Long-Lived Assets

9 Months Ended

Oct. 31, 2020

Property, Plant and Equipment [Abstract]

Long-Lived Assets

Long-Lived Assets

The following table provides details of property and equipment, net as of October 31, 2020, February 1, 2020 and November 2, 2019:

	October 31, 2020		February 1, 2020		November 2, 2019
	(in millions)
Property and Equipment, at Cost	$	6,312	$	6,613	$	6,449
Accumulated Depreciation and Amortization	(4,081)		(4,127)		(3,878)
Property and Equipment, Net	$	2,231	$	2,486	$	2,571

Depreciation expense was $127 million and $148 million for the third quarter of 2020 and 2019, respectively. Depreciation expense was $393 million and $443 million for year-to-date 2020 and 2019, respectively.

Long-lived store assets, which include leasehold improvements, store related assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Store assets are grouped at the lowest level for which they are largely independent of other assets or asset groups. If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair value, determined by the estimated discounted future cash flows of the asset group. For operating lease assets, the Company determines the fair value of the assets by comparing the contractual rent payments to estimated market rental rates.  An individual asset within an asset group is not impaired below its estimated fair value. The fair value of long-lived store assets are determined using Level 3 inputs within the fair value hierarchy.

The Company remains committed to taking the necessary steps to prepare the Victoria's Secret business to operate as a separate, standalone company. Management is actively working on implementing a comprehensive profit improvement plan that will better position the Company to evaluate the next steps for the separation of the Victoria's Secret business. A component of the profit improvement plan includes a rationalization of the Victoria’s Secret company-operated store footprint. The Company expects that it will close approximately 240 stores in North America in 2020. Given the closures as well as the negative operating results of certain Victoria's Secret stores in 2020 and 2019, the Company determined that the estimated undiscounted future cash flows were less than the carrying values for certain Victoria's Secret asset groups and, as a result, determined the estimated fair values of the store asset groups using estimated discounted future cash flows and estimated market rental rates. Long-lived store asset impairment charges are included within the Victoria's Secret segment, in Costs of Goods Sold, Buying and Occupancy in the Consolidated Statements of Income (Loss).

The following table provides pre-tax long-lived store asset impairment charges included in the Consolidated Statement of Income (Loss) for 2020 and 2019:

Store Asset Impairment								Operating Lease Asset Impairment								Total Impairments
Third Quarter				Year-to-Date				Third Quarter				Year-to-Date				Third Quarter				Year-to-Date
2020		2019		2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
(in millions)
$	—	$	188	$	111	$	188	$	—	$	30	$	103	$	30	$	—	$	218	$	214	$	218

Victoria's Secret Hong Kong

During the second quarter of 2020, the Company closed its unprofitable Victoria's Secret flagship store in Hong Kong. As a result of the store closure, the Company recognized a non-cash pre-tax gain of $39 million, primarily due to terminating the store lease and the related write-off of the operating lease liability in excess of the operating lease asset, which was partially impaired in fiscal 2019. This gain is included in Costs of Goods Sold, Buying and Occupancy in the year-to-date 2020 Consolidated Statement of Loss. The Company also recorded $3 million of severance and related costs, included in General, Administrative and Store Operating Expenses in the year-to-date 2020 Consolidated Statement of Loss.