AMERICAN EAGLE OUTFITTERS INC, 10-K filed on 3/14/2019
Annual Report
v3.19.1
Document and Entity Information - USD ($)
12 Months Ended
Feb. 02, 2019
Mar. 11, 2019
Aug. 04, 2018
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Feb. 02, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Trading Symbol AEO    
Entity Registrant Name AMERICAN EAGLE OUTFITTERS INC    
Entity Central Index Key 0000919012    
Current Fiscal Year End Date --02-02    
Entity Well-known Seasoned Issuer Yes    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Large Accelerated Filer    
Entity Shell Company false    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Common Stock, Shares Outstanding   172,584,549  
Entity Public Float     $ 4,233,230,262
v3.19.1
Consolidated Balance Sheets - USD ($)
Feb. 02, 2019
Feb. 03, 2018
Current assets:    
Cash and cash equivalents $ 333,330,000 $ 413,613,000
Short-term investments (available for sale) 92,135,000 0
Merchandise inventory 424,404,000 398,213,000
Accounts receivable, net 93,477,000 78,304,000
Prepaid expenses and other 102,907,000 78,400,000
Total current assets 1,046,253,000 968,530,000
Property and equipment, net of accumulated depreciation 742,149,000 724,239,000
Intangible assets, net of accumulated amortization 43,268,000 46,666,000
Goodwill 14,899,000 15,070,000
Deferred income taxes 14,062,000 9,344,000
Other assets 42,747,000 52,464,000
Total assets 1,903,378,000 1,816,313,000
Current liabilities:    
Accounts payable 240,671,000 236,703,000
Accrued compensation and payroll taxes 82,173,000 54,324,000
Accrued rent 89,076,000 83,312,000
Accrued income and other taxes 20,064,000 12,781,000
Unredeemed gift cards and gift certificates 53,997,000 52,347,000
Current portion of deferred lease credits 9,974,000 11,203,000
Other liabilities and accrued expenses 46,690,000 34,551,000
Total current liabilities 542,645,000 485,221,000
Non-current liabilities:    
Deferred lease credits 47,377,000 47,977,000
Non-current accrued income taxes 3,547,000 7,269,000
Other non-current liabilities 22,254,000 29,055,000
Total non-current liabilities 73,178,000 84,301,000
Commitments and contingencies
Stockholders’ equity:    
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 172,436 and 177,316 shares outstanding, respectively 2,496,000 2,496,000
Contributed capital 574,929,000 593,770,000
Accumulated other comprehensive loss, net of tax (34,832,000) (30,795,000)
Retained earnings 2,054,654,000 1,883,592,000
Treasury stock, 77,130 and 72,250 shares, respectively, at cost (1,309,692,000) (1,202,272,000)
Total stockholders' equity 1,287,555,000 1,246,791,000
Total liabilities and stockholders’ equity $ 1,903,378,000 $ 1,816,313,000
v3.19.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Jan. 30, 2016
Statement Of Financial Position [Abstract]        
Preferred stock, par value $ 0.01 $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000 5,000,000 5,000,000
Preferred stock, issued 0 0 0 0
Preferred stock, outstanding 0 0 0 0
Common stock, par value $ 0.01 $ 0.01 $ 0.01 $ 0.01
Common stock, shares authorized 600,000,000 600,000,000 600,000,000 600,000,000
Common stock, shares issued 249,566,000 249,566,000 249,566,000 249,566,000
Common stock, shares outstanding 172,436,000 177,316,000 181,886,000 180,135,000
Treasury stock, shares 77,130,000 72,250,000 67,680,000  
v3.19.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Income Statement [Abstract]      
Total net revenue $ 4,035,720 $ 3,795,549 $ 3,609,865
Cost of sales, including certain buying, occupancy and warehousing expenses 2,548,082 2,425,044 2,242,938
Gross profit 1,487,638 1,370,505 1,366,927
Selling, general and administrative expenses 980,610 879,685 857,562
Impairment and restructuring charges 1,568 20,611 21,166
Depreciation and amortization expense 168,331 167,421 156,723
Operating income 337,129 302,788 331,476
Other income (expense), net 7,971 (15,615) 3,786
Income before income taxes 345,100 287,173 335,262
Provision for income taxes 83,198 83,010 122,813
Net income $ 261,902 $ 204,163 $ 212,449
Basic net income per common share $ 1.48 $ 1.15 $ 1.17
Diluted net income per common share $ 1.47 $ 1.13 $ 1.16
Weighted average common shares outstanding - basic 176,476 177,938 181,429
Weighted average common shares outstanding - diluted 178,035 180,156 183,835
v3.19.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Statement Of Income And Comprehensive Income [Abstract]      
Net income $ 261,902 $ 204,163 $ 212,449
Other comprehensive gain (loss):      
Foreign currency translation gain (loss) (4,037) 5,667 (6,594)
Other comprehensive gain (loss) (4,037) 5,667 (6,594)
Comprehensive income $ 257,865 $ 209,830 $ 205,855
v3.19.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Contributed Capital
Retained Earnings
Treasury Stock
[1]
Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Jan. 30, 2016 $ 1,051,376 $ 2,496 $ 590,820 $ 1,659,267 $ (1,171,339) $ (29,868)
Beginning Balance (in shares) at Jan. 30, 2016 180,135,000 180,135,000 [2]        
Stock awards $ 27,877   27,877      
Repurchase of common stock from employees (7,032)       (7,032)  
Repurchase of common stock from employees (in shares) [2]   (455,000)        
Reissuance of treasury stock $ 17,173   (17,247) (2,821) 37,241  
Reissuance of treasury stock (in shares) 2,206,000 2,206,000 [2]        
Net income $ 212,449     212,449    
Other comprehensive loss (6,594)         (6,594)
Cash dividends and dividend equivalents ($0.50 per share) (90,680)   2,440 (93,120)    
Ending Balance at Jan. 28, 2017 $ 1,204,569 $ 2,496 603,890 1,775,775 (1,141,130) (36,462)
Ending Balance (in shares) at Jan. 28, 2017 181,886,000 181,886,000 [2]        
Stock awards $ 17,202   17,202      
Repurchase of common stock as part of publicly announced programs (87,672)       (87,672)  
Repurchase of common stock as part of publicly announced programs (in shares) [2]   (6,000,000)        
Repurchase of common stock from employees (12,513)       (12,513)  
