ULTA BEAUTY, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this quarterly report. This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "believes," "expects," "plans," "estimates," "targets," "strategies," or other comparable words. Any forward-looking statements contained in this Form 10-Q are based upon our historical performance and on current plans, estimates, and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, targets, strategies, or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation:
The negative impacts the COVID-19 pandemic has had, and will continue to have,
? on our business, financial condition, profitability, cash flows, and supply
chain, as well as consumer spending (including future uncertain impacts);
? epidemics, pandemics like COVID-19 or natural disasters that have and could
continue to negatively impact sales;
changes in the overall level of consumer spending and volatility in the
? economy, including as a result of the COVID-19 pandemic and/or government aid
programs;
? a decline in operating results that has and may continue to lead to asset
impairment and store closure charges;
? our ability to sustain our growth plans and successfully implement our
long-range strategic and financial plan;
? our ability to gauge beauty trends and react to changing consumer preferences
in a timely manner;
? the possibility that we may be unable to compete effectively in our highly
competitive markets;
? our ability to execute our Efficiencies for Growth cost optimization program;
the possibility that cybersecurity breaches and other disruptions could
? compromise our information or result in the unauthorized disclosure of
confidential information;
? the possibility of material disruptions to our information systems;
the possibility that the capacity of our distribution and order fulfillment
? infrastructure and the performance of our distribution centers and fast
fulfillment centers may not be adequate to support our expected future growth
plans;
? changes in the wholesale cost of our products;
? the possibility that new store openings and existing locations may be impacted
by developer or co-tenant issues;
? our ability to attract and retain key executive personnel;
? our ability to successfully execute our common stock repurchase program or
implement future common stock repurchase programs; and
other risk factors detailed in our public filings with the Securities and
?
"Risk Factors" of our Annual Report on Form 10-K for the year
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ended January 30, 2021 , as such may be amended or supplemented in oursubsequently filed Quarterly Reports on Form 10-Q (including this report).
Except to the extent required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. References in the following discussion to "we," "us," "our," "Ulta Beauty ," the "Company," and similar references meanUlta Beauty, Inc. and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.
Overview
We were founded in 1990 as a beauty retailer at a time when prestige, mass, and salon products were sold through distinct channels - department stores for prestige products; drug stores and mass merchandisers for mass products; and salons and authorized retail outlets for professional hair care products. We developed a unique specialty retail concept that offers a broad range of brands and price points, a compelling value proposition, and a convenient and welcoming shopping environment. We define our target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category and has high expectations for the shopping experience. We believe our strategy provides us with the competitive advantages that have contributed to our financial performance. We are the largest beauty retailer inthe United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services. We provide unmatched product breadth, value, and convenience in a distinctive specialty retail environment. Key aspects of our business include: our ability to offer our guests a unique combination of more than 25,000 beauty products from across the categories of prestige and mass cosmetics, fragrance, haircare, prestige and mass skincare, bath and body products, and salon styling tools, as well as a full-service salon in every store featuring hair, skin, and brow services; our focus on delivering a compelling value proposition to our guests across all of our product categories; and convenience, as our stores are predominantly located in convenient, high-traffic locations such as power centers. The continued growth of our business and any future increases in net sales, net income, and cash flows is dependent on our ability to execute our strategic priorities: 1) build omnichannel operations that more deeply connects guests across channels, 2) reimagine how guests experience and discover beauty, 3) drive market share growth through the deployment of winning category strategies, 4) deepenUlta Beauty love and loyalty, 5) drive holistic cost optimization, and 6) develop our talent and strengthen our culture. We believe that the expandingU.S. beauty products and salon services industry, the shift in distribution channel of prestige beauty products from department stores to specialty retail stores, coupled withUlta Beauty's competitive strengths, position us to capture additional market share in the industry. Comparable sales is a key metric that is monitored closely within the retail industry. Our comparable sales have fluctuated in the past, and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable sales, including generalU.S. economic conditions, changes in merchandise strategy or mix, and timing and effectiveness of our marketing activities, among others. Over the long term, our growth strategy is to increase total net sales through increases in our comparable sales, opening new stores, and increasing omnichannel capabilities. Long term operating profit is expected to increase as a result of our ability to expand merchandise margin and leverage our fixed store costs with comparable sales increases and operating efficiencies offset by incremental investments in people, systems, and supply chain required to support a 1,500 to 1,700 store chain in theU.S. with successful e-commerce and competitive omnichannel capabilities.
