GENESCO INC

Previous wording

Fiscal 2024 included a 53rd week. Excluding the 53rd week, net sales decreased 3.6% for Fiscal 2024.

Current wording

Fiscal 2024 included a 53rd week. Excluding the 53rd week, net sales increased 1.1% for Fiscal 2025.

Previous wording

Total comparable sales decreased 4% for Fiscal 2024, including a 7% decrease in same store sales and an 8% increase in comparable direct sales.

Current wording

Total comparable sales increased 3% for Fiscal 2025, including flat same store sales and a 12% increase in comparable e-commerce sales.

Previous wording

Operating margin decreased as a percentage of net sales from 3.9% in Fiscal 2023 to (0.6%) in Fiscal 2024.

Current wording

Operating margin increased 120 basis points as a percentage of net sales from (0.6%) in Fiscal 2024 to 0.6% in Fiscal 2025.

Previous wording

The effective income tax rate decreased from 19.8% in Fiscal 2023 to (8.5%) in Fiscal 2024.

Current wording

The effective income tax rate increased from (8.5%) in Fiscal 2024 to 309.6% in Fiscal 2025 as a result of a $26.2 million valuation allowance in Fiscal 2025.

Previous wording

Diluted loss per share from continuing operations was $2.10 per share in Fiscal 2024 compared to diluted earnings per share from continuing operations of $5.69 per share in Fiscal 2023.

Current wording

Diluted loss per share from continuing operations was $1.80 per share in Fiscal 2025 compared to $2.10 per share in Fiscal 2024.

Previous wording

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, cash and working capital. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store has comparable sales (which we refer to in this report as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable direct sales"). Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days. Expanded stores are excluded from the comparable sales calculation until the first day an expanded store has comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison. We have not disclosed comparable sales for Fiscal 2023, as we believe that overall sales was a more meaningful metric in Fiscal 2023 due to the impact of the COVID-19 pandemic and related extended store closures that occurred in the first quarter of Fiscal 2022.

Current wording

We consider comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including occupancy, selling salaries, depreciation, etc. Comparable sales also have a direct impact on our total net revenue, working capital and cash. We define "comparable sales" as sales from stores open longer than one year, beginning with the first day a store has comparable sales (which we refer to in this report as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable e-commerce sales"). Temporarily closed stores are excluded from the comparable sales calculation if closed for more than seven days. Expanded stores are excluded from the comparable sales calculation until the first day an expanded store has comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison.

Previous wording

Our net sales for Fiscal 2024 decreased 2.5% to $2.32 billion from $2.38 billion in Fiscal 2023. Included in Fiscal 2024 was a 53rd week compared to a 52-week in Fiscal 2023. Excluding the 53rd week, net sales decreased 3.6% for Fiscal 2024. The decrease in net sales was driven by decreased store sales at Journeys Group and decreased wholesale sales, partially offset by an 8% increase in e-commerce comparable sales for the total Company, strong store performance at Schuh and Johnston & Murphy and an $8.7 million favorable foreign exchange impact on sales due to changes in foreign exchange rates. Inflationary pressures and economic uncertainty continue to impact the discretionary spending behavior of our consumers. The shopping behavior of our Journeys consumer, in particular, has shifted toward shopping almost exclusively for key footwear items, putting more pressure on our core product assortment. Journeys Group sales decreased 8% and Genesco Brands Group sales decreased 9%, while Schuh Group sales increased 11% and Johnston & Murphy Group sales increased 8% for Fiscal 2024 compared to Fiscal 2023. Schuh's sales increased 8% on a local currency basis for Fiscal 2024. Total comparable sales decreased 4% for Fiscal 2024, with same store sales down 7% and comparable direct sales up 8%.