Repurchase of common stock from employees (in shares) [2]   (871,000)        
Reissuance of treasury stock $ 3,923   (29,632) (5,488) 39,043  
Reissuance of treasury stock (in shares) 2,301,000 2,301,000 [2]        
Net income $ 204,163     204,163    
Other comprehensive loss 5,667         5,667
Cash dividends and dividend equivalents ($0.50 per share) (88,548)   2,310 (90,858)    
Ending Balance at Feb. 03, 2018 $ 1,246,791 $ 2,496 593,770 1,883,592 (1,202,272) (30,795)
Ending Balance (in shares) at Feb. 03, 2018 177,316,000 177,316,000 [2]        
Stock awards $ 27,057   27,057      
Repurchase of common stock as part of publicly announced programs (144,405)       (144,405)  
Repurchase of common stock as part of publicly announced programs (in shares) [2]   (7,300,000)        
Repurchase of common stock from employees (19,668)       (19,668)  
Repurchase of common stock from employees (in shares) [2]   (943,000)        
Reissuance of treasury stock $ 17,038   (48,022) 8,407 56,653  
Reissuance of treasury stock (in shares) 3,358,000 3,363,000 [2]        
Net income $ 261,902     261,902    
Other comprehensive loss (4,037)         (4,037)
Cash dividends and dividend equivalents ($0.50 per share) (97,123)   2,124 (99,247)    
Ending Balance at Feb. 02, 2019 $ 1,287,555 $ 2,496 $ 574,929 $ 2,054,654 $ (1,309,692) $ (34,832)
Ending Balance (in shares) at Feb. 02, 2019 172,436,000 172,436,000 [2]        
[1] 77,130 shares, 72,250 shares and 67,680 shares at February 2, 2019, February 3, 2018 and January 28, 2017 respectively. During Fiscal 2018, Fiscal 2017, and Fiscal 2016, 3,358 shares, 2,301 shares, and 2,206 shares, respectively, were reissued from treasury stock for the issuance of share-based payments.
[2] 600,000 authorized, 249,566 issued and 172,436 outstanding, $0.01 par value common stock at February 2, 2019; 600,000 authorized, 249,566 issued and 177,316 outstanding, $0.01 par value common stock at February 3, 2018; 600,000 authorized, 249,566 issued and 181,886 outstanding, $0.01 par value common stock at January 28, 2017; 600,000 authorized, 249,566 issued and 180,135 outstanding, $0.01 par value common stock at January 30, 2016. The Company has 5,000 authorized, with none issued or outstanding, $0.01 par value preferred stock for all periods presented.
v3.19.1
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Statement Of Stockholders Equity [Abstract]      
Cash dividends and dividend equivalents, Per share $ 0.50 $ 0.50 $ 0.55
Common stock, shares authorized 600,000,000 600,000,000 600,000,000
Common stock, shares issued 249,566,000 249,566,000 249,566,000
Common stock, shares outstanding 172,436,000 177,316,000 181,886,000
Common stock, par value $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000 5,000,000
Preferred stock, shares issued 0 0 0
Preferred stock, shares outstanding 0 0 0
Preferred stock, par value $ 0.01 $ 0.01 $ 0.01
Treasury stock, shares 77,130,000 72,250,000 67,680,000
Reissuance of treasury stock, shares 3,358,000 2,301,000 2,206,000
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Operating activities:      
Net income $ 261,902,000 $ 204,163,000 $ 212,449,000
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 170,504,000 169,473,000 158,174,000
Share-based compensation 27,506,000 16,890,000 29,137,000
Deferred income taxes (4,391,000) 44,312,000 14,838,000
Foreign currency transaction gain (397,000) (5,616,000) (835,000)
Loss on impairment of assets 546,000 0 20,576,000 [1]
Changes in assets and liabilities:      
Merchandise inventory (28,496,000) (35,912,000) (53,613,000)
Accounts receivable (14,093,000) 8,837,000 (7,705,000)
Prepaid expenses and other (3,367,000) (399,000) (332,000)
Other assets (4,746,000) 5,317,000 (6,705,000)
Accounts payable 4,329,000 (16,663,000) 52,347,000
Unredeemed gift cards and gift certificates 1,882,000 (874,000) 4,465,000
Deferred lease credits (1,829,000) 984,000 (5,229,000)
Accrued compensation and payroll taxes 28,043,000 1,289,000 (25,809,000)
Accrued income and other taxes 7,221,000 565,000 (10,695,000)
Accrued liabilities 12,031,000 2,060,000 (15,467,000)
Total adjustments 194,743,000 190,263,000 153,147,000
Net cash provided by operating activities 456,645,000 394,426,000 365,596,000
Investing activities:      
Capital expenditures for property and equipment (189,021,000) (169,469,000) (161,494,000)
Purchase of available-for-sale investments (202,912,000)    
Sale of available-for-sale investments 109,776,000    
Acquisition of intangible assets (672,000) (2,681,000) (1,528,000)
Net cash used for investing activities (282,829,000) (172,150,000) (163,022,000)
Financing activities:      
Payments on capital leases and other (6,802,000) (3,384,000) (4,375,000)
Repurchase of common stock as part of publicly announced programs (144,405,000) (87,682,000)  
Repurchase of common stock from employees (19,668,000) (12,513,000) (7,032,000)
Net proceeds from stock options exercised 15,495,000 3,355,000 16,260,000
Excess tax benefit from share-based payments     763,000
Cash dividends paid (97,123,000) (88,548,000) (90,680,000)
Net cash used for financing activities (252,503,000) (188,772,000) (85,064,000)
Effect of exchange rates on cash (1,596,000) 1,496,000 1,036,000
Net increase (decrease) in cash and cash equivalents (80,283,000) 35,000,000 118,546,000
Cash and cash equivalents - beginning of period 413,613,000 378,613,000 260,067,000
Cash and cash equivalents - end of period $ 333,330,000 $ 413,613,000 $ 378,613,000
[1] Non-cash impairment charges of $20.6 million for Fiscal 2016 consisted of $7.2 million for the impairment of all Company-owned retail stores in the United Kingdom, Hong Kong and China, as well as $10.8 million of impairment and restructuring charges related to non-store corporate assets that support the international retail stores and e-commerce operations and $2.5 million of goodwill impairment for the China and Hong Kong retail operations.
v3.19.1
Business Operations
12 Months Ended
Feb. 02, 2019
Accounting Policies [Abstract]  
Business Operations

