Fair Value Measurements

6 Months Ended

Jul. 30, 2011

Fair Value Measurements

10. Fair Value Measurements

The Company classifies fair value based measurements on a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1 such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company’s financial instruments at July 30, 2011 and January 29, 2011 consisted primarily of cash and cash equivalents, customer accounts receivable, investments in the Company’s irrevocable grantor’s trust (“Rabbi Trust”) that holds assets intended to fund benefit obligations under the Company’s Supplemental Retirement Savings Plan and Deferred Compensation Plan, accounts payable and its revolving credit facility. The Company believes the carrying value of cash and cash equivalents, customer accounts receivable and accounts payable approximates their fair value due to their short-term nature. The money market investments in the Rabbi Trust are recorded at fair value based on quoted market prices in active markets for identical assets (Level 1 measurements) and are not significant to the total value of the Rabbi Trust. The investments in life insurance policies held in the Rabbi Trust are recorded at their cash surrender values, which is consistent with settlement value and is not a fair value measurement. The Company believes that the carrying value of its revolving credit facility approximates fair value at July 30, 2011 and January 29, 2011 as the interest rates are market-based variable rates and were re-set with the third party lenders during the third quarter of 2010.

The Company monitors the performance and productivity of its store portfolio and closes stores when appropriate. When it is determined that a store is underperforming or is to be closed, the Company reassesses the recoverability of the store’s long-lived assets, which in some cases results in an impairment charge. In the twenty-six weeks ended July 30, 2011, the Company performed impairment analyses on the assets of certain stores, triggered by the Company’s store rationalization plan.

The following table summarizes the non-financial assets that were measured at fair value on a non-recurring basis in performing these analyses for the twenty-six weeks ended July 30, 2011:

			Fair Value Measurements Using
			Quoted
			Market
			Prices in						Impairment
			Active		Observable				of Store
	Net		Markets		Inputs Other				Assets
	Carrying		for		than Quoted		Significant		Twenty-Six
	Value at		Identical		Market		Unobservable		Weeks
	July 30,		Assets		Prices		Inputs		Ended
	2011		(Level 1)		(Level 2)		(Level 3)		July 30, 011
	(In thousands)
Long-lived assets held and used	$	495	$	—	$	—	$	495	$	1,217
Total	$	495	$	—	$	—	$	495	$	1,217

The Company estimates the fair value of these store assets using an income approach which is based on estimates of future operating cash flows at the store level. These estimates, which include estimates of future net store sales, direct store expenses and non-cash store adjustments, are based on the experience of management, including historical store operating results and management’s knowledge and expectations. These estimates are affected by factors that can be difficult to predict, such as future operating results, customer activity and future economic conditions. No impairment of store assets was recorded in the thirteen weeks ended July 30, 2011 or July 31, 2010. Insignificant store impairments were recorded in the twenty-six weeks ended July 31, 2010.