second quarter
Filed Aug 25, 2026Second-quarter income declined as sales and gross margin contracted amid pressure on customer discretionary income.
Retail sales decreased 6%, same-store sales decreased 3.7%, gross margin declined to 32.8% from 36.2%, and net income fell to $ 1,149 from $ 6,832.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Retail salesGAAP | $ 163,902 | – | decrease of 6% |
| Other revenue (principally finance, late fees and layaway charges)GAAP | 1,599 | – | – |
| Total revenuesGAAP | 165,501 | – | – |
| Gross marginGAAP | 53,722 | – | – |
| Gross margin as a percent of salesGAAP | 32.8% | – | – |
| Cost of goods soldGAAP | 110,180 | – | – |
| Selling, general and administrativeGAAP | 54,047 | – | – |
| Selling, general and administrative as a percent of salesGAAP | 33.0% | – | – |
| DepreciationGAAP | 2,246 | – | – |
| Interest and other incomeGAAP | (2,268) | – | – |
| Costs and expenses, netGAAP | 164,205 | – | – |
| Income Before Income TaxesGAAP | 1,296 | – | – |
| Income Tax ExpenseGAAP | 147 | – | – |
| Net IncomeGAAP | $ 1,149 | – | – |
| Basic Earnings Per ShareGAAP | $ 0.06 | – | – |
| Diluted Earnings Per ShareGAAP | $ 0.06 | – | – |
| Six months retail salesGAAP | $ 333,312 | – | decrease of 2.9% |
| Six months other revenue (principally finance, late fees and layaway charges)GAAP | 3,293 | – | – |
| Six months total revenuesGAAP | 336,605 | – | – |
| Six months gross marginGAAP | 116,792 | – | – |
| Six months gross margin as a percent of salesGAAP | 35.0% | – | – |
| Six months cost of goods soldGAAP | 216,520 | – | – |
| Six months selling, general and administrativeGAAP | 107,977 | – | – |
| Six months selling, general and administrative as a percent of salesGAAP | 32.4% | – | – |
| Six months depreciationGAAP | 4,482 | – | – |
| Six months interest and other incomeGAAP | (3,501) | – | – |
| Six months costs and expenses, netGAAP | 325,478 | – | – |
| Six months Income Before Income TaxesGAAP | 11,127 | – | – |
| Six months Income Tax ExpenseGAAP | 669 | – | – |
| Six months Net IncomeGAAP | $ 10,458 | – | – |
| Six months Basic Earnings Per ShareGAAP | $ 0.53 | – | – |
| Six months Diluted Earnings Per ShareGAAP | $ 0.53 | – | – |
What drove it
- Second-quarter sales decreased 6% primarily due to a 3.7% same-store sales decrease compared to 2025.
- Management attributed quarterly results largely to continued pressure on customers' discretionary income from persistent inflation, higher fuel prices and continued elevated interest rates.
- Gross margin decreased from 36.2% to 32.8% of sales due to lower merchandise margins and deleveraging of occupancy costs.
- Second-quarter SG&A expense decreased $3.3 million primarily due to lower payroll costs and credit card fees.
- The Company closed eight stores during the second quarter ended August 1, 2026.
Concerns
- Management expects negative pressure on customers' discretionary income to continue for the foreseeable future.
- Management anticipates the back half of 2026 to be challenging.
- The store base was 1,057 stores in 31 states as of August 1, 2026, compared to 1,101 stores in 31 states as of August 2, 2025.
- Quarterly income tax expense was $0.1 million versus an income tax benefit of $0.3 million in the prior year.
What to watch
- Same-store sales, which decreased 3.7% in the second quarter compared to 2025.
- Merchandise margins and occupancy-cost leverage, which drove gross margin to 32.8% of sales.
- Expense and inventory management during the back half of 2026.
- Further store closures and their effect on sales and profitability.
Balance sheet and cash flow
- Cash and cash equivalents: $ 35,115 as of August 1, 2026; $ 16,788 as of January 31, 2026.
- Short-term investments: 58,650 as of August 1, 2026; 56,859 as of January 31, 2026.