Current wording

Our net sales for Fiscal 2025 (52 weeks) were flat at $2.3 billion compared to Fiscal 2024 (53 weeks). The flat net sales for Fiscal 2025 reflected an increase in comparable e-commerce sales offset by 63 net store closings, the negative impact of the extra week in Fiscal 2024 due the 53-week calendar shift and decreased wholesale sales. Excluding the 53rd week in Fiscal 2024, net sales increased 1.1% for Fiscal 2025. Inflationary pressures and economic uncertainty continue to impact the discretionary spending behavior of our consumers. Consumers continue to show a willingness to shop when there is a reason and retreat when there is not. Consumers remain selective in their purchases and we continue to innovate and add freshness to our assortments to satisfy our customers. Journeys Group sales increased 3% offset by a sales decrease of 6% at Johnston & Murphy Group and a sales decrease of 11% at Genesco Brands Group, while Schuh Group sales were flat for Fiscal 2025 compared to Fiscal 2024. Schuh's sales decreased 2% on a local currency basis for Fiscal 2025. Total comparable sales increased 3% for Fiscal 2025, with same store sales flat and comparable e-commerce sales up 12%.

Previous wording

Gross margin decreased 3.3% to $1.10 billion in Fiscal 2024 from $1.14 billion in Fiscal 2023 and decreased as a percentage of net sales from 47.6% in Fiscal 2023 to 47.3% in Fiscal 2024, reflecting decreased gross margin as a percentage of net sales in Journeys Group, partially offset by an increase in gross margin as a percentage of net sales in all of our other operating business units. The overall decrease in gross margin as a percentage of net sales reflects increased promotional activity at Journeys and Johnston & Murphy and increased shipping and warehouse expense at Johnston & Murphy, primarily reflecting increased warehouse costs. All of these decreases to gross margin are partially offset by a more elevated product mix at Schuh as well as reduced duties and freight from the new ROI-based distribution center, decreased air freight at Johnston & Murphy and easing of freight and logistics pressures, favorable changes in product mix and increased prices at Genesco Brands.

Current wording

Gross margin decreased 0.2% to $1.097 billion in Fiscal 2025 from $1.099 billion in Fiscal 2024 and decreased as a percentage of net sales from 47.3% in Fiscal 2024 to 47.2% in Fiscal 2025, reflecting decreased gross margin as a percentage of net sales in Journeys Group and Schuh Group, partially offset by an increase in gross margin as a percentage of net sales in Johnston & Murphy Group and Genesco Brands Group. The overall decrease in gross margin as a percentage of net sales reflects increased promotional activity at Schuh Group, partially offset by better initial margins and lower wholesale reserves at Johnston & Murphy Group and a favorable change in product mix at Genesco Brands Group.

Previous wording

Selling and administrative expenses increased as a percentage of net sales from 43.7% in Fiscal 2023 to 46.5% in Fiscal 2024, reflecting increased expenses as a percentage of net sales in all of our operating business units. The overall increase in expenses as a percentage of net sales in Fiscal 2024 reflects the deleverage of expenses, especially compensation expense, selling salaries, marketing and occupancy expenses as a result of decreased revenue in Fiscal 2024. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Current wording

Selling and administrative expenses in Fiscal 2025 decreased to $1.080 billion compared to $1.082 billion in Fiscal 2024. Selling and administrative expenses decreased 10 basis points as a percentage of net sales in Fiscal 2025 compared to Fiscal 2024 from 46.5% to 46.4%, reflecting decreased expenses as a percentage of net sales at Journeys Group and Genesco Brands Group, partially offset by increased expenses as a percentage of net sales at Schuh Group and Johnston & Murphy Group. The overall decrease in expenses as a percentage of net sales in Fiscal 2025 reflects a decrease in occupancy costs, partially offset by increased marketing expenses. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.

Previous wording

The loss from continuing operations before income taxes (“pretax loss") for Fiscal 2024 was $21.8 million, compared to earnings from continuing operations before income taxes ("pretax earnings") of $90.1 million for Fiscal 2023. The pretax loss for Fiscal 2024 included a non-cash goodwill impairment charge of $28.5 million and asset impairment and other charges of $1.8 million which included $1.1 million for severance and $1.0 million for asset impairments, partially offset by a $0.3 million insurance gain. Pretax earnings for Fiscal 2023 included an asset impairment and other charge of $0.9 million which included $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of the pension plan.