1.  Business Operations

American Eagle Outfitters, Inc. (the “Company” or “AEO, Inc.”), a Delaware corporation, operates under the American Eagle® (“AE”) and Aerie® brands.  We also operate Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and Todd Snyder New York, a premium menswear brand.  

Founded in 1977, AEO, Inc. is a leading multi-brand specialty retailer that operates more than 1,000 retail stores in the U.S. and internationally, online at www.ae.com and www.aerie.com and international store locations managed by third-party operators. Through its portfolio of brands, the Company offers high quality, on-trend clothing, accessories and personal care products at affordable prices. The Company’s online business, AEO Direct, ships to 81 countries worldwide. 

Merchandise Mix

The following table sets forth the approximate consolidated percentage of total net revenue from operations attributable to each merchandise group for each of the periods indicated:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

 

 

2019

 

 

2018

 

 

2017

 

Men’s apparel and accessories

 

 

32

%

 

 

34

%

 

 

35

%

Women’s apparel and accessories (excluding Aerie)

 

 

52

%

 

 

53

%

 

 

54

%

Aerie

 

 

16

%

 

 

13

%

 

 

11

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

v3.19.1
Summary of Significant Accounting Policies
12 Months Ended
Feb. 02, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Summary of Significant Accounting Policies

2.  Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. At February 2, 2019, the Company operated in one reportable segment.

Fiscal Year

Our fiscal year is a 52 or 53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2019” refers to the 52-week period that will end on February 1, 2020.  “Fiscal 2018” refers to the 52-week period ended February 2, 2019. “Fiscal 2017” refers to the 53-week period ended February 3, 2018.  “Fiscal 2016” refers to the 52-week period ended January 28, 2017.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which consists of a comprehensive lease accounting standard. Under the new standard, right-of-use assets and lease liabilities arising from most leases will be recognized on the balance sheet and enhanced disclosures on key quantitative and qualitative information about leasing arrangements will be required. Leases will be classified as either operating or financing, and the lease classification will determine whether expense is recognized on a straight-line basis (operating leases) or based on separately amortizing the right-of-use asset and applying an effective interest method on the lease liability (financing leases). The new standard is effective for interim and annual periods on January 1, 2019, and the Company expects to apply the transitional package of practical expedients allowed by the standard to not reassess the identification, classification and initial direct costs of leases commencing before the effective date of Topic 842; however, the Company does not expect to elect the hindsight transitional practical expedient. The Company also expects to apply the practical expedient to not separate lease and non-lease components to new leases as well as existing leases through transition. The Company expects to make an accounting policy election to not apply recognition requirements of the guidance to short-term leases.

