Net income (loss) $ 8,052 $ 161,258 $ (70,457) $ 353,479
Net income (loss) per common share:        
Basic $ 0.14 $ 2.77 $ (1.25) $ 6.05
Diluted $ 0.14 $ 2.76 $ (1.25) $ 6.02
Weighted average common shares outstanding:        
Basic 56,318 58,171 56,369 58,401
Diluted 56,497 58,446 56,369 58,718
v3.20.2
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Consolidated Statements of Comprehensive Income (Loss)        
Net income (loss) $ 8,052 $ 161,258 $ (70,457) $ 353,479
Other comprehensive income:        
Foreign currency translation adjustments 105   30  
Comprehensive income (loss) $ 8,157 $ 161,258 $ (70,427) $ 353,479
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Operating activities    
Net income (loss) $ (70,457) $ 353,479
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 154,029 144,951
Non-cash lease expense 132,808 152,134
Impairment charges, store closures and other costs, net 59,997  
Deferred income taxes 4,905 2,734
Stock-based compensation expense 14,595 12,766
Loss on disposal of property and equipment 2,273 3,215
Change in operating assets and liabilities:    
Receivables 11,345 11,437
Merchandise inventories (74,842) (101,670)
Prepaid expenses and other current assets 854 (18,315)
Income taxes (26,235) (21,772)
Accounts payable (18,486) 46,101
Accrued liabilities (32,901) (2,629)
Deferred revenue (20,990) (16,700)
Operating lease liabilities (137,383) (138,557)
Other assets and liabilities 16,477 20,162
Net cash provided by operating activities 15,989 447,336
Investing activities    
Purchases of short-term investments   (245,000)
Proceeds from short-term investments 110,000 95,000
Capital expenditures (77,090) (151,213)
Acquisitions, net of cash acquired (1,220)  
Purchases of equity investments (5,386) (33,339)
Net cash provided by (used in) investing activities 26,304 (334,552)
Financing activities    
Proceeds from long-term debt 800,000  
Repurchase of common shares (72,981) (378,300)
Stock options exercised 577 42,935
Purchase of treasury shares (3,065) (9,272)
Debt issuance costs (1,861)  
Net cash provided by (used in) financing activities 722,670 (344,637)
Effect of exchange rate changes on cash and cash equivalents 30  
Net increase (decrease) in cash and cash equivalents 764,993 (231,853)
Cash and cash equivalents at beginning of period 392,325 409,251
Cash and cash equivalents at end of period 1,157,318 177,398
Supplemental information    
Cash paid for interest 3,132  
Income taxes paid, net of refunds 2,287 97,024
Non-cash capital expenditures $ 19,176 $ 43,269
v3.20.2
Consolidated Statements of Stockholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Common Stock
Treasury - Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Balance at Feb. 02, 2019 $ 592 $ (24,908) $ 738,671 $ 1,105,863   $ 1,820,218
Balance (in shares) at Feb. 02, 2019 59,232 (648)        
Net income (loss)       192,221   192,221
Stock-based compensation     6,030     6,030
Adoption of accounting standards | ASU 2016-02, Leases (Topic 842)       (2,375)   (2,375)
Stock options exercised and other awards $ 4   42,052     42,056
Stock options exercised and other awards (in shares) 348          
Purchase of treasury shares   $ (9,183)       (9,183)
Purchase of treasury shares (in shares)   (27)        
Repurchase of common shares $ (3)     (107,396)   (107,399)
Repurchase of common shares (in shares) (318)          
Balance at May. 04, 2019 $ 593 $ (34,091) 786,753 1,188,313   1,941,568
Balance (in shares) at May. 04, 2019 59,262 (675)        
Balance at Feb. 02, 2019 $ 592 $ (24,908) 738,671 1,105,863   1,820,218
Balance (in shares) at Feb. 02, 2019 59,232 (648)        
Net income (loss)           353,479
Repurchase of common shares           $ (378,301)
Repurchase of common shares (in shares)           (1,110)
Balance at Aug. 03, 2019 $ 585 $ (34,180) 794,368 1,078,678   $ 1,839,451
Balance (in shares) at Aug. 03, 2019 58,485 (675)       57,810
Balance at May. 04, 2019 $ 593 $ (34,091) 786,753 1,188,313   $ 1,941,568
Balance (in shares) at May. 04, 2019 59,262 (675)        
Net income (loss)       161,258   161,258
Stock-based compensation     6,736     6,736
Stock options exercised and other awards     879     879
Stock options exercised and other awards (in shares) 15          
Purchase of treasury shares   $ (89)       (89)
Repurchase of common shares $ (8)     (270,893)   (270,901)
Repurchase of common shares (in shares) (792)          
Balance at Aug. 03, 2019 $ 585 $ (34,180) 794,368 1,078,678   $ 1,839,451
Balance (in shares) at Aug. 03, 2019 58,485 (675)       57,810
Balance at Feb. 01, 2020 $ 573 $ (34,448) 807,492 1,128,477   $ 1,902,094
Balance (in shares) at Feb. 01, 2020 57,285 (676)       56,609
Net income (loss)       (78,509)   $ (78,509)
Stock-based compensation     6,182     6,182
Foreign currency translation adjustments         $ (75) (75)
Stock options exercised and other awards     250     250
Stock options exercised and other awards (in shares) 45          
Purchase of treasury shares   $ (3,002)       (3,002)
Purchase of treasury shares (in shares)   (15)        
Repurchase of common shares $ (3)     (72,978)   (72,981)
Repurchase of common shares (in shares) (327)          
Balance at May. 02, 2020 $ 570 $ (37,450) 813,924 976,990 (75) 1,753,959
Balance (in shares) at May. 02, 2020 57,003 (691)        
Balance at Feb. 01, 2020 $ 573 $ (34,448) 807,492 1,128,477   $ 1,902,094
Balance (in shares) at Feb. 01, 2020 57,285 (676)       56,609
Net income (loss)           $ (70,457)
Repurchase of common shares           $ (72,981)
Repurchase of common shares (in shares)           (327)
Balance at Aug. 01, 2020 $ 570 $ (37,513) 822,664 985,042 30 $ 1,770,793
Balance (in shares) at Aug. 01, 2020 57,014 (691)       56,323
Balance at May. 02, 2020 $ 570 $ (37,450) 813,924 976,990 (75) $ 1,753,959
Balance (in shares) at May. 02, 2020 57,003 (691)        
Net income (loss)       8,052   8,052
Stock-based compensation     8,413     8,413
Foreign currency translation adjustments         105 105
Stock options exercised and other awards     327     327
Stock options exercised and other awards (in shares) 11          
Purchase of treasury shares   $ (63)       (63)
Balance at Aug. 01, 2020 $ 570 $ (37,513) $ 822,664 $ 985,042 $ 30 $ 1,770,793
Balance (in shares) at Aug. 01, 2020 57,014 (691)       56,323
v3.20.2
Business and basis of presentation
6 Months Ended
Aug. 01, 2020
Business and basis of presentation  
Business and basis of presentation

