# GENESCO INC (GCO) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GENESCO INC's 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/18498/000095017025044864/gco-20250201.htm
Accession: 0000950170-25-044864
Filing date: 2025-03-26
Report date: 2025-02-01
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/GCO/
All MD&A years: /company/GCO/mda/
Previous year: /company/GCO/mda/fy2024/ (FY 2024)
Next year: /company/GCO/mda/fy2026/ (FY 2026)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this Annual Report on Form 10-K, and with Part II, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024, filed with the SEC on March 27, 2024, which provides a discussion of our financial condition and results of operations for Fiscal 2024 compared to our Fiscal 2023.

Summary of Results of Operations

•
Net sales were flat in Fiscal 2025 compared to Fiscal 2024.

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

•
Journeys Group sales increased 3%, partially 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.

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

•
Gross margin decreased 10 basis points as a percentage of net sales from 47.3% in Fiscal 2024 to 47.2% in Fiscal 2025.

•
Selling and administrative expenses decreased 10 basis points as a percentage of net sales from 46.5% in Fiscal 2024 to 46.4% in Fiscal 2025.

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

•
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.

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

Key Performance Indicators

In assessing the performance of our business, we consider a variety of performance and financial measures. The key performance indicators we use to evaluate the financial condition and operating performance of our business are comparable sales, net sales, gross margin, operating income and operating margin. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.

Comparable Sales

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,

31

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.

Results of Operations—Fiscal 2025 Compared to Fiscal 2024

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%.

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.

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.

Operating margin was 0.6% in Fiscal 2025 compared to an operating margin loss of (0.6)% in Fiscal 2024 reflecting improved operating margin at Journeys Group and Genesco Brands Group, partially offset by decreased operating margin at Schuh Group and Johnston & Murphy Group. The improvement in operating margin in Fiscal 2025 primarily reflects a non-cash goodwill impairment charge of $28.5 million in Fiscal 2024 and decreased selling and administrative expenses as a percentage of net sales, partially offset by decreased gross margin as a percentage of net sales in Fiscal 2025 compared to Fiscal 2024.

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.

32

The effective income tax rate was 309.6% for Fiscal 2025 compared to (8.5%) for Fiscal 2024. The higher effective tax rate for Fiscal 2025 compared to Fiscal 2024 reflects a $26.2 million U.S. valuation allowance recorded in Fiscal 2025, reflecting the uncertainty regarding our ability to realize the benefit of our general tax attributes in the U.S. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

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.

Journeys Group

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","","%"],["","","2025","","","2024","","","Change"],["","","(dollars in thousands)"],["Net sales","","$","1,398,922","","","$","1,363,835","","","","2.6","%"],["Cost of sales","","","715,723","","","","696,351"],["Gross margin","","","683,199","","","","667,484","","","","2.4","%"],["% of sales","","","48.8","%","","","48.9","%"],["Selling and administrative expenses","","","656,854","","","","656,412","","","","0.1","%"],["% of sales","","","47.0","%","","","48.1","%"],["Operating income","","$","26,345","","","$","11,072","","","","137.9","%"],["Operating margin","","","1.9","%","","","0.8","%"]]
[[/GREPCENT_TABLE]]

Net sales from Journeys Group increased 2.6% to $1.40 billion for Fiscal 2025 compared to $1.36 billion for Fiscal 2024. The increase in net sales was primarily due to a total comparable sales increase of 6% driven by increased comparable e-commerce sales and increased same store sales, partially offset by a 5% decrease in the average number of Journeys stores for Fiscal 2025 due to 57 net store closures and a decrease in sales related to the 53-week calendar shift. We believe our Journeys consumer is more interested in a broader range of brands they are buying and more diversified in the styles they are wearing. We have injected the product assortment with more new relevant product offerings across several casual and athletic brands and increased investment in the Journeys brand to elevate the customer experience.

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.

The 110 basis point improvement in operating margin for Journeys Group in Fiscal 2025 compared to Fiscal 2024 was primarily due to decreased selling and administrative expenses as a percentage of net sales reflecting decreased occupancy, compensation and freight expenses, partially offset by increased performance-based compensation and marketing expenses. Gross margin decreased by 10 basis points as a percentage of net sales in Fiscal 2025, reflecting changes in product mix, partially offset by decreased markdowns.

