INCOME TAXES

12 Months Ended

Jan. 31, 2025

INCOME TAXES

INCOME TAXES

NOTE 9 — INCOME TAXES

The income tax provision is comprised of the following:

	Year Ended January 31,
	2025		2024		2023
	(In thousands)
Current
Federal	$	42,301	$	42,376	$	27,982
State and city		10,191		9,768		8,278
Foreign		12,093		9,971		14,647
		64,585		62,115		50,907
Deferred
Federal		9,215		6,469		(50,764)
State and city		688		878		(4,457)
Foreign		2,078		(3,603)		526
		11,981		3,744		(54,695)
Income tax expense (benefit)	$	76,566	$	65,859	$	(3,788)
Income (loss) before income taxes
United States	$	218,963	$	218,528	$	(106,086)
Non-United States		50,896		22,071		(32,084)
	$	269,859	$	240,599	$	(138,170)

Effective January 1, 2018, the Tax Cuts and Jobs Act (“TCJA”) subjects a U.S. parent company to current tax on its global intangible low-taxed income (“GILTI”). For fiscal 2025, the Company has elected to treat the tax effect of GILTI as a current period expense.

The significant components of the Company’s net deferred tax liabilities at January 31, 2025 and 2024 are summarized as follows:

	2025		2024
	(In thousands)
Deferred income tax assets:
Compensation	$	3,696	$	3,444
Inventory		12,036		13,756
Provision for bad debts and sales allowances		12,775		11,918
Supplemental employee retirement plan		959		792
Net operating loss		40,480		40,183
Operating lease liability		63,715		52,341
Foreign tax credit carryforward		6,050		5,594
Section 174 R&D amortization		1,338		1,016
Other		6,158		4,919
Gross deferred income tax assets		147,207		133,963
Less: valuation allowance		(46,361)		(39,140)
Net deferred income tax assets		100,846		94,823
Deferred income tax liabilities:
Depreciation and amortization		(19,737)		(15,821)
Intangibles		(49,237)		(51,071)
Operating lease asset		(57,881)		(46,546)
Prepaid expenses and other		(1,807)		(2,149)
Other		(4,828)		(2,724)
Total deferred income tax liabilities		(133,490)		(118,311)
Net deferred income tax liabilities	$	(32,644)	$	(23,488)

The Company intends to indefinitely reinvest substantially all of the undistributed earnings of its foreign subsidiaries. The total undistributed earnings of the Company’s foreign subsidiaries that are considered to be indefinitely reinvested were approximately $200 million as of January 31, 2025. Upon distribution of these earnings in the form of dividends or otherwise, the Company does not anticipate any material tax costs. As such, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of these undistributed foreign earnings.

On December 12, 2022, the Council of the European Union (“EU”) announced that EU member states reached an agreement to implement the minimum tax component of the Organization for Economic Co-operation and Development’s international tax reform initiative, known as Pillar Two. The Pillar Two Model Rules provide for a global minimum tax of 15% for multinational enterprise groups, and is effective for fiscal 2025. While these rules did not have a material impact on the Company’s effective tax rate or financial results for fiscal 2025, the Company continues to monitor its operations and evolving tax legislation in the jurisdictions in which it operates.

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements for the years ended January 31:

	2025		2024		2023
Provision for Federal income taxes at the statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of Federal tax benefit	3.2		3.7		(2.1)
Permanent differences	3.3		2.8		(2.1)
U.S. tax on foreign earnings	2.3		1.8		(6.0)
Foreign tax rate differential and other foreign adjustments	(1.0)		1.0		1.2
Foreign tax credit	(3.7)		(2.9)		7.9
Valuation allowance	2.7		0.4		(3.1)
Goodwill impairment	—		—		(17.3)
Non-taxable capital gain	—		—		5.1
Other, net	0.6		(0.4)		(1.9)
Actual provision for income taxes	28.4	%	27.4	%	2.7	%

The Company’s effective tax rate increased to 28.4% in fiscal 2025 compared to 27.4% in fiscal 2024. This increase in the Company’s effective tax rate is primarily due to the impact of permanent tax adjustments on the annual effective tax rate, offset by a reduction in unrecognized income tax benefits related to the Company’s foreign exposures. The Company’s effective tax rate increased to 27.4% in fiscal 2024 compared to 2.7% in fiscal 2023. This increase in the Company’s effective tax rate is primarily the result of the Company’s charges related to goodwill impairment of $347.2 million which significantly decreased pretax book income in relation to its tax expense in fiscal 2023, as well as operating losses generated in certain foreign jurisdictions during fiscal 2024 that are not expected to be realized.

At January 31, 2025, the Company had state net operating loss carryforwards of $3.6 million, of which $1.8 million carryforward indefinitely and the remainder primarily expires in 2036 through 2041. In addition, the Company had foreign net operating loss carryforwards of $36.9 million, with most jurisdictions having indefinite carryforward periods. At January 31, 2025, the Company also has federal foreign tax credit carryforwards of $6.1 million, which expire in 2029 through 2035.

Valuation allowances represent deferred tax benefits where management is uncertain if the Company will have the ability to recognize those benefits in the future. During the year ended January 31, 2025, the Company recorded an increase to its valuation allowance of $7.2 million against its deferred tax assets, of which $0.4 million related to an increase in the Company’s deferred tax assets and related valuation allowance for excess foreign tax credits, $1.5 million related to a net increase in the Company’s deferred tax assets and related valuation allowance for standalone state tax losses and foreign losses and $5.3 million related to an increase in the Company’s valuation allowance for foreign losses not expected to be utilized.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits, excluding interest and penalties, is as follows:

	2025		2024		2023
	(In thousands)
Balance at February 1,	$	4,241	$	3,582	$	2,442
Additions based on tax positions related to the current year		62		57		245
Additions for tax positions of prior years		54		1,015		895
Reductions for tax positions of prior years		(45)		(413)		—
Settlements		(727)		—		—
Lapses of statutes of limitations		(1,325)		—		—
Balance at January 31,	$	2,260	$	4,241	$	3,582

The Company accounts for uncertain income tax positions in accordance with ASC 740 — Income Taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of January 31, 2025, there was a decrease in the unrecognized tax position reserve of $2.0 million related to state, local and foreign income tax return filings.

The Company’s policy on classification is to include interest in interest and financing charges, net and penalties in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). The Company and certain of its subsidiaries are subject to U.S. federal income tax as well as the income tax of multiple state, local, and foreign jurisdictions.

Of the major jurisdictions, the Company and its subsidiaries are subject to examination in the United States and various foreign jurisdictions for fiscal year 2019 and forward. The Company is currently under audit by New York for fiscal years 2019 through 2023 and France for fiscal years 2019 through 2021. The Company does not expect a material reduction in its unrecognized income tax benefits, prior to any annual increase, during the next twelve months.