1.Business and basis of presentation

On January 29, 2017, Ulta Salon, Cosmetics & Fragrance, Inc. implemented a holding company reorganization. Pursuant to the reorganization, Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty, Inc. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

The Company was originally founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. The stores also feature full-service salons. As of August 1, 2020, the Company operated 1,264 stores across 50 states, as shown in the table below.

Number of

Number of

Location

    

stores

    

Location

    

stores

Alabama

22

Montana

6

Alaska

3

Nebraska

5

Arizona

30

Nevada

15

Arkansas

10

New Hampshire

7

California

160

New Jersey

39

Colorado

26

New Mexico

7

Connecticut

17

New York

51

Delaware

3

North Carolina

34

Florida

86

North Dakota

3

Georgia

38

Ohio

43

Hawaii

4

Oklahoma

21

Idaho

9

Oregon

17

Illinois

55

Pennsylvania

45

Indiana

24

Rhode Island

3

Iowa

10

South Carolina

20

Kansas

13

South Dakota

3

Kentucky

15

Tennessee

26

Louisiana

19

Texas

115

Maine

3

Utah

14

Maryland

25

Vermont

1

Massachusetts

21

Virginia

29

Michigan

49

Washington

36

Minnesota

18

West Virginia

7

Mississippi

10

Wisconsin

20

Missouri

24

Wyoming

3

Total

1,264

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are of a normal

recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

The Company’s operating results for the 13 and 26 weeks ended August 1, 2020 may not be indicative of the results that may be expected for the fiscal year ending January 30, 2021 because of the novel coronavirus (COVID-19) pandemic. As a result of the pandemic, the Company modified a number of its business practices, in part due to legislation, executive orders and guidance from government entities and healthcare authorities (including the temporary closing of businesses deemed “non-essential,” shelter in place orders, social distancing and quarantines). The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, profitability, cash flows and supply chain, although the full extent is uncertain. As the pandemic continues to evolve, the extent of the impact on the Company’s business, financial condition, profitability, cash flows and supply chain will depend on future developments, including, but not limited to, the duration and extent of any temporary closing of certain of our stores, the duration of quarantines, shelter-in-place and other travel restrictions within the U.S. and other affected countries, the duration and spread of the pandemic (including any relapses), its severity, the actions to contain the virus and/or treat its impact, the duration, timing and severity of the impact on consumer spending (including the recession resulting from the pandemic), and how quickly and to what extent normal economic and operating conditions can resume, all of which are highly uncertain and cannot be predicted.

