Note 12 - Share-based Compensation

6 Months Ended

Aug. 03, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

12. Share-Based Compensation

Share-Based Compensation Expense

Total compensation expense, included in SG&A, and the associated tax benefits recognized related to our share-based compensation plans, was as follows:

	Thirteen weeks ended				Twenty-six weeks ended
	August 3,		July 29,		August 3,		July 29,
($ in millions)	2024		2023		2024		2023
Options and employee stock purchase plan	$	1	$	1	$	2	$	2
Restricted stock units and performance stock units		6		1		11		2
Total share-based compensation expense	$	7	$	2	$	13	$	4
Tax benefit recognized	$	1	$	1	$	2	$	1

Stock Options

As of August 3, 2024, there were 8,433,658 shares available for issuance under the 2007 Stock Incentive Plan. Effective in 2024, we no longer issue stock option grants. The table below provides activity for existing awards for the twenty-six weeks ended August 3, 2024.

				Weighted-		Weighted-
	Number			Average		Average
	of			Remaining		Exercise
	Shares			Contractual Life		Price
	(in thousands)			(in years)		(per share)
Options outstanding at the beginning of the year		2,738				$	48.23
Exercised		(245	)				21.60
Expired or cancelled		(293	)				52.92
Options outstanding at August 3, 2024		2,200			3.2	$	50.56
Options exercisable at August 3, 2024		1,931			2.5	$	52.48

The total fair value of options vested for the twenty-six weeks ended August 3, 2024 and July 29, 2023 was $2 million and $4 million, respectively. The cash received from option exercises during the thirteen weeks ended  August 3, 2024 and  July 29, 2023 was an insignificant amount and $1 million, respectively. The cash received from option exercises during the twenty-six weeks ended August 3, 2024 and  July 29, 2023 was $5 million for both periods. The related tax benefits realized from option exercises were not significant for all periods presented.

The total intrinsic value of options exercised (the difference between the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) is presented below:

	Thirteen weeks ended				Twenty-six weeks ended
	August 3,		July 29,		August 3,		July 29,
($ in millions)	2024		2023		2024		2023
Exercised	$	—	$	—	$	3	$	3

The aggregate intrinsic value for stock options outstanding, and outstanding and exercisable (the difference between our closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) is presented below:

	August 3,		July 29,
($ in millions)	2024		2023
Outstanding	$	1	$	2
Outstanding and exercisable	$	1	$	2

As of August 3, 2024, there was $1 million of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a remaining weighted-average period of 1.2 years.

The table below summarizes information about stock options outstanding and exercisable at August 3, 2024.

	Options Outstanding						Options Exercisable
			Weighted-
			Average		Weighted-				Weighted-
			Remaining		Average				Average
Range of Exercise	Number		Contractual		Exercise		Number		Exercise
Prices	Outstanding		Life		Price		Exercisable		Price
	(in thousands, except prices per share and contractual life)
$21.60 - $30.98		439		4.5	$	26.54		387	$	26.23
$36.49 - $46.64		513		6.2		40.70		296		42.19
$53.61 - $58.94		382		2.2		56.47		382		56.47
$62.02 - $72.83		866		1.3		65.98		866		65.98
		2,200		3.2	$	50.56		1,931	$	52.48

Restricted Stock Units and Performance Stock Units

Restricted stock units (“RSU”) are awarded to certain officers, key employees of the Company, and nonemployee directors. Additionally, performance stock units (“PSU”) are awarded to certain officers and key employees in connection with our long-term incentive program. Each RSU and PSU represents the right to receive one share of our common stock, provided that the applicable performance and vesting conditions are satisfied. PSU awards also include a performance objective based on our relative total shareholder return over the performance period to a pre-determined peer group, assuming the reinvestment of dividends. The fair value of the market condition of our PSU awards is determined using a Monte Carlo simulation as of the date of the grant.

Generally, RSU awards fully vest after the passage of time, typically over three years for employees and one year for nonemployee directors, provided there is continued service with the Company until the vesting date, subject to the terms of the award. PSU awards are earned only after the attainment of performance goals in connection with the relevant performance period. PSUs granted in 2024 vest after the attainment of the performance period, which is three years. Prior PSU grants vested after the attainment of the performance period of two years and an additional one-year period. No dividends are paid or accumulated on any RSU or PSU awards. Compensation expense is recognized over the vesting period on a straight-line basis.

RSU and PSU activity for the twenty-six weeks ended August 3, 2024 is summarized as follows:

				Weighted-
				Average		Weighted-
	Number			Remaining		Average
	of			Contractual		Grant Date
	Shares			Life		Fair Value
	(in thousands)			(in years)		(per share)
Nonvested at beginning of year		1,378				$	38.81
Granted		1,382					29.00
Vested		(477	)				49.60
Forfeited		(79	)				32.16
Nonvested at August 3, 2024		2,204			1.7	$	30.57
Aggregate value ($ in millions)	$	67

The total value of RSU and PSU awards that vested during the twenty-six weeks ended August 3, 2024 and July 29, 2023 was $24 million and $23 million, respectively. As of August 3, 2024, there was $46 million of total unrecognized compensation cost related to nonvested awards.