 

In July 2018, the FASB issued ASU No. 2018-11, "Leases: Targeted Improvements," which provides an optional transition method that allows entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption while comparative periods presented will continue to be in accordance with U.S. GAAP Topic 840. The Company plans to use the optional transition method and apply the lease standard as of January 1, 2019 and does not anticipate a material cumulative-effect adjustment to the opening balance of retained earnings. The Company is nearing completion of its assessment process and its determination of the expanded disclosure regarding leases, as well as the impact to the consolidated financial statements.  The Company has made enhancements to its information systems and internal controls in response to the new rule requirements including the implementation of a lease tracking software for managing and reporting information related to leases.  Upon adoption, the Company is prepared to provide expanded disclosures in the consolidated financial and it expects to recognize assets and liabilities of approximately $1.2 to $1.5 billion. Among other process and internal control actions, the Company is still finalizing the impact to the right of use asset for stores having historical impairments (which would impact the effect of adoption for the right of use asset).  The adoption of ASC 842 is not expected to have a material impact on the Company’s consolidated results of operations and cash flows.   

 

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). The new guidance permits companies to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) on items within accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt ASU 2018-02 in Fiscal 2019 and does not expect a material impact from the adoption of this guidance to its Consolidated Financial Statements.

 

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairments under Step 2 by eliminating the requirement to perform procedures to determine the fair value of the assets and liabilities of the reporting unit, including previously unrecognized assets and liabilities, in order to determine the fair value of the goodwill and any impairment charge to be recognized. Under this ASU, the impairment charge to be recognized should be the amount by which the reporting unit's carrying value exceeds the reporting unit's fair value as calculated under Step 1 provided that the loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. This ASU is effective beginning in Fiscal 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The adoption of this ASU may have a material effect on our consolidated financial statements in the event that we determine that goodwill for any of our reporting units is impaired.

 

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the consolidated results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income (refer to Note 11 to the Consolidated Financial Statements).

Cash and Cash Equivalents & Short-term Investments

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

As of February 2, 2019, short-term investments classified as available-for-sale included certificates of deposit and commercial paper with a maturity of greater than three months, but less than one year.

As of February 3, 2018, the Company held no short or long-term investments.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents and short-term investments.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when control of the merchandise has transferred to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

Property and Equipment

Property and equipment is recorded on the basis of cost with depreciation computed utilizing the straight-line method over the assets’ estimated useful lives. The useful lives of our major classes of assets are as follows:

 

Buildings

25 years

Leasehold improvements

Lesser of 10 years or the term of the lease

Fixtures and equipment

5 years

Information technology

3-5 years

 

As of February 2, 2019, the weighted average remaining useful life of our assets was approximately 8 years.

 

In accordance with ASC 360, Property, Plant, and Equipment, the Company’s management evaluates the value of leasehold improvements and store fixtures associated with retail stores, which have been open for a period of time sufficient to reach maturity. The Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of the assets. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded separately as a component of operating income under loss on impairment of assets. During Fiscal 2018, the Company recorded no significant asset impairment charges.  During Fiscal 2017, the Company recorded no asset impairment charges.

During Fiscal 2016, the Company recorded pre-tax asset impairment charges of $20.6 million that included $7.2 million for the impairment of all Company owned retail stores in the United Kingdom, Hong Kong and China.  This amount is included within impairment and restructuring charges in the Consolidated Statements of Operations. These charges were the result of business performance and exploring an initiative to convert these markets to licensed partnerships.  Retail stores in these markets no longer are able to generate sufficient cash flow over the expected remaining lease term to recover the carrying value of the respective stores’ assets. Additionally, the Company recorded $10.8 million of impairment charges related to non-store corporate assets that support the United Kingdom, Hong Kong and China Company owned retail store and e-commerce operations and $2.5 million of goodwill impairment for the China and Hong Kong retail operations.

When the Company closes, remodels or relocates a store prior to the end of its lease term, the remaining net book value of the assets related to the store is recorded as a write-off of assets within depreciation and amortization expense.

Refer to Note 7 to these Consolidated Financial Statements for additional information regarding property and equipment and Note 15 for additional information regarding impairment charges. 

 

Goodwill

The Company’s goodwill is primarily related to acquisitions. In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment annually, or more frequently if indicators of impairment exist, and last performed an annual impairment test as of February 2, 2019. As a result, there were no impairments recorded during Fiscal 2018. During Fiscal 2016, the Company concluded goodwill was impaired resulting in a $2.5 million charge included within impairment and restructuring charges in the Consolidated Statements of Operations as a result of the Company’s plans to convert these markets to licensed partnerships.  All other goodwill for the Company was not impaired as a result of the annual goodwill impairment test.

