Fair Value Measurements

6 Months Ended

Aug. 01, 2020

NOTE 4 | FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

■Level 1 - Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

■Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

■Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

Financial Assets

The following table presents the Company’s financial assets, recorded in cash and cash equivalents on the unaudited Consolidated Balance Sheets, measured at fair value on a recurring basis as of August 1, 2020 and February 1, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall.


	August 1, 2020
	Level 1		Level 2		Level 3
	(in thousands)
Money market funds	$	173,071	$	—	$	—



	February 1, 2020
	Level 1		Level 2		Level 3
	(in thousands)
Money market funds	$	188,182	$	—	$	—

The money market funds are valued using quoted market prices in active markets.

The carrying amounts reflected on the unaudited Consolidated Balance Sheets for the remaining cash and cash equivalents, receivables, prepaid expenses, and payables as of August 1, 2020 and February 1, 2020 approximated their fair values.

Non-Financial Assets

The Company’s non-financial assets, which include fixtures, equipment, improvements, and right of use assets are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur indicating the carrying value of these assets may not be recoverable, an impairment test is required. For stores that trigger, a recovery test is performed first comparing the undiscounted cash flows to the net assets of the store. The second step impairment test requires the Company to estimate the fair value of the assets and compare this to the carrying value of the assets. If the fair value of the asset is less than the carrying value, then an impairment charge is recognized, and the non-financial assets are recorded at fair value. The Company estimates the fair value using a discounted cash flow model or other fair value models as appropriate. Factors used in the evaluation include, but are not limited to, management’s plans for future operations, recent operating results, projected cash flows, and overall economic factors, including the current global outbreak of COVID-19. As a result of the COVID-19 pandemic, including temporary store closures and the related decline in sales beginning in March 2020 and continuing through the second quarter, the Company concluded that a triggering event had occurred. Consequently, the Company performed interim impairment testing. As a result of this testing, during the thirteen and twenty-six weeks ended August 1, 2020, the Company recognized impairment charges of approximately $6.8 million and $21.5 million, respectively, related to store-level property and equipment and right of use assets. During the thirteen and twenty-six weeks ended August 3, 2019, the Company recognized impairment charges of approximately $2.3 million. Impairment charges are recorded in cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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