33

Schuh Group

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","","%"],["","","2025","","","2024","","","Change"],["","","(dollars in thousands)"],["Net sales","","$","479,891","","","$","480,164","","","","(0.1",")%"],["Cost of sales","","","280,395","","","","273,588"],["Gross margin","","","199,496","","","","206,576","","","","(3.4",")%"],["% of sales","","","41.6","%","","","43.0","%"],["Selling and administrative expenses","","","189,297","","","","185,141","","","","2.2","%"],["% of sales","","","39.4","%","","","38.6","%"],["Operating income","","$","10,199","","","$","21,435","","","","(52.4",")%"],["Operating margin","","","2.1","%","","","4.5","%"]]
[[/GREPCENT_TABLE]]

Net sales from the Schuh Group were flat at $479.9 million for Fiscal 2025 compared to $480.2 million for Fiscal 2024. Net sales in Fiscal 2025 included a total comparable sales decrease of 2% driven by decreased store sales, partially offset by increased e-commerce comparable sales, accelerating to over 40% of Schuh sales, and a favorable impact of $9.0 million in sales due to changes in foreign exchange rates. Schuh's sales decreased 2% on a local currency basis for Fiscal 2025. Schuh continues to contend with a challenging and highly promotional U.K. footwear market. The consumer continues to be selective with their discretionary purchases. In addition, Schuh Group sales in Fiscal 2025 compares against back-to-back years of record sales growth. Schuh Group operated 124 stores at the end of Fiscal 2025 compared to 122 stores at the end of Fiscal 2024.

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.

Johnston & Murphy Group

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","","%"],["","","2025","","","2024","","","Change"],["","","(dollars in thousands)"],["Net sales","","$","320,208","","","$","339,446","","","","(5.7",")%"],["Cost of sales","","","148,461","","","","160,461"],["Gross margin","","","171,747","","","","178,985","","","","(4.0",")%"],["% of sales","","","53.6","%","","","52.7","%"],["Selling and administrative expenses","","","163,331","","","","162,671","","","","0.4","%"],["% of sales","","","51.0","%","","","47.9","%"],["Operating income","","$","8,416","","","$","16,314","","","","(48.4",")%"],["Operating margin","","","2.6","%","","","4.8","%"]]
[[/GREPCENT_TABLE]]

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

34

Johnston & Murphy retail operations at the end of Fiscal 2025 was 148 Johnston & Murphy shops and factory stores, compared to 156 Johnston & Murphy shops and factory stores, including five stores in Canada, at the end of Fiscal 2024. Johnston & Murphy closed its five Canadian stores at the end of Fiscal 2025.

The 220 basis point decrease in operating margin for Johnston & Murphy Group for Fiscal 2025 compared to Fiscal 2024 reflects increased selling and administrative expenses as a percentage of net sales for Fiscal 2025, reflecting the deleverage of expenses, especially marketing expense, selling salaries and compensation expense in part as a result of decreased revenue in Fiscal 2025. Johnston & Murphy continues to make investments in marketing to enhance the brand as the men's non-athletic premium footwear market returns to a more normal operating environment. Gross margin as a percentage of net sales increased in Fiscal 2025, primarily reflecting improved initial margins and lower markdowns.

Genesco Brands Group

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","","%"],["","","2025","","","2024","","","Change"],["","","(dollars in thousands)"],["Net sales","","$","126,041","","","$","141,179","","","","(10.7",")%"],["Cost of sales","","","83,670","","","","95,404"],["Gross margin","","","42,371","","","","45,775","","","","(7.4",")%"],["% of sales","","","33.6","%","","","32.4","%"],["Selling and administrative expenses","","","35,565","","","","45,783","","","","(22.3",")%"],["% of sales","","","28.2","%","","","32.4","%"],["Operating income (loss)","","$","6,806","","","$","(8",")","","NM"],["Operating margin","","","5.4","%","","","(0.0",")%"]]
[[/GREPCENT_TABLE]]

Net sales for Genesco Brands Group decreased 10.7% to $126.0 million for Fiscal 2025 from $141.2 million for Fiscal 2024, primarily due to the repositioning of the business to a more refined portfolio of licenses to emphasize key brands, partially offset by increased sales of Dockers footwear.

The 540 basis point improvement in operating margin for Genesco Brands Group in Fiscal 2025 was primarily due to decreased selling and administrative expenses as a percentage of net sales reflecting decreased royalty, marketing and other expenses primarily as a result of an amendment to the Levi's license agreement, partially offset by increased performance-based compensation and freight expenses. Gross margin increased as a percentage of net sales which also contributed to the operating margin improvement, reflecting a favorable brand sales mix shift.