Impact of COVID-19
We continue to closely monitor the impact of COVID-19 on all facets of our business. As we navigated the impact of the COVID pandemic, we proactively took steps to optimize our cost structure, while also investing in new capabilities to support future growth. As ofJuly 31, 2021 , all our stores, salons and brow service offerings were open and operating under our Shop Safe Standards. We intend to resume skin and make-up services when it is safe to do so. Additionally, 19 Table of Contents during the first half of fiscal 2021, as local restrictions lifted, we increased our operating hours and, as store traffic trends improved, we adjusted staffing levels to support the increased demand. During the first half of fiscal 2021, we experienced an increase in sales driven primarily by the favorable impact from stronger consumer confidence, government stimulus payments and the easing of COVID-19 restrictions. While operations during the first half of fiscal 2021 did not appear to be negatively impacted, the COVID-19 pandemic had a material negative impact on fiscal 2020 operations and financial results and could have additional negative impacts in the future. The extent of the impact of pandemic on our business and financial results will depend on future developments, including, but not limited to, the potential temporary reclosing of certain stores, the potential temporary restrictions on certain store operating hours and/or in-store capacity, the duration of potential future quarantines, shelter-in-place and other travel restrictions within theU.S. and other affected countries, supply chain disruptions, the potential for increased freight costs and higher wholesale costs, the duration of the pandemic and any variants of the virus, the duration, timing and severity of the impact on consumer spending, the timing and effectiveness of vaccine distribution, vaccination rates, and how quickly and to what extent normal economic and operating conditions can resume.
Industry trends
Our research indicates thatUlta Beauty has captured meaningful market share across all categories over the last several years. However, the COVID-19 pandemic and its various impacts have changed consumer behavior and consumption of beauty products due to the closures of offices, retail stores and other businesses and the significant decline in social gatherings. Despite the overall beauty market decline in 2020, we expect the beauty category will return to growth in 2021 as consumers recover from the impacts of COVID-19, and we remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term.
Basis of presentation
The Company has one reportable segment, which includes retail stores, salon services, and e-commerce.
We recognize merchandise revenue at the point of sale in our retail stores. E-commerce sales are recognized upon shipment or guest pickup of the merchandise based on meeting the transfer of control criteria. Retail store and e-commerce sales are recorded net of estimated returns. Shipping and handling are treated as costs to fulfill the contract and not a separate performance obligation. Accordingly, we recognize revenue for our single performance obligation related to online sales at the time control of the merchandise passes to the customer, which is at the time of shipment or guest pickup. We provide refunds for merchandise returns within 60 days from the original purchase date. State sales taxes are presented on a net basis as we consider our self a pass-through conduit for collecting and remitting state sales tax. Salon service revenue is recognized at the time the service is provided to the guest. Gift card sales revenue is deferred until the guest redeems the gift card. Company coupons and other incentives are recorded as a reduction of net sales. Other revenue sources include the private label and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage. Comparable sales reflect sales for stores beginning on the first day of the 14th month of operation. Therefore, a store is included in our comparable store base on the first day of the period after one year of operations plus the initial one-month grand opening period. Non-comparable store sales include sales from new stores that have not yet completed their 13th month of operation and stores that were closed for part or all of the period in either year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or prior period. Comparable sales include retail sales and salon services (including stores temporarily closed due to COVID-19), and e-commerce. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales. Measuring comparable sales allows us to evaluate the performance of our store base as well as several other aspects of our overall strategy. Several factors could positively or negatively impact our comparable sales results:
? the general national, regional, and local economic conditions and corresponding
impact on customer spending levels;
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? the introduction of new products or brands;
? the location of new stores in existing store markets;
? competition;
? our ability to respond on a timely basis to changes in consumer preferences;
? the effectiveness of our various merchandising and marketing activities; and
? the number of new stores opened and the impact on the average age of all of our
comparable stores. Cost of sales includes:
? the cost of merchandise sold, including substantially all vendor allowances,
which are treated as a reduction of merchandise costs;
? distribution costs including labor and related benefits, freight, rent,
depreciation and amortization, real estate taxes, utilities, and insurance;
? shipping and handling costs;
? retail stores occupancy costs including rent, depreciation and amortization,
real estate taxes, utilities, repairs and maintenance, insurance, and licenses;
? salon services payroll and benefits; and
? shrink and inventory valuation reserves.