Intangible Assets

Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives.  The Company’s intangible assets, which consist primarily of trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows is less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded for all periods presented.

Refer to Note 8 to these Consolidated Financial Statements for additional information regarding intangible assets.

Gift Cards

Revenue is not recorded on the issuance of gift cards.  The value of a gift card is recorded as a current liability upon issuance and revenue is recognized when the gift card is redeemed for merchandise.  The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue.

The Company determines an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed. The Company recorded $8.9 million, $10.1 million, and $9.1 million during Fiscal 2018, Fiscal 2017, and Fiscal 2016, respectively, of revenue related to gift card breakage.

Deferred Lease Credits

Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the landlord.

Self-Insurance Liability

The Company uses a combination of insurance and self-insurance mechanisms for certain losses related to employee medical benefits and worker’s compensation. Costs for self-insurance claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Management believes that it has adequately reserved for its self-insurance liability, which is capped through the use of stop loss contracts with insurance companies. However, any significant variation of future claims from historical trends could cause actual results to differ from the accrued liability.

Co-branded Credit Card

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the AE and Aerie brands. These credit cards are issued by a third-party bank (the “Bank”) in accordance with a credit card agreement (the “Agreement”). The Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. We receive funding from the Bank based on the Agreement and card activity, which includes payments for new account activations and usage of the credit cards. We recognize revenue for this funding when the amounts are fixed or determinable and collectability is reasonably assured.  This revenue is recorded in other revenue, which is a component of total net revenue in our Consolidated Statements of Operations and Retained Earnings. The adoption of ASC 606, Revenue from Contracts with Customers (“ASC 606”) did not have an impact of the Company’s accounting for the co-branded credit card.

For further information on the Company’s loyalty program, refer to the Customer Loyalty Program caption below.

Customer Loyalty Program

The Company recently launched a new, highly digitized loyalty program called AEO ConnectedTM (the “Program”).  This Program integrates the current credit card rewards program and the AEREWARDS® loyalty program into one combined customer offering.  Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds.  Customers earn rewards in the form of discount savings certificates. Rewards earned are valid through the stated expiration date, which is 45 days from the issuance date of the reward.  Rewards not redeemed during the 45-day redemption period are forfeited.  Additional rewards are also given for key items such as jeans and bras.  

Points earned under the Program on purchases at American Eagle and Aerie are accounted for in accordance with ASC 606.  The portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire, using the relative stand-alone selling price method.  Additionally, reward points earned using the co-branded credit card on non-AE or Aerie purchases are accounted for in accordance with ASC 606.  As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of the adjustments are recorded in cost of sales.  The Company recorded a net increase to opening retained earnings of $0.2 million as of February 4, 2018 due to the cumulative impact of adoption of ASC 606.

Sales Return Reserve

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Beginning balance

 

$

4,717

 

 

$

3,639

 

 

$

3,349

 

Returns

 

 

(113,805

)

 

 

(103,393

)

 

 

(97,126

)

Provisions

 

 

113,708

 

 

 

104,471

 

 

 

97,416

 

Ending balance

 

$

4,620

 

 

$

4,717

 

 

$

3,639

 

 

ASC 606 changes the balance sheet presentation of the Company’s sales return reserve.  Presentation on a gross basis is now required, consisting of a separate right of return asset and liability.  These amounts are recorded within (i) Prepaid Expenses and Other and (ii) Other Liabilities and Accrued Expenses, respectively, on the Consolidated Balance Sheets.  Historically, the Company presented the net sales return liability within Other Liabilities and Accrued Expenses on the Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales.  The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

Income Taxes

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits, may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740 which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income.

Refer to Note 14 to the Consolidated Financial Statements for additional information.

Revenue Recognition

In May 2014, the FASB issued ASC 606.  ASC 606 is a comprehensive new revenue recognition model that expands disclosure requirements and requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASC 606 is effective for annual reporting periods beginning after December 15, 2017. The Company adopted ASC 606 on February 4, 2018 using the modified retrospective method applied to all contracts as of February 4, 2018. Results for reporting periods beginning on or after February 4, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting. The Company recorded a net increase to opening retained earnings of $0.2 million as of February 4, 2018 due to the cumulative impact of adoption.  The impact was the result of accounting for customer loyalty programs using a relative stand-alone selling price method vs. incremental cost method.  The Company defers a portion of the sales revenue attributed to the loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606. Refer to the Customer Loyalty Program caption above for additional information.

Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales.  The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages. 

 

Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise.  Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption above.

The Company recognizes royalty revenue generated from its license or franchise agreements based upon a percentage of merchandise sales by the licensee/franchisee.  This revenue is recorded as a component of total net revenue when earned.

Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively "merchandise costs") and buying, occupancy and warehousing costs.