Current wording

Earnings from continuing operations before income taxes (“pretax earnings") for Fiscal 2025 was $9.3 million, compared to a loss from continuing operations before income taxes ("pretax loss") of $21.8 million for Fiscal 2024. Pretax earnings for Fiscal 2025 included asset impairment and other charges of $3.2 million which included $1.8 million for severance and $1.4 million for asset impairments. The pretax loss for Fiscal 2024 included a non-cash goodwill impairment charge of $28.5 million and asset impairment and other charges of $1.8 million which included $1.1 million for severance and $1.0 million for asset impairments, partially offset by a $0.3 million insurance gain.

Previous wording

The net loss for Fiscal 2024 was $16.8 million, or $1.50 diluted loss per share compared to net earnings of $71.9 million, or $5.66 diluted earnings per share for Fiscal 2023. The net loss for Fiscal 2024 includes a $9.4 million ($7.2 million, net of tax) gain from insurance proceeds related to legacy environmental matters. The effective income tax rate was (8.5%) for Fiscal 2024 compared to 19.8% for Fiscal 2023. The effective tax rate for Fiscal 2024 was lower compared to Fiscal 2023, reflecting the impact of recording a valuation allowance against certain tax attributes that we no longer believe it is more-likely-than-not we will realize the benefit, partially offset by accrued interest related to a IRS refund that is due to the Company. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Current wording

The net loss for Fiscal 2025 was $18.9 million, or $1.74 diluted loss per share compared to a net loss of $16.8 million, or $1.50 diluted loss per share for Fiscal 2024. The net loss for Fiscal 2025 and Fiscal 2024 includes a $1.2 million ($0.9 million, net of tax) and $9.4 million ($7.2 million, net of tax), respectively, gain from insurance proceeds related to legacy environmental matters.

Previous wording

The store count for Journeys Group was 1,063 stores at the end of Fiscal 2024, including 222 Journeys Kidz stores, 39 Journeys stores in Canada and 33 Little Burgundy stores in Canada, compared to 1,130 stores at the end of Fiscal 2023, including 233 Journeys Kidz stores, 45 Journeys stores in Canada and 34 Little Burgundy stores in Canada.

Current wording

The store count for Journeys Group was 1,006 stores at the end of Fiscal 2025, including 211 Journeys Kidz stores, 35 Journeys stores in Canada and 30 Little Burgundy stores in Canada, compared to 1,063 stores at the end of Fiscal 2024, including 222 Journeys Kidz stores, 39 Journeys stores in Canada and 33 Little Burgundy stores in Canada.

Previous wording

Schuh Group operating income for Fiscal 2024 was $21.4 million compared to $17.6 million for Fiscal 2023. The 21.8% increase in operating income this year reflects (i) increased net sales and (ii) increased gross margin as a percentage of net sales, reflecting an elevated product mix and reduced duties and freight as a result of the new ROI-based distribution center. In addition, operating income included a favorable impact of $1.3 million due to changes in foreign exchange rates compared to last year. Selling and administrative expenses increased as a percentage of net sales reflecting increased selling salaries, marketing expense and performance-based compensation expense, partially offset by decreased occupancy expense.

Current wording

The 240 basis point decrease in operating margin for Fiscal 2025 compared to Fiscal 2024 reflects decreased gross margin as a percentage of net sales reflecting a more promotional environment at Schuh Group during Fiscal 2025, partially offset by decreased shipping and warehouse expenses. The increase in selling and administrative expenses as a percentage of net sales also contributed to the decrease in operating margin reflecting increased selling salaries, marketing expense and depreciation expense, partially offset by decreased performance-based compensation expense and occupancy expense. In addition, operating income included a favorable impact of $0.2 million due to changes in foreign exchange rates compared to last year.

