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Stock-Based Compensation
 12 Months Ended
Feb. 03, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation:
Plan Summaries
Certain of the Company’s employees participate in the following four stock-based compensation plans: “2013 Equity Incentive Plan” (EIP), “Management Stock Compensation Plan,” “2013 Employee Stock Purchase Plan” (ESPP), and the "2012 Long Term Performance Plan" (LTPP), which are herein referred to together as the “Plans.” The Company issues new shares on the vesting of stock awards or exercise of stock options under these Plans.
The EIP provides the Company’s employees and directors the opportunity to receive various types of stock-based compensation and cash awards. The terms of the stock-based awards granted to employees and directors are the same, except that those for directors cliff vest within one year of the grant date. As of February 3, 2023, the Company has outstanding stock options, vested and vesting stock awards, and performance share awards under this plan. Stock options granted under the EIP generally become exercisable 33%, 33% and 33% after one, two and three years, respectively, while vesting stock awards granted prior to fiscal 2020 generally vest 25%, 25%, 25% and 25% after one, two, three and four years, respectively. Vesting stock awards granted in fiscal 2020 and thereafter generally vest 33%, 33% and 33% after one, two and three years, respectively. The maximum contractual term for stock options granted under the EIP is ten years, but historically the Company has granted stock options with a seven-year contractual term. The requisite service period is accelerated for employees meeting retirement eligibility conditions. Vesting accelerates for eligible officers upon termination of employment, subject to certain conditions set forth in the Company’s Executive Severance, Change in Control and Retirement Policy effective July 1, 2020. Stock-based awards generally provide for accelerated vesting if there is a change in control (as defined in the EIP). Vesting stock awards and performance share awards have forfeitable rights to dividends. As of February 3, 2023, the total authorized shares of common stock for issuance under the EIP is 8.5 million.
The Company grants performance-based stock awards to certain officers and key employees under the EIP. Performance shares are rights to receive shares of the Company’s stock upon satisfaction of certain requirements. Performance-based stock awards granted prior to fiscal 2022 include service and performance conditions. Performance-based stock awards granted in fiscal 2022 and thereafter also include market conditions. For performance-based stock awards granted prior to fiscal 2023, the performance metrics are based on annual operating cash flows and a three year cumulative measure of earnings. For performance-based stock awards granted in fiscal 2023, the performance metrics are based on three year cumulative operating cash flows and a three year cumulative measure of earnings. The market conditions for awards granted in fiscal 2022 and thereafter are based on the Company's total shareholder return over the three year performance period as compared to the total shareholder return for a specified group of companies over the same period. These awards cliff vest at the end of the third fiscal year following the grant date, subject to meeting the minimum service requirements and the achievement of the Company’s performance metrics and market conditions, with the number of shares ultimately issued, if any, ranging up to 200% of the specified target shares. If performance is below a minimum threshold level of performance, no shares will be issued.
The Management Stock Compensation Plan provides for awards in share units to eligible employees. Benefits are payable in shares of the Company’s stock that are held in a trust for the purpose of funding benefit payments to the participants. During fiscal 2017, all remaining outstanding awards in the Management Stock Compensation Plan vested. The Board of Directors may at any time amend or terminate the Management Stock Compensation Plan. In the event of a change in control of the Company (as defined by the Management Stock Compensation Plan), participant accounts will be immediately distributed, otherwise participant accounts will generally be distributed upon retirement based on the participant’s payout election, or upon termination. The Management Stock Compensation Plan does not provide for a maximum number of shares available for future issuance.
The Company’s ESPP allows eligible employees to purchase shares of the Company’s stock at a discount of up to 15% of the fair market value on the date of purchase. During the three fiscal years ended February 3, 2023, the ESPP discount was 5% of the fair market value on the date of purchase, thereby resulting in the ESPP being non-compensatory. As of February 3, 2023, 3.4 million shares of the Company’s stock are authorized for issuance under the ESPP.
The LTPP provides certain employees of the Company the opportunity to receive various types of stock-based compensation awards. Vesting stock awards issued under the LTPP generally cliff vest at the end of the third fiscal year following the grant date. Vesting may be accelerated for employees meeting retirement eligibility conditions. Vesting stock awards under the LTPP have forfeitable rights to dividends.
Expense and Related Tax Benefits Recognized
Stock-based compensation expense and related tax benefits recognized under the Plans were:
Year Ended
February 3,
2023		January 28,
2022		January 29,
2021
(in millions)
Stock-based compensation expense:
Stock options$— $1 $3 
Vesting stock awards38 36 32 
Performance share awards10 9 7 
Total stock-based compensation expense$48 $46 $42 
Tax benefits recognized from stock-based compensation$16 $15 $14 
Stock-based compensation expense for stock options was not material for fiscal 2023.
Stock Options
Stock options are granted with their exercise price equal to the closing market price of the Company’s stock on the last trading day preceding the grant date.
