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Income Taxes | 12 Months Ended
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Feb. 03, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Intra-Entity Transactions During fiscal 2022, the Company completed an intra-entity transfer of intellectual property rights from certain U.S. entities to a wholly-owned Swiss subsidiary, more closely aligning the Company’s intellectual property rights with its business operations. This transaction resulted in a taxable gain in the U.S. The U.S. taxable gain generated by this intercompany transfer of intellectual property was primarily offset by the recognition of a deferred income tax asset in the Swiss subsidiary. The intra-entity transfer of intellectual property rights resulted in a U.S. income tax expense of approximately $103 million. The U.S. income tax expense generated by this intercompany transfer of intellectual property was substantially offset by the benefit recorded as a result of the recognition of a deferred income tax asset in the Swiss subsidiary of approximately $92 million. The net impact to the Company’s income tax expense for this transaction was approximately $11 million as of fiscal 2024. The change of the net tax impact for fiscal 2024 from fiscal 2023 is the result of the adjustment made to the effective tax rate applied to the deferred tax asset. For the intra-entity transfer of the intellectual property rights, the Company made U.S. income tax payments of $107.2 million during fiscal 2022. The Company estimates it will take between 5 and 10 years to amortize the Swiss deferred income tax asset. During fiscal 2024, the Company recognized a one-time net tax benefit of Swiss Franc 33.7 million related to the consolidation of certain business functions into Switzerland that was approved by the Switzerland tax authority during the third quarter of fiscal 2024. Changes in Income Tax Law During calendar 2019, Switzerland implemented income tax reform (“Swiss tax reform”) that was effective as of January 1, 2020. The Swiss tax reform eliminates certain preferential income tax treatments and includes transitional relief measures which provides for future income tax deductions. During fiscal 2020, the Company recognized a one-time income tax benefit of approximately $8.1 million related primarily to the recognition of a deferred income tax asset associated with the estimated value of an income tax basis step-up of the Company’s Switzerland subsidiary’s assets. During fiscal 2023, the Company recorded a $2.3 million reserve for uncertain income tax positions related to such deferred income tax asset. During fiscal 2024, based on recent developments among European Union tax authorities, the Company wrote off the $8.1 million tax benefit related to the value of the income tax basis step-up of the Company’s Switzerland subsidiary’s assets, resulting in a net income tax expense of $5.8 million. Income Tax Expense Income tax expense is summarized as follows (in thousands):
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Federal: |  |  |  |  |
Current | $ | 7,876 |  |  | $ | 8 |  |  | $ | 149,811 |
Deferred | 2,270 |  |  | 10,577 |  |  | 9,859 |
State: |  |  |  |  |
Current | 1,546 |  |  | (1,963) |  |  | 10,433 |
Deferred | 1,211 |  |  | 85 |  |  | 2,443 |
Foreign: |  |  |  |  |
Current | 30,071 |  |  | 28,844 |  |  | 13,592 |
Deferred | (17,556) |  |  | (1,049) |  |  | (112,458) |
Total | $ | 25,418 |  |  | $ | 36,502 |  |  | $ | 73,680 |
Actual income tax expense differs from expected income tax expense obtained by applying the statutory federal income tax rate to earnings before income taxes as follows:
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Computed “expected” tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | 0.7 | % |  | 1.1 | % |  | 1.6 | %
Intra-entity intellectual property transfer tax rate difference 1 | 3.1 | % |  | — | % |  | 1.6 | %
GILTI | 2.2 | % |  | 2.4 | % |  | 0.6 | %
Unrecognized tax liabilities (benefits) | 0.7 | % |  | 2.5 | % |  | (0.6 | %)
Tax Reform - repatriation tax adjustment | 0.4 | % |  | 0.4 | % |  | 0.2 | %
Tax settlements | 0.3 | % |  | — | % |  | — | %
Subpart F Income | 0.2 | % |  | — | % |  | 4.5 | %
Valuation reserve 2 | 0.2 | % |  | (4.0 | %) |  | 0.7 | %
Non-deductible participation loss | — | % |  | — | % |  | 1.8 | %
Foreign derived intangible income 3 | — | % |  | — | % |  | (1.5 | %)
Share-based compensation | (0.2 | %) |  | (0.2 | %) |  | (0.4 | %)
Prior year income tax adjustments | (0.8 | %) |  | (1.2 | %) |  | 0.4 | %
Non-deductible permanent differences | (1.1 | %) |  | 1.6 | % |  | 0.6 | %
Non-U.S. tax expense versus U.S. federal statutory tax rate 4 | (2.7 | %) |  | (4.8 | %) |  | (2.4 | %)
Basis step up | (13.6 | %) |  | — | % |  | — | %
Other, net | 0.4 | % |  | (0.4 | %) |  | 0.9 | %
Effective income tax rate | 10.8 | % |  | 18.4 | % |  | 29.0 | %