Previous wording

Johnston & Murphy Group net sales increased 7.8% to $339.4 million for Fiscal 2024 from $314.8 million for Fiscal 2023 primarily due to increased total comparable sales of 9% driven by increased store and e-commerce sales, partially offset by decreased wholesale sales. Compelling product and strong sales of non-footwear items contributed to the increase in sales for Fiscal 2024. Johnston & Murphy has repositioned its brand to a multi-category lifestyle brand, offering more casual and comfortable footwear and apparel, and it continues to resonate well with its consumers' more casual preferences. Retail operations accounted for 78.3% of Johnston & Murphy Group's sales in Fiscal 2024, up from 76.0% in Fiscal 2023. The store count for Johnston & Murphy retail operations at the end of Fiscal 2024 was 156 Johnston & Murphy shops and factory stores, including five stores in Canada, compared to 158 Johnston & Murphy shops and factory stores, including six stores in Canada, at the end of Fiscal 2023.

Current wording

Johnston & Murphy Group net sales decreased 5.7% to $320.2 million for Fiscal 2025 from $339.4 million for Fiscal 2024 primarily due to decreased total comparable sales of 2% driven by decreased store and e-commerce comparable sales, a 3% decrease in the average number of Johnston & Murphy stores for Fiscal 2025 and decreased wholesale sales. The softening in men's non-athletic premium footwear market made for a difficult operating environment in Fiscal 2025. Johnston & Murphy continues to make inroads with more casual footwear and in apparel and accessories, such as outerwear and leather goods. Retail operations accounted for 78.3% of Johnston & Murphy Group's sales in both Fiscal 2025 and Fiscal 2024. The store count for

Previous wording

Corporate and other expense for Fiscal 2024 was $62.3 million compared to $32.5 million for Fiscal 2023. Corporate and other expense in Fiscal 2024 included non-cash impairment charges of $28.5 million related to goodwill and a $1.8 million charge in asset impairment and other charges which included $1.1 million in severance and $1.0 million for asset impairments, partially offset by a $0.3 million insurance gain. Corporate and other expense in Fiscal 2023 included $1.6 million for asset impairments, partially offset by a $0.7 million gain on the termination of our pension plan.

Current wording

Corporate and other expense for Fiscal 2025 decreased 39% to $37.8 million compared to $62.3 million for Fiscal 2024. Corporate and other expense in Fiscal 2025 included a $3.2 million charge in asset impairment and other charges which included $1.8 million for severance and $1.4 million for asset impairments. Corporate and other expense in Fiscal 2024 included non-cash impairment charges of $28.5 million related to goodwill and a $1.8 million charge in asset impairment and other charges which included $1.1 million in severance and $1.0 million for asset impairments, partially offset by a $0.3 million insurance gain. The corporate expense increase, excluding asset impairment and other charges in Fiscal 2025 and Fiscal 2024 and goodwill impairment in Fiscal 2024, primarily reflects an increase in performance-based compensation and compensation expenses in Fiscal 2025 compared to Fiscal 2024.

Previous wording

Cash provided by operating activities was $259.7 million higher in Fiscal 2024 compared to Fiscal 2023, reflecting primarily the following factors:

Current wording

Cash provided by operating activities was $6.9 million lower in Fiscal 2025 compared to Fiscal 2024, reflecting primarily the following factors:

Previous wording

a $263.9 million increase in cash flow from changes in inventory, primarily reflecting a decrease in inventory, primarily Journeys and Johnston & Murphy inventory, in Fiscal 2024 compared to the re-inventorying of our operating business units in Fiscal 2023 following the supply chain disruptions in Fiscal 2022, partially offset by a $15.8 million decrease in cash flow from changes in accounts payable, primarily reflecting changes in buying patterns in Fiscal 2024; and

Current wording

an $82.0 million increase in cash flow from changes in accounts payable, primarily reflecting changes in buying patterns in Fiscal 2025;

Previous wording

Cash used in investing activities was flat for Fiscal 2024 compared to Fiscal 2023 as the increased capital expenditures for investments in retail stores and omni-channel was offset by decreased capital expenditures for the new corporate headquarters building.

