Derivative Financial Instruments

3 Months Ended

May 04, 2013

Derivative Financial Instruments

Derivative Financial Instruments

11.  Derivative Financial Instruments

We are exposed to market risk associated with foreign currency exchange rate fluctuations as a result of our direct sourcing programs and our operations in foreign countries.  In connection with our direct sourcing programs, we may enter into merchandise purchase commitments that are denominated in a currency different from the functional currency of the operating entity.  Our risk management policy is to hedge a significant portion of forecasted merchandise purchases for our direct sourcing programs that bear foreign exchange risk using foreign exchange forward contracts.  The Company has not elected to apply hedge accounting to these transactions denominated in a foreign currency.

Our derivative financial instruments are recorded in the condensed consolidated balance sheet at fair value determined by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at period end.

The tables below disclose the fair value of the derivative financial instruments included in the condensed consolidated balance sheets as of May 4, 2013, February 2, 2013 and April 28, 2012 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments:
At May 4, 2013- Foreign exchange forward contracts	Other current assets	$	138	Accrued expenses and other current liabilities	$	11
At February 2, 2013- Foreign exchange forward contracts	Other current assets	$	215	Accrued expenses and other current liabilities	$	17
At April 28, 2012- Foreign exchange forward contracts	Other current assets	$	—	Accrued expenses and other current liabilities	$	548

At May 4, 2013, we had four contracts to purchase Euros for an aggregate notional amount of US$0.5 million maturing in various increments at various dates through September 2013, eight contracts to purchase United States dollars (“USD”) for an aggregate notional amount of Canadian dollars (“CAD”) $2.0 million maturing in various increments at various dates through August 2013 and 14 contracts to purchase USD for an aggregate notional amount of pounds Sterling (“GBP”) £11.7 million maturing in various increments at various dates through October 2013.  For the quarter ended May 4, 2013, we recognized a net pre-tax gain of $0.7 million in cost of sales in the condensed consolidated statement of earnings for our derivative financial instruments not designated as cash flow hedges.

At February 2, 2013, we had four contracts maturing in varying increments to purchase Euros for an aggregate notional amount of US$1.2 million maturing at various dates through May 2013, 10 contracts maturing in varying increments to purchase USD for an aggregate notional amount of CAD $4.1 million maturing at various dates through May 2013 and 16 contracts maturing in varying increments to purchase USD for an aggregate notional amount of GBP £14.0 million maturing at various dates through June 2013.

At April 28, 2012, we had 12 contracts to purchase Euros for an aggregate notional amount of US$1.4 million maturing in various increments at various dates through August 2012, 11 contracts to purchase USD for an aggregate notional amount of CAD $5.0 million maturing in various increments at various dates through August 2012 and 15 contracts to purchase USD for an aggregate notional amount of GBP £10.9 million maturing in various increments at various dates through August 2012.  For the quarter ended April 28, 2012, we recognized a net pre-tax loss of $0.8 million in cost of sales in the condensed consolidated statement of earnings for our derivative financial instruments not designated as cash flow hedges.

We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of May 4, 2013, February 2, 2013 or April 28, 2012, respectively.