- Restricted cash: 2,675 as of August 1, 2026; 2,675 as of January 31, 2026.
- Accounts receivable - net: 20,459 as of August 1, 2026; 25,462 as of January 31, 2026.
- Merchandise inventories: 82,487 as of August 1, 2026; 83,696 as of January 31, 2026.
- Total Current Assets: 208,463 as of August 1, 2026; 193,267 as of January 31, 2026.
- Property and Equipment - net: 51,730 as of August 1, 2026; 53,748 as of January 31, 2026.
- Right-of-Use Assets, net: 142,303 as of August 1, 2026; 153,933 as of January 31, 2026.
- TOTAL assets: $ 423,438 as of August 1, 2026; $ 421,419 as of January 31, 2026.
- Current Liabilities: $ 105,640 as of August 1, 2026; $ 102,385 as of January 31, 2026.
- Current Lease Liability: 47,835 as of August 1, 2026; 53,507 as of January 31, 2026.
- Noncurrent Liabilities: 11,264 as of August 1, 2026; 11,272 as of January 31, 2026.
- Lease Liability: 90,794 as of August 1, 2026; 96,941 as of January 31, 2026.
- Stockholders' Equity: 167,905 as of August 1, 2026; 157,314 as of January 31, 2026.
Analysis
The second quarter showed a material earnings decline. Retail sales were $ 163,902 versus $ 174,653 in the prior-year quarter, while the release described sales as decreasing 6% and same-store sales as decreasing 3.7%. Total revenues were 165,501 versus 176,509. Net Income was $ 1,149 versus $ 6,832, and diluted earnings per share were $ 0.06 versus $ 0.35.
The principal profitability pressure was gross margin. Gross margin was 53,722, or 32.8% of sales, compared with 63,186, or 36.2% of sales. Management attributed the decline to lower merchandise margins and deleveraging of occupancy costs. SG&A fell to 54,047 from 57,371, primarily due to lower payroll costs and credit card fees, but SG&A as a percent of sales increased to 33.0% from 32.8%.
For the six months ended August 1, 2026, retail sales were $ 333,312 compared with $ 343,072, described as a decrease of 2.9%. The release attributed the first-half sales decline to flat same-store sales compared to 2025 and the impact of closed stores. First-half Net Income was $ 10,458 compared with $ 10,141, and diluted earnings per share were $ 0.53 compared with $ 0.51. First-half gross margin was 35.0% of sales versus 35.6%, while SG&A was 32.4% of sales versus 32.8%.
Store rationalization continued, with eight stores closed during the second quarter. The Company had 1,057 stores in 31 states as of August 1, 2026, compared with 1,101 stores in 31 states as of August 2, 2025. Management identified persistent inflation, higher fuel prices and elevated interest rates as pressures on discretionary consumer spending and stated that it expects the back half of 2026 to be challenging.
The balance sheet reported cash and cash equivalents of $ 35,115 and short-term investments of 58,650 as of August 1, 2026. Merchandise inventories were 82,487. The filing did not report operating cash flow, free cash flow, share repurchases, dividends, debt, or quantitative forward guidance.
Management, verbatim
Our results in the quarter are in large part due to the continued pressure on our customers’ discretionary income, which is being negatively impacted in part by persistent inflation, higher fuel prices and continued elevated interest rates.
John Cato, Chairman, President, and Chief Executive Officer
We expect the negative pressure on our customers’ discretionary income to continue for the foreseeable future. We will continue to tightly manage our expenses and inventory as we anticipate the back half of 2026 to be challenging.
John Cato, Chairman, President, and Chief Executive Officer
Not in the filing
stated, not guessed- Quantitative forward guidance for revenue, gross margin, operating expenses, tax rate, earnings, or other metrics was not provided.
- Prior-period outlook was not provided.
- Operating income was not reported.
- Non-GAAP metrics were not reported.
- Operating cash flow was not reported.
- Free cash flow was not reported.
- Share repurchases were not reported.
- Dividends were not reported.
- Debt was not reported.
- Segment revenue and segment profitability were not reported.
- Prior-quarter comparisons for reported income-statement metrics were not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.