______________________________________________________________________ 1 During fiscal 2022, the Company completed an intra-entity transfer of intellectual property rights from a U.S. entity to a wholly-owned Swiss subsidiary, resulting in an income tax rate difference of $4.0 million as of January 29, 2022. As of February 3, 2024, the updated rate difference is $11.0 million. 2 Amounts relate primarily to the release of the valuation reserve offset by valuation reserves on net operating losses, other deferred income tax assets arising during the respective period jurisdictions where there have been cumulative net operating losses, limiting the Company’s ability to consider other subjective evidence to continue to recognize the existing deferred income tax assets. 3 During fiscal 2022, the Company recognized an additional foreign-derived intangible income tax benefits of $37.0 million related to the intra-entity transfer of intellectual property rights. 4 The jurisdictional location of pre-tax income (loss) may represent a significant component of the Company’s effective income tax rate as earnings (loss) in foreign jurisdictions are taxed at rates different from the U.S. statutory income tax rate. These amounts exclude the impact of net changes in valuation allowances, audit and other adjustments related to the Company’s non-U.S. operations, as they are reported separately in the appropriate corresponding line items. Total income tax expense is allocated as follows (in thousands):
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Operations | $ | 25,418 |  |  | $ | 36,502 |  |  | $ | 73,680 |
Stockholders’ equity | 627 |  |  | 450 |  |  | 2,264 |
Convertible debt | (9,378) |  |  | (6,207) |  |  | — |
Total income tax expense | $ | 16,667 |  |  | $ | 30,745 |  |  | $ | 75,944 |
The income tax effects of the components of OCL are allocated as follows (in thousands):
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Derivative financial instruments designated as cash flow hedges | $ | 37 |  |  | $ | (945) |  |  | $ | 1,627 |
Defined benefit plans | 590 |  |  | 1,395 |  |  | 637 |
Total income tax expense | $ | 627 |  |  | $ | 450 |  |  | $ | 2,264 |
Total earnings before income tax expense and noncontrolling interests are comprised as follows (in thousands):
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Domestic operations | $ | 61,157 |  |  | $ | 45,317 |  |  | $ | 141,920 |
Foreign operations | 174,978 |  |  | 152,729 |  |  | 111,809 |
Earnings before income tax expense and noncontrolling interests | $ | 236,135 |  |  | $ | 198,046 |  |  | $ | 253,729 |
Deferred Income Taxes The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows (in thousands):
| Feb 3, 2024 |  | Jan 28, 2023
Deferred income tax assets: |  |  |
Operating lease liabilities | $ | 156,689 |  |  | $ | 156,234 |
Intangible assets | 77,354 |  |  | 95,119 |
Net operating losses | 43,849 |  |  | 45,384 |
Goodwill amortization | 34,594 |  |  | 2,019 |
Impairment basis difference | 12,703 |  |  | — |
Convertible senior notes hedge transactions | 9,666 |  |  | 3,919 |
Defined benefit plans | 9,620 |  |  | 10,186 |
Deferred compensation | 7,838 |  |  | 7,177 |
Inventory valuation | 3,828 |  |  | 4,025 |
Deferred income | 3,614 |  |  | 5,076 |
Sales return and other reserves | 1,691 |  |  | 1,615 |
Accrued bonus | 1,581 |  |  | 1,046 |
Excess of financial accounting over tax depreciation/amortization | 1,454 |  |  | 649 |
Account receivable reserve | 1,386 |  |  | 1,454 |
Lease incentives | 1,233 |  |  | 1,438 |
Uniform capitalization | 840 |  |  | 919 |
Other, net | 18,200 |  |  | 13,449 |
Total deferred income tax assets | 386,140 |  |  | 349,709 |
Deferred income tax liabilities: |  |  |
Operating right-of-use assets | (151,871) |  |  | (146,243) |
Convertible senior notes debt discount | (128) |  |  | — |
Valuation allowances | (55,231) |  |  | (45,063) |
Net deferred income tax assets | $ | 178,910 |  |  | $ | 158,403 |
Based on the historical earnings of the Company and projections of future taxable earnings in certain jurisdictions, management believes it is more likely than not that the results of operations will not generate sufficient taxable earnings to realize certain net deferred income tax assets. Therefore, the Company has recorded a valuation allowance of $55.2 million as of February 3, 2024, which is an increase of $10.2 million from fiscal 2023. As of February 3, 2024, certain of the Company’s operations had net operating loss carryforwards of $45.9 million (income tax effected, not net of uncertain income tax positions), including state/provincial net operating loss carryforwards. These are comprised of $7.0 million (income tax effected, not net of uncertain income tax positions) of net operating loss carryforwards with an unlimited carryforward life, $38.7 million (income tax effected, not net of uncertain income tax positions) of foreign net operating loss carryforwards