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Derivative Financial Instruments | 3 Months Ended
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May 03, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Hedging Strategy Foreign Exchange Currency Contracts The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. The Company enters into certain forward exchange currency contracts to hedge the risk of a portion of these anticipated foreign currency transactions against foreign currency rate fluctuations. The Company may also hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. Interest Rate Swap Agreements The Company is exposed to interest rate risk on its floating-rate debt. From time to time, the Company may enter into interest rate swap agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. In connection with the sale of the U.S. distribution center, the Company settled its interest rate swap agreement. As of May 3, 2025, there was no related net unrealized loss, net of tax, in AOCL related to this interest rate swap. Summary of Derivative Instruments The fair value of derivative instruments in the condensed consolidated balance sheets is (in thousands):
| Fair Value at May 3, 2025 |  | Fair Value at Feb 1, 2025 |  | Derivative Balance Sheet Location |  |
ASSETS: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | 15 |  |  | $ | 7,456 |  |  | Other current assets/Other assets |  |
Total derivatives designated as hedging instruments | 15 |  |  | 7,456 |  |  |  |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange currency contracts | — |  |  | 3,011 |  |  | Other current assets |  |
2028 Bond Hedge | 5,809 |  |  | 11,252 |  |  | Other assets |  |
Total derivatives not designated as hedging instruments | 5,809 |  |  | 14,263 |  |  |  |  |
Total | $ | 5,824 |  |  | $ | 21,719 |  |  |  |  |
LIABILITIES: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | 10,486 |  |  | $ | — |  |  | Accrued expenses/Other long-term liabilities |  |
Total derivatives designated as hedging instruments | 10,486 |  |  | — |  |  |  |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange currency contracts | 4,772 |  |  | 8 |  |  | Accrued expenses and other current liabilities |  |
Embedded derivative | 1,270 |  |  | 2,460 |  |  | Convertible senior notes due 2028, net |  |
Total derivatives not designated as hedging instruments | 6,042 |  |  | 2,468 |  |  |  |  |
Total | $ | 16,528 |  |  | $ | 2,468 |  |  |  |  |
Derivatives Designated as Hedging Instruments Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During the three months ended May 3, 2025, the Company purchased U.S. dollar forward contracts in Europe totaling $89.0 million that were designated as cash flow hedges. As of May 3, 2025, the Company had forward contracts outstanding for its European operations of $220.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 17 months. As of May 3, 2025, AOCL related to foreign exchange currency contracts included a $8.2 million net unrealized loss, net of tax, of which $4.9 million will be recognized in cost of product sales over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. As of February 1, 2025, the Company had forward contracts outstanding for its European operations of $182.0 million that were designated as cash flow hedges. The following summarizes the gains (losses) before income taxes recognized on derivative instruments designated as cash flow hedges in other comprehensive income (loss) (“OCL”) and net earnings (loss) (in thousands):
| Gain (Loss) Recognized in OCL |  | Gain (Loss) Reclassified from AOCL into Earnings (Loss) |  | Location of Gain (Loss) Reclassified from AOCL into Earnings (Loss)
| May 3, 2025 |  | May 4, 2024 |  | May 3, 2025 |  | May 4, 2024 |
| Three Months Ended
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | (16,418) |  |  | $ | 1,171 |  |  | $ | 958 |  |  | $ | (2,045) |  |  | Cost of product sales
Interest rate swap | $ | — |  |  | $ | 193 |  |  | $ | — |  |  | $ | 155 |  |  | Interest expense
The following summarizes net after income tax derivative activity recorded in AOCL (in thousands):
| Three Months Ended |  |
| May 3, 2025 |  | May 4, 2024 |  |  |  |
Beginning balance gain (loss) | $ | 7,300 |  |  | $ | (544) |  |  |  |  |
Net gain (loss) from changes in cash flow hedges | (14,612) |  |  | 1,145 |  |  |  |  |
Net (gain) loss reclassified into earnings (loss) | (853) |  |  | 1,620 |  |  |  |  |
Ending balance gain (loss) | $ | (8,165) |  |  | $ | 2,221 |  |  |  |  |
Foreign Exchange Currency Contracts Not Designated as Hedging Instruments As of May 3, 2025, the Company had euro foreign exchange currency contracts to purchase $96.0 million expected to mature over the next 12 months. As of February 1, 2025, the Company had euro foreign exchange currency contracts to purchase $74.0 million. As discussed in Note 11 - Convertible Senior Notes and Related Transactions, the Company has recognized equity-linked derivatives including the embedded derivative associated with the Additional 2028 Notes. In connection with the 2028 Notes, the Company also purchased the 2028 Bond Hedge which did not qualify for the derivative scope exception for equity-linked instruments. These derivatives are not designated as hedging instruments for accounting purposes. Changes in fair value of these derivatives are reported in net earnings (loss) as part of other income (expense). The following summarizes the gains (losses) before income taxes recognized on derivative instruments not designated as hedging instruments in other income (expense) (in thousands):
| Location of Gain (Loss) Recognized in Earnings (Loss) |  | Gain (Loss) Recognized in Earnings (Loss) |  |  |  |
|  | Three Months Ended |  |
|  | May 3, 2025 |  | May 4, 2024 |  |  |  |
Foreign exchange currency contracts | Other income, net |  | $ | (7,821) |  |  | $ | 521 |  |  |  |  |
2028 Bond Hedge | Other income, net |  | $ | (5,443) |  |  | $ | 45,813 |  |  |  |  |
Embedded derivatives | Other income, net |  | $ | 1,190 |  |  | $ | (7,302) |  |  |  |  |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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