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STOCK-BASED COMPENSATION

12 Months Ended

Feb. 02, 2025

Share-Based Payment Arrangement [Abstract]

The Company grants stock-based awards under its Stock Incentive Plan (the “Plan”). Awards that may be granted under the Plan include, but are not limited to (i) service-based non-qualified stock options (“stock options”); (ii) service-based restricted stock units (“RSUs”); and (iii) contingently issuable performance share units (“PSUs”). Each award granted under the Plan is subject to an award agreement that incorporates, as applicable, the exercise price, the term of the award, the periods of restriction, the number of shares to which the award pertains, performance periods and performance measures, and such other terms and conditions as the plan committee determines. Awards granted under the Plan are classified as equity awards, which are recorded in stockholders’ equity in the Company’s Consolidated Balance Sheets. When estimating the grant date fair value of stock-based awards, the Company considers whether an adjustment is required to the closing price or the expected volatility of its common stock on the date of grant when the Company is in possession of material nonpublic information. No such adjustments were made to the grant date fair value of awards granted in any period presented. Shares issued as a result of stock-based compensation transactions generally have been funded with the issuance of new shares of the Company’s common stock.

According to the terms of the Plan, for purposes of determining the number of shares available for grant, each share underlying a stock option award reduces the number available by one share and each share underlying an RSU or PSU award reduces the number available by two shares for awards made before June 22, 2023 and by 1.6 shares for awards made on or after June 22, 2023. Total shares available for grant at February 2, 2025 amounted to 4.3 million shares.

Net income for 2024, 2023 and 2022 included $54.0 million, $51.9 million and $46.6 million, respectively, of pre-tax expense related to stock-based compensation, with related recognized income tax benefits of $6.4 million, $6.3 million and $5.9 million, respectively.

The Company receives a tax deduction for certain transactions associated with its stock-based awards. The actual income tax benefits realized from these transactions in 2024, 2023 and 2022 were $7.8 million, $8.0 million and $3.7 million, respectively. The tax benefits realized included discrete net excess tax benefits (deficiencies) of $1.2 million, $(1.0) million and $(2.0) million recognized in the Company’s provision for income taxes during 2024, 2023 and 2022, respectively.

Stock Options

Stock options granted to employees are generally exercisable in four equal annual installments commencing one year after the date of grant. The underlying stock option award agreements generally provide for accelerated vesting upon the award recipient’s retirement (as defined in the Plan). Such stock options are granted with a 10-year term and the per share exercise price cannot be less than the closing price of the common stock on the date of grant.

The Company estimates the fair value of stock options at the date of grant using the Black-Scholes-Merton model. The estimated fair value of the stock options granted is expensed over the stock options’ requisite service periods.

The following summarizes the assumptions used to estimate the fair value of stock options granted during 2024, 2023 and 2022 and the resulting weighted average grant date fair value per stock option:


	2024			2023			2022
Weighted average risk-free interest rate	4.33		%	3.33		%	2.50		%
Weighted average expected stock option term (in years)	6.25			6.25			6.25
Weighted average Company volatility	53.32		%	50.60		%	47.34		%
Expected annual dividends per share	$	0.15		$	0.15		$	0.15
Weighted average grant date fair value per stock option	$	60.96		$	43.47		$	34.27

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options. Company volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term. Expected dividends are based on the anticipated common stock cash dividend rate for the Company at the time of grant.

The Company has continued to utilize the simplified method to estimate the expected term for its “plain vanilla” stock options granted due to a lack of relevant historical data resulting, in part, from changes in the pool of employees receiving stock option grants. The Company will continue to evaluate the appropriateness of utilizing such method.

Stock option activity for the year was as follows:


(In thousands, except per stock option data)	Stock Options	Weighted Average Exercise Price Per Stock Option		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at February 4, 2024	513	$	94.05	5.9	$	15,996
Granted	58	109.75
Exercised	60	121.28
Forfeited / Expired	7	115.13
Outstanding at February 2, 2025	504	$	92.31	6.2	$	5,158
Exercisable at February 2, 2025	324	$	93.58	5.1	$	3,898

The aggregate grant date fair value of stock options granted during 2024, 2023 and 2022 was $3.6 million, $3.7 million and $4.6 million, respectively.

The aggregate grant date fair value of stock options that vested during 2024, 2023 and 2022 was $2.8 million, $2.6 million and $1.7 million, respectively.

The aggregate intrinsic value of stock options exercised during 2024 and 2023 was $0.7 million and $3.1 million, respectively. There were no exercises in 2022.

At February 2, 2025, there was $4.7 million of unrecognized pre-tax compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 1.7 years.

RSUs

RSUs granted to employees generally vest in four equal annual installments commencing one year after the date of grant, although the Company does make from time to time, and currently has outstanding, RSUs with different vesting schedules. Service-based RSUs granted to non-employee directors vest in full the earlier of one year after the date of grant or the date of the Annual Meeting of Stockholders following the year of grant. The underlying RSU award agreements for employees generally provide for accelerated vesting upon the award recipient’s retirement (as defined in the Plan). The fair value of RSUs is equal to the closing price of the Company’s common stock on the date of grant and is expensed over the RSUs’ requisite service periods.