Corporate, Interest Expenses and Other Charges

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.

Net interest expense decreased $3.5 million or 45.4% to $4.3 million in Fiscal 2025 from $7.8 million in Fiscal 2024 primarily reflecting decreased average borrowings in Fiscal 2025 compared to Fiscal 2024.

35

Liquidity and Capital Resources

Working Capital

Our business is seasonal, with our investment in inventory and accounts receivable normally reaching peaks in the spring and fall of each year. Historically, cash flow from operations has been generated principally in the fourth quarter of each fiscal year.

[[GREPCENT_TABLE]]
[["Cash flow changes:","","Fiscal Year Ended"],["(in thousands)","","February 1, 2025","","","February 3, 2024","","","Increase (Decrease)"],["Net cash provided by operating activities","","$","87,886","","","$","94,796","","","$","(6,910",")"],["Net cash used in investing activities","","","(41,131",")","","","(60,001",")","","","18,870"],["Net cash used in financing activities","","","(47,003",")","","","(47,579",")","","","576"],["Effect of foreign exchange rate fluctuations on cash","","","(900",")","","","(51",")","","","(849",")"],["Net decrease in cash and cash equivalents","","$","(1,148",")","","$","(12,835",")","","$","11,687"]]
[[/GREPCENT_TABLE]]

Reasons for the major variances in cash provided by (used in) the table above are as follows:

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

•
a $129.4 million decrease in cash flow from changes in inventory, primarily reflecting a year over year increase in Journeys Group, Johnston & Murphy Group and Genesco Brands Group inventory, partially offset by a year over year decrease in Schuh inventory; and partially offset by

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

•
a $17.6 million increase in cash flow from changes in accounts receivable, primarily reflecting the distribution model transition at Genesco Brands Group and decreased Genesco Brands Group sales; and

•
a $61.7 million increase in cash flow from changes in other assets and liabilities, partially offset by a $47.6 million decrease in cash flow from changes in prepaids and other current assets, primarily reflecting changes in timing of prepaid income taxes and changes in timing of rent payments in Fiscal 2025 compared to Fiscal 2024.

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.

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.

Sources of Liquidity and Future Capital Needs

We have three principal sources of liquidity: cash flow from operations, cash on hand and our credit facilities discussed in Item 8, Note 8, "Long-Term Debt", to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

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.

36

We had outstanding letters of credit of $5.9 million under the Credit Facility at February 1, 2025. These letters of credit support lease and insurance indemnifications.

On November 2, 2022, Schuh entered into a facility agreement (the "Facility Agreement") with Lloyds Bank PLC (“Lloyds”) for a £19.0 million revolving credit facility. The Facility Agreement expires November 2, 2025, with options to request two one-year extensions to this termination date subject to lender approval, and bears interest at 2.35% over the Bank of England Base Rate. This Facility Agreement replaced Schuh's Facility Letter that would have expired in October 2023. The Facility Agreement includes certain financial covenants specific to Schuh. Following certain customary events of default outlined in the Facility Agreement, payment of outstanding amounts due may be accelerated or the commitments may be terminated. The Facility Agreement is secured by charges over all of the assets of Schuh, and Schuh's subsidiary, Schuh (ROI) Limited. Pursuant to a Guarantee in favor of Lloyds in its capacity as security trustee, Genesco Inc. has guaranteed the obligations of Schuh under the Facility Agreement and certain existing ancillary facilities on an unsecured basis. As of February 1, 2025, we did not have any borrowings under the Schuh Facility Agreement.

We were in compliance with all the relevant terms and conditions of the Credit Facility and Facility Agreement as of February 1, 2025.

We believe that cash on hand, cash provided by operations and borrowings under our amended Credit Facility and the Schuh Facility Agreement will be sufficient to support our liquidity needs in Fiscal 2026 and the foreseeable future.

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.

37

Contractual Obligations

The following table sets forth aggregate contractual obligations as of February 1, 2025.

[[GREPCENT_TABLE]]
[["(in thousands)"],["Contractual Obligations","","Total","","","Current","","","Long-Term"],["Long-Term Debt Obligations","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Operating Lease Obligations(1)","","","572,243","","","","147,883","","","","424,360"],["Other Long-Term Liabilities","","","508","","","","153","","","","355"],["Total Contractual Obligations","","$","572,751","","","$","148,036","","","$","424,715"]]
[[/GREPCENT_TABLE]]

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

We issue inventory purchase orders in the ordinary course of business, which represent authorizations to purchase that are cancelable by their terms. We do not consider purchase orders to be firm inventory commitments. If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation.