Current wording

Cash used in investing activities was $18.9 million lower in Fiscal 2025 compared to Fiscal 2024 reflecting decreased capital expenditures primarily related to omni-channel capabilities and investments in retail stores.

Previous wording

Cash used in financing activities was $2.0 million higher in Fiscal 2024 as compared to Fiscal 2023 primarily reflecting decreased revolver borrowings in Fiscal 2024, partially offset by decreased share repurchases this year.

Current wording

Cash used in financing activities was $0.6 million lower in Fiscal 2025 as compared to Fiscal 2024 primarily reflecting decreased share repurchases, partially offset by decreased net borrowings this year compared to last year.

Previous wording

On January 28, 2022, we entered into a Third Amendment (the "Third Amendment") to our Fourth Amended and Restated Credit Agreement dated as of January 31, 2018 between us, certain of our subsidiaries, the lenders party thereto and Bank of America, N.A. as agent (as amended, the "Credit Facility" or the "Credit Agreement") to, among other things, extend the maturity date to January 28, 2027 and remove the $17.5 million first in-last out term loan. The Total Commitments (as defined in the Credit Agreement) for revolving loans is $332.5 million. As of February 3, 2024 we have $32.9 million in U.S. revolver borrowings and $1.8 million (C$2.4 million) related to GCO Canada ULC. We had outstanding letters of credit of $6.9 million under the Credit Facility at February 3, 2024. These letters of credit support lease and insurance indemnifications.

Current wording

On January 28, 2022, we entered into a Third Amendment (the "Third Amendment") to our Fourth Amended and Restated Credit Agreement dated as of January 31, 2018 between us, certain of our subsidiaries, the lenders party thereto and Bank of America, N.A. as agent (as amended, the "Credit Facility" or the "Credit Agreement") to, among other things, extend the maturity date to January 28, 2027 and remove the $17.5 million first in-last out term loan. The Total Commitments (as defined in the Credit Agreement) for revolving loans is $332.5 million. As of February 1, 2025 we did not have any revolver borrowings outstanding.

Previous wording

In the fourth quarter of Fiscal 2021, we implemented tax strategies allowed under the 5-year carryback provisions in the CARES Act which we believe will generate approximately $55 million of net tax refunds. We received approximately $26 million of such net tax refunds in Fiscal 2022 and anticipated receipt of the remaining outstanding net tax refund in Fiscal 2023. However, in the third quarter of Fiscal 2023, we were notified the IRS would conduct an audit of the periods related to the outstanding net tax refund. While we do not believe any uncertainty with the technical merits of the positions generating the net tax refunds exists, we do anticipate the timing of the net tax refund will be extended as a result of the audit process. Accordingly, we have recorded the outstanding refund as non-current prepaid income taxes on the Consolidated Balance Sheets as of February 3, 2024.

Current wording

In the fourth quarter of Fiscal 2021, we implemented tax strategies allowed under the 5-year carryback provisions in the CARES Act which we believed would generate approximately $55 million of net tax refunds. We received approximately $26 million of such net tax refunds in Fiscal 2022 and anticipated receipt of the remaining outstanding net tax refund in Fiscal 2023. However, in the third quarter of Fiscal 2023, we were notified that the Internal Revenue Service ("IRS") would conduct an audit of the periods related to the outstanding net tax refund. As a result, the timing of the net tax refund was extended due to the audit process. On January 17, 2025, we executed Form 870 with the IRS exam team and began the process of completing the separate Joint Committee on Taxation review of our claim. Form 870 is used upon completion of an IRS examination to indicate the taxpayer’s agreement with the revenue agent’s report of proposed adjustments and agreement to pay any deficiency. As a result, we now expect a refund of $59.3 million based on additional accrued interest and minor changes to the refund as agreed to on Form 870. Further, we now expect to complete the remaining requirements of the Joint Committee on Taxation governmental review process and collect the refund during Fiscal 2026. As such, we have moved the receivable from noncurrent prepaid income taxes to prepaids and other current assets on the Consolidated Balance Sheets as of February 1, 2025.

