Fair Value Measurements

12 Months Ended

Jan. 29, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

11. Fair Value Measurements

Assets and Liabilities Measured on a Recurring Basis

The following table presents information about assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):

	January 29, 2022
	Level 1		Level 2			Level 3
Assets (liabilities):
Money market mutual funds	$	167,277	$	—		$	—
Investments of officers' life insurance	$	—	$	14,575		$	—
Non-qualified deferred compensation plan	$	—	$	(17,453	)	$	—
Investment in Rover Group, Inc.	$	32,819	$	—		$	—

	January 30, 2021
	Level 1		Level 2			Level 3
Assets (liabilities):
Money market mutual funds	$	63,798	$	—		$	—
Investments of officers' life insurance	$	—	$	14,140		$	—
Non-qualified deferred compensation plan	$	—	$	(15,526	)	$	—

The fair value of money market mutual funds is based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Money market mutual funds included in the Company’s cash and cash equivalents were $158.0 million and $56.0 million as of January 29, 2022 and January 30, 2021, respectively. Also included in the Company’s money market mutual funds balances were $9.3 million and $7.8 million as of January 29, 2022 and January 30, 2021, respectively, which relate to the Company’s restricted cash, and are included in other current assets in the consolidated balance sheets.

The Company maintains a deferred compensation plan for key executives and other members of management, which is funded by investments in officers’ life insurance. The fair value of this obligation is based on participants’ elected investments, which reflect the closing market prices of similar assets.

The Company previously held an equity investment, in the form of multiple series of preferred stock, in A Place for Rover, Inc., an online marketplace for pet care, which was historically accounted for as an equity security

without a readily determinable fair value. In July 2021, A Place for Rover, Inc. completed a business combination with Nebula Caravel Acquisition Corp., a publicly-traded special purpose acquisition company. The combined entity was renamed to Rover Group, Inc. (“Rover”), and the Company’s equity investment was converted into shares of Rover Class A common stock. In September 2021, the Company received additional shares of Rover Class A common stock in accordance with certain earnout provisions from the July 2021 business combination. The Company now remeasures the fair value of its investment on a quarterly basis, and the resulting gains or losses are included in other non-operating income in the consolidated statements of operations. On November 23, 2021, the Company completed the sale of approximately 11% of its Rover Class A common stock for net proceeds of $6.1 million in cash as part of its participation in an underwritten secondary offering by certain Rover shareholders.

Assets Measured on a Non-Recurring Basis

The Company’s non-financial assets, which primarily consist of goodwill, other intangible assets, fixed assets and equity and other investments, are reported at carrying value, or at fair value as of the date of the Company’s acquisition of Petco Holdings, Inc. LLC on January 26, 2016, and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and indefinite-lived intangibles or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable), non-financial assets are assessed for impairment. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.

In fiscal 2021 and 2020, the Company determined that the fair value of its reporting unit was greater than its carrying amount, and therefore no goodwill impairment charge was recorded (Note 7). In fiscal 2021 and 2020, the Company determined that the fair value of its trade name was greater than its carrying amount, and therefore no tradename impairment charge was recorded. There were no indications of impairment of the Company’s other intangible assets or equity and other investments in fiscal 2021 and 2020.

In fiscal 2019, the Company determined that the fair value of its reporting unit was greater than its carrying amount, and therefore no goodwill impairment charge was recorded. In fiscal 2019, the Company determined that the carrying amount of its trade name exceeded its fair value, resulting in a trade name impairment charge of $19.0 million. The Company recorded impairment charges of $0.7 million on other intangible assets and $3.2 million on its other cost method investments in fiscal 2019. The related losses are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations. There were no other indications of impairment of the Company’s other intangible assets or equity and cost method investments in fiscal 2019.  

The Company recorded fixed asset and right-of-use asset impairment charges of $10.4 million, $14.5 million $13.0 million in fiscal years 2021, 2020, and 2019, respectively. Impairment charges are primarily related to pet care center locations and are recorded in selling, general and administrative expense in the accompanying consolidated statements of operations.