Fair Value Measurements

6 Months Ended

Jul. 29, 2023

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Applicable accounting standards require disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Each fair value measurement is reported in one of the following three levels:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

•Level 2 inputs are observable inputs other than quoted prices included in Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs.

•Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis include our cash equivalents, marketable securities, foreign currency contracts, company-owned life insurance policies with a cash surrender value, and certain nonqualified deferred compensation liabilities.

We measure the fair value of cash equivalents and certain marketable securities based on quoted prices in active markets for identical assets. Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

In August 2022, the Company opened investment portfolios consisting of U.S. government treasury notes and bills. These investments are classified as available-for-sale debt securities and reported at fair value on a recurring basis and utilize Level 1 inputs for measurement. Additionally, in the second quarter of fiscal 2023 the Company invested in time deposits, which are reported at fair value utilizing Level 1 inputs for measurement.

As of July 29, 2023, the investment portfolios aggregate balance was $301.0 million, of which $300.0 million are recognized in marketable securities and $1.0 million are recognized in cash and cash equivalents on our Condensed Consolidated Balance Sheets.

During the three and six months ended July 29, 2023, we realized a $0.1 million and $1.0 million loss on sales of U.S. government securities, which is included within other expense, net in our Condensed Consolidated Statements of Operations.

We measure the fair value of our foreign currency contracts, life insurance policies with cash surrender values and certain nonqualified deferred compensation liabilities based on Level 2 inputs using quotations provided by major market news services, such as Bloomberg, and industry-standard models that consider various assumptions, including quoted forward prices, time value, volatility factors, and contractual prices for the underlying instruments, and other relevant economic measures, all of which are observable in active markets. When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

The following tables present our assets and liabilities measured at fair value on a recurring basis:


	July 29, 2023
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
Assets
Level 1:
U.S. government securities(1)	$	258.5	$	—	$	(0.4)	-0.4	$	258.1
Time deposits(2)	42.9		—		—			42.9
Level 2:
Company-owned life insurance(3)	0.4		—		—			0.4
Total assets	$	301.8	$	—	$	(0.4)		$	301.4
Liabilities
Level 2:
Foreign currency contracts(4)	$	6.4	$	—	$	—		$	6.4
Nonqualified deferred compensation(4)	0.4		—		—			0.4
Total liabilities	$	6.8	$	—	$	—		$	6.8


	July 30, 2022
	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value
Assets


Level 2:
Foreign currency contracts(5)	$	1.7	$	—	$	—	$	1.7
Company-owned life insurance(3)	0.5		—		—		0.5
Total assets	$	2.2	$	—	$	—	$	2.2
Liabilities
Level 2:

Nonqualified deferred compensation(4)	0.5		—		—		0.5
Total liabilities	$	0.5	$	—	$	—	$	0.5


	January 28, 2023
	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value
Assets
Level 1:
U.S. government securities(1)	$	253.5	$	—	$	(0.9)	$	252.6
Level 2:

Company-owned life insurance(3)	0.5		—		—		0.5
Total assets	$	254.0	$	—	$	(0.9)	$	253.1
Liabilities
Level 2:
Foreign currency contracts(4)	$	5.9	$	—	$	—	$	5.9
Nonqualified deferred compensation(4)	0.4		—		—		0.4
Total liabilities	$	6.3	$	—	$	—	$	6.3

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(1) Recognized in cash and cash equivalents and marketable securities on our Condensed Consolidated Balance Sheets.

(2) Recognized in marketable securities on our Condensed Consolidated Balance Sheets.

(3) Recognized in accrued liabilities and other current liabilities on our Condensed Consolidated Balance Sheets.

(4) Recognized in other noncurrent assets on our Condensed Consolidated Balance Sheets.

(5) Recognized in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

Assets that are Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring basis relate primarily to property and equipment, operating lease right-of-use ("ROU") assets and other intangible assets, including digital assets, which are remeasured when the estimated fair value is below its carrying value. When we determine that impairment has occurred, the carrying value of the asset is reduced to its fair value. Fair value of digital assets held are based on Level 1 inputs, as described above, and impairment losses for digital assets cannot be recovered for any subsequent increase in fair value until the sale or disposal of the asset.

As of July 29, 2023, our government-guaranteed low interest French term loans due October 2022 through October 2026 ("French Term Loans") had a carrying value of $34.6 million and a fair value of $29.4 million. The fair values of our French Term Loans were estimated based on a model that discounted future principal and interest payments at interest rates available to us at the end of the period for similar debt of the same maturity, which is a Level 2 input as defined by the fair value hierarchy.

During the six months ended July 30, 2022, we recognized impairment charges of $33.7 million associated with digital assets in SG&A expenses in our Condensed Consolidated Statements of Operations. These charges were recognized in the United States segment.

During the six months ended July 30, 2022, we recognized impairment charges of $2.5 million associated with certain store-level intangible assets to reflect their fair values in our Condensed Consolidated Statements of Operations. These charges were recognized in our Europe segment.

The carrying values of our cash, restricted cash, net receivables, accounts payable and current portion of debt approximate their fair values due to their short-term maturities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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