Goodwill and Other Intangible Assets

12 Months Ended

Jan. 29, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Note 4

Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill by segment were as follows:


(In thousands)	Journeys Group		Licensed Brands Group		Total Goodwill
Balance, January 30, 2021	$	10,082	$	28,468	$	38,550
Effect of foreign currency exchange rates		5		1		6
Balance, January 29, 2022	$	10,087	$	28,469	$	38,556

During the first quarter of Fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization resulting from the COVID-19 pandemic, since the last consideration of indicators of impairment in the fourth quarter of Fiscal 2020 for our Schuh Group reporting unit. When indicators of impairment are present on an interim basis, we must assess whether it is “more likely than not” (i.e., a greater than 50% chance) that an impairment has occurred. Due to the identified indicators of impairment in the first quarter of Fiscal 2021, we determined that it was “more likely than not” that an impairment had occurred and performed a full valuation of our Schuh Group reporting. Based upon the results of these analyses, we concluded the goodwill attributed to Schuh Group was fully impaired. As a result, we recorded an impairment charge of $79.3 million in the first quarter of Fiscal 2021.

Goodwill Valuation (Schuh Group)

We estimated the fair value of our Schuh reporting unit in the first quarter of Fiscal 2021 using a discounted cash flow method (income approach) weighted 50% and a guideline public company method (market approach) weighted 50%. The key assumptions used under the income approach include the following:

•

Future cash flow assumptions - Our projections for the Schuh reporting unit were based on organic growth and were derived from historical experience and assumptions regarding future growth and profitability trends, including considerations for the impact from the outbreak of the COVID-19 pandemic. Our analysis incorporated an assumed period of cash flows of seven years with a terminal value.

•

Discount rate - The discount rate was based on an estimated weighted average cost of capital (“WACC”) for the reporting unit. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. We developed our cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Schuh reporting unit was 16%.

The guideline company method involves analyzing transaction and financial data of publicly traded companies to develop multiples, which are adjusted to account for differences in growth prospects and risk profiles of the reporting unit and comparable companies.

Note 4

Goodwill and Other Intangible Assets, Continued

Other Intangible Assets

Trademark Valuation

In addition, as a result of the factors noted above, we evaluated the fair value of our trademarks during the first quarter of Fiscal 2021. The fair value of trademarks was determined based on the royalty savings approach. This analysis indicated trademark

impairment in our Journeys Group and Johnston & Murphy Group. As a result, we recorded a trademark impairment of $5.3 million in the first quarter of Fiscal 2021. This charge is included in asset impairment and other, net in the accompanying Consolidated Statements of Operations.

Key assumptions included in the estimation of the fair value for trademarks include the following:

•

Future cash flow assumptions - Future cash flow assumptions include retail sales from our retail store operations and ecommerce retail sales. Sales were based on organic growth and were derived from historical experience and assumptions regarding future growth, including considerations for the impact of the ongoing COVID-19 pandemic. Our analysis incorporated an assumed period of cash flows of five years with a terminal value.

•

Royalty rate - The royalty rate used to estimate the fair values of our reporting units’ trademarks was 1%.

•

Discount rate - The discount rate was based on an estimated WACC for each business. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The WACC used to estimate the fair values of our reporting units’ trademarks was approximately 15%.

Other intangibles by major classes were as follows:


	Trademarks(1)				Customer Lists(2)						Other(3)						Total
(In thousands)	Jan. 29, 2022		Jan. 30, 2021		Jan. 29, 2022			Jan. 30, 2021			Jan. 29, 2022			Jan. 30, 2021			Jan. 29, 2022			Jan. 30, 2021
Gross other intangibles	$	25,935	$	26,443	$	6,586		$	6,617		$	400		$	400		$	32,921		$	33,460
Accumulated amortization		—		—		(2,666	)		(2,131	)		(400	)		(400	)		(3,066	)		(2,531	)
Other Intangibles, net	$	25,935	$	26,443	$	3,920		$	4,486		$	—		$	—		$	29,855		$	30,929

(1)

Includes a $22.6 million trademark at January 29, 2022 related to Schuh Group and $3.4 million related to Journeys Group.

(2)

Includes $5.1 million for the Togast acquisition.

(3)

Backlog for Togast.

The amortization of intangibles was $0.6 million, $0.9 million and $0.2 million for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. Currently, amortization of intangibles is expected to be $0.6 million for each of the next five years.