Stock option activity for the year ended February 3, 2023 was:
Shares of stock under stock optionsWeighted-average exercise priceWeighted-average remaining contractual termAggregate intrinsic value
(in millions)(in years)(in millions)
Outstanding at January 28, 20220.6 $72.34 3.3$6 
Options granted— — 
Options forfeited or expired— — 
Options exercised(0.2)68.89 
Outstanding at February 3, 20230.4 $74.57 2.9$11 
Exercisable at February 3, 20230.3 $74.67 2.8$10 
Vested and expected to vest at February 3, 20230.4 $74.57 2.9$11 
As of February 3, 2023, the unrecognized compensation cost, net of estimated forfeitures, related to stock options was not material.
The following table summarizes activity related to exercises of stock options:
Year Ended
February 3,
2023		January 28,
2022		January 29,
2021
(in millions)
Cash received from exercises of stock options$— $1 $— 
Stock exchanged at fair value upon exercises of stock options$1 $1 $1 
Tax benefits from exercises of stock options$1 $1 $2 
Total intrinsic value of options exercised$8 $4 $8 
 The fair value of stock option awards granted under the Company’s plan were valued using the Black-Scholes option-pricing model based on the following assumptions:
Expected Term--The expected term was calculated from the Company's historical settlement data.
Expected Volatility--The expected volatility is based on the historical volatility of the Company over a period commensurate with the expected term of the stock option as of the date of grant.
Risk-Free Interest Rate--The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the stock option on the date of grant.
Dividend Yield--The dividend yield assumed over the expected term of the option is calculated based on the most recently announced dividend as of the grant date.
The weighted-average grant date fair value and assumptions used to determine the fair value of stock options granted for the periods presented were:
Year Ended
January 29,
2021
Weighted-average grant-date fair value$17.54 
Expected term (in years)3.8
Expected volatility35.5 %
Risk-free interest rate0.3 %
Dividend yield1.8 %
Vesting Stock Awards
Vesting stock award activity for the year ended February 3, 2023 was:
Shares of stock under vesting stock awardsWeighted-average grant date fair value
(in millions)
Unvested at January 28, 20221.0 $80.78 
Awards granted0.6 95.43 
Awards forfeited(0.1)85.94 
Awards vested(0.5)79.87 
Unvested at February 3, 20231.0 $89.60 
The grant date fair value of vesting stock awards is based on the closing market price of the Company’s stock on the last trading day preceding the grant date. The weighted-average grant date fair value of the vesting stock awards granted in fiscal 2023, 2022 and 2021 was $95.43, $83.65 and $76.41, respectively. As of February 3, 2023 there was $46 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted-average period of 1.8 years. The fair value of vesting stock awards that vested in fiscal 2023, 2022 and 2021 was $44 million, $39 million and $32 million, respectively.
Performance Share Awards
Performance share award activity for the year ended February 3, 2023 was:
Shares of stock under performance sharesWeighted-average grant date fair value
(in millions)
Unvested at January 28, 20220.2 $78.13 
Awards granted0.2 100.94 
Awards forfeited— — 
Awards vested(0.1)74.46 
Performance adjustments— — 
Unvested at February 3, 20230.3 $91.63 
The actual number of shares to be issued upon vesting range between 0-200% of the specified target shares. In the table above, the number of performance shares are presented at 100% of the specified target shares, except for awards that vested and the performance adjustment. The vested amount reflects the number of shares to be issued based on the actual achievement of the performance goals for shares that vested during the period. The performance adjustment amount reflects the increase or decrease in the number of performance shares vested compared to the number of performance shares that would have vested at target.
The weighted-average grant date fair value of the performance share awards granted in fiscal 2023, 2022 and 2021 was $100.94, $80.57 and $74.40, respectively. For performance shares granted prior to fiscal 2022, the grant date fair value was based on the closing market price of the Company’s common stock on the last trading day preceding the grant date. For performance share awards granted in fiscal 2022 and thereafter, the grant date fair value was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the Company's expected total shareholder return relative to a specified group of companies defined within the award agreement. The primary assumptions included an expected volatility of 38.02% and 39.73% for fiscal 2023 and 2022, respectively, and a risk-free interest rate of 2.44% and 0.32% for fiscal 2023 and 2022, respectively. The expected volatility was based on the historical volatility of the Company over a period commensurate with the expected term of the award as of the date of grant. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the award on the date of grant.
The fair value of performance share awards that vested in fiscal 2023 was $10 million. For unvested performance shares as of February 3, 2023 the Company expects to issue 0.3 million shares of stock in the future based on the estimated future achievement of the performance goals. As of February 3, 2023 there was $11 million of unrecognized compensation cost, net of estimated forfeitures, related to performance share awards, which is expected to be recognized over a weighted-average period of 1.8 years.