Liquidity and Management Plans

9 Months Ended

Oct. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity and Management Plans

Liquidity and Management PlansAs previously disclosed, the COVID-19 pandemic has and continues to result in an overall disruption in the Company's operations and supply chain. While virtually all of the Company's retail stores reopened in June and July 2020 after being temporarily closed in March, the majority of reopened stores are operating at reduced capacity and hours in accordance with local regulations. All stores strictly adhere to current Centers for Disease Control and Prevention (the “CDC”) recommendations and local regulations to protect the health and safety of customers and associates. During the third quarter of 2020 the Company did not see the level of sales recovery from reopened stores that it had anticipated. The Company believes that COVID-19 has had an outsized impact on its customer demographic as the Company's customers are, in general, quite

pragmatic with limited demand for new outfits in the absence of social engagements during the initial pandemic and subsequent resurgences. In addition, the Company's store traffic data suggests that its customers remain hesitant to shop in stores. Also during the third quarter, the lender for the Company's Credit Facility, an asset-based facility, reduced its appraisal valuations of the Company's inventory, which has the effect of reducing the amount of funding available under the facility. As a result, the Company's revenues, results of operations and cash flows continue to be materially adversely impacted, which raises substantial doubt about the Company's ability to continue as a going concern within one year after the date of the accompanying unaudited Condensed Consolidated Financial Statements are available to be issued.

Prior to 2020, the Company financed its operations principally through cash generated from operations as well as from its asset-based Credit Facility. In 2018, the Company generated additional cash through the sale of its headquarters and distribution facility. Due to continued operating losses, in February 2020 the Company amended its asset-based Credit Facility and put in place a Term Loan Facility (see Note 6). With the COVID-19 pandemic and the resulting CARES Act passed by Congress, the Company applied for and received a $10.0 million PPP loan in June 2020. During August 2020, the Company put in place a Secured Vendor Financing Program. On October 27, 2020, Cache Valley Bank submitted the Company's PPP Loan forgiveness application to the SBA. The SBA has 90 days to review and issue a decision regarding forgiveness. The Company believes that the SBA will approve the PPP Loan forgiveness application and that the loan principal will be entirely forgiven.

The Company continues to take short-term measures to increase its liquidity and sources of financing. However, conditions remain challenging and the Company has engaged strategic advisors, including B. Riley Securities Inc., to assist with management's evaluation and pursuit of available strategic alternatives. Various alternatives are being evaluated to improve the Company's liquidity and financial position, including, but not limited to, further lease concessions and deferrals, further reductions of operating and capital expenditures, raising additional capital including seeking a refinancing of the Company's debt, sale of the Company or its assets and restructuring its debt and liabilities through a private restructuring or a restructuring under the protection of applicable bankruptcy laws. However, there can be no assurance that the Company will be able to improve its financial position and liquidity, complete a refinancing, raise additional capital or successfully restructure its indebtedness and liabilities. The Company's strategic plans are not yet finalized and are subject to numerous uncertainties including negotiations with creditors and investors and conditions in the credit and capital markets.

There is significant uncertainty around the disruptions related to the COVID-19 pandemic and its impact on the global economy. The Company has experienced, and could continue to experience, other impacts as a result of the COVID-19 pandemic, including, but not limited to, significant impacts on its results of operations and charges from potential adjustments to the carrying amount of its inventory and long-lived asset impairment charges. While the Company anticipates future results of operations will continue to be adversely impacted, the full extent to which the COVID-19 pandemic impacts the Company's future results will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new trends and information which may emerge concerning the severity of the COVID-19 pandemic in the United States, actions taken to contain it or treat its impact, resurgence(s) of COVID-19 that occur, and how quickly and to what extent normal economic and operating conditions can resume.

The accompanying unaudited Condensed Consolidated Financial Statements were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business and do not include any adjustments to reflect the possible future effects of the uncertainty on the recoverability or classification of recorded asset amounts or classifications of the liabilities.