Our cost of sales may be negatively impacted as we open new stores. Changes in our merchandise mix may also have an impact on cost of sales. This presentation of items included in cost of sales may not be comparable to the way in which our competitors or other retailers compute their cost of sales.
Selling, general and administrative expenses include:
? payroll, bonus, and benefit costs for retail store and corporate employees;
? advertising and marketing costs;
? occupancy costs related to our corporate office facilities;
? stock-based compensation expense;
depreciation and amortization for all assets, except those related to our
? retail stores and distribution operations, which are included in cost of
sales; and
? legal, finance, information systems, and other corporate overhead costs.
This presentation of items in selling, general and administrative expenses may not be comparable to the way in which our competitors or other retailers compute their selling, general and administrative expenses.
Impairment, restructuring and other costs include long-lived asset impairment charges and restructuring costs associated with store closings.
Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising. Interest expense (income), net includes both interest expense and income. Interest expense includes interest costs and facility fees associated with our credit facility, which is structured as an asset-based lending instrument. Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising interest rates. Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase.
Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.
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Results of operations
Our quarterly periods are the 13 weeks ending on the Saturday closest toApril 30 ,July 31 ,October 31 , andJanuary 31 . The Company's second quarter in fiscal 2021 and 2020 ended onJuly 31, 2021 andAugust 1, 2020 , respectively. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.
The following tables present the components of our consolidated results of operations for the periods indicated:
13 Weeks Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
(Dollars in thousands) 2021 2020 2021 2020
Net sales $ 1,967,207 $ 1,228,009 $ 3,905,726 $ 2,401,219
Cost of sales 1,169,244 899,002 2,353,975 1,768,607
Gross profit 797,963 329,007 1,551,751 632,612
Selling, general and administrative expenses 464,299 271,587
908,174 652,499
Impairment, restructuring and other costs - 40,758 - 60,300
Pre-opening expenses 1,357 3,907 5,946 8,542
Operating income (loss) 332,307 12,755 637,631 (88,729)
Interest expense, net 425 2,617 783 3,889
Income (loss) before income taxes 331,882 10,138
636,848 (92,618)
Income tax expense (benefit) 80,989 2,086 155,666 (22,161)
Net income (loss) $ 250,893 $ 8,052 $ 481,182 $ (70,457)
Other operating data:Number of stores end of period 1,296 1,264
1,296 1,264
Comparable sales 56.3% (26.7)% 60.9% (31.1)%
13 Weeks Ended 26 Weeks Ended
July 31, August 1, July 31, August 1,
(Percentage of net sales) 2021 2020 2021 2020
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 59.4% 73.2% 60.3% 73.7%
Gross profit 40.6% 26.8% 39.7% 26.3%
Selling, general and administrative expenses 23.6% 22.1%
23.3% 27.2%
Impairment, restructuring and other costs 0.0% 3.3%
0.0% 2.5%
Pre-opening expenses 0.1% 0.3% 0.1% 0.3%
Operating income (loss) 16.9% 1.1% 16.3% (3.7)%
Interest expense, net 0.0% 0.2% 0.0% 0.1%Income (loss) before income taxes 16.9% 0.9%
16.3% (3.8)%
Income tax expense (benefit) 4.1% 0.2% 4.0% (0.9)%
Net income (loss) 12.8% 0.7% 12.3% (2.9)%
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Comparison of 13 weeks ended
Net sales
Net sales increased$739.2 million or 60.2%, to$2.0 billion for the 13 weeks endedJuly 31, 2021 , compared to$1.2 billion for the 13 weeks endedAugust 1, 2020 . The net sales increase was primarily due to the favorable impact from improving consumer confidence and the easing of COVID-19 restrictions. The total comparable sales increase of 56.3% during the 13 weeks endedJuly 31, 2021 was driven by a 52.5% increase in transactions and a 2.5% increase in average ticket.
