The following table sets forth income reconciliations of the statutory federal income tax rate to actual rates based on income or loss before income taxes, reflecting the adoption of new accounting guidance. A subsequent table below provides the corresponding information for the prior year before the adoption of new accounting guidance and is provided for comparative purposes only.


	January 31,
	2026
	(in thousands)
Federal income tax (benefit) at statutory rate	$	(10,741	)	21	%
State income tax, net of federal benefit (1)		530		(1.0	)
Permanent items		819		(1.6	)
Tax credits		(169	)	0.3
Change in valuation allowance		8,372		(16.4	)
Uncertain tax positions		(154	)	0.3
Other items		258		(0.5	)
Effective income tax rate	$	(1,085	)	2.1	%

(1) State taxes in Oregon made up the majority (greater than 50%) of the tax effect in this category.

The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the following periods:


	February 1,				February 3,
		2025				2024
Federal statutory rate			21.0	%			21.0	%
State tax, net of federal benefit			(6.9	)			4.1
Permanent items			(2.2	)			(2.4	)
Tax credits			1.0				2.4
Valuation allowance			(18.3	)			-
Other items			(0.8	)			(1.0	)
Effective income tax rate			(6.2	)%			24.1	%

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 31, 2026 and February 1, 2025, respectively, are presented below:


	January 31,			February 1,
	2026			2025
Deferred tax assets:
Accrued liabilities	$	1,843		$	268
Operating lease liability		83,758			89,494
Gift card liability		3,482			3,191
Goodwill		343			425
Intangible asset		343			490
Inventories		3,478			3,021
Sales return reserve		194			214
Stock-based compensation		254			726
Tax credits		1,182			1,120
Net operating losses		13,268			11,136
Section 163(j) interest		7,363			5,910
Loyalty program		1,324			654
Total gross deferred tax assets		116,832			116,649
Less: Valuation allowance		(19,536	)		(10,082	)
Deferred tax assets, net of valuation allowance	$	97,296		$	106,567
Deferred tax liabilities:
Depreciation	$	(23,570	)	$	(28,676	)
ROU asset		(72,741	)		(77,701	)
Prepaid expenses		(985	)		(1,330	)
Total gross deferred tax liabilities		(97,296	)		(107,707	)
Net deferred tax (liability) asset	$	-		$	(1,140	)

As of January 31, 2026, the Company had a federal net operating loss (“NOL”) carryforward of $53,397 with no expiration period. In addition, the Company has federal credit carryforwards of $1,174 which begins to expire in 2044. The Company continues to evaluate the possibility of an ownership change in accordance with Internal Revenue Code Section 382, which could limit the utilization of their NOL and credit carryforwards each year. In general terms, an ownership change results from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percent over a three-year period. As of January 31, 2026, the Company is not aware of any such ownership change.