XML 38 R22.htm IDEA: XBRL DOCUMENT

RISK MANAGEMENT AND DERIVATIVES

12 Months Ended

Jan. 30, 2021

14. RISK MANAGEMENT AND DERIVATIVES

General Risk Management

The Company maintains cash and cash equivalents and certain other financial instruments with various financial institutions. The financial institutions are located throughout the world and the Company’s policy is designed to limit exposure to any one institution or geographic region. The Company’s periodic evaluations of the relative credit standing of these financial institutions are considered in the Company’s investment strategy.

The Company’s Brand Portfolio segment sells to online retailers, national chains, department stores, mass merchandisers and independent retailers in the United States, Canada and approximately 66 other countries. Receivables arising from these sales are not collateralized. However, a portion is covered by documentary letters of credit. Credit risk is affected by conditions or occurrences within the economy and the retail industry. The Company maintains an allowance for expected credit losses based upon factors surrounding the credit risk of specific customers and historical trends.

Derivatives

In the normal course of business, the Company’s financial results are impacted by currency rate movements in foreign-currency-denominated assets, liabilities and cash flows as it makes a portion of its purchases and sales in local currencies. The Company has established policies and business practices that are intended to mitigate a portion of the effect of these exposures. The Company’s hedging strategy permits the use of forward contracts as cash flow hedging instruments to manage its currency exposures. These derivative financial instruments are viewed as risk management tools and are not used for trading or speculative purposes. Derivatives entered into by the Company are designated as cash flow hedges of forecasted foreign currency transactions.

Derivative financial instruments expose the Company to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. The Company does not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with major international financial institutions. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

The Company principally uses foreign currency forward contracts as cash flow hedges to offset a portion of the effects of exchange rate fluctuations. The Company’s cash flow exposures include anticipated foreign currency transactions, such as foreign currency denominated sales, costs, expenses and intercompany charges, as well as collections and payments.

The cash flow hedging instruments are recorded in the Company’s consolidated balance sheets at fair value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive loss ("OCL") and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

The Company had no forward contracts as of January 30, 2021. As of February 1, 2020, the Company had forward contracts maturing at various dates through May 2020. The contract amounts in the following table represent the net notional amount of all purchase and sale contracts of a foreign currency.


(U.S. $equivalent in thousands)	January 30, 2021		February 1, 2020
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	—	$	3,963
Euro		—		1,251
Chinese yuan		—		2,355
Other currencies		—		69
Total financial instruments	$	—	$	7,638

The classification and fair values of derivative instruments designated as hedging instruments included within the consolidated balance sheets as of January 30, 2021 and February 1, 2020 are as follows:


	Asset Derivatives		Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value	Balance Sheet Location	Fair Value
Foreign Exchange Forward Contracts
January 30, 2021	Prepaid expenses and other current assets	—	Other accrued expenses	—
February 1, 2020	Prepaid expenses and other current assets	—	Other accrued expenses	103

During 2020 and 2019, the effect of derivative instruments in cash flow hedging relationships on the consolidated statements of earnings (loss) was as follows:

2020

2019

Loss

Gain (Loss)

Reclassified

Reclassified

Gain

from

Gain (Loss)

from

Foreign exchange forward contracts:

Recognized in

Accumulated

Recognized in

Accumulated

Income Statement Classification

OCI on

OCL into

OCL on

OCL into

Gains (Losses)- Realized

Derivatives

Earnings

Derivatives

Earnings

Net sales

—

Cost of goods sold

—

439

(38)

Selling and administrative expenses

(6)

(68)

(227)

Additional information related to the Company’s derivative financial instruments are disclosed within Note 1 and Note 15 to the consolidated financial statements.