Derivative Financial Instruments

9 Months Ended

Oct. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 4 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

As of October 31, 2020, and November 2, 2019, we were party to interest rate swaps with notional amounts totaling $1.5 billion. We pay a variable rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and nine months ended October 31, 2020, and November 2, 2019.

As of October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $250 million to hedge the interest rate exposure of anticipated future debt issuances. We designated these derivative financial instruments as cash flow hedges. We assess, both at inception and on an ongoing basis, whether the derivative financial instrument is highly effective in offsetting changes in cash flows of the hedged item and whether it is probable that the hedged forecasted transaction will occur. As of October 31, 2020, a $1 million loss was recorded in Accumulated Other Comprehensive Loss and will be reclassified to Net Interest Expense when the forecasted transaction affects earnings.


Effect of Hedges on Debt (millions)	October 31, 2020		February 1, 2020		November 2, 2019



Long-term debt and other borrowings
Carrying amount of hedged debt	$	1,696	$	1,630	$	1,614
Cumulative hedging adjustments, included in carrying amount	203		137		122


Effect of Hedges on Net Interest Expense	Three Months Ended				Nine Months Ended
(millions)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019


Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$	(36)	$	14	$	66	$	115
Hedged debt	36		(14)		(66)		(115)
Total	$	—	$	—	$	—	$	—