Fair Value Measurements

9 Months Ended

Oct. 29, 2011

Fair Value Measurements

11. 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 October 29, 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 the 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 October 29, 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 thirty-nine weeks ended October 29, 2011, the Company performed impairment analyses on the assets of certain stores, triggered by both actions under the Company’s store rationalization plan and reviews of the stores’ operating results. In the thirteen weeks ended October 30, 2010, the Company performed impairment analyses on the assets of certain stores, triggered by the Company’s expectation to close certain store locations.

The following tables summarize the non-financial assets that were measured at fair value on a non-recurring basis in performing these analyses for the thirteen weeks ended October 29, 2011 and October 30, 2010:

			Fair Value Measurements Using
					Observable				Impairment of
			Quoted Market		Inputs Other				Store Assets
			Prices in Active		than Quoted		Significant		Thirteen
			Markets for		Market		Unobservable		Weeks Ended
			Identical Assets		Prices		Inputs		October 29,
	Total		(Level 1)		(Level 2)		(Level 3)		2011
	(In thousands)
Long-lived assets held and used	$	1,076	$	—	$	—	$	1,076	$	2,067
Total	$	1,076	$	—	$	—	$	1,076	$	2,067

			Fair Value Measurements Using
					Observable				Impairment of
			Quoted Market		Inputs Other				Store Assets
			Prices in Active		than Quoted		Significant		Thirteen
			Markets for		Market		Unobservable		Weeks Ended
			Identical Assets		Prices		Inputs		October 30,
	Total		(Level 1)		(Level 2)		(Level 3)		2010
	(In thousands)
Long-lived assets held and used	$	1,371	$	—	$	—	$	1,371	$	545
Total	$	1,371	$	—	$	—	$	1,371	$	545

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 thirty-nine weeks ended October 29, 2011:

			Fair Value Measurements Using
					Observable				Impairment of
			Quoted Market		Inputs Other				Store Assets
			Prices in Active		than Quoted		Significant		Thirty-Nine
			Markets for		Market		Unobservable		Weeks Ended
			Identical Assets		Prices		Inputs		October 29,
	Total		(Level 1)		(Level 2)		(Level 3)		2011
	(In thousands)
Long-lived assets held and used	$	2,175	$	—	$	—	$	2,175	$	3,284
Total	$	2,175	$	—	$	—	$	2,175	$	3,284

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. Additional insignificant store impairments were recorded in the prior quarters of 2010 and reported in the thirty-nine weeks ended October 30, 2010.