RSU activity for the year was as follows:


(In thousands, except per RSU data)	RSUs	Weighted Average Grant Date Fair Value Per RSU
Non-vested at February 4, 2024	1,175	$	80.79
Granted	522	108.97
Vested	441	80.31
Forfeited	187	88.09
Non-vested at February 2, 2025	1,069	$	93.45

The aggregate grant date fair value of RSUs granted during 2024, 2023 and 2022 was $56.8 million, $54.9 million and $53.6 million, respectively. The aggregate grant date fair value of RSUs vested during 2024, 2023 and 2022 was $35.4 million, $43.4 million and $39.3 million, respectively.

At February 2, 2025, there was $64.7 million of unrecognized pre-tax compensation expense related to non-vested RSUs, which is expected to be recognized over a weighted average period of 1.7 years.

PSUs

PSU awards granted to employees have a three-year service period. Each award is subject to various performance and/or market conditions goals as follows:


Grant Year	Goal for 50% of the Award	Goal for 50% of the Award
2021	Company total shareholder return (“TSR”) relative to a pre-established group of industry peers during a three-year period from the grant date	Company’s earnings before interest and taxes (“EBIT”) during fiscal 2021
2022	Company TSR relative to a pre-established group of industry peers during a three-year period from the grant date	Company’s cumulative EBIT during a fiscal three-year performance period
2023	Company TSR relative to a pre-established group of industry peers during a three-year period from the grant date	Company’s average return on invested capital (“ROIC”) during a fiscal three-year performance period
2024	Company TSR relative to a pre-established group of industry peers during a three-year period from the grant date	Company’s average ROIC during a fiscal three-year performance period

The final number of shares to be earned, if any, is contingent upon the Company’s achievement of goals for the applicable performance period. For awards granted in 2021, the holders of the awards earned an aggregate of 55,000 shares. The Company achieved performance on the one-year EBIT measure above the maximum performance level. The Company achieved performance on the three-year TSR measure between the threshold and target levels. For the EBIT-based portion of the awards granted in 2022, the applicable performance period ended in the fourth quarter of 2024 and the performance condition was not achieved.

The Company records expense ratably over the three-year service period, with expense determined as follows: (i) TSR-based portion of the awards is based on the grant date fair value regardless of whether the market condition is satisfied because the awards are subject to market conditions and (ii) EBIT- and ROIC-based portion of the awards are based on the grant date fair value per share and the Company’s current expectations of the probable number of shares that will ultimately be issued.

The grant date fair value of the awards granted is established as follows: (i) TSR-based portion of the awards uses a Monte Carlo simulation model and (ii) EBIT- and ROIC-based portion of the awards are based on the closing price of the Company’s common stock reduced for the present value of any dividends expected to be paid on such common stock during the three-year service period, as these contingently issuable PSUs do not accrue dividends.

The following summarizes the assumptions used to estimate the fair value of PSUs subject to market conditions that were granted during 2024, 2023 and 2022 and the resulting weighted average grant date fair value:


	2024			2023			2022
Weighted average risk-free interest rate	4.71		%	3.56		%	2.91		%
Weighted average Company volatility	48.28		%	58.21		%	64.02		%
Expected annual dividends per share	$	0.15		$	0.15		$	0.15
Weighted average grant date fair value per PSU	$	138.12		$	120.42		$	103.36

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for the term corresponding to the three-year performance period. Company volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the three-year performance period. Expected dividends are based on the anticipated common stock cash dividend rate for the Company at the time of grant.

For certain of the awards granted, the after-tax portion of the award is subject to a holding period of one year after the vesting date. For these awards, the grant date fair value was discounted 4.40%, 7.40% and 6.90% in 2024, 2023 and 2022, respectively, for the restriction of liquidity, which was calculated using the Finnerty model.

Total PSU activity for the year was as follows:


(In thousands, except per PSU data)	PSUs	Weighted Average Grant Date Fair Value Per PSU
Non-vested at February 4, 2024	236	$	102.29
Granted	127	122.76
Reduction due to market conditions achieved below target	1	157.70
Reduction due to performance conditions not achieved	33	70.64
Vested	55	124.12
Forfeited	8	121.28
Non-vested at February 2, 2025	266	$	110.64

The aggregate grant date fair value of PSUs granted during 2024, 2023 and 2022 was $15.6 million, $12.3 million and $6.3 million, respectively. The aggregate grant date fair value of PSUs vested during 2024 and 2023 was $6.8 million and $8.6 million, respectively. No PSUs vested during 2022. PSUs in the above table that remain subject to market conditions are reflected at the target level, which is consistent with how expense will be recorded, regardless of the numbers of shares that are expected to be earned.

At February 2, 2025, there was $18.0 million of unrecognized pre-tax compensation expense related to non-vested PSUs, which is expected to be recognized over a weighted average period of 1.9 years.