In addition, the Company’s business is subject to seasonal fluctuation, with significant portions of the Company’s net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. As a result, the results for the 13 and 26 weeks ended August 1, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 30, 2021, or for any other future interim period or for any future year.

These interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

v3.20.2
Summary of significant accounting policies
6 Months Ended
Aug. 01, 2020
Summary of significant accounting policies  
Summary of significant accounting policies

2.Summary of significant accounting policies

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s second quarter in fiscal 2020 and 2019 ended on August 1, 2020 and August 3, 2019, respectively.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and operating lease assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact the Company’s results of operations. While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.

Inventory valuation

Merchandise inventories are carried at the lower of cost or market (net realizable value). Cost is determined using the moving average cost method and includes costs incurred to purchase and distribute goods as well as related vendor allowances including co-op advertising, markdowns, and volume discounts. We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience. If actual demand or market conditions are different than those projected by management, future merchandise margin rates may be unfavorably or favorably affected by adjustments to these estimates. During the 13 and 26 weeks ended August 1, 2020, the Company increased inventory reserves $16,523 and $17,745, respectively, to adjust for slow turning and discontinued makeup SKUs and permanently closed stores.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  The most significant relief measures which the Company qualifies for are the employee retention credit, tax deferral, and technical corrections to tax depreciation.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. We believe there is a reasonable assurance that the Company will comply with the relevant conditions of the employee retention credit provision of the CARES Act, and that we will receive the credits for which we have applied. We will continue to assess our treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on our business.

Employee retention credit (ERC) and payroll tax deferral. The ERC allows for a refundable tax credit against certain employment taxes equal to 50% of the first ten thousand dollars in qualified wages paid to each employee commencing on March 13, 2020 and through January 1, 2021. To be eligible, the Company must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019. Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic. During the 13 and 26 weeks ended August 1, 2020, the Company recognized $48,181 related to the CARES Act ERC as a reduction of the associated costs within selling, general and administrative expenses on the Company’s consolidated statements of operations and within accounts receivable, net on the Company's consolidated balance sheets. 

Additionally, the CARES Act contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020. As of August 1, 2020, the Company has deferred $18,709 in social security tax payments, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022. The deferred amounts are recorded as a liability within other long-term liabilities on the Company’s consolidated balance sheets.

Technical corrections to tax depreciation. The CARES Act also includes a technical correction of tax depreciation methods for qualified improvement property, which changes 39-year property to 15-year property eligible for 100% tax bonus depreciation. This provision of the CARES Act resulted in a cash tax refund of $4,600 relating to property and equipment, from filing an amended federal income tax return, as of August 1, 2020. Furthermore, the Company expects the changes to qualified impairment property depreciation to result in reductions to estimated income tax payments for fiscal 2020.

Recent accounting pronouncements not yet adopted

Taxes – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity

method investments, performing intraperiod allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

Recently adopted accounting pronouncements

Intangibles – Goodwill and Other-Internal-Use Software. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The Company adopted the new guidance prospectively as of February 2, 2020, and its adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

v3.20.2
Revenue
6 Months Ended
Aug. 01, 2020
Revenue  
Revenue

3.Revenue

The Company’s net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue sources include the private label and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:

13 Weeks Ended  

26 Weeks Ended

(Percentage of net sales)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Cosmetics

43%

47%

46%

50%

Skincare, bath, and fragrance

28%

22%

26%

21%

Haircare products and styling tools

21%

21%

20%

19%

Services

3%

6%

4%

6%

Other (nail products, accessories, and other)

5%

4%

4%

4%

100%

100%

100%

100%

Deferred revenue

Deferred revenue primarily represents contract liabilities for the Company’s obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, the Company recognizes breakage on gift cards proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue:

13 Weeks Ended

26 Weeks Ended  

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Beginning balance

$

206,653

$

173,921

$

230,011

$

193,585

Additions to contract liabilities (1)

50,448

64,863

92,672

135,167

Deductions to contract liabilities (2)

(49,355)

(66,831)

(114,937)

(156,799)

Ending balance

$

207,746

$

171,953

$

207,746

$

171,953

(1)Loyalty points and gift cards issued in the current period but not redeemed or expired.
(2)Revenue recognized in the current period related to the beginning liability.

Other amounts included in deferred revenue were $8,799 and $10,401 at August 1, 2020 and August 3, 2019, respectively.

v3.20.2
Impairment charges, store closures and other costs
6 Months Ended
Aug. 01, 2020
Impairment charges, store closures and other costs  
Impairment charges, store closures and other costs

4.Impairment charges, store closures and other costs

Impairment of long-lived tangible assets. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets. The asset group identified is at the store level and includes both property and equipment and operating lease assets.

