Derivative Instruments and Hedging Activities

3 Months Ended

Aug. 02, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 7. Derivative Instruments and Hedging Activities

The Company is exposed to various market risks including, but not limited to, foreign currency exchange rates and market interest rates. The Company strives to control its exposure to these risks through our normal operating activities and, where appropriate, through the use of derivative financial instruments. Derivative financial instruments are measured at fair value on a recurring basis using various pricing models that incorporate observable market parameters, such as interest rate yield curves and foreign currency rates and are classified as Level 2 within the fair value hierarchy.

For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded in AOCL in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCL is recorded in earnings and reflected in the condensed consolidated statements of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk. The gain or loss associated with changes in the fair value of derivatives not designated as hedges are recorded immediately in the condensed consolidated statements of operations on the same line as the associated risk. For a designated net investment hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded as a cumulative translation adjustment in AOCL in the condensed consolidated balance sheets.

Net investment hedges

The Company is exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries. To manage this risk, the Company designates certain qualifying derivative and non-derivative instruments, including cross-currency swaps and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries.

The Company had a fixed-rate, cross-currency swap, with a notional value of $60.0 million (€54.8 million), that settled in December 2024 with a gross gain of approximately $3.1 million. The cross-currency swap was designated as a hedge of the Company’s net investment in its euro-denominated subsidiaries. The gain will remain in AOCL until the hedged net investment is sold or substantially liquidated.

Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company recognizes the impact of all other changes in fair value of the derivative, which represents the interest rate differential of the cross-currency swap, through interest expense. For the three months ended August 2, 2025 and July 27, 2024, the Company recorded zero and a gain of $0.2 million, respectively, in interest expense, net in the condensed consolidated statements of operations.

As of August 2, 2025, the Company designated €55.0 million of long-term borrowings under its revolving credit facility (see Note 8 “Debt”) as a net investment hedge of the foreign currency exposure of its investment in its euro-denominated subsidiaries. The remaining euro-denominated borrowings were previously designated as a net investment hedge up until December 18, 2024. Due to changes in the value of the euro-denominated long-term borrowings designated as a net investment hedge, in the three months ended August 2, 2025 and July 27, 2024, losses, net of tax, of $0.2 million and $3.4 million, respectively, were recognized within the currency translation section of other comprehensive income (loss). Included in AOCL related to net investment hedges were cumulative gains of $8.8 million and $9.0 million, respectively, as of August 2, 2025 and May 3, 2025. The Company manages the related foreign exchange risk of its euro-denominated long-term borrowings not designated as a net investment hedge through certain euro-denominated financial assets.

Interest rate swaps

The Company utilizes interest rate swaps to limit its exposure to market fluctuations on its variable-rate borrowings. The interest rate swaps effectively convert a portion of the Company’s variable rate borrowings to a fixed rate based upon a determined notional amount. The Company has an interest rate swap, maturing on October 31, 2027, with a notional value of $152.1 million (€132.0 million). The interest rate swap is designated as a cash flow hedge.

Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter. The effective portion of the periodic changes in fair value is recognized in AOCL in the condensed consolidated balance sheets. Subsequently, the accumulated gains and losses recorded in AOCL are reclassified to income in the period during which the hedged cash flow impacts earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three months ended August 2, 2025 and July 27, 2024.

Derivatives not designated as hedges

The Company uses short-term foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-functional currency balance sheet exposures. These forward contracts are not designated as hedging instruments. Gains and losses on these forward contracts are recognized in other expense, net, along with the foreign currency gains and losses on monetary assets and liabilities, in the condensed consolidated statements of operations.

As of August 2, 2025 and May 3, 2025, the Company held foreign currency forward contracts with a notional value of $124.7 million and $107.2 million, respectively. During the three months ended August 2, 2025, the Company recognized a loss of $0.2 million related to foreign currency forward contracts in the condensed consolidated statements of operations. During the three months ended July 27, 2024, the Company recognized a loss of zero related to foreign currency forward contracts in the condensed consolidated statements of operations.

Effect of derivative instruments on comprehensive income (loss)

The pre-tax effects of derivative financial instruments recorded in other comprehensive income (loss) were as follows:

	Three Months Ended
	August 2, 2025		July 27, 2024
(in millions)	(13 Weeks)		(13 Weeks)
Net investment hedges	$	—	$	(0.9	)
Interest rate swaps		0.7		(1.3	)
Total	$	0.7	$	(2.2	)

Fair value of derivative instruments on the balance sheet

The fair value of derivative instruments is classified as Level 2 within the fair value hierarchy and is recorded in the condensed consolidated balance sheets as follows:

		Asset/(Liability)
(in millions)	Financial Statement Caption	August 2, 2025			May 3, 2025
Derivatives designated as hedging instruments:
Interest rate swaps	Other long-term liabilities	$	(5.0	)	$	(5.7	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	0.2		$	0.7