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Share-Based Payments | 12 Months Ended
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Feb. 03, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Payments | 12. Share-Based Payments The Company accounts for share-based compensation under the provisions of ASC 718, Compensation – Stock Compensation (“ASC 718”), which requires the Company to measure and recognize compensation expense for all share-based payments at fair value. Total share-based compensation expense included in the Consolidated Statements of Operations for Fiscal 2023, Fiscal 2022, and Fiscal 2021 was $51.1 million ($36.2 million, net of tax), $39.0 million ($27.3 million, net of tax), and $38.2 million ($28.8 million, net of tax), respectively. There was $20.1 million of share-based payment expense, consisting of both time- and performance-based awards, included in gross profit this year. This is compared to $16.8 million of share-based payment expense included in gross profit last year. There was $31.0 million of share-based payment expense, consisting of time and performance-based awards, included in selling, general, and administrative expenses for Fiscal 2023. This is compared to $22.2 million of share-based payment expense included in selling, general, and administrative expenses for Fiscal 2022. ASC 718 requires recognition of compensation cost under a non-substantive vesting period approach for awards containing provisions that accelerate or continue vesting upon retirement. Accordingly, for awards with such provisions, the Company recognizes compensation expense over the period from the grant date to the date that retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. Additionally, for awards granted to retirement-eligible employees, the full compensation cost of an award must be recognized immediately upon grant. At February 3, 2024, the Company had awards outstanding under two share-based compensation plans, which are described below. Share-based compensation plans 2023 Stock Award and Incentive Plan (“2023 Plan”) The 2023 Plan was approved by the stockholders on June 7, 2023. The 2023 Plan authorized 10.6 million shares for issuance, in the form of options, stock appreciation rights (“SARS”), restricted stock, restricted stock units, bonus stock and awards, performance awards, dividend equivalents and other stock-based awards. The 2023 Plan allows the Compensation Committee of the Board to determine which employees receive awards and the terms and conditions of the awards under the 2023 Plan. The 2023 Plan provides for grants to directors who are not officers or employees of the Company, which are not to exceed in value of $750,000 in any single fiscal year. Through February 3, 2024, approximately a nominal amount of shares of restricted stock and common stock had been granted under the 2023 Plan to employees and directors. Approximately 11% of the restricted stock awards are performance-based and are earned if the established performance goals are met. The remaining 89% of the restricted stock awards are time-based and 12% vest ratably over three years and 88% vest over one year. 2020 Stock Award and Incentive Plan (“2020 Plan”) The 2020 Plan was approved by the stockholders on April 13, 2020. The 2020 Plan authorized 10.2 million shares for issuance, in the form of options, stock appreciation rights (“SARS”), restricted stock, restricted stock units, bonus stock and awards, performance awards, dividend equivalents and other stock-based awards. The 2020 Plan provides that for awards intended to qualify as “performance-based compensation” under Code Section 162(m), (i) the maximum number of shares awarded to any individual may not exceed 3.0 million shares per year for options and SARS and (ii) no more than 1.5 million shares may be granted with respect to each of restricted shares of stock and restricted stock units (subject to certain adjustments and exceptions provided therein). The 2020 Plan allows the Compensation Committee of the Board to determine which employees receive awards and the terms and conditions of the awards under the 2020 Plan. The 2020 Plan provides for grants to directors who are not officers or employees of the Company, which are not to exceed in value of $750,000 in any single fiscal year. Through February 3, 2024, approximately 7.2 million shares of restricted stock and approximately 3.4 million shares of common stock had been granted under the 2020 Plan to employees and directors. Approximately 40% of the restricted stock awards are performance-based and are earned if the established performance goals are met. The remaining 60% of the restricted stock awards are time-based and 97% vest ratably over three years and 3% vest over a period of one to two years. The 2020 Plan terminated on June 7, 2023 with all rights of the awardees and all unexpired awards continuing in force and operation after the termination. Stock Option Grants The Company has granted time-based stock options under the 2020 Plan. Time-based stock option awards vest over the requisite service period of the award or to an employee’s eligible retirement date, if earlier. A summary of the Company’s stock option activity under the 2020 Plan for Fiscal 2023 follows:
