Subsequent Events

Company Response to COVID-19

Subsequent to February 1, 2020, the Company announced actions in response to the continued spread of COVID-19.

On March 16, 2020, as a proactive and cautionary measure, the Company elected to borrow $40.0 million from its 2019 Credit Agreement, leaving its availability under the 2019 Credit Agreement at $21.0 million.

On March 19, 2020, the Company announced the temporary closure of all its stores and the intent to pay employees for the following two weeks. The Company is not currently able to predict the timing of store reopenings, but will continue to monitor the situation. The Company continues to serve customers through its e-commerce channel.

In an effort to further strengthen its financial flexibility and efficiently manage through the pandemic, the Company is proactively taking the following additional actions:


•	Executing a substantial reduction in expenses and capital expenditures. This includes a significant reduction in forward inventory receipts, advertising expenses, outbound freight expense and corporate expenses.


•	Temporarily reducing base compensation by 20% for vice presidents and above. The cash compensation of non-employee members of the Board of Directors has been waived for the first quarter of fiscal 2020.


•	Furloughing hourly store associates effective April 2, 2020 until further notice. As circumstances change, the Company will make every effort to bring these associates back to work as soon as possible. Furloughed associates will also be able to apply for unemployment benefits, if eligible.

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, 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 Company continues to examine the impacts this CARES Act may have on its business.

As of April 4, 2020, the Company had approximately $36.1 million in cash, which includes the $40.0 million borrowed under the 2019 Credit Agreement on March 16, 2020. While the Company expects this uncertain matter to negatively impact the results of operations, cash flows and financial position of the Company, the related financial impact cannot be reasonably estimated at this time. Based on the plans that the Company has put in place, it expects to be able to meet its obligations as they become due over the coming year.

Store optimization strategy

As part of the Company’s store optimization strategy, the Company permanently closed 27 store locations subsequent to year end.