Significant estimates are used in determining future cash flows of each store over its remaining lease term including our expectations of future projected cash flows including revenues, operating expenses, and market conditions. An impairment loss is recorded if the carrying amount of the long-lived asset exceeds its fair value.

The Company evaluates long-lived assets for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable. As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores. The Company performed undiscounted cash flow analyses over the long-lived assets associated with those stores. Based on these undiscounted cash flow analyses, the Company determined that certain long-lived assets had carrying values that exceeded their estimated undiscounted cash flows. Asset groups are written down only to the extent that their carrying value is lower than their respective fair value. Fair values of the asset group are determined by discounting the cash flows at a rate that approximates the cost of capital of a market participant. Management’s forecast of future cash flows is based on the income approach. The fair value of individual operating lease assets is determined using estimated market rent assessments.

The Company’s analysis indicated that the carrying values of certain long-lived assets exceeded their respective fair values. As a result, the Company recognized an impairment charge of $20,886 and $40,428 for the 13 and 26 weeks ended August 1, 2020, respectively. Additional impairments were recorded in the second quarter as a result of continued business disruption and certain macroeconomic factors associated with the COVID-19 pandemic. These charges are recorded in impairment charges, store closures and other costs in the consolidated statements of operations. These impairment charges were primarily driven by lower than projected revenues, lower market rate assessments, and the effect of temporary store closures as a result of the COVID-19 pandemic.

The determination of estimated market rent used in the fair value estimate of the Company’s operating lease assets included within the respective store asset group requires significant management judgment. Changes in these estimates

could have a significant impact on whether long-lived store assets should be further evaluated for impairment and could have a significant impact on the resulting impairment charge.

Store closures and other costs. During the second quarter of fiscal 2020, the Company announced that after evaluating its store portfolio, it would permanently close 19 stores in the third quarter of fiscal 2020. Accordingly, for the 13 and 26 weeks ended August 1, 2020, the Company recognized $19,569 of long-lived asset and right-of-use asset impairment charges and $303 in related severance charges in impairment charges, store closures and other costs in the consolidated statements of operations. The impairment charges reduced the carrying value of the lease asset to its estimated fair value. Fair value was estimated using an income-approach based on management's forecast of future cash flows expected to be derived from the property based on current sublease market rent. There were no related asset impairment charges for the 13 or 26 weeks ended August 3, 2019.

The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include: the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.

v3.20.2
Goodwill and Other Intangible Assets
6 Months Ended
Aug. 01, 2020
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

5.Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $10,870 at August 1, 2020, February 1, 2020, and August 3, 2019. No additional goodwill was recognized during the 13 and 26 weeks ended August 1, 2020. The Company reviews the recoverability of goodwill annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

Other intangible assets with finite useful lives are amortized over their useful lives. The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

As a result of the COVID-19 pandemic and decline in the macroeconomic environment, the Company performed an interim impairment analysis as of August 1, 2020, which indicated that no impairment existed for goodwill or other intangible assets.

v3.20.2
Leases
6 Months Ended
Aug. 01, 2020
Leases  
Leases

6.Leases

The Company leases retail stores, distribution and fast fulfillment centers, corporate offices, and certain equipment under non-cancellable operating leases with various expiration dates through 2033. Leases generally have an initial lease term of 10 years and include renewal options under substantially the same terms and conditions as the original leases. Leases do not contain any material residual value guarantees or material restrictive covenants.

All retail store, distribution and fast fulfillment center, and corporate office leases are classified as operating leases. The Company does not have any finance leases.

Lease cost

The majority of operating lease cost relates to retail stores and distribution and fast fulfillment centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses. Operating lease cost was $75,699 and $71,579 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively. Operating lease cost was $153,232 and $142,921 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

Other information

The following table presents supplemental disclosures of cash flow information related to operating leases:

26 Weeks Ended

(In thousands)

August 1, 2020

August 3, 2019

Cash paid for operating lease liabilities (1)

$

175,881

$

165,882

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

162,603

190,824

(1)Excludes cash received for tenant incentives of $18,149 and $36,445 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.
v3.20.2
Commitments and contingencies
6 Months Ended
Aug. 01, 2020
Commitments and contingencies  
Commitments and contingencies

7.Commitments and contingencies

The Company is involved in various legal proceedings that are incidental to the conduct of the business including both class action and single plaintiff litigation. In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

v3.20.2
Debt
6 Months Ended
Aug. 01, 2020
Debt  
Debt

8.Debt

On March 11, 2020, the Company entered into Amendment No. 1 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $1,000,000 or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $100,000, subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.250%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.