Design costs are related to the Company's Design Center operations and include compensation, travel and entertainment, supplies and samples for our design teams, as well as rent and depreciation for our Design Center. These costs are included in cost of sales as the respective inventory is sold.

Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel and entertainment for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales.  Additionally, selling, general and administrative expenses do not include rent and utilities related to our stores, operating costs of our distribution centers, and shipping and handling costs related to our e-commerce operations.

Advertising Costs

Certain advertising costs, including direct mail, in-store photographs and other promotional costs are expensed when the marketing campaign commences. As of February 2, 2019 and February 2, 2018, the Company had prepaid advertising expense of $12.6 million and $6.6 million, respectively. All other advertising costs are expensed as incurred. The Company recognized $143.2 million, $129.8 million and $124.5 million in advertising expense during Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively.

Store Pre-Opening Costs

Store pre-opening costs consist primarily of rent, advertising, supplies and payroll expenses. These costs are expensed as incurred.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency transaction gain (loss), interest income/expense and realized investment gains/losses.

Legal Proceedings and Claims

The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies (“ASC 450”), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450.  As the Company believes that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position, results of operations or consolidated cash flows of the Company.  However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

Supplemental Disclosures of Cash Flow Information

The table below shows supplemental cash flow information for cash amounts paid during the respective periods:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Cash paid during the periods for:

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

81,248

 

 

$

47,094

 

 

$

126,592

 

Interest

 

$

1,207

 

 

$

1,098

 

 

$

1,155

 

 

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified two operating segments (American Eagle Brand and Aerie Brand) that reflect the Company’s operational structure as well as the business’s internal view of analyzing results and allocating resources. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280.  

The following tables present summarized geographical information:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Total net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

3,511,265

 

 

$

3,295,066

 

 

$

3,160,699

 

Foreign (1)

 

 

524,455

 

 

 

500,483

 

 

 

449,166

 

Total net revenue

 

$

4,035,720

 

 

$

3,795,549

 

 

$

3,609,865

 

 

(1)

Amounts represent sales from American Eagle and Aerie international retail stores, and e-commerce sales that are billed to and/or shipped to foreign countries and international franchise royalty revenue.

 

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2019

 

 

2018

 

Long-lived assets, net:

 

 

 

 

 

 

 

 

United States

 

$

728,196

 

 

$

706,778

 

Foreign

 

 

72,120

 

 

 

79,197

 

Total long-lived assets, net

 

$

800,316

 

 

$

785,975

 

 

v3.19.1
Cash, Cash Equivalents and Short-term Investments
12 Months Ended
Feb. 02, 2019
Cash And Cash Equivalents [Abstract]  
Cash, Cash Equivalents and Short-term Investments

3.  Cash, Cash Equivalents and Short-term Investments

The following table summarizes the fair market value of our cash and available for sale marketable securities, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)

 

February 2,

2019

 

 

February 3,

2018

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash

 

$

108,216

 

 

$

184,107

 

Interest bearing deposits

 

 

165,274

 

 

 

174,577

 

Commercial paper

 

 

59,840

 

 

 

54,929

 

Total cash and cash equivalents

 

$

333,330

 

 

$

413,613

 

Short-term investments(1):

 

 

 

 

 

 

 

 

Certificates of deposits

 

 

70,000

 

 

 

 

Commercial paper

 

 

22,135

 

 

 

 

Total short-term investments

 

 

92,135

 

 

 

 

Total cash and short-term investments

 

 

425,465

 

 

 

413,613

 

 

 

 

 

 

 

 

 

 

(1) Please see Note 2 to the Consolidated Financial Statements for a description of what we consider cash-equivalents and short-term investments.

 

 

 

v3.19.1
Fair Value Measurements
12 Months Ended
Feb. 02, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements

4.  Fair Value Measurements

ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.  Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

Financial Instruments

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes this three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 — Quoted prices in active markets.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly.

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.

In accordance with ASC 820, the following tables represent the fair value hierarchy for the Company’s financial assets (Cash, cash equivalents and short-term investments) measured at fair value on a recurring basis as of February 2, 2019 and February 3, 2018:

 

 

Fair Value Measurements at February 2, 2019

 

(In thousands)

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

108,216

 

 

$

108,216

 

 

 

 

 

 

 

Interest bearing deposits

 

165,274

 

 

 

165,274

 

 

 

 

 

 

 

Commercial paper

 

59,840

 

 

 

59,840

 

 

 

 

 

 

 

Total cash and cash equivalents

$

333,330

 

 

 

333,330

 

 

 

 

 

 

 

Short-term investments (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposits

 

70,000

 

 

 

70,000

 

 

 

 

 

 

 

Commercial paper

 

22,135

 

 

 

22,135

 

 

 

 

 

 

 

Total short-term investments

 

92,135

 

 

 

92,135

 

 

 

 

 

 

 

Total

$

425,465

 

 

$

425,465

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Please see Note 2 to the Consolidated Financial Statements for a description of what we consider cash-equivalents and short-term investments.