Previous wording

(1) Operating lease obligations excludes $10.5 million for leases signed but not yet commenced.

Current wording

(1) Operating lease obligations excludes $27.9 million for leases signed but not yet commenced.

Previous wording

Capital expenditures were $60.3 million and $59.9 million for Fiscal 2024 and 2023, respectively. The $0.4 million increase in Fiscal 2024 capital expenditures as compared to Fiscal 2023 is primarily due to increases for new stores, renovations and computer hardware, software and warehouse enhancements to drive traffic and omni-channel initiatives, almost offset by decreased capital expenditures for our new corporate headquarters.

Current wording

Capital expenditures were $41.1 million and $60.3 million for Fiscal 2025 and 2024, respectively. The $19.2 million decrease in Fiscal 2025 capital expenditures as compared to Fiscal 2024 is primarily due to decreases in computer hardware, software and warehouse enhancements to drive traffic and omni-channel initiatives and decreases for new stores, partially offset by increased renovations.

Previous wording

We expect total capital expenditures for Fiscal 2025 to be approximately $52-$57 million of which approximately 59% is for new stores and renovations and 41% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel initiatives and other projects. We do not currently have any longer term capital expenditures or other cash requirements other than as set forth in the contractual obligations table. We also do not currently have any off-balance sheet arrangements.

Current wording

We expect total capital expenditures for Fiscal 2026 to be approximately $50-$65 million of which approximately 70% is for new stores and renovations and 30% is for computer hardware, software and warehouse enhancements for initiatives to drive traffic and omni-channel initiatives and other projects. We do not currently have any longer term capital expenditures or other cash requirements other than as set forth in the contractual obligations table. We also do not currently have any off-balance sheet arrangements.

Previous wording

We repurchased 1,261,295 shares during Fiscal 2024 at a cost of $32.0 million or an average of $25.39 per share. We were operating under a $100.0 million repurchase authorization from February 2022. In June 2023, we announced an additional $50.0 million share repurchase authorization. As of February 3, 2024, we have $52.1 million remaining under the expanded share repurchase authorization. We repurchased 1,380,272 shares during Fiscal 2023 at a cost of $72.7 million or an average of $52.66 per share. We repurchased 1,360,909 shares during Fiscal 2022 at a cost of $82.8 million or an average of $60.88 per share. During the first quarter of Fiscal 2025, through March 27, 2024, we did not repurchase any shares.

Current wording

We repurchased 399,633 shares during Fiscal 2025 at a cost of $9.8 million or an average of $24.49 per share. We were operating under a $100.0 million repurchase authorization from February 2022. In June 2023, we announced an additional $50.0 million share repurchase authorization. As of February 1, 2025, we have $42.3 million remaining under the expanded share repurchase authorization. We repurchased 1,261,295 shares during Fiscal 2024 at a cost of $32.0 million or an average of $25.39 per share. We repurchased 1,380,272 shares during Fiscal 2023 at a cost of $72.7 million or an average of $52.66 per share. During the first quarter of Fiscal 2026, through March 26, 2025, we repurchased 469,325 shares at a cost of $10.0 million or an average of $21.31 per share.

Previous wording

Cash – Our cash balances are held in our bank accounts and not invested at this time. We did not have significant exposure to changing interest rates on invested cash at February 3, 2024. As a result, we consider the interest rate risk implicit in these investments at February 3, 2024 to be low. We did not hold any cash equivalents at February 3, 2024.

Current wording

Cash and Cash Equivalents – Our cash and cash equivalent balances are held in our bank accounts and are invested primarily in institutional money market funds. We did not have significant exposure to changing interest rates on invested cash at February 1, 2025. As a result, we consider the interest rate risk implicit in these investments at February 1, 2025 to be low. We had cash equivalents of $7.5 million at February 1, 2025.

