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STOCK-BASED COMPENSATION | 9 Months Ended
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Oct. 29, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company grants stock-based awards under its Stock Incentive Plan (the “Plan”). Awards that may be granted under the Plan include, but are not limited to (i) service-based non-qualified stock options (“stock options”); (ii) service-based restricted stock units (“RSUs”); and (iii) contingently issuable performance share units (“PSUs”). Please see Note 13, “Stock-Based Compensation,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended January 29, 2023 for a detailed description of the Company’s stock-based compensation awards, including information relating to vesting terms and service, performance and market conditions, and additional information. According to the terms of the Plan, for purposes of determining the number of shares available for grant, each share underlying a stock option award reduces the number available by one share and each share underlying an RSU or PSU award reduces the number available by two shares for awards made before June 22, 2023 and by 1.6 shares for awards made on or after June 22, 2023. Net income for the thirty-nine weeks ended October 29, 2023 and October 30, 2022 included $39.5 million and $35.3 million, respectively, of pre-tax expense related to stock-based compensation, with related recognized income tax benefits of $4.8 million and $4.5 million, respectively. Stock Options The Company estimates the fair value of stock options at the date of grant using the Black-Scholes-Merton model. The estimated fair value of the stock options granted is expensed over the stock options’ requisite service periods. The following summarizes the assumptions used to estimate the fair value of stock options granted during the thirty-nine weeks ended October 29, 2023 and the resulting weighted average grant date fair value per stock option:
| 10/29/23
Weighted average risk-free interest rate | 3.33 | %
Weighted average expected stock option term (in years) | 6.25
Weighted average Company volatility | 50.60 | %
Expected annual dividends per share | $ | 0.15
Weighted average grant date fair value per stock option | $ | 43.47
Stock option activity for the thirty-nine weeks ended October 29, 2023 was as follows:
(In thousands, except per stock option data) | Stock Options |  | Weighted Average Exercise Price Per Stock Option
Outstanding at January 29, 2023 | 694 |  |  | $ | 98.08 |
Granted | 86 |  |  | 83.80 |
Exercised | — |  |  | — |
Forfeited / Expired | 65 |  |  | 113.57 |
Outstanding at October 29, 2023 | 715 |  |  | $ | 94.94 |
RSUs The fair value of RSUs is equal to the closing price of the Company’s common stock on the date of grant and is expensed over the RSUs’ requisite service periods. RSU activity for the thirty-nine weeks ended October 29, 2023 was as follows:
(In thousands, except per RSU data) | RSUs |  | Weighted Average Grant Date Fair Value Per RSU
Non-vested at January 29, 2023 | 1,325 |  |  | $ | 77.33 |
Granted | 638 |  |  | 83.78 |
Vested | 521 |  |  | 76.17 |
Forfeited | 168 |  |  | 81.72 |
Non-vested at October 29, 2023 | 1,274 |  |  | $ | 80.46 |
PSUs The Company currently has PSU awards outstanding subject to three-year performance periods from the applicable grant date. The final number of shares to be earned, if any, is contingent upon the Company’s achievement of goals for the applicable performance period. Each outstanding award is subject to various performance and/or market conditions goals as follows:
Grant Year | Goal for 50% of the Award | Goal for 50% of the Award
2020 | Company total shareholder return (“TSR”) relative to companies included in the S&P 500 as of the grant date | Company’s absolute stock price growth during a three-year performance period
2021 | Company TSR relative to a pre-established group of industry peers | Company’s earnings before interest and taxes (“EBIT”) during fiscal 2021
2022 | Company TSR relative to a pre-established group of industry peers | Company’s cumulative EBIT during a fiscal three-year performance period
2023 | Company TSR relative to a pre-established group of industry peers | Company’s average return on invested capital (“ROIC”) during a fiscal three-year performance period
For awards granted in 2020, the applicable three-year performance periods have ended, and the holders of the awards earned an aggregate of 139,000 shares. The shares earned were between target and maximum levels for the awards granted in the first and second quarters of 2020, and were between threshold and target for the awards granted in the third quarter of 2020. The Company granted contingently issuable PSUs to certain of the Company’s senior executives during the first quarter of 2023. For such awards, the Company records expense ratably over the three-year service period, with expense determined as follows: (i) TSR-based portion of the awards – based on the grant date fair value regardless of whether the market condition is satisfied because the awards are subject to market conditions and (ii) ROIC-based portion of the awards – based on the grant date fair value per share and the Company’s current expectations of the probable number of shares that will ultimately be issued. The grant date fair value of the awards granted was established as follows: (i) TSR-based portion of the awards – using the Monte Carlo simulation model and (ii) ROIC-based portion of the awards – based on the closing price of the Company’s common stock reduced for the present value of any dividends expected to be paid on such common stock during the three-year service period, as these contingently issuable PSUs do not accrue dividends. The following summarizes the assumptions used to estimate the fair value of PSUs subject to market conditions that were granted during the thirty-nine weeks ended October 29, 2023 and the resulting weighted average grant date fair value:
| 10/29/23 |
Weighted average risk-free interest rate | 3.56 | % |
Weighted average Company volatility | 58.21 | % |
Expected annual dividends per share | $ | 0.15 |  |
Weighted average grant date fair value per PSU | $ | 120.42 |  |
For certain of the awards granted, the after-tax portion of the award is subject to a holding period of one year after the vesting date. For these awards, the grant date fair value was discounted 7.40% for the restriction of liquidity, which was calculated using the Finnerty model. Total PSU activity for the thirty-nine weeks ended October 29, 2023 was as follows:
(In thousands, except per PSU data) | PSUs |  | Weighted Average Grant Date Fair Value Per PSU
Non-vested at January 29, 2023 | 244 |  |  | $ | 84.40 |
Granted | 122 |  |  | 100.44 |
Increase due to market conditions achieved above target | 36 |  |  | 58.39 |
Reduction due to market conditions achieved below target | 18 |  |  | 71.92 |
Vested | 139 |  |  | 61.69 |
Forfeited | — |  |  | — |
Non-vested at October 29, 2023 | 245 |  |  | $ | 102.32 |

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