 

 

 

 

 

 

 

 

 

Fair Value Measurements at February 3, 2018

 

(In thousands)

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

184,107

 

 

$

184,107

 

 

$

 

 

$

 

Interest bearing deposits

 

174,577

 

 

 

174,577

 

 

 

 

 

 

 

Commercial paper

 

54,929

 

 

 

54,929

 

 

 

 

 

 

 

Total cash and cash equivalents

$

413,613

 

 

$

413,613

 

 

$

 

 

$

 

 

Non-Financial Assets

The Company’s non-financial assets, which include intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis.  However, if certain triggering events occur and the Company is required to evaluate the non-financial instrument for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the estimated fair value.  During Fiscal 2016, the Company concluded the goodwill was impaired for the Hong Kong and China businesses, resulting in a $2.5 million charge included within impairment and restructuring charges in the Consolidated Statements of Operations as a result of the performance of those businesses and the Company’s exploration of alternatives, including the licensing of these markets to third-party operators.  All other goodwill for the Company was not impaired as a result of the annual goodwill impairment test.

Certain long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820.  During Fiscal 2018, the Company recorded immaterial asset impairment charges.  During Fiscal 2017, the Company recorded no asset impairment charges. During Fiscal 2016, certain long-lived assets related to the Company’s retail stores, goodwill and corporate assets were determined to be unable to recover their respective carrying values and were written down to their fair value, resulting in a loss of $20.6 million, which is recorded within impairment and restructuring charges within the Consolidated Statements of Operations. The fair value of the impaired assets after the recorded loss is an immaterial amount.

The fair value of the Company’s stores was determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest.  The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located.

v3.19.1
Earnings per Share
12 Months Ended
Feb. 02, 2019
Earnings Per Share [Abstract]  
Earnings per Share

5.  Earnings per Share

The following is a reconciliation between basic and diluted weighted average shares outstanding:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands, except per share amounts)

 

2019

 

 

2018

 

 

2017

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of common shares outstanding

 

 

176,476

 

 

 

177,938

 

 

 

181,429

 

Dilutive effect of stock options and non-vested

   restricted stock

 

 

1,559

 

 

 

2,218

 

 

 

2,406

 

Diluted number of common shares outstanding

 

 

178,035

 

 

 

180,156

 

 

 

183,835

 

 

There were no anti-dilutive stock options outstanding during Fiscal 2018.  Stock option awards to purchase approximately  2.2 million and 2.2 million shares of common stock during Fiscal 2017 and Fiscal 2016, respectively, were outstanding, but were not included in the computation of weighted average diluted common share amounts as the effect of doing so would have been anti-dilutive.

Additionally, approximately 0.2 million, 19,000, and 24,000 shares of restricted stock units for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively, were outstanding, but not included in the computation of weighted average diluted common share amounts as the effect of doing so would be anti-dilutive.  Furthermore, approximately 0.2 million, 0.9 million, and 0.1 million of performance-based restricted stock awards for Fiscal 2018, Fiscal 2017, and Fiscal 2016, respectively, were not included in the computation of weighted average diluted common share amounts because the number of shares ultimately issued is contingent on the Company’s performance compared to pre-established performance goals.  

Refer to Note 12 to the Consolidated Financial Statements for additional information regarding share-based compensation.

v3.19.1
Accounts Receivable, net
12 Months Ended
Feb. 02, 2019
Receivables [Abstract]  
Accounts Receivable, net

6.  Accounts Receivable, net

Accounts receivable, net are comprised of the following:

 

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2019

 

 

2018

 

Franchise and license receivable

 

$

31,474

 

 

$

32,930

 

Merchandise sell-offs and vendor receivables

 

 

12,943

 

 

 

15,742

 

Credit card program receivable

 

 

21,129

 

 

 

9,544

 

Tax refunds

 

 

7,483

 

 

 

8,271

 

Landlord construction allowances

 

 

9,001

 

 

 

5,605

 

Gift card receivable

 

 

3,514

 

 

 

1,799

 

Other items

 

 

7,933

 

 

 

4,413

 

Total

 

$

93,477

 

 

$

78,304

 

 

There was no allowance for uncollectible receivables as of February 2, 2019.  Allowance for uncollectible receivables of $20.4 million are included within Accounts receivable, net as of February 3, 2018, respectively.

v3.19.1
Property and Equipment
12 Months Ended
Feb. 02, 2019
Property Plant And Equipment [Abstract]  
Property and Equipment

7.  Property and Equipment

Property and equipment consists of the following:

 

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2019

 

 

2018

 

Land

 

$

17,910

 

 

$

17,910

 

Buildings

 

 

209,487

 

 

 

206,505

 

Leasehold improvements

 

 

698,029

 

 

 

630,725

 

Fixtures and equipment

 

 

1,221,203

 

 

 

1,143,140

 

Construction in progress

 

 

34,221

 

 

 

25,595

 

Property and equipment, at cost

 

$

2,180,850

 

 

$

2,023,875

 

Less:  Accumulated depreciation

 

 

(1,438,701

)

 

 

(1,299,636

)

Property and equipment, net

 

$

742,149

 

 

$

724,239

 

 

Depreciation expense is summarized as follows:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Depreciation expense

 

$

164,265

 

 

$

158,969

 

 

$

152,644

 

 

Additionally, during Fiscal 2018, Fiscal 2017 and Fiscal 2016, the Company recorded $2.0 million, $6.0 million and $1.5 million, respectively, related to asset write-offs within depreciation and amortization expense.