As of August 1, 2020, the Company had $800,000 outstanding under the credit facility and the weighted average interest rate was 1.59% for the 26 weeks ended August 1, 2020. As of February 1, 2020 and August 3, 2019, the Company had no borrowings outstanding under the credit facility. As of August 1, 2020, the Company was in compliance with all terms and covenants of the Loan Agreement.

v3.20.2
Fair value measurements
6 Months Ended
Aug. 01, 2020
Fair value measurements  
Fair value measurements

9.Fair value measurements

The carrying value of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments. The carrying value of long-term debt also approximates its fair value.

Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.
Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.
Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of August 1, 2020, February 1, 2020, and August 3, 2019, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $27,283, $29,442, and $26,848, respectively, related to its non-qualified deferred compensation plan. The liabilities have been categorized as Level 2 as they are based on third-party reported values, which are based primarily on quoted market prices of underlying assets of the funds within the plan.

Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. These assets can include long-lived assets and goodwill that have been reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

v3.20.2
Investments
6 Months Ended
Aug. 01, 2020
Investments  
Investments

10. Investments

Short-term investments typically consist of certificates of deposit and are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments. The Company did not have short-term investments as of August 1, 2020. The Company’s short-term investments were $110,000 and $150,000 as of February 1, 2020, and August 3, 2019, respectively.

The Company’s investments in renewable energy projects are accounted for under the equity method of accounting.  The balance of these investments was $5,110, $3,936, and $17,449 as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively, and is included in other long-term assets on the consolidated balance sheets. The Company contributed capital of $5,386 and received distributions including $1,291 of investment tax credits during the 26 weeks ended August 1, 2020. The Company contributed capital of $33,339 and received distributions including $17,370 of investment tax credits during the 26 weeks ended August 3, 2019.

v3.20.2
Stock-based compensation
6 Months Ended
Aug. 01, 2020
Stock-based compensation  
Stock-based compensation

11.Stock-based compensation

The Company measures stock-based compensation expense on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the following weighted-average assumptions for the periods indicated:

    

26 Weeks Ended

August 1,

August 3,

    

2020

    

2019

Volatility rate

 

43.0%

31.0%

Average risk-free interest rate

 

0.3%

2.3%

Average expected life (in years)

 

3.4

 

3.5

Dividend yield

 

None

 

None

The Company granted 248 and 97 stock options during the 26 weeks ended August 1, 2020 and August 3, 2019, respectively. The stock-based compensation expense for stock options was $2,872 and $2,199 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively. The stock-based compensation expense for stock options was $5,347 and $4,319 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively. The weighted-average grant date fair value of these stock options was $54.40 and $89.91 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively. At August 1, 2020, there was approximately $23,696 of unrecognized stock-based compensation expense related to unvested stock options.

The Company issued 158 and 47 restricted stock units during the 26 weeks ended August 1, 2020 and August 3, 2019, respectively. The stock-based compensation expense for restricted stock units was $5,161 and $3,422 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively. The stock-based compensation expense for restricted stock units was $9,348 and $6,243 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively. At August 1, 2020, there was approximately $38,743 of unrecognized stock-based compensation expense related to restricted stock units.

The Company did not issue any performance-based restricted stock units during the 26 weeks ended August 1, 2020. The Company issued 21 performance-based restricted stock units during the 26 weeks ended August 3, 2019. The stock-based compensation expense for performance-based restricted stock units was $380 and $1,390 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively. The stock-based compensation benefit for performance-based restricted stock units was $100 for the 26 weeks ended August 1, 2020. The stock-based compensation expense for performance-based restricted stock units was $3,101 for the 26 weeks ended August 3, 2019. At August 1, 2020, there was approximately $1,019 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

v3.20.2
Income Taxes
6 Months Ended
Aug. 01, 2020
Income Taxes  
Income Taxes

12.Income taxes

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which the Company operates stores. Income tax expense of $2,086 for the 13 weeks ended August 1, 2020 represents an effective tax rate of 20.6%, compared to $48,431 of tax expense representing an effective tax rate of 23.1% for the 13 weeks ended August 3, 2019. The lower effective tax rate is primarily due to a decrease in operating income.

Income tax benefit of $22,161 for the 26 weeks ended August 1, 2020 represents an effective tax rate of 23.9%, compared to $95,796 of tax expense representing an effective tax rate of 21.3% for the 26 weeks ended August 3, 2019. The higher effective tax rate is due to a reduction of tax-deductible stock option expense in the first 26 weeks of fiscal 2020.

v3.20.2
Net income (loss) per common share
6 Months Ended
Aug. 01, 2020
Net income (loss) per common share  
Net income (loss) per common share

13.Net income (loss) per common share

The following is a reconciliation of net income (loss) and the number of shares of common stock used in the computation of net income (loss) per basic and diluted share:

13 Weeks Ended

26 Weeks Ended

August 1,

August 3,

August 1,

August 3,

(In thousands, except per share data)