expiring between fiscal 2025 and fiscal 2043 and $0.2 million (income tax effected) of state/provincial net operating loss carryforwards expiring starting fiscal 2025 and beyond. Based on the historical earnings of these operations, management believes it is more likely than not that some of the operations will not generate sufficient earnings to utilize these net operating losses. As of February 3, 2024 and January 28, 2023, the Company had a valuation allowance of $45.7 million and $36.0 million, respectively, related to its net operating loss carryforwards. Unrecognized Income Tax Benefit The Company and its subsidiaries are subject to U.S. federal and foreign income tax, as well as income tax of multiple state and foreign local jurisdictions. From time-to-time, the Company is subject to routine income and other audits on various income tax matters around the world in the ordinary course of business. As of February 3, 2024, no major income tax, and other, audits were ongoing. A reconciliation of the beginning and ending amount of gross unrecognized income tax benefit (excluding interest and penalties) is as follows (in thousands):
| Year Ended
| Feb 3, 2024 |  | Jan 28, 2023 |  | Jan 29, 2022
Beginning balance | $ | 56,074 |  |  | $ | 51,736 |  |  | $ | 34,246 |
Additions: |  |  |  |  |
Income tax positions related to the prior year | 47 |  |  | 3,954 |  |  | 280 |
Income tax positions related to the current year | 324 |  |  | 454 |  |  | 21,616 |
Reductions: |  |  |  |  |
Income tax positions related to the prior year | (4,046) |  |  | (70) |  |  | (2,405) |
Income tax positions related to the current year | (756) |  |  | — |  |  | (2,001) |
Ending balance | $ | 51,643 |  |  | $ | 56,074 |  |  | $ | 51,736 |
The amount of unrecognized income tax benefit as of February 3, 2024 and January 28, 2023 includes $35.1 million and $34.9 million (net of federal benefit on state issues), respectively, which, if ultimately recognized, may reduce our future annual effective income tax rate. As of February 3, 2024 and January 28, 2023, the Company had $63.4 million and $64.4 million, respectively, of aggregate accruals for uncertain income tax positions, including penalties and interest. This includes an accrual of $19.9 million for the estimated transition tax (excluding interest) related to the 2017 Tax Cuts and Jobs Act (the “Tax Reform”) and $20.6 million for the intra-entity transfer of intellectual property rights from certain U.S. entities to a wholly-owned Swiss subsidiary, substantially offset by the related deferred income tax benefit recorded by the Swiss Subsidiary. The Company reviews and updates the estimates used in the accrual for uncertain income tax positions, as appropriate, as more definitive information or interpretations become available from income taxing authorities, and on the completion of income tax audits, the receipt of assessments, expiration of statutes of limitations, or occurrence of other events. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company included interest and penalties related to uncertain income tax positions of a $3.4 million, $2.6 million and $0.2 million in income tax expense for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Total interest and penalties related to uncertain income tax positions was $11.7 million and $8.4 million at February 3, 2024 and January 28, 2023, respectively. During fiscal 2021, the Company became aware of a foreign withholding income tax regulation that could be interpreted to apply to certain of its previous transactions. The Company currently does not expect its exposure, if any, will have a material impact on its consolidated financial position, results of operations or cash flows. Indefinite Reinvestment Assertion The Company has historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. As a result of the Tax Reform, the Company had a substantial amount of previously taxed earnings that could be distributed to the U.S. without additional U.S. taxation. As of February 3, 2024, the Company determined that approximately $228.5 million of such foreign earnings are not indefinitely reinvested. The incremental tax cost to repatriate these earnings to the U.S. is immaterial. The Company intends to indefinitely reinvest the remaining earnings from the Company’s foreign subsidiaries for which a deferred income tax liability has not already been recorded. The Company continues to evaluate its plans for reinvestment or repatriation of unremitted foreign earnings and regularly reviews its cash positions and determination of indefinite reinvestment of foreign earnings. If the Company determines that all or a portion of such foreign earnings are no longer indefinitely reinvested, the Company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the one-time transition tax.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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