 

v3.19.1
Intangible Assets
12 Months Ended
Feb. 02, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Intangible Assets

8.  Intangible Assets

Intangible assets include costs to acquire and register the Company’s trademark assets. The following table represents intangible assets as of February 2, 2019 and February 3, 2018:

 

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2019

 

 

2018

 

Trademarks, at cost

 

$

70,994

 

 

$

70,322

 

Less: Accumulated amortization

 

 

(27,726

)

 

 

(23,656

)

Intangible assets, net

 

$

43,268

 

 

$

46,666

 

 

Amortization expense is summarized as follows:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Amortization expense

 

$

4,225

 

 

$

4,551

 

 

$

4,007

 

 

The table below summarizes the estimated future amortization expense for intangible assets existing as of February 2, 2019 for the next five Fiscal Years:

 

 

 

Future

 

(In thousands)

 

Amortization

 

2019

 

$

4,004

 

2020

 

$

3,332

 

2021

 

$

3,005

 

2022

 

$

3,002

 

2023

 

$

2,906

 

 

 

v3.19.1
Other Credit Arrangements
12 Months Ended
Feb. 02, 2019
Debt Disclosure [Abstract]  
Other Credit Arrangements

9.  Other Credit Arrangements

In January 2019, the Company entered into an amended and restated Credit Agreement (“Credit Agreement”) for five-year, syndicated, asset-based revolving credit facilities (the “Credit Facilities”). The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400 million, subject to customary borrowing base limitations. The Credit Facilities provide increased financial flexibility and take advantage of a favorable credit environment.

All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by a first-priority security interest in certain working capital assets of the borrowers and guarantors, consisting primarily of cash, receivables, inventory and certain other assets, and will be further secured by first-priority mortgages on certain real property.

As of February 2, 2019, the Company was in compliance with the terms of the Credit Agreement and had $8.1 million outstanding in stand-by letters of credit. No loans were outstanding under the Credit Agreement as of February 2, 2019.

As of February 2, 2019, the Company had no outstanding trade letters of credit.  

v3.19.1
Leases
12 Months Ended
Feb. 02, 2019
Leases [Abstract]  
Leases

10.  Leases

The Company leases all store premises, some of its office space and certain information technology and office equipment. The store leases generally have initial terms of 10 years and are classified as operating leases. Most of these store leases provide for base rentals and the payment of a percentage of sales as additional contingent rent when sales exceed specified levels. Additionally, most leases contain construction allowances and/or rent holidays. In recognizing landlord incentives and minimum rent expense, the Company amortizes the items on a straight-line basis over the lease term (including the pre-opening build-out period).

A summary of fixed minimum and contingent rent expense for all operating leases follows:

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

 

January 28,

 

(In thousands)

 

2019

 

 

2018

 

 

2017

 

Store rent:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed minimum

 

$

303,123

 

 

$

298,458

 

 

$

286,850

 

Contingent

 

 

13,883

 

 

 

9,566

 

 

 

8,519

 

Total store rent, excluding common area maintenance

   charges, real estate taxes and certain other expenses

 

$

317,006

 

 

$

308,025

 

 

$

295,369

 

Offices, distribution facilities, equipment and other

 

 

18,636

 

 

 

26,960

 

 

 

18,172

 

Total rent expense

 

$

335,642

 

 

$

334,985

 

 

$

313,541

 

 

In addition, the Company is typically responsible under its store, office and distribution center leases for tenant occupancy costs, including maintenance costs, common area charges, real estate taxes and certain other expenses.

The table below summarizes future minimum lease obligations, consisting of fixed minimum rent, under operating leases in effect at February 2, 2019:

 

(In thousands)

 

Future Minimum

 

Fiscal years:

 

Lease Obligations

 

2019

 

$

295,754

 

2020

 

$

264,572

 

2021

 

$

229,995

 

2022

 

$

188,921

 

2023

 

$

174,576

 

Thereafter

 

$

372,056

 

Total

 

$

1,525,874

 

 

v3.19.1
Other Comprehensive Income
12 Months Ended
Feb. 02, 2019
Equity [Abstract]  
Other Comprehensive Income

11.  Other Comprehensive Income

The accumulated balances of other comprehensive income included as part of the Consolidated Statements of Stockholders’ Equity follow:

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Before

 

 

Tax

 

 

Other

 

 

 

Tax

 

 

Benefit

 

 

Comprehensive

 

(In thousands)

 

Amount

 

 

(Expense)

 

 

Income

 

Balance at January 30, 2016