    

2020

    

2019

    

2020

    

2019

Numerator:

Net income (loss)

    

$

8,052

$

161,258

$

(70,457)

$

353,479

Denominator:

Weighted-average common shares – Basic

56,318

58,171

56,369

58,401

Dilutive effect of stock options and non-vested stock

179

275

317

Weighted-average common shares – Diluted

56,497

58,446

56,369

58,718

Net income (loss) per common share:

Basic

$

0.14

$

2.77

$

(1.25)

$

6.05

Diluted

$

0.14

$

2.76

$

(1.25)

$

6.02

The denominator for diluted net income per common share for the 13 weeks ended August 1, 2020 and August 3, 2019 excludes 553 and 101 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects. The denominator for diluted net income (loss) per common share for the 26 weeks ended August 1, 2020 and August 3, 2019 excludes 711 and 164 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects. Outstanding performance-based restricted stock units are included in the computation of dilutive shares only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be considered satisfied if the end of the reporting period were the end of the related contingency period and the results would be dilutive under the treasury stock method.

v3.20.2
Share repurchase program
6 Months Ended
Aug. 01, 2020
Share repurchase program  
Share repurchase program

14.Share repurchase program

On March 15, 2018, the Company announced that the Board of Directors authorized a share repurchase program (the 2018 Share Repurchase Program) pursuant to which the Company could repurchase up to $625,000 of the Company’s

common stock. The 2018 Share Repurchase Program authorization revoked the previously authorized but unused amount of $41,317 from the earlier share repurchase program. The 2018 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 14, 2019, the Company announced that the Board of Directors authorized a new share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company could repurchase up to $875,000 of the Company’s common stock. The 2019 Share Repurchase Program authorization revoked the previously authorized but unused amount of $25,435 from the 2018 Share Repurchase Program. The 2019 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 12, 2020, the Company announced that the Board of Directors authorized a new share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company may repurchase up to $1,600,000 of the Company’s common stock. The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amounts of $165,309 from the 2019 Share Repurchase Program. The 2020 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. On April 2, 2020, the Company announced that the share repurchase program has been suspended in order to strengthen its liquidity and preserve cash while navigating the COVID-19 pandemic.

A summary of the Company’s common stock repurchase activity is presented in the following table:

26 Weeks Ended  

(In thousands)

August 1, 2020

August 3, 2019

Shares repurchased

327

1,110

Total cost of shares repurchased

$

72,981

$

378,301

v3.20.2
Summary of significant accounting policies (Policies)
6 Months Ended
Aug. 01, 2020
Summary of significant accounting policies  
Fiscal quarter

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s second quarter in fiscal 2020 and 2019 ended on August 1, 2020 and August 3, 2019, respectively.

Inventory valuation

Inventory valuation

Merchandise inventories are carried at the lower of cost or market (net realizable value). Cost is determined using the moving average cost method and includes costs incurred to purchase and distribute goods as well as related vendor allowances including co-op advertising, markdowns, and volume discounts. We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience. If actual demand or market conditions are different than those projected by management, future merchandise margin rates may be unfavorably or favorably affected by adjustments to these estimates. During the 13 and 26 weeks ended August 1, 2020, the Company increased inventory reserves $16,523 and $17,745, respectively, to adjust for slow turning and discontinued makeup SKUs and permanently closed stores.

Use of estimates

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and operating lease assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact the Company’s results of operations. While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.

CARES Act

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  The most significant relief measures which the Company qualifies for are the employee retention credit, tax deferral, and technical corrections to tax depreciation.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. We believe there is a reasonable assurance that the Company will comply with the relevant conditions of the employee retention credit provision of the CARES Act, and that we will receive the credits for which we have applied. We will continue to assess our treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on our business.

Employee retention credit (ERC) and payroll tax deferral. The ERC allows for a refundable tax credit against certain employment taxes equal to 50% of the first ten thousand dollars in qualified wages paid to each employee commencing on March 13, 2020 and through January 1, 2021. To be eligible, the Company must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019. Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic. During the 13 and 26 weeks ended August 1, 2020, the Company recognized $48,181 related to the CARES Act ERC as a reduction of the associated costs within selling, general and administrative expenses on the Company’s consolidated statements of operations and within accounts receivable, net on the Company's consolidated balance sheets. 

Additionally, the CARES Act contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020. As of August 1, 2020, the Company has deferred $18,709 in social security tax payments, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022. The deferred amounts are recorded as a liability within other long-term liabilities on the Company’s consolidated balance sheets.

