Impact of COVID-19 (Notes)

3 Months Ended

Oct. 31, 2020

Unusual or Infrequent Item, or Both [Line Items]

Unusual or Infrequent Items, or Both, Disclosure [Text Block]

In March 2020, the COVID-19 outbreak was declared to be a global pandemic by the World Health Organization. In response to COVID-19, certain governments imposed travel restrictions and local statutory quarantines and the Company experienced widespread temporary store closures. The Company has seen, and may continue to see, material adverse impacts as a result of COVID-19. The extent of future impacts of COVID-19 on the Company’s business, including the duration and impact on overall customer demand, are uncertain as current circumstances are dynamic and depend on future developments, including, but not limited to, the duration and spread of COVID-19, the emergence of new variants of coronavirus, such as the Delta and Omicron variants, and the availability and acceptance of effective vaccines, boosters or medical treatments.

During the thirteen and thirty-nine weeks ended October 31, 2020, the Company experienced a material adverse impact to net sales across brands and regions as a result of widespread temporary store closures in response to COVID-19, which was not offset by year-over-year digital sales growth. During the thirteen and thirty-nine weeks ended October 30, 2021, the vast majority of Company-operated stores were fully open for in-store service. As of October 30, 2021, there were no COVID-19 related store closures of Company-operated stores, although additional temporary store closures have subsequently been mandated in certain parts of the Europe, Middle East and Africa (“EMEA”) region in response to COVID-19. During periods of temporary store closures, reductions in revenue have not been offset by proportional decreases in expense, as the Company continues to incur store occupancy costs such as operating lease costs, net of rent abatements agreed upon during the period, depreciation expense, and certain other costs such as compensation, net of government payroll relief, and administrative expenses resulting in a negative effect on the relationship between the Company’s costs and revenues.

During the thirteen weeks ended May 2, 2020, the Company recognized $14.8 million of charges to reduce the carrying value of inventory, primarily as a result of COVID-19 and the temporary closure of the Company’s stores, in cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Further negative developments in the COVID-19 pandemic could result in additional charges to reduce the carrying value of inventory.

As a result of COVID-19, the Company has suspended certain rent payments for periods of store closures, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward. As of October 30, 2021 and January 30, 2021, the Company had $16.5 million and $24.2 million, respectively, related to suspended rent payments classified within accrued expenses on the Condensed Consolidated Balance Sheets. The Company obtained rent abatements of $1.7 million and $14.6 million, respectively, during the thirteen and thirty-nine weeks ended October 30, 2021, and $1.9 million and $18.9 million, respectively, during the thirteen and thirty-nine weeks ended October 31, 2020. All of the benefits related to these abatements were recognized within variable lease cost during the applicable periods.

During the thirteen weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $0.6 million and $2.8 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income. During the thirty-nine weeks ended October 30, 2021 and October 31, 2020, the Company recognized qualified payroll-related credits reducing payroll expenses by approximately $5.4 million and $14.7 million, respectively, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). There are also instances where governments have provided wage subsidies through direct payments to the Company’s associates. In these instances, no benefits are recognized on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), but the Company does see a reduction in expense incurred. The Company also intends to continue to defer qualified payroll and other tax payments as permitted by applicable government laws and regulations.

The Company has recognized asset impairment charges related to the Company’s operating lease right-of-use assets and property and equipment, which are principally the result of the impact of COVID-19 on store cash flows. Refer to Note 9, “ASSET IMPAIRMENT,” for additional information.

The Company has also experienced other material impacts as a result of COVID-19, such as deferred tax valuation allowances and other tax charges. Refer to Note 10, “INCOME TAXES,” for additional information.

In March 2020, in an effort to improve the Company’s then near-term cash position as a precautionary measure in response to COVID-19, the Company borrowed $210.0 million under its senior secured asset-based revolving credit facility (the “ABL Facility”) and withdrew the majority of excess funds from the overfunded Rabbi Trust assets, providing the Company with $50.0 million of additional cash. In July 2020, the Company took additional actions to preserve liquidity in light of the continued global uncertainty then presented by COVID-19, and completed a private offering of $350.0 million aggregate principal amount of senior secured notes (the “Senior Secured Notes”). The Company used the net proceeds of such offering to repay all outstanding borrowings under the Company’s term loan facility (the “Term Loan Facility”), to repay a portion of the outstanding borrowings under the ABL Facility and to pay fees and expenses in connection with such repayments and the offering.