Gross profit
Gross profit increased$469.0 million or 142.5%, to$798.0 million for the 13 weeks endedJuly 31, 2021 , compared to$329.0 million for the 13 weeks endedAugust 1, 2020 . Gross profit as a percentage of net sales increased to 40.6% for the 13 weeks endedJuly 31, 2021 , compared to 26.8% for the 13 weeks endedAugust 1, 2020 . The increase in gross profit margin was primarily due to leverage of fixed costs, improvement in merchandise margins, favorable channel mix shifts, and leverage of salon expenses.
Selling, general and administrative expenses
Selling, general and administrative (SG&A) expenses increased$192.7 million or 71.0%, to$464.3 million for the 13 weeks endedJuly 31, 2021 , compared to$271.6 million for the 13 weeks endedAugust 1, 2020 . SG&A expenses as a percentage of net sales increased to 23.6% for the 13 weeks endedJuly 31, 2021 , compared to 22.1% for the 13 weeks endedAugust 1, 2020 , due to deleverage related to higher store payroll and benefits primarily due to less employee retention credits received under the CARES Act, and higher marketing expense, partially offset by leverage in corporate overhead and store expenses due to higher sales.
Impairment, restructuring and other costs
There were no impairment, restructuring and other costs recognized in the 13
weeks ended
Pre-opening expenses
Pre-opening expenses decreased$2.6 million to$1.4 million for the 13 weeks endedJuly 31, 2021 compared to$3.9 million for the 13 weeks ended August
1, 2020. Interest expense, net
Interest expense, net was$0.4 million for the 13 weeks endedJuly 31, 2021 compared to$2.6 million of interest expense, net for the 13 weeks endedAugust 1, 2020 . Interest expense represents interest on borrowings and fees related to the credit facility. Interest income results from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase. We did not have any outstanding borrowings on our credit facility as ofJuly 31, 2021 andJanuary 30, 2021 . We had$800.0 million outstanding under the credit facility as ofAugust 1, 2020 .
Income tax expense
Income tax expense of$81.0 million for the 13 weeks endedJuly 31, 2021 represents an effective tax rate of 24.4%, compared to$2.1 million of tax expense representing an effective tax rate of 20.6% for the 13 weeks endedAugust 1, 2020 . The higher effective tax rate is primarily due to a decrease in the benefit of state tax credits compared to the 13 weeks endedAugust 1, 2020 as a result of an increase in pre-tax income.
Net income
Net income was$250.9 million for the 13 weeks endedJuly 31, 2021 , compared to$8.1 million for the 13 weeks endedAugust 1, 2020 . The increase in net income is primarily due to the$469.0 million increase in gross profit and$40.8 23
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million decrease in impairment, restructuring and other costs, partially offset by a$192.7 million increase in SG&A expenses and a$78.9 million increase in income taxes. Comparison of 26 weeks endedJuly 31, 2021 to 26 weeks endedAugust 1, 2020
Net sales
Net sales increased$1.5 billion or 62.7%, to$3.9 billion for the 26 weeks endedJuly 31, 2021 , compared to$2.4 billion for the 26 weeks endedAugust 1, 2020 . The net sales increase was primarily due to the favorable impact from stronger consumer confidence, government stimulus payments, and the easing of COVID-19 restrictions. The total comparable sales increase of 60.9% during the 26 weeks endedJuly 31, 2021 was driven by a 52.5% increase in transactions and a 5.5% increase in average ticket.
Gross profit
Gross profit increased$919.1 million or 145.3%, to$1.6 billion for the 26 weeks endedJuly 31, 2021 , compared to$632.6 million for the 26 weeks endedAugust 1, 2020 . Gross profit as a percentage of net sales increased to 39.7% for the 26 weeks endedJuly 31, 2021 , compared to 26.3% for the 26 weeks endedAugust 1, 2020 . The increase in gross profit margin was primarily due to leverage of fixed costs, improvement in merchandise margins, leverage of salon expenses, and favorable channel mix shifts.