Technical corrections to tax depreciation. The CARES Act also includes a technical correction of tax depreciation methods for qualified improvement property, which changes 39-year property to 15-year property eligible for 100% tax bonus depreciation. This provision of the CARES Act resulted in a cash tax refund of $4,600 relating to property and equipment, from filing an amended federal income tax return, as of August 1, 2020. Furthermore, the Company expects the changes to qualified impairment property depreciation to result in reductions to estimated income tax payments for fiscal 2020.

Recent accounting pronouncements not yet adopted and Recently adopted accounting pronouncements

Recent accounting pronouncements not yet adopted

Taxes – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity

method investments, performing intraperiod allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

Recently adopted accounting pronouncements

Intangibles – Goodwill and Other-Internal-Use Software. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The Company adopted the new guidance prospectively as of February 2, 2020, and its adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

v3.20.2
Business and basis of presentation (Tables)
6 Months Ended
Aug. 01, 2020
Business and basis of presentation  
Schedule of stores operated by geographic area

Number of

Number of

Location

    

stores

    

Location

    

stores

Alabama

22

Montana

6

Alaska

3

Nebraska

5

Arizona

30

Nevada

15

Arkansas

10

New Hampshire

7

California

160

New Jersey

39

Colorado

26

New Mexico

7

Connecticut

17

New York

51

Delaware

3

North Carolina

34

Florida

86

North Dakota

3

Georgia

38

Ohio

43

Hawaii

4

Oklahoma

21

Idaho

9

Oregon

17

Illinois

55

Pennsylvania

45

Indiana

24

Rhode Island

3

Iowa

10

South Carolina

20

Kansas

13

South Dakota

3

Kentucky

15

Tennessee

26

Louisiana

19

Texas

115

Maine

3

Utah

14

Maryland

25

Vermont

1

Massachusetts

21

Virginia

29

Michigan

49

Washington

36

Minnesota

18

West Virginia

7

Mississippi

10

Wisconsin

20

Missouri

24

Wyoming

3

Total

1,264

v3.20.2
Revenue (Tables)
6 Months Ended
Aug. 01, 2020
Revenue  
Schedule of approximate percentage of net sales by primary category

The following table sets forth the approximate percentage of net sales by primary category:

13 Weeks Ended  

26 Weeks Ended

(Percentage of net sales)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Cosmetics

43%

47%

46%

50%

Skincare, bath, and fragrance

28%

22%

26%

21%

Haircare products and styling tools

21%

21%

20%

19%

Services

3%

6%

4%

6%

Other (nail products, accessories, and other)

5%

4%

4%

4%

100%

100%

100%

100%

Summary of changes in deferred revenue

13 Weeks Ended

26 Weeks Ended  

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Beginning balance

$

206,653

$

173,921

$

230,011

$

193,585

Additions to contract liabilities (1)

50,448

64,863

92,672

135,167

Deductions to contract liabilities (2)

(49,355)

(66,831)

(114,937)

(156,799)

Ending balance

$

207,746

$

171,953

$

207,746

$

171,953

v3.20.2
Leases (Tables)
6 Months Ended
Aug. 01, 2020
Leases  
Schedule of cash flow information related to operating leases

The following table presents supplemental disclosures of cash flow information related to operating leases:

26 Weeks Ended

(In thousands)

August 1, 2020

August 3, 2019

Cash paid for operating lease liabilities (1)

$

175,881

$

165,882

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

162,603

190,824

(1)Excludes cash received for tenant incentives of $18,149 and $36,445 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.
v3.20.2
Stock-based compensation (Tables)
6 Months Ended
Aug. 01, 2020
Stock-based compensation  
Schedule of weighted average assumptions to determine grant date fair value of employee stock options

    

26 Weeks Ended

August 1,

August 3,

    

2020

    

2019

Volatility rate

 

43.0%

31.0%

Average risk-free interest rate

 

0.3%

2.3%

Average expected life (in years)

 

3.4

 

3.5

Dividend yield

 

None

 

None

v3.20.2
Net income (loss) per common share (Tables)
6 Months Ended
Aug. 01, 2020
Net income (loss) per common share  
Schedule reconciliation of net income (loss) and the number of shares of common stock used in the computation of net income (loss) per basic and diluted share

13 Weeks Ended

26 Weeks Ended

August 1,

August 3,

August 1,

August 3,

(In thousands, except per share data)

    

2020

    

2019

    

2020

    

2019

Numerator:

Net income (loss)

    

$

8,052

$

161,258

$

(70,457)

$

353,479

Denominator:

Weighted-average common shares – Basic

56,318

58,171

56,369

58,401

Dilutive effect of stock options and non-vested stock

179

275

317

Weighted-average common shares – Diluted

56,497

58,446

56,369

58,718

Net income (loss) per common share:

Basic

$

0.14

$

2.77

$

(1.25)

$

6.05

Diluted

$

0.14

$

2.76

$

(1.25)

