Risk Management and Derivatives

12 Months Ended

Feb. 03, 2018

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Risk Management And Derivatives

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 national chains, online retailers, department stores, mass merchandisers, independent retailers and catalogs in the United States, Canada and approximately 57 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 doubtful accounts 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 uses derivative financial instruments, primarily forward contracts, 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 and have varying maturities through February 2019. 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 Company performs a quarterly assessment of the effectiveness of the hedge relationship and measures and recognizes any hedge ineffectiveness in the consolidated statements of earnings. Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for 2017, 2016 and 2015 was not material.

The Company’s hedging strategy uses forward contracts as cash flow hedging instruments, which 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 income and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

As of February 3, 2018 and January 28, 2017, the Company had forward contracts maturing at various dates through February 2019 and February 2018, respectively. 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)	February 3, 2018		January 28, 2017
Financial Instruments
Euro	$	21,223	$	13,297
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	16,874		18,826
Chinese yuan	12,058		7,723
New Taiwanese dollars	596		526
United Arab Emirates dirham	—		823
Japanese yen	—		769
Other currencies	415		124
Total financial instruments	$	51,166	$	42,088

The classification and fair values of derivative instruments designated as hedging instruments included within the consolidated balance sheets as of February 3, 2018 and January 28, 2017 are as follows:

($ in thousands)	Asset Derivatives				Liability Derivatives
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Foreign exchange forwards contracts:
February 3, 2018	Prepaid expenses and other current assets		$	1,540	Other accrued expenses		$	542
January 28, 2017	Prepaid expenses and other current assets		$	234	Other accrued expenses		$	874

During 2017 and 2016, the effect of derivative instruments in cash flow hedging relationships on the consolidated statements of earnings was as follows:

	2017						2016
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCI on Derivatives			Gain (Loss) Reclassified from Accumulated OCI into Earnings			Loss Recognized in OCI on Derivatives			(Loss) Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	(25	)	$	30		$	(61	)	$	(125	)
Cost of goods sold	1,144			171			(1,308		)	64
Selling and administrative expenses	1,011			157			(359		)	(441		)
Interest expense	(1		)	(1		)	(21		)	(4		)

All of the gains and losses currently included within accumulated other comprehensive loss associated with the Company’s foreign exchange forward contracts are expected to be reclassified into net earnings within the next 12 months. Additional information related to the Company’s derivative financial instruments are disclosed within Note 1 and Note 14 to the consolidated financial statements.