|  | Fiscal Year Ending February 3, 2024 |
|  |  |  |  | Weighted- Average |  |  | Weighted- Average Remaining Contractual |  |  | Aggregate Intrinsic |
|  | Options |  |  | Exercise Price |  |  | Term |  |  | Value |
|  | (In thousands) |  |  |  |  |  | (In years) |  |  | (In thousands) |
Outstanding - January 28, 2023 |  |  | 3,950 |  |  | $ | 17.01 |  |  |  |  |  |  |
Granted |  |  | 1,051 |  |  | $ | 13.17 |  |  |  |  |  |  |
Exercised (1) |  |  | (491 | ) |  | $ | 12.18 |  |  |  |  |  |  |
Cancelled |  |  | (297 | ) |  | $ | 13.99 |  |  |  |  |  |  |
Outstanding - February 3, 2024 |  |  | 4,213 |  |  | $ | 16.83 |  |  |  | 4.0 |  |  |  | 22,038 |
Vested and expected to vest - February 3, 2024 |  |  | 3,252 |  |  | $ | 16.97 |  |  |  | 2.7 |  |  |  | 9,251 |
Exercisable - February 3, 2024 (2) |  |  | 1,694 |  |  | $ | 13.71 |  |  |  | 2.7 |  |  |  | 11,963 |
(1) Options exercised during Fiscal 2023 ranged in price from $8.62 to $17.24. (2) Options exercisable represent “in-the-money” vested options based upon the weighted average exercise price of vested options compared to the Company’s stock price on February 3, 2024. The weighted-average grant date fair value of stock options granted during Fiscal 2023 and Fiscal 2022 was $5.31 and $5.90, respectively. The aggregate intrinsic value of options exercised during Fiscal 2023 and Fiscal 2022 was $3.6 million, and $0.5 million, respectively. Cash received from the exercise of stock options and the actual tax detriment realized from share-based payments was $7.6 million and ($0.5) million, respectively, for Fiscal 2023. Cash received from the exercise of stock options and the actual tax benefit realized from share-based payments was $2.1 million and $0.3 million, respectively, for Fiscal 2022. As of February 3, 2024, there was $0.4 million of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 1.8 years. The fair value of stock options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:
|  | Fiscal Years Ending
|  | February 3, |  | January 28,
Black-Scholes Option Valuation Assumptions |  | 2024 |  | 2023
Risk-free interest rate (1) |  | 3.4% |  | 2.5%
Dividend yield |  | 2.8% |  | 3.8%
Volatility factor (2) |  | 55.7% |  | 52.2%
Weighted-average expected term (3) |  | 4.5 years |  | 4.5 years
(1) Based on the United States Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options. (2) Based on the historical volatility of the Company’s common stock. (3) Represents the period that options are expected to be outstanding. The weighted average expected option terms were determined based on historical experience. Restricted Stock Grants Time-based restricted stock awards are composed of time-based restricted stock units. These awards vest over three years. Time-based restricted stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original awards. Performance-based restricted stock awards include performance-based restricted stock units. These awards cliff vest at the end of a three-year period based upon the Company’s achievement of pre-established goals throughout the term of the award. Performance-based restricted stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original awards. The grant date fair value of time-based restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant. A Monte Carlo simulation was utilized for performance-based restricted stock awards. A summary of the activity of the Company’s restricted stock is presented in the following tables:
|  | Time-Based Restricted Stock Units |  |  | Performance- Based Restricted Stock Units |
|  | Fiscal Year Ending |  |  | Fiscal Year Ending |
|  | February 3, 2024 |  |  | February 3, 2024 |
(Shares in thousands) |  | Shares |  |  | Weighted-Average Grant Date Fair Value |  |  | Shares |  |  | Weighted-Average Grant Date Fair Value |
Non-vested - January 28, 2023 |  |  | 2,749 |  |  | $ | 17.00 |  |  |  | 1,574 |  |  | $ | 20.11 |
Granted |  |  | 1,939 |  |  |  | 13.42 |  |  |  | 958 |  |  |  | 15.04 |
Vested |  |  | (1,585 | ) |  |  | 14.95 |  |  |  | (421 | ) |  |  | 15.95 |
Cancelled |  |  | (273 | ) |  |  | 15.64 |  |  |  | (88 | ) |  |  | 22.90 |
Non-vested - February 3, 2024 |  |  | 2,830 |  |  | $ | 15.83 |  |  |  | 2,023 |  |  | $ | 18.45 |
As of February 3, 2024, there was $25.8 million of unrecognized compensation expense related to non-vested time-based restricted stock unit awards that is expected to be recognized over a weighted average period of 1.8 years. There is $3.6 million of unrecognized compensation expense related to performance-based restricted stock unit awards that is expected to be recognized over a weighted average period of 1.6 years. As of February 3, 2024, the Company had 12.0 million shares available for all equity grants. During Fiscal 2023 and Fiscal 2022, we repurchased approximately 0.8 million and 0.6 million shares, respectively, from certain employees at market prices totaling $10.7 million and $9.8 million, respectively. These shares were repurchased for the payment of taxes in connection with the vesting of share-based payments, as permitted under our equity incentive plans. The aforementioned share repurchases have been recorded as treasury stock.

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