Derivative Financial Instruments

3 Months Ended

May 02, 2026

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company has Euro-denominated sales to customers and partners in the European Union which are fulfilled by the Company’s distribution center in Europe and subject to exchange rate risk as substantially all the merchandise sold is sourced through U.S. dollar transactions. Beginning in the first quarter of 2026, the Company uses foreign currency forward contracts designated as cash flow hedges (“Designated Cash Flow Hedges”) to mitigate this foreign currency exposure. These forward contracts currently have a maximum term of 12 months. The Company does not use derivative financial instruments for trading or speculative purposes.

All Designated Cash Flow Hedges are recorded on the Consolidated Balance Sheets at fair value and changes in fair value of the Designated Cash Flow Hedges are recorded in Accumulated Other Comprehensive Income. The gains and losses for these Designated Cash Flow Hedges are reclassified from Accumulated Other Comprehensive Income to Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss) upon sale of the hedged merchandise to the customer. The Company classifies proceeds received or amounts paid upon the settlement of a Designated Cash Flow Hedge in the same manner as the related hedged merchandise, which is in Operating Activities in the Consolidated Statements of Cash Flows.

As of May 2, 2026, outstanding Designated Cash Flow Hedges are recorded at their fair value of $1 million in Other Current Assets on the Consolidated Balance Sheet and had a U.S. dollar notional amount of $47 million. In the first quarter of 2026, a pre-tax gain of $1 million was recognized in Accumulated Other Comprehensive Income related to Designated Cash Flow Hedges. Prior to the first quarter of 2026, the Company did not have any Designated Cash Flow Hedges since becoming an independent, publicly traded company.

The Company estimates that $1 million of net pre-tax gains included in Accumulated Other Comprehensive Income as of May 2, 2026 related to Designated Cash Flow Hedges will be reclassified to Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss) within the next 12 months. Actual amounts ultimately reclassified depend on the exchange rates in effect when derivative contracts that are currently outstanding mature.