Capital Expenditures

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.

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.

Common Stock Repurchases

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.

Environmental and Other Contingencies

We are subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Item 8, Note 15, "Legal Proceedings", to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

38

Financial Market Risk

The following discusses our exposure to financial market risk.

Outstanding Debt – We do not have any outstanding revolver borrowings as of February 1, 2025.

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.

Summary – Based on our overall market interest rate exposure at February 1, 2025, we believe that the effect, if any, of reasonably possible near-term changes in interest rates on our consolidated financial position, results of operations or cash flows for Fiscal 2026 would not be material.

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.

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.

New Accounting Principles

Descriptions of recently issued accounting pronouncements, if any, and the accounting pronouncements adopted by us during Fiscal 2025 are included in Note 2, "New Accounting Pronouncements", to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data".

Critical Accounting Estimates

Inventory Valuation

In our footwear wholesale operations and our Schuh Group segment, cost for inventory that we own is determined using the first-in, first-out ("FIFO") method. Net realizable value is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders for footwear wholesale. We provide a valuation allowance when the inventory has not been marked down to net realizable value based on current selling prices or when the inventory is not turning and is not expected to turn at satisfactory levels.

In our retail operations, other than the Schuh Group segment, we employ the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.

39

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

turn, average selling price and inventory age and 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.

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.

Impairment of Long-Lived Assets

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.

We annually assess our goodwill and indefinite lived trademarks for impairment and on an interim basis if indicators of impairment are present. Our annual assessment date of goodwill and indefinite lived trade names is the first day of the fourth quarter.

In accordance with ASC 350, "Intangibles - Goodwill and Other" ("ASC 350") we have the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill is impaired. If, after such assessment, we conclude that the asset is not impaired, no further action is required. However, if we conclude otherwise, we are required to determine the fair value of the asset using a quantitative impairment test. The quantitative impairment test for goodwill compares the fair value of each reporting unit with the carrying value of the reporting unit with which the goodwill is associated. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded for the amount, if any, in which the carrying value exceeds the reporting unit's fair value. We estimate fair value using the best information available, and compute the fair value derived by a combination of the market and income approach. The market approach is based on observed market data of comparable companies to determine fair value. The income approach utilizes a projection of a reporting unit’s estimated operating results and cash flows that are discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in our fair value estimate is the weighted average cost of capital utilized for discounting our cash flow projections in our income approach. The projection uses our best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. For additional information regarding impairment of long-lived assets, see Item 8, Note 3, "Goodwill and Other Intangible Assets" and Note 4,"Asset Impairments and Other Charges" to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

The quantitative impairment test for indefinite lived trademarks compares the fair value of the trademark with the carrying value of the related trademark. If the fair value of the trademark is less than the carrying value of the trademark, an impairment charge

40

would be recorded for the amount, if any, in which the carrying value exceeds the trademark’s fair value. We estimate fair value using the best information available, and compute the fair value using an income approach that estimates the savings that the trademark owner would realize from owning that asset instead of having to pay rent or a royalty for the use of it. Key assumptions in our fair value estimate are the selected royalty rate and discount rate. Other significant estimates and assumptions include terminal value growth rates and future profitability expectations.

Revenue Recognition

In accordance with ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASC 606"), revenue shall be recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. Revenue is measured as the amount of consideration we expect to be entitled to in exchange for corresponding goods. Substantially all of our sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product at the point of sale. Revenue from retail sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value added taxes. Revenue from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of estimated returns, and excludes sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Actual amounts of markdowns have not differed materially from estimates. Shipping and handling costs charged to customers are included in net sales. We elected the practical expedient within ASC 606 related to taxes that are assessed by a governmental authority, which allows for the exclusion of sales and value added tax from transaction price.

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.

Income Taxes

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.

41

Income tax reserves for uncertain tax positions are determined using the methodology required by the Accounting Standards Codification (“ASC”) Income Tax Topic, ("ASC 740"). This methodology requires companies to assess each income tax position taken using a two-step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If our determinations and estimates prove to be inaccurate, the resulting adjustments could be material to our future financial results. See Item 8, Note 11, "Income Taxes", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to income taxes.