Selling, general and administrative expenses
SG&A expenses increased$255.7 million or 39.2%, to$908.2 million for the 26 weeks endedJuly 31, 2021 , compared to$652.5 million for the 26 weeks endedAugust 1, 2020 . SG&A expenses as a percentage of net sales decreased to 23.3% for the 26 weeks endedJuly 31, 2021 , compared to 27.2% for the 26 weeks endedAugust 1, 2020 , due to leverage in corporate overhead and store expenses due to higher sales, partially offset by deleverage related to higher store payroll and benefits primarily due to less employee retention credits received under the CARES Act, and higher marketing expense.
Impairment, restructuring and other costs
There were no impairment, restructuring and other costs recognized in the 26
weeks ended
Pre-opening expenses
Pre-opening expenses decreased$2.6 million to$5.9 million for the 26 weeks endedJuly 31, 2021 , compared to$8.5 million for the 26 weeks ended August
1, 2020. Interest expense, net
Interest expense, net was$0.8 million for the 26 weeks endedJuly 31, 2021 compared to$3.9 million of interest expense, net for the 26 weeks endedAugust 1, 2020 . Interest expense represents interest on borrowings and fees related to the credit facility. Interest income results from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase. We did not have any outstanding borrowings on our credit facility as ofJuly 31, 2021 andJanuary 30, 2021 . We had$800.0 million outstanding under the credit facility as ofAugust 1, 2021 .
Income tax expense (benefit)
Income tax expense of$155.7 million for the 26 weeks endedJuly 31, 2021 represents an effective tax rate of 24.4%, compared to$22.2 million of tax benefit representing an effective tax rate of 23.9% for the 26 weeks endedAugust 1, 2020 . The higher effective tax rate is primarily due to a decrease in the benefit of state tax credits compared to the 26 weeks endedAugust 1, 2020 as a result of an increase in pre-tax income. 24 Table of Contents Net income (loss)
Net income was$481.2 million for the 26 weeks endedJuly 31, 2021 compared to a net loss of$70.5 million for the 26 weeks endedAugust 1, 2020 . The increase in net income is primarily due to a$919.1 million increase in gross profit and a$60.3 million decrease in impairment, restructuring and other costs, partially offset by a$255.7 million increase in SG&A expenses and a$177.8 million increase in income taxes.
Liquidity and capital resources
Our primary cash needs are for rent, capital expenditures for new, remodeled, and relocated stores, increased merchandise inventories related to store expansion and new brand additions, supply chain improvements, share repurchases, and continued improvement in our information technology systems. Our primary sources of liquidity are cash and cash equivalents, short-term investments, cash flows from operations, including changes in working capital, and borrowings under our credit facility. As ofJuly 31, 2021 ,January 30, 2021 , andAugust 1, 2020 , we had cash and cash equivalents of$770.1 million ,$1.0 billion , and$1.2 billion , respectively. The most significant components of our working capital are merchandise inventories and cash and cash equivalents reduced by related accounts payable and accrued expenses. Our working capital needs are greatest from August through November each year as a result of our inventory build-up during this period for the approaching holiday season. Based on past performance and current expectations, we believe that cash and cash equivalents, short-term investments, cash generated from operations, and borrowings under the credit facility will satisfy the Company's working capital needs, capital expenditure needs, commitments, and other liquidity requirements through at least the next twelve months.
The following table presents a summary of our cash flows for the 26 weeks ended
26 Weeks Ended
July 31, August 1,
(In thousands) 2021 2020Net cash provided by operating activities$ 401,413 $ 15,989 Net cash provided by (used in) investing activities (57,305)
26,304
Net cash provided by (used in) financing activities (619,959)
722,670
Effect of exchange rate changes on cash and cash equivalents (56) 30 Net increase (decrease) in cash and cash equivalents$ (275,907)
$ 764,993 Operating activities Operating activities consist of net income (loss) adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, long-lived asset impairment charges, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes. The first 26 weeks of 2021 increase over the first 26 weeks of 2020 is mainly due to the increase in net income, and the timing of accounts payable and accrued liabilities, partially offset by decreases in merchandise inventories and long-lived asset impairment charges. The increase in net income was primarily due to an increase in gross profit resulting from higher sales and a decrease in impairment, restructuring and other costs, partially offset by an increase in SG&A expenses and income taxes. Merchandise inventories, net were$1.44 billion atJuly 31, 2021 , compared to$1.37 billion atAugust 1, 2020 , representing an increase of$75.14 million or 5.5%. The increase in total inventory was primarily driven by the addition of 32 net new stores opened sinceAugust 1, 2020 , the opening of theJacksonville, FL fast fulfillment center, and increased purchases to support strong demand.
Investing activities
We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems. Investment activities for capital
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expenditures were
During the 26 weeks endedJuly 31, 2021 , we opened 35 new stores, relocated two stores and remodeled five stores, compared to the 26 weeks endedAugust 1, 2020 , when we opened 11 new stores and relocated one store. Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems, and supply chain investments we undertake and the timing of these expenditures. Based on past performance and current expectations, we believe our sources of liquidity will be sufficient to fund future capital expenditures.
Financing activities
Financing activities consist principally of borrowings on our revolving credit facility, share repurchases, and capital stock transactions. Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock. We had no borrowings outstanding under the credit facility as ofJuly 31, 2021 andJanuary 30, 2021 . As ofAugust 1, 2020 , we had$800.0 million outstanding under the credit facility. The zero outstanding borrowings position atJuly 31, 2021 andJanuary 30, 2021 continues to be due to a combination of factors including an improvement in sales trends as compared to the 26 weeks endedAugust 1, 2020 , overall performance of management initiatives including expense control, as well as inventory and other working capital reductions. We may require borrowings under the facility from time to time in future periods for unexpected business disruptions, to support our new store program, share repurchases, and seasonal inventory needs.
Share repurchase program
OnMarch 14, 2019 , the Board of Directors authorized a share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company could repurchase up to$875.0 million of the Company's common stock. The 2019 Share Repurchase Program authorization revoked the previously authorized but unused amount of$25.4 million from the earlier share repurchase program. The 2019 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time. OnMarch 12, 2020 , the Board of Directors authorized a share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company may repurchase up to$1.6 billion of the Company's common stock. The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amount of$177.8 million from the 2019 Share Repurchase Program. The 2020 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. A summary of common stock repurchase activity is presented in the following table: 26 Weeks Ended July 31, August 1, (Dollars in millions) 2021 2020 Shares repurchased 1,989,576 326,970
Total cost of shares repurchased
Credit facility OnMarch 11, 2020 , we entered into Amendment No. 1 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) withWells Fargo Bank, National Association , as Administrative Agent, Collateral Agent and a Lender thereunder;Wells Fargo Bank, National Association andJPMorgan Chase Bank, N.A ., as Lead Arrangers and Bookrunners;JPMorgan Chase Bank, N.A ., as Syndication Agent and a Lender;PNC Bank, National Association , as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement
matures onMarch 11 , 26 Table of Contents
2025, provides maximum revolving loans equal to the lesser of$1.0 billion or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a$50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional$100.0 million , subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company's assets are pledged as collateral for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear interest, at the Company's election, at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.250%, with such margins based on the Company's borrowing availability, and the unused line fee is 0.20% per annum. As ofJuly 31, 2021 andJanuary 30, 2021 , we had no borrowings outstanding under the credit facility. As ofAugust 1, 2020 , we had$800.0 million outstanding under the credit facility and the weighted average interest rate was 1.59%.
As of
Seasonality Our business is subject to seasonal fluctuation. Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected byMother's Day andValentine's Day . Any decrease in sales during these higher sales volume periods could have an adverse effect on our business, financial condition, or operating results for the entire fiscal year. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.
Off-balance sheet arrangements
As of
Contractual obligations
Our contractual obligations consist of operating lease obligations, purchase obligations, and our revolving line of credit. No material changes outside the ordinary course of business have occurred in our contractual obligations during the 26 weeks endedJuly 31, 2021 .
Critical accounting policies and estimates
Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year endedJanuary 30, 2021 .
Recently adopted accounting pronouncements
See Note 2 to our consolidated financial statements, "Summary of significant accounting policies - Recently adopted accounting pronouncements."
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