Previous wording

Accounts Receivable – Our accounts receivable balance at February 3, 2024 is concentrated in our wholesale businesses, which sell primarily to department stores and independent retailers across the United States. In the wholesale businesses, one customer accounted for 18%, one customer accounted for 16%, one customer accounted for 11% and one customer accounted for 10% of our total trade receivables balance, while no other customer accounted for more than 8% of our total trade receivables balance as of February 3, 2024. We monitor the credit quality of our customers and establish an allowance for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the economy and the retail industry, as well as company-specific information.

Current wording

Accounts Receivable – Our accounts receivable balance at February 1, 2025 is concentrated in our wholesale businesses, which sell primarily to department stores and independent retailers across the United States. In the wholesale businesses, one customer accounted for 27%, one customer accounted for 19%, one customer accounted for 11% and one customer accounted for 10% of our total trade receivables balance, while no other customer accounted for more than 7% of our total trade receivables balance as of February 1, 2025. We monitor the credit quality of our customers and establish an allowance for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the economy and the retail industry, as well as company-specific information.

Previous wording

Foreign Currency Exchange Risk – We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional currency and those financial results must be translated into United States dollars. As currency exchange rates fluctuate, translation of our financial statements of foreign businesses into United States dollars affects the comparability of financial results between years. Schuh Group's net sales and operating income for Fiscal 2024 were positively impacted by $11.8 million and $1.3 million, respectively, due to the change in foreign exchange rates.

Current wording

Foreign Currency Exchange Risk – We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional currency and those financial results must be translated into United States dollars. As currency exchange rates fluctuate, translation of our financial statements of foreign businesses into United States dollars affects the comparability of financial results between years. Schuh Group's net sales and operating income for Fiscal 2025 were positively impacted by $9.0 million and $0.2 million, respectively, due to the change in foreign exchange rates.

Previous wording

Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, we employ the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyze markdown requirements at the stock number level based on factors such as inventory turn, average selling price and inventory age. In addition, we accrue markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown allowances, we maintain reserves for shrinkage and damaged goods based on historical rates.

Current wording

Inherent in the retail inventory method are subjective judgments and estimates about the recoverability of the inventory and its market value, including merchandise mark-on, markups, markdowns and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, we employ the retail inventory method in multiple subclasses of inventory with similar gross margins. We analyze markdown requirements at the stock number level based on factors such as inventory

Previous wording

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value. A change of 10% from the recorded amounts for markdowns, shrinkage and damaged goods would have changed inventory by $0.7 million at February 3, 2024.

Current wording

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends and overall economic conditions as well as expectations surrounding future sales. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value. A change of 10% from the recorded amounts for markdowns, shrinkage and damaged goods would have changed inventory by $0.9 million at February 1, 2025.

Previous wording

We periodically assess the recoverability of our long-lived assets, other than goodwill, and evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets.

Current wording

We periodically assess the recoverability of our long-lived assets, other than goodwill, and evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if an asset's fair value is less than the carrying amount. Fair value of our long-lived assets is determined by estimated future cash flows, undiscounted and without interest charges, and comparable market rents. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets.

Previous wording

A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized in our Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity.

Current wording

Revenue from gift cards is deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized in our Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in future periods. We perform an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity.

Previous wording

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent it is more likely than not that some portion or all of a deferred asset will not be realized, valuation allowances are established. To the extent valuation allowances are established or increased in a period, we include an expense within the tax provision in our Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when we consider that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any other negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, we would record an income tax benefit for a portion or all of the deferred tax valuation allowance released. At February 3, 2024, we had a deferred tax valuation allowance of $44.0 million.

Current wording

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent it is more likely than not that some portion or all of a deferred asset will not be realized, valuation allowances are established. To the extent valuation allowances are established or increased in a period, we include an expense within the tax provision in our Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when we consider that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any other negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, we would record an income tax benefit for a portion or all of the deferred tax valuation allowance released. At February 1, 2025, we had a deferred tax valuation allowance of $72.4 million.