$

6.02

v3.20.2
Share repurchase program (Tables)
6 Months Ended
Aug. 01, 2020
Share repurchase program  
Summary of the Company's common stock repurchase activity

A summary of the Company’s common stock repurchase activity is presented in the following table:

26 Weeks Ended  

(In thousands)

August 1, 2020

August 3, 2019

Shares repurchased

327

1,110

Total cost of shares repurchased

$

72,981

$

378,301

v3.20.2
Business and basis of presentation (Details)
Aug. 01, 2020
store
state
Stores by state  
Number of stores operated 1,264
Number of states in which entity operates | state 50
Alabama  
Stores by state  
Number of stores operated 22
Alaska  
Stores by state  
Number of stores operated 3
Arizona  
Stores by state  
Number of stores operated 30
Arkansas  
Stores by state  
Number of stores operated 10
California  
Stores by state  
Number of stores operated 160
Colorado  
Stores by state  
Number of stores operated 26
Connecticut  
Stores by state  
Number of stores operated 17
Delaware  
Stores by state  
Number of stores operated 3
Florida  
Stores by state  
Number of stores operated 86
Georgia  
Stores by state  
Number of stores operated 38
Hawaii  
Stores by state  
Number of stores operated 4
Idaho  
Stores by state  
Number of stores operated 9
Illinois  
Stores by state  
Number of stores operated 55
Indiana  
Stores by state  
Number of stores operated 24
Iowa  
Stores by state  
Number of stores operated 10
Kansas  
Stores by state  
Number of stores operated 13
Kentucky  
Stores by state  
Number of stores operated 15
Louisiana  
Stores by state  
Number of stores operated 19
Maine  
Stores by state  
Number of stores operated 3
Maryland  
Stores by state  
Number of stores operated 25
Massachusetts  
Stores by state  
Number of stores operated 21
Michigan  
Stores by state  
Number of stores operated 49
Minnesota  
Stores by state  
Number of stores operated 18
Mississippi  
Stores by state  
Number of stores operated 10
Missouri  
Stores by state  
Number of stores operated 24
Montana  
Stores by state  
Number of stores operated 6
Nebraska  
Stores by state  
Number of stores operated 5
Nevada  
Stores by state  
Number of stores operated 15
New Hampshire  
Stores by state  
Number of stores operated 7
New Jersey  
Stores by state  
Number of stores operated 39
New Mexico  
Stores by state  
Number of stores operated 7
New York  
Stores by state  
Number of stores operated 51
North Carolina  
Stores by state  
Number of stores operated 34
North Dakota  
Stores by state  
Number of stores operated 3
Ohio  
Stores by state  
Number of stores operated 43
Oklahoma  
Stores by state  
Number of stores operated 21
Oregon  
Stores by state  
Number of stores operated 17
Pennsylvania  
Stores by state  
Number of stores operated 45
Rhode Island  
Stores by state  
Number of stores operated 3
South Carolina  
Stores by state  
Number of stores operated 20
South Dakota  
Stores by state  
Number of stores operated 3
Tennessee  
Stores by state  
Number of stores operated 26
Texas  
Stores by state  
Number of stores operated 115
Utah  
Stores by state  
Number of stores operated 14
Vermont  
Stores by state  
Number of stores operated 1
Virginia  
Stores by state  
Number of stores operated 29
Washington  
Stores by state  
Number of stores operated 36
West Virginia  
Stores by state  
Number of stores operated 7
Wisconsin  
Stores by state  
Number of stores operated 20
Wyoming  
Stores by state  
Number of stores operated 3
v3.20.2
Summary of significant accounting policies - Fiscal quarter (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 01, 2020
Aug. 03, 2019
Summary of significant accounting policies      
Fiscal period   91 days 91 days
Increased inventory reserve $ 16,523 $ 17,745  
Reduction of associated costs related to CARES Act ERC 48,181 48,181  
Deferred social security tax payments 18,709 18,709  
Amount of cash tax refund $ 4,600 $ 4,600  
v3.20.2
Revenue - Disaggregated revenue (Details)
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Disaggregated revenue        
Concentration (as a percent) 100.00% 100.00% 100.00% 100.00%
Cosmetics        
Disaggregated revenue        
Concentration (as a percent) 43.00% 47.00% 46.00% 50.00%
Skincare, bath, and fragrance        
Disaggregated revenue        
Concentration (as a percent) 28.00% 22.00% 26.00% 21.00%
Haircare products and styling tools        
Disaggregated revenue        
Concentration (as a percent) 21.00% 21.00% 20.00% 19.00%
Services        
Disaggregated revenue        
Concentration (as a percent) 3.00% 6.00% 4.00% 6.00%
Other (nail products, accessories, and other)        
Disaggregated revenue        
Concentration (as a percent) 